Thank you for viewing this Illinois Bar Journal article. Please join the ISBA to access all of our IBJ articles and archives.
Dramshop: Strict damage caps for the Illinois Insurance Guarantee Fund
Supreme Court resolves a split in appellate decisions to strictly cap the fund's liability, despite a harsh result for the parents in Rogers.
The Illinois Supreme Court has mended a divide between appellate court decisions regarding whether certain dramshop liabilities should be reduced from a jury's award of damages or from a statutory liability cap that applies to the Illinois Insurance Guarantee Fund. The court ruled that the cap defines the upper limit of liability, no matter how large the jury's award.
A split in the districts
Under the Illinois Insurance Code, the Guarantee Fund serves as a substitute for an insolvent insurer and steps in to represent defendants whose own liability insurers have gone belly-up. The Fund then becomes liable for the defendant's damages, minus any proceeds available from other insurance policies held by either the defendant or the plaintiff.
However, the Illinois Dramshop Act includes a statutory limit on the amount of liability that can be assessed against the Fund for claims involving dramshop liquor-related damages. That statutory cap was $130,338.51 at the time relevant to this lawsuit.
In Rogers v. Imeri, 2013 IL 115860, the plaintiffs' 18-year-old son died after a head-on collision on a rural highway in Effingham County. The other driver, 60-year-old John Winterrowd, was found to be intoxicated while heading home from Johnny's Bar and Grill, a licensed liquor establishment owned by defendant Gani Imeri.
The Rogers family received $26,550 from Winterrowd's automobile liability insurer and $80,000 from their own insurance provider, for a total of $106,550 of compensation for the loss of their son.
The Rogers family then filed a six-count complaint against Imeri, seeking damages pursuant to the Dramshop Act to be paid by the insurance provider for Johnny's Bar and Grill. Prior to trial, however, Johnny's insurance provider was declared insolvent and liquidated, and the Guarantee Fund thereafter stepped into the defendant's shoes.
The parties agreed that the $106,550 in insurance proceeds the Rogers family received should be offset from the Fund's liability pursuant to statute but, still prior to trial, they disagreed as to whether the offset should be subtracted from the statutory cap (which would result in a payment from the Fund of about $23,788) or from whatever amount the jury eventually found to be the total damages (which could result in a payment from the Fund of up to, but not exceeding, the statutory cap of $130,338).
The trial court ruled that the dispute over how to offset the liabilities was premature because the plaintiffs had not yet obtained a verdict against the defendant, but the court certified the question for an interlocutory appeal to the fifth district appellate court.
The fifth district panel ruled that the offset should be subtracted from the eventual jury verdict and then reduced, if necessary, down to the statutory cap of $130,338. That judgment was the opposite of how the first district appellate court had previously ruled in Guzman v. 7513 West Madison Street, 2013 IL App (1st) 122161.
Liability may not exceed the statutory cap
After a detailed analysis of the relevant statutes, the supreme court determined that the legislature did not intend for the Guarantee Fund to be an additional source of compensation, and that its liability may never exceed the statutory cap.
"Thus,...the Fund's obligation is linked with Imeri's obligation to pay damages," Justice Mary Jane Theis wrote for the unanimous court. "In this case, Imeri's obligation cannot exceed [the statutory cap of] $130,338.51...And that is the maximum extent of the Fund's obligation."
Since the defendant's liability, and the Fund's related obligation, may not exceed the statutory cap, any jury verdict above that amount would be a legally improper starting point for offsetting the other insurance proceeds.
"[T]he Fund's obligation cannot be expanded by a jury's verdict; it can only be reduced by other insurance," the supreme court held. "The setoff of the amount that the Rogerses received from the automobile liability insurance policies should come from Imeri's maximum dramshop liability," which is capped pursuant to the Dramshop Act.
Chicago-area liquor-law attorney Majdi Y. Hijazin said he believes the supreme court correctly repaired the split between appellate districts. The result is harsh for the Rogers family, who apparently will not be able to recover any more than $130,338 to compensate for the loss of their son due to insufficient insurance policies held both by themselves and by Winterrowd.
Nonetheless, Hijazin said there are sound policy reasons for limiting the exposure to liability for liquor license holders with proper dramshop insurance.
"This is a case of substandard insurance policies and the Rogers - God bless them, I feel bad for them - were only paid about $106,000 from the auto-insurance companies to compensate for losing their son," Hijazin said. "There's no amount of money that will fully reimburse you for that, but the $106,000 sure doesn't get them anywhere near feeling whole again.
"It is a sad situation," he continued, "but the court said look, these statutes are pretty clear, and it interpreted the statutes strictly. The laws say you can get something from the Guarantee Fund, but only up to the statutory cap and only after you have exhausted all amounts under any and all insurance policies."
While Hijazin agreed that liquor-license holders have a legitimate duty to protect their patrons and the public, which is the policy behind dramshop laws, the bar owners cannot be fully liable for the actions of their customers and the liability cap for their insurance providers is therefore equally well founded in policy and law.
"Even if the jury in this case were to enter a million-dollar verdict, Imeri and the Guarantee Fund would not be on the hook for any more than the statutory cap," Hijazin said. "It's a shame that the auto-insurance policies apparently couldn't come anywhere close to covering a verdict like that, but that does not shift the burden to the bar owner or the Guarantee Fund."