North American Elite Ins. Co. v. Menard, Inc.

Dist. Ct. did not err in dismissing plaintiff-excess insurance company’s action against defendant-insured, even though plaintiff asserted that defendant, who self-insured itself for first $2 million in underlying negligence claim, violated its duties as “insurer” under Illinois law when: (1) it failed to accept $1,985,000 offer to settle underlying action; (2) it entered into “high-low” settlement agreement that called for payment of $500,000 regardless of jury verdict and capped any payment at $6 million, (2) jury returned $13 million verdict in underlying action; and (3) defendant paid $2 million of said verdict and plaintiff paid $3 million of said verdict pursuant to terms of its excess insurance policy. While plaintiff asserted that defendant did not act in good faith when it rejected initial settlement offer, and that said actions resulted in plaintiff having to pay out $3 million on claim, defendant was not “insurer” for purposes of imposing duty to settle as alleged in instant complaint. Rather defendant had essentially $2 million deductible with respect to plaintiff’s excess insurance policy. Moreover, plaintiff’s insurance policy allowed plaintiff to participate in defense of underlying claim, and plaintiff failed to use this option. Also, policy failed to contain any language requiring defendant to act in good faith during litigation and to try to reach settlement below defendant’s $2 million cap.