CLAIMS ISSUES POTPOURRI October 24, 2019

CLAIMS ISSUES POTPOURRI October 24, 2019

Condition 2 Condition 2. During the term of this policy and any renewal thereof, the named insured shall immediately inform the Company of each change in the garaging address of an insured vehicle, of each new resident driver, of the suspension or revocation of the driver license of the named insured or of any resident driver, and of any other change in the persons or risks for which coverage is provided hereunder so as to allow the Company to determine whether and under what premium and conditions to continue coverage under this policy.

Condition 2 Hypothetical No. 1 December 31, 2018: Named Insured Began driving for Uber January 1, 2019: Policy Incepts Can we use Condition 2?

Condition 2 Hypothetical No. 2 January 1, 2019: Policy Incepts January 2, 2019: Named Insured begins driving for Uber Can we use Condition 2?

Condition 2 Hypothetical No. 3 January 1, 2019: Policy Incepts January 2, 2019: Named Insured’s girlfriend moves into household, but she would not change the premium Can we use Condition 2?

Condition 2 Hypothetical No. 4 January 1, 2019: Policy incepts and Named Insured does not disclose girlfriend who lives with him, but she would not have changed the premium January 2, 2019: Named Insured buys a second car, but does not disclose girlfriend Can we use Condition 2?

Condition 2 Hypothetical No. 5 January 1, 2019: Policy incepts January 2, 2019: Girlfriend moves in with insured and, if disclosed, she would change the premium July 1, 2019: Policy renewed July 2, 2019: Loss occurs with girlfriend driving insured vehicle Can we use Condition 2?

Condition 2 Hypothetical No. 6 January 1, 2019: Policy incepts January 2, 2019: Insured begins driving for Uber June 30, 2019: Insured stops driving for Uber July 1, 2019: Policy renewed July 2, 2019: Loss occurs and Uber use discovered Can we use Condition 2?

Negligent Entrustment Reasonable belief exclusion (p) to any person who operated or used an owned automobile or a non-owned automobile without a reasonable belief that he or she is entitled to do so, however, this exclusion does not apply to the named insured

Negligent Entrustment A claim for negligent entrustment asserts that the defendant gave another person express or implied permission to use or possess a dangerous article or instrumentality which the defendant knew or should have known would likely be used in a manner involving an unreasonable risk of harm to others. Evans v. Shannon, 201 Ill. 2d 424, 434 (2002). In the context of automobiles, “[t]here are two primary considerations in negligent-entrustment analysis: (1) whether the owner of the vehicle entrusted the car to an incompetent or unfit driver, and (2) whether the incompetency was a proximate cause of a plaintiff's injury.” Id. citing Taitt v. Robinson, 266 Ill. App. 3d 130, 132 (1994).

Negligent Entrustment The general rule is that “the alleged incompetence of the driver must be a proximate cause of the negligent act that caused the injury [citation], and the entrustor is liable, but only if his conduct is the legal cause of the complained-of bodily harm.” Watson v. Enterprise Leasing Co., 325 Ill. App. 3d 914, 922 (2001). “Legal cause” is a component of proximate cause and is “largely a question of foreseeability.” Abrams v. City of Chicago, 211 Ill.2d 251 (2004). “The relevant inquiry is whether ‘the injury is of a type that a reasonable person would see as a likely result of his or her conduct.’” Id. quoting First Springfield Bank & Trust v. Galman, 188 Ill. 2d 252, 260 (1999).

Negligent Entrustment In Luethi v. Yellow Cab, 136 Ill. App. 3d 829 (1st Dist. 1985) the court stated in reversing the dismissal of a negligent entrustment count of a complaint in case involving the lease of a cab to an unlicensed driver that: "Numerous courts have determined that entrusting a car to an unlicensed driver is tantamount to entrusting a car to an incompetent driver, and therefore an independent act of negligence. Further, many of those courts adopt the view that the negligence of the unlicensed driver provides a causal connection necessary to establish liability in tort between the negligence of the entrusting automobile dealer and the injuries sustained by the plaintiff. This appears to be the preferred view." (citation omitted) (emphasis added).

