Insurance Law

Dist. Ct. did not err in granting defendant-insurance company’s motion for summary judgment in plaintiff-insured’s action, alleging that defendant breached terms of policy on plaintiff’s show horse by withholding consent for horse’s authorized humane destruction, and that defendant’s continued care and control over plaintiff’s horse long after policy had terminated constituted conversion and theft. Plaintiff’s contention that defendant breached policy by failing to provide mortality coverage was not supported by record, where: (1) although horse had serious foot injury, horse did not die, and no veterinarian rendered opinion that horse’s immediate destruction was imperative for humane reasons, as required under terms of policy; and (2) nothing in policy required defendant to agree to euthanize horse. Also, plaintiff could not establish conversion claim, where plaintiff failed to demand return of horse after defendant took control of horse to give treatment for horse’s leg. Moreover, plaintiff could not establish theft claim, where there was no evidence for jury to determine that defendant knowingly or intentionally exercised unauthorized control over horse, especially where plaintiff’s counsel conceded that defendant could keep horse.

Dist. Ct. did not err in finding that $5 million life insurance policy issued by plaintiff-insurance company was void ab initio, since record showed that policy was essentially illegal wagering contract, where, although insured nominally procured policy on his own behalf, $300,000 yearly policy premiums were loaned to insured by third-party with expectation that at end of term of loan insured would assign rights to policy to third-party, which in turn sold policy to other entities having no insurable interest in life of insured. Record also showed that: (1) insured, who essentially paid nothing for instant policy, could not afford policy premiums; (2) financing of premiums had been concealed from plaintiff; and (3) there was no serious risk that insured would sell rights to policy to entity not associated with scheme or would retain rights to policy for himself at end of loan term. Dist. Ct. erred, though, in finding that plaintiff could not retain all premiums paid on policy, but rather found that last entity to hold interest in policy could receive $13,000 refund on premiums that it paid because last entity was unaware of instant deceptive scheme to obtain rights to policy. Ct. of Appeals found that last entity was not innocent purchaser of policy so as to qualify for refund, but rather was sophisticated buyer that purchased rights to policy knowing risk that court could find policy void ab initio.

Dist. Ct. did not err in dismissing plaintiff-insured’s action for failure to state viable claim under Indiana law, where plaintiff alleged that defendant-insurance company wrongfully denied plaintiff benefits for loss of business income arising out of State of Indiana’s issuance of COVID-19 restrictions that greatly impacted its hotel business. Dist. Ct. could properly find that denial of benefits was consistent with language of policy that required that plaintiff establish that it incurred “direct physical loss or damages,” and that plaintiff’s allegations did not establish a direct physical loss or damages arising out of COVID-19 virus. Ct. rejected plaintiff’s claim that its allegation that virus particles had attached to hotel property was sufficient to qualify as direct physical loss or damage. Ct. further noted that plaintiff’s hotel had status as essential business during pandemic that allowed it to remain open to provide lodging and carryout food service. As such, COVID-19 restrictions did not render hotel completely uninhabitable.

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.