Insurance Law

Dist. Ct. did not err in dismissing plaintiffs-insurance beneficiaries’ action against defendant-insurance company, alleging that defendant breached terms of its life insurance policy by failing to pay plaintiffs $3 million in policy proceeds under circumstances where policyholder had failed to make premium payment five months prior to her death. Section 234(1) of Illinois Insurance Code prohibits insurers from canceling policy within 6 months after policyholder missed premium payment deadline unless insurer had given policyholder notice that met certain requirements set forth in section 234(1), and Notice that defendant gave to policyholder, which essentially tracked language set forth in section 234(1), gave policyholder adequate notice of consequences of nonpayment of premium that included cancellation of policy if premium had not been paid by certain date. Fact that relevant notice provisions appeared on back side of Notice sent to policyholder, or that Notice did not specify that payment could be made to agent did not require different result.

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.

Dist. Ct. did not err in dismissing for failure to state viable cause of action, plaintiff-insured’s claim, alleging that defendant-insurance company wrongfully denied its claim for insurance benefits arising out of defendant’s policy, where plaintiff allegedly incurred business losses when it had to close its stores under government orders due to COVID-19 pandemic. Defendant's policy contained broad virus exclusion that stated that defendant would not pay for loss or damage caused by or resulting from any virus, and Dist. Ct. could properly find that said clause precluded coverage for plaintiff’s claim. While plaintiff argued that regulatory estoppel should prevent virus exclusion clause from barring plaintiff’s claim for coverage, where plaintiff alleged that defendant had misrepresented virus exclusion clause to officials at Illinois Department of Insurance, Illinois has not adopted or recognized regulatory estoppel. Ct. further rejected plaintiff’s claim that virus exclusion clause did not apply to other covered areas in policy.