Play Jiu Jitsu with Negligent Entrustment The exclusion sought to be applied by insurer of the at fault tortfeasor, will typically, like that of American Alliance, have an exception for the named insured and perhaps a resident relative. American Access v. Novit, 2018 IL App (1st) 171048 held that there is coverage for negligent entrustment based upon the insuring agreement of the policy.

Play Jiu Jitsu with Negligent Entrustment The policy, in relevant part, provides as follows: Part II – Uninsured Motorist Coverage Uninsured Motorist Coverage. To pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of property damage to a vehicle described in the policy and bodily injury, including death resulting therefrom, hereinafter called "bodily injury", sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured motor vehicle

Play Jiu Jitsu with Negligent Entrustment "uninsured motor vehicle" includes a trailer of any type and means: a motor vehicle or trailer with respect to the ownership, maintenance or use of which, there is no bodily injury liability bond or insurance policy applicable at the time of the accident with respect to any person or organization legally responsible for the use of such automobile, or said bond or insurance policy has limits less than that required by the Illinois Financial Responsibility Law.

Verifying Insurance with Secretary of State The Illinois Vehicle Code, 215 ILCS 5/143a(6), states in relevant part: (6) Failure of the motorist from whom the claimant is legally entitled to recover damages to file the appropriate forms with the Safety Responsibility Section of the Department of Transportation within 120 days of the accident date shall create a rebuttable presumption that the motorist was uninsured at the time of the injurious occurrence.

Verifying Insurance with Secretary of State There is a two-stage process from the Secretary of State to verify coverage. Step one, the SOS sends correspondence to the owner to inquire of insurance coverage. If they do not receive a response. then they send the first letter stating they will certify in 30 days. Step two, the SOS does an additional search and sends correspondence again. If after that they do not have a response, then they certify. Only with the certification should an at fault tortfeasor be considered uninsured.

Verifying Insurance with Secretary of State Effective January 1, 2020 that will change with the provision of insurance information to the Secretary of State. Not only with the information be more accurate, but it will be provided quicker.

Verifying Insurance with Secretary of State Obtaining information from the SOS with the new information cannot be done by FOIA, but must be done by court order, subpoena, or consent. This may be able to be done by Rule 224 petition or subpoena in the underlying case.

Questionable denials from other insurers In two recent cases an insurer either improperly rescinded a policy or waived the right to rescind and we were able to deny the uninsured motorist claim. Particularly rescissions should be investigated. A rescission must be taken promptly and adhered to. An insurer cannot pay one claim and then deny another based upon rescission unless it did not know the basis for the rescission at the time of the payment. Section 154 of the Insurance Code is a limitations on the actions of an insurer. Accordingly, once a policy is expired or renewed, it cannot be rescinded.

Section 155 Under Section 155, the court may award attorneys fees and penalties in any action by or against an insurance company where there is in issue the liability of the insurance company on a policy or the amount of loss, or for an unreasonable delay in settling a claim, and the company’s action or delay is “vexatious or unreasonable.” 215 ILCS 5/155.

Section 155 Damages under Section 155 are not proper where there is a bona fide, or true dispute as to coverage. O’Connor v. Country Mutual Insurance Co., 2013 IL App (3d) 110870. Even if the insurer’s coverage position is ultimately found to be incorrect, Section 155 damages are not proper if a true, bona fide, coverage dispute existed.

Jones v. American Family Ins. Co., 2019 IL App (1st) 18177-U Penalties and attorneys’ fees pursuant to Section 155 were appropriate where the insurer denied coverage to a car destroyed as a result of arson based on the concealment and misrepresentation of facts surrounding the fire because they did not create a bona fide defense. The insured initially reported that she had parked her car across the street from a client because she had a flat tire, placed a new spare tire in her car and called her brother to pick her up. Days later, she was told that someone had “torched” her car, and she went back to that location to find that it had been burned.

