Insurance Law

Plaintiff filed a lawsuit against her employer’s general commercial liability carrier alleging the insurance company unreasonably delayed payment after plaintiff was injured in an automobile collision with an underinsured motorist. Plaintiff sought relief under section 155 of the Illinois Insurance Code, which provides supplemental remedy for an insurer’s unreasonable delay in settling an insurance claim through an action for breach of contract. The district court granted judgment on the pleadings to the defendant and plaintiff appealed. The Seventh Circuit affirmed, finding that the insurance policy at question did not create a contractual duty for the insurer to investigate and settle the claim for underinsured motorist benefits in good faith and, without that, plaintiff did not have a viable legal theory to support her claim. (EASTERBROOK and BRENNAN, concurring)

In an insurance coverage dispute where the underlying matter dealt with a breach of contract between a hospital (the insured) and a software company, the insured argued that its insurance company was required to cover damages awarded to it in a trial in the underlying matter by referencing a partial settlement agreement between the insurer and the insured in which the insured argued permitted recovery for claims not covered by the insurance policy. The district court agreed with the insured and the insurer appealed. The Seventh Circuit also agreed and affirmed, finding that the negotiated terms of the settlement agreement should be given their full effect. (JACKSON-AKIWUMI and PRYOR, concurring)

In an insurance coverage matter, the court was asked to determine whether the insurer had a duty to defend under a claims made insurance policy where a lawsuit was filed after the expiration of the policy but where the attorney in the underlying lawsuit sent written notice, including an attorney’s lien and a demand for preservation of evidence, prior to the termination date of the insurance policy. The district court entered partial summary judgment in favor of the policyholder, finding that the attorney’s letter was a claim under the policy and that it triggered the insurer’s duty to defend. The district court did not determine whether there was a duty to indemnify and stayed the federal case pending the outcome of the underlying lawsuit in state court. The insurer appealed the stay order and asked the appellate court to reverse the partial summary judgment. During the pendency of the appeal, the parties in the state court reached a settlement and the case was dismissed. The Seventh Circuit dismissed the appeal as moot, explaining that the stay order was the only possible basis for appellate jurisdiction as the partial summary judgment order was not final and appealable and that the stay order “evaporated” with dismissal of the state case. (BRENNAN and ST. EVE, concurring)