Insurance Law

Dist. Ct. did not err in granting defendant-insurance company’s motion for summary judgment in action by plaintiffs-assignees of insured, alleging that defendant owed plaintiffs proceeds from insurance policy, where: (1) insured had settled underlying Texas lawsuit, which concerned potential claim under policy with plaintiffs; (2) terms of settlement called for stipulation to entry of judgment in amount of $5.12 million against insured; (3) insured assigned to plaintiffs’ purported right to recover against defendant in coverage dispute; (4) plaintiffs promised not to execute on judgment against insured; and (5) defendant played no role in insured’s settlement of underlying action since defendant had no duty to defend under policy. Ct. found that: (1) instant type of settlement and assignment was neither enforceable nor binding against defendant because said settlement was collusive and distorted adversarial process; and (2) insured’s assignment was invalid as matter of relevant Texas public policy. Ct. further noted that plaintiffs could not use amount of settlement of Texas lawsuit as evidence as to what defendant owed plaintiffs in underlying claim under instant circumstances, where there was no full adversarial trial on matter.

Dist. Ct. erred in granting Intervenors-insurance companies’ motion for summary judgment, alleging that it was not obligated to defend defendant-insured in underlying defective-product lawsuit arising out of claim that windows manufactured by insured were defective and had allowed air and water to leak into and damage plaintiffs-homeowners’ homes. Under terms of insurance policies, Intervenors were not obligated to reimburse insured for replacement of defective windows that had been manufactured by insured. However, instant policies potentially covered damages caused by leaky windows to plaintiffs' homes, where exclusion in policies for property damage “to your product,” i.e., windows, did not apply to damage to plaintiffs walls and other elements of their homes that were not supplied to plaintiffs by insured. As such, Intervenors had duty to defend insured on all claims in underlying lawsuit.

Dist. Ct. did not err in dismissing as untimely plaintiff’s 2012 breach of contract action, alleging that defendant owed it $2 million for series of reinsurance transactions that occurred prior to 1993. Record showed that said contracts required parties to generate quarterly statements that netted various claims and payments between parties, and that said statements ceased after 1993. Moreover, Illinois 10-year limitations period for instant contracts applied, such that plaintiff had until 2003 to sue on said contracts. Ct. rejected plaintiff’s claim that under Ill. Statute (215 ILCS 5/206), it (as insurance company liquidator) could wait until its predecessor in interest competed its liquidation to submit final statement of account between parties, especially where plaintiff had not obtained judicial permission to delay submission of statements. Also, fact that plaintiff made initial $2 million demand in 2008 did not support its claim that separate contract arose at that time, since defendant never accepted plaintiff’s demand.

Dist. Ct. did not err in granting plaintiffs-insureds’ motion for summary judgment in action alleging that defendant-insurance company wrongfully withheld proceeds of insurance policy, where record showed that insureds’ 21-year old son intentionally set fire to plaintiffs’ home. While language in policy precluded plaintiffs from obtaining instant proceeds, said language was in conflict with Illinois Standard Fire Policy, which set minimum threshold for what fire-insurance policies must cover. Moreover, defendant failed to provide said minimum coverage, since: (1) defendant’s policy suspends for all insured parties coverage for intentional loss caused by any insured party; and (2) Standard Fire Policy suspends coverage only if hazard “increased by any means within control or knowledge of an insured.” As such, while son could not recover under Standard Fire Policy for his intentional acts, innocence co-insureds such as plaintiffs could still recover under Standard Fire Policy.

Dist. Ct. did not err in granting defendants-insureds’ motion for summary judgment in plaintiff-insurance company’s action seeking declaration that it did not owe duty to defend defendants in underlying action by condominium association alleging that insured-sub-contractor caused newly constructed multi-story condominium building to suffer water damage when subcontractor failed to apply adequate coat of sealant to exterior of building. While commercial general liabilities policies of sort issued by plaintiff are not intended to serve as performance bonds that would cover economic losses sustained as result of defects in or damage to insureds’ own work or product, underlying action alleged that subcontractor acted negligently, which would be sufficient to qualify as “occurrence” under terms of policy. Moreover, plaintiff had duty to defend where underlying complaint contained allegations of damage to building that went beyond subcontractor’s own work and product. In this respect, Ct. rejected plaintiff’s contention that scope of subcontractor’s project was entirety of building rather than just building’s exterior.