Jones v. American Family Ins. Co., 2019 IL App (1st) 18177-U Upon investigation, the insurer learned that: – the insured’s ex-boyfriend lived at the residence in front of which the insured parked the car; – there was no new tire in the car; and – the insured’s telephone records showed that she did not call her brother. The insured later stated that she was unaware that her ex-boyfriend lived at that address, that she called her boss and not her brother, and continued the say she bought a new tire.

Jones v. American Family Ins. Co., 2019 IL App (1st) 18177-U The insurer denied the claim based on misrepresentations and concealments of material facts surrounding the fire damage, and the insured filed a lawsuit that sought, among other things, attorneys’ fees and penalties under Section 155 The Court awarded damages under Section 155, finding that the insurer acted vexatiously and unreasonably because: – There was no dispute that the car was damaged by fire; – The insurer presented no evidence of fraud; and – The insured consistently maintained that her car was damaged by arson on the date of the reported incident.

Negron v. United Equitable Insurance Co., 2019 IL App (1st) 172846-U The Court affirmed the award of damages under Section 155 where the insurer was found to unreasonably delay the settlement of the insured’s claim after his vehicle was struck in an accident. The insured was in a car accident on September 8, 2014 that made his vehicle inoperable, and immediately notified his carrier. When the carrier had not adjusted the insured’s claim by April 2015, the insured filed suit, seeking, among other things, damages under Section 155.

Negron v. United Equitable Insurance Co., 2019 IL App (1st) 172846-U The trial court found that the carrier’s delay in adjusting the insured’s claim was unreasonable and vexatious because: – The carrier continued to insist on a letter of experience, despite the fact that the insured informed the carrier that he could not obtain one, the carrier had requested one itself, the policy did not require it, and the carrier knew that the plaintiff had a clean driving record; – This type of claim was typically paid within 14 to 21 days; – The claim file showed that the carrier determined that it was a total loss early in the process but made no effort to settle; and – The carrier changed its basis for delaying the settlement by claiming that the insured was seeking coverage from the other driver’s carrier and that it could not communicate with the insured because he was represented by counsel.

Negron v. United Equitable Insurance Co., 2019 IL App (1st) 172846-U On appeal, the carrier did not dispute that the trial court’s findings were sufficient to support a finding that its conduct was unreasonable, but argued that a bona fide dispute existed over coverage of the insured’s rental car, storage fees for the vehicle and on whether the insured was entitled to replacement cost The Court rejected the carrier’s argument because the disputes were not the reason for the delay in adjusting the insured’s claim and did not arise until much later An insurer is not permitted to unreasonably and vexatiously delay the handling of an insured’s claim indefinitely, as long as it can, at some point in the future, find a dispute with the insured over coverage.

United Equitable Insurance Co. v. Michele, et al., 2019 IL App (1st) 180087-U The court awarded attorneys’ fees and costs under Section 155 to insureds where the insurance company denied a claim and tried to rescind the policy, finding that the insurer did not investigate its basis for rescission, or that its investigation led to a bona fide dispute. The insurer in that case filed an action to rescind a policy based on its contention that the insured’s adult son, who was driving at the time of the accident, was an undisclosed resident at the insured’s household.

United Equitable Insurance Co. v. Michele, et al., 2019 IL App (1st) 180087-U The insureds filed a counterclaim for attorneys’ fees stating that, not only had their son lived in a separate residence since before the policy was issued, but the insurer did not attempt to investigate whether their son lived with them before rescinding their policy. The Court noted that, before rescinding the policy, the insurer had received an affidavit from the son’s roommate, stating that the son had lived with him and not with his parents since 2013, the year the insureds applied for the policy.

United Equitable Insurance Co. v. Michele, et al., 2019 IL App (1st) 180087-U The insurer took no action to investigate further or contradict the affidavit. A note in the claim file stating that “at no time is any offer to be made” further indicated that the insurer made its decision to deny the claim without substantive investigation, which indicated bad faith.

