Madison - St. Clair Record

Sunday, October 13, 2019

Appellate court upholds circuit ruling in Founders Insurance Co. case

By David Hutton | Feb 10, 2017

The Fifth District Appellate Court has upheld a lower court ruling that granted summary judgment to the defendants in an appeal by Founders Insurance Co.

St. Clair County Associate Judge Christopher Kolker had granted summary judgment to the defendants, Kelly Goretzke and Anthony Ashbrook, ruling that Founders Insurance had actual notice of an underlying lawsuit prior to the entry of final judgment in that lawsuit.

The appellate court also agreed that the circuit court did not err in concluding that the plaintiff did not meet its burden of demonstrating that Goretzke breached the assistance and cooperation provisions of her insurance contract with the plaintiff.

On April 6, 2009, Founders Insurance filed a complaint for declaratory judgement in St. Clair County Circuit Court.

Goretzke and Ashbrook had been involved in a collision in 2006. Ashbrook filed suit against Goretzke on Feb. 25, 2008, served her with a summons on March 21, 2008, and obtained a default judgment against her in the amount of $35,226 on May 26, 2008.

According to the complaint filed by Founders, in 2009 Goretzke transferred to Ashbrook all rights she possessed against the insurance company.

Moreover, the complaint alleged that at no time did Goretzke or Ashbrook notify Founders Insurance of the lawsuit. The insurer claimed it first learned of the lawsuit when Ashbrook attempted to collect from the plaintiff on the default judgment on Jan. 20, 2009.

Attorneys representing Ashbrook then answered the complaint, admitting that a "default" was obtained against Goretzke on May 26, 2008, but denying that the default judgment was final at that time.

Ashbrook alleged that the judgment did not become final until Feb. 17, 2009. This happened after his attorneys notified the insurance company in writing on Jan. 12, 2009, of the default.

Ashbrook alleged that despite having notice, the plaintiff did not defend Goretzke and that Goretzke did not assign her rights to Ashbrook until after the plaintiff received actual notice of the lawsuit and failed to defend Goretzke.

On April 16, 2015, attorneys representing Founders Insurance filed a cross-motion for summary judgment.

An affidavit from Jason Jaramillo, a senior claims analyst employed by Founders Insurance, stated among other things that Goretzke "never notified [the plaintiff] of the pending lawsuit or any of the pending hearing dates at any time."

During a hearing for summary judgment, held on Dec. 31, 2015, Ashbrook’s attorneys alleged that Founders Insurance acted improperly because their client had informed them of the default, but they allowed an order to become final.

For their part, Founders Insurance contended that Goretzke breached both the notice clause of her contract with the plaintiff and the cooperation clause of the contract.

On Jan. 8, 2016, Kolker entered a two-page written order in which he ruled that the plaintiff had been informed of the collision by a lien letter mailed to the plaintiff on Oct. 10, 2006. As a result, he ruled that Founders Insurance “had notice.”

Kolker also ruled that, with regard to the Founders Insurance claim that Goretzke failed to cooperate with them, they had "failed to show that it tried to get the insured’s participation.”

On appeal, Founders Insurance attorneys maintained that the circuit court's ruling granting summary judgment to the defendants was erroneous because the May 6, 2008, order was a final judgment, and the company had no notice of the lawsuit prior to the entry of that order.

Founders also maintained in the appeal that Goretzke breached the notice-of-lawsuit condition of her policy with the plaintiff, and therefore there can be no coverage in this case.

The appellate court concluded that Kolker properly could, and did, require a separate written order in the case underlying this one − and that pursuant to Rule 272, the judgment in that case could become final only when the separate written order was signed and filed by the judge.

The appellate court also considered whether the fact that the order was not submitted by Ashbrook's attorney within 14 days means that the May 6, 2008, judgment nevertheless somehow became the final judgment in that case.

“We note that the plaintiff has provided no argument or authority in support of such a proposition, and we are aware of none,” the court said in its ruling. "We also note that at the Dec. 31, 2015, hearing before Judge Kolker, Ashbrook's attorney argued that she "intentionally waited several months to enter the final order" because she wanted to give the plaintiff the chance to get the default judgment set aside, but that instead the plaintiff told Goretzke that she should retain legal counsel, at her own expense, to have the judgment vacated.”

Moreover, on appeal, Ashbrook's attorney noted that the plaintiff had clear notice that the May 6, 2008, order was not a final order because by its own terms it required a subsequent written order to be prepared and submitted by Ashbrook's attorney, and that pursuant to the plain language of Rule 272, until that happened and the judge signed and filed the subsequent written order, there could be no final order in the case.

Citing Vega v. Gore, the appellate court ruled that Founders Insurance had clear notice of the lawsuit before a final judgement was entered. It also ruled it found nothing in the principal case relied upon by the company.

On the point alleging Goretzke breached the contract, the court found that “an insurer may be liable under an insurance contract even if the insured never tenders a defense of the lawsuit.”

The Fifth District Appellate Court also noted that the Supreme Court of Illinois has held that because there is in Illinois a strong public policy in favor of coverage, the actual notice standard does not unduly burden insurers permitted to operate in this state.

On the final point, the Fifth District Appellate Court noted it had already rejected Founders Insurance’s contention that it did not have notice of the lawsuit until after a final judgment had been entered.

Moreover, aside from the question of notice of the lawsuit, the court agreed with Ashbrook that it is undisputed that the plaintiff was informed of the accident itself by a lien letter mailed to the plaintiff on Oct. 10, 2006.

Ashbrook’s attorneys pointed out that in M.F.A. Mutual Insurance Co. v. Cheek, the Supreme Court of Illinois established the rule that "unless the alleged breach of the cooperation clause substantially prejudices the insurer in defending the primary action, it is not a defense under the contract."

The Fifth District Appellate Court pointed out that the Cheek rule has survived subsequent tweaking of the rules with regard to prejudice in the context of notice of a lawsuit clauses.

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Illinois Fifth District Appellate Court St. Clair County Circuit Court