PRO TIP NEVER WRITE: “at no time is any offer to be made” When you write a claim note, think about the kinds of questions you will be asked at a deposition about that note.

Hess v. State Auto Insurance Companies, 2019 IL App (5th) 180220 Issue – Whether an automobile insurance policy’s limits of liability could be stacked either two or four separate times. The Declarations contained three separate physical pages (two containing relevant information). Four vehicles were covered under the policy.

Hess v. State Auto Insurance Companies, 2019 IL App (5th) 180220 On one page of the Declarations, three autos were listed as having a premium paid in a table, indicating that there was 100,000 per person, 300,000 per accident liabilitybodily injury coverage for each of those three vehicles. One the next physical Declarations page, there was one additional auto listed as having a premium paid, and the table was repeated, indicating that there was liabilitybodily injury coverage for the vehicle.

Hess v. State Auto Insurance Companies, 2019 IL App (5th) 180220 Three claimants were involved in an accident, with each claimant incurring damages over 100,000. There were two amended Declarations pages, each one removing one of the vehicles covered. Both amended Declarations pages listed the amended date as after the accident involving the claimants

Hess v. State Auto Insurance Companies, 2019 IL App (5th) 180220 The claimants sought to stack or aggregate the policy limits of liability four separate times, from 100,000 per persons/ 300,000 per accident to 400,000 per persons/ 1.2 million per accident. – The claimants argued that the policies could be stacked four separate times because there were multiple limits of liability listed, and there were four separate vehicles. – The claimants also argued that the policies could be stacked because of the existence of the two separate amended Declarations pages. The circuit court held in favor of the claimants, and ordered the policy stacked four times.

Hess v. State Auto Insurance Companies, 2019 IL App (5th) 180220 The Appellate Court modified the circuit court’s ruling, holding that the limits of liability could be stacked twice, resulting in 200,000 per person/ 600,000 per accident coverage. The Appellate Court held that the two separate amended Declarations pages clearly did not apply, as they were not in existence at the time of the accident. The Appellate Court further held that the policy could be stacked twice, because the limits of liability were listed twice in the Declarations, creating an ambiguity.

Hess v. State Auto Insurance Companies, 2019 IL App (5th) 180220 The Illinois Supreme Court is currently reviewing the Appellate Court’s decision The insurer has taken the position that bodily injury liability limits should not be stacked as there can never be an ambiguity as to which limit of liability applies – only the car involved in the accident could possibly apply. – Which is how the vast majority of other jurisdictions have resolved the issue.

Key Takeaways Listing the limits of liability multiple times in an automobile policy may result in stacking or aggregating the coverages. Stacking certainly applies to uninsured and underinsured motorist coverage. – And pending the Illinois Supreme Court’s Ruling, may or may not apply to bodily injury coverage. An unambiguous anti-stacking provision and only listing uninsured /underinsured coverage’s limits of liability once in the declarations will remove the threat of stacking or aggregating the coverages.

State Farm Mutual Automobile Insurance Co. v. Leon, 2019 IL App (1st) 180655 The insured had an uninsured motorist policy, which required cooperation, proof of loss, and required that the insured make any demand for arbitration within two years following the date of the accident. Following an accident involving the insured, the insurer began its investigation and sent the insured a letter requesting specific details and documents surrounding the accident. The insured’s attorney submitted the police report from the accident, as well as a letter from another insurance company, explaining that the other insurance company did not cover the bodily injuries.

State Farm Mutual Automobile Insurance Co. v. Leon, 2019 IL App (1st) 180655 The insurer submitted multiple letters to the insured’s attorney, reserving its rights and requesting a recorded statement from the insured, as well as proof that neither the driver of the vehicle, nor the owner, had insurance coverage. – The insurer did not receive any of the requested information from the insured. The insurer then sent another letter, stating if it did not hear from the insured within 30 days, it would close its file under the assumption that the insured was no longer interested in pursuing a claim. The two-year limitation period in which to demand arbitration expired.

State Farm Mutual Automobile Insurance Co. v. Leon, 2019 IL App (1st) 180655 After the expiration of the limit, the insured’s attorney sent a letter asking for clarification for the requested information. The insurer filed a complaint for declaratory judgment, asserting that there was no uninsured motorist coverage available because the insured failed to timely demand arbitration. The insured claimed that the policy’s tolling clause, as well as section 143.1 of the Illinois Insurance Code, tolled the time she needed to make a demand for arbitration, claiming that she filed a sufficient proof of loss. The circuit court held that the insured did not file a sufficient proof of loss to trigger the tolling provision of the policy or section 143.1.

State Farm Mutual Automobile Insurance Co. v. Leon, 2019 IL App (1st) 180655 Illinois law recognizes limitations periods as valid contractual provisions in insurance contracts. Section 143.1 of the Insurance Code restricts limitations provisions and tolls the running period for an insured to bring a legal action once proof of loss has been filed. The purpose of Section 143.1 is to prevent insurance companies from sitting on claims, allowing the limitations period to run, and depriving insureds of litigating their claims.

State Farm Mutual Automobile Insurance Co. v. Leon, 2019 IL App (1st) 180655 The Appellate Court held that it was evident that the insured did not file a sufficient proof of loss. – The Court noted that, for an uninsured motorist claim, proof of loss would be proof that there is no other insurance available to cover the insured’s claim. The Court noted that the documentation the insurer received did not indicate whether the vehicle’s driver or owner had any applicable insurance coverage. The Court also held that the insurer did not sit on the insured’s claim. There was no coverage, as the insured did not timely file a demand for arbitration.

Key Takeaways A limitations period is enforceable in an insurance policy. – However, an insurer cannot attempt to sit on a claim delaying it so that the limitations period passes. A limitations period is tolled once proof of loss is submitted. – Proof of loss can be defined within the policy. – As to uninsured motorist coverage, proof of loss requires proof that no other insurance covers the loss.

Gean v. State Farm Mutual Automobile Ins. Co., 2019 IL App (1st) 180935 The insured had underinsured motorist coverage with a limit of 100,000 for bodily injury, as well as automobile medical payments with a limit of 1,000. The insured was involved in two separate collisions. – In the first collision, the at-fault driver’s insurer paid 20,000 as settlement of the insured’s claim. The insured’s insurer paid the 1,000 medical payment. – In the second collision, the at-fault driver’s insurer paid 20,000 as settlement of the insured’s claim. The insured’s insurer paid the 1,000 medical payment.

Gean v. State Farm Mutual Automobile Ins. Co., 2019 IL App (1st) 180935 The insured presented underinsured claims to his insurer, which were submitted to arbitration pursuant to the policy provisions. The arbitrators awarded the insured 19,000 for the injuries sustained in the first accident, and 25,000 for the injuries sustained in the second accident. The insurer informed the insured that the arbitration awards were subject to setoffs equal to the amounts he recovered from the medical payments, and the other insurance providers. – Resulting in 0 for the first accident, and 4,000 for the second accident.

Gean v. State Farm Mutual Automobile Ins. Co., 2019 IL App (1st) 180935 The policy had a “Nonduplication” provision which reduced the amount of payment owed to the insured under his underinsured coverage by damaged that have already been paid. The policy also restricted the amount of payment owed under underinsured coverage to the total amount of damages resulting from bodily injury less the amounts actually recovered. The insured tendered the 4,000 balance to the insured, who rejected it, claiming he was entitled to the full 19,000 and 25,000 he was awarded in arbitration. The circuit court ultimately held that the insurer was entitled to a setoff under the policy provisions, leaving a total balance of 4,000 owed to the insured.

Gean v. State Farm Mutual Automobile Ins. Co., 2019 IL App (1st) 180935 Underinsured coverage is a statutory creation designed to fill the gap between an insured’s claim and the amount recovered from a tortfeasor’s insurance. – The coverage is not intended to permit an insured to recover amounts from an insurer exceeding the coverage provided by the underinsured motorist policy. The purpose of underinsured coverage is to place the insured in the same position he would have obtained had the tortfeasor, the at-fault driver, carried adequate liability insurance.

Gean v. State Farm Mutual Automobile Ins. Co., 2019 IL App (1st) 180935 The Appellate Court held that the insurance policy adhered to well-established principles of public policy behind the underinsured motorist statute. – Had the insured accepted the 4,000, he would have been in the same position if the at-fault driver in the second collision had a coverage limit of 25,000. The policy also did not permit a double set-off, as the insured was not awarded the full 100,000 for either underinsured claim.

Gean v. State Farm Mutual Automobile Ins. Co., 2019 IL App (1st) 180935 Underinsured motorist coverage is intended to put the insured in the same position he or she would have been if the at fault driver had sufficient liability coverage. A policy may properly require any amounts received in a loss to set-off any underinsured claim.

Using Google Maps for Historical Purposes Step 1: Get to the address using Google Streetview and ascertain the date the image was taken. In this case, the image was taken on October 2018.

Using Google Maps for Historical Purposes Step 2: Click the clock, which will give a drop down of the available images for that location.

Using Google Maps for Historical Purposes Step 3: Click the earlier date to see if it back further in time. In this case, the earlier image is from July 2017.

Using Google Maps for Historical Purposes Step 4: Remove the dialogue box and zoom in on the portion of the image you want. In this case there is a difference between damage to the pole.

Settling Cases: Medicare Part C Medicare Parts A and B are the traditional Medicare program where the government, through CMS, administers the payments. Medicare Part C or Medicare Advantage Plans are a situation in which private insurers collect premium from the patient and benefits from the government and administer the program.

Settling Cases: Medicare Part C 1. A final demand letter from CMS does not include payments made by a Part C provider on behalf of the claimant. 2. A final demand letter from CMS does not include payments made by a Part C provider on behalf of the claimant.

Settling Cases: Medicare Part C 3. A final demand letter from CMS does not include payments made by a Part C provider on behalf of the claimant. 4. A final demand letter from CMS does not include payments made by a Part C provider on behalf of the claimant.

Settling Cases: Medicare Part C The Medicare Advantage Plan steps into the shoes of CMS and has all of the rights and remedies available to CMS. Most plaintiffs’ counsel do not know the difference between traditional Medicare and Medicare Part C.

Settling Cases: Medicare Part C As a result, you will need to do some education. I have had good success sending this letter to plaintiffs’ counsel.

Settling Cases: Medicare Part C If the claimant is over 65 or a Social Security recipient, then ask and confirm if a claimant is a Part C recipient. Include defense and indemnity language in the release, including from the lawyer, for all interests including Medicare and any Medicare Advantage Plan.

Settling Cases: Medicare Part C There is no safe harbor, that is American Alliance is responsible irrespective of whether there is a misrepresentation. Accordingly, the steps to protect against adverse results are all the more necessary.

Settling cases: minors, disabled persons, and death claims Minors and disabled persons do not own their claims, their parents or guardians do, and court approval is needed to settle a third-party claim. If the settlement involves a death, whether first-party or third-party, court approval is almost always needed.

Settling cases: minors, disabled persons, and death claims The first-party claims of minors or disabled persons may be able to be settled without court assistance, but that will be determined by the amount of the settlement. Always make sure you are dealing with the right guardian, especially if the parents are divorced

Settling cases: liens Make sure you record all liens that you receive in the file Medical liens, attorneys’ liens, workers’ compensation liens (that may benefit AACC in an uninsured or underinsured motorist case).

Issues with claims to be on the lookout for with regard to rideshare More vehicles than people on a policy, especially where one of the vehicles is a high gas mileage vehicle. Passengers in the vehicle at the time of the accident unrelated to and not living with the driver, particularly if they are seated in the back seat.

Patrick Eckler 312-578-7653 deckler@pretzel-st ouffer.com Paula Villela 312-578-7659 pvillela@pretzel-sto uffer.com Jonathan Federman 312-578-7461 jfederman@pretzel-s touffer.com