Answer to Interrogatory Raises Insurance Policy Limits in Injured Worker Case to $1 Million-Enough to Pay Jury’s Verdict

In 2006, Kipling Development Corp. was building a home in Will County, Ill. Kipling was the general contractor on the job.  The firm hired subcontractors to handle specific pieces of the job, including Speed-Drywall and United Floor Covering.

A service technician, Brian Harwell, entered the worksite to replace a furnace filter, using the stairs leading to the first floor to the basement. In the process, the stairs collapsed beneath Harwell, sending him falling into the basement. He sustained serious injuries and filed a lawsuit against Kipling as the general contractor of the building site.

In the lawsuit, it was alleged that Kipling was negligent in choosing not to properly supervise and direct construction and failing to furnish Harwell with a safe workplace and a safe stairway. In addition, Harwell also sued Speed-Drywall and United Floor Covering, claiming that they had modified or failed to secure the stairwell.

In September 2007, Kipling’s attorneys (paid for by Fireman’s Fund, as the insurance company had a duty to defend Kipling) filed an answer to Harwell’s interrogatories stating that Kipling had liability insurance with Fireman’s Fund Insurance Co., and that the maximum liability limit on the policy was $1 million.

Kipling’s policy with Fireman’s Fund included an endorsement requiring Kipling to obtain certificates of insurance and hold harmless agreements from all subcontractors. If Kipling failed to do so “at the time of an ‘occurrence’ involving a subcontractor,” then Fireman’s Fund would pay a maximum of $50,000 for all damages and defense costs due to any “bodily injury” “arising out of any covered acts” of the subcontractor.

In 2008, after Kipling’s lawyers had answered Harwell’s interrogatories, Fireman’s Fund sent Kipling a series of letters informing it that because Kipling had failed to comply with the endorsement, the limits of Fireman’s Fund’s liability had been reduced to $50,000 from the $1 million first revealed in answers to interrogatories.

Fireman’s Fund reiterated this position in 2011. But Kipling’s attorneys (who also represented Fireman’s Fund) did not amend the interrogatory answer to reflect this change, and Harwell’s attorneys had no knowledge of the change. In other words, the attorneys for Harwell had no idea that the policy limits had now fallen as low as $50,000 from $1 million, which had been disclosed in discovery by the answer to that specific interrogatory question about insurance policy limits.

In 2012, the matter went to a jury trial against only Kipling with Kipling’s defense funded by Fireman’s Fund.

Harwell argued then that the drywall contractor damaged the staircase, while Kipling’s counsel argued that the flooring contractor was responsible.  The jury found Kipling negligent and signed a verdict for $255,186 in damages in favor of Harwell. Kipling went out of business and had no assets to satisfy the judgment.

In 2013, Harwell brought suit for declaratory judgment against Kipling and Fireman’s Fund, asking for a declaration that Fireman’s Fund’s policy on Kipling covered Harwell’s damages. In response, Fireman’s Funds claimed that the endorsement limited its liability to $50,000 and the $50,000 limit had been reached in paying for Kipling’s defense. Both parties moved for summary judgment. The trial judge granted Fireman’s Fund’s motion.

Years before Harwell asked Fireman’s Fund to pay the damages for his injuries – indeed, years before Harwell litigated at a jury trial to determine Kipling’s negligence for the accident – Fireman’s Fund had already informed Kipling that it was limiting its liability to $50,000. Yet, Kipling’s lawyers (paid for by Fireman’s Fund, as required by his policy with Kipling), who had earlier told Harwell that the policy limit was $1 million, failed to inform Harwell of this material change in position.

This violated Illinois Supreme Court Rule 213(i), which states that “a party has a duty to seasonably supplement or amend any prior answer or response whenever new or additional information subsequently becomes known to that party.”

Our [S]upreme [C]ourt has instructed that their rules “are not mere suggestions. Rather, they have the force of law, and the presumption must be that they will be obeyed and enforced as written.” People v. Houston, 226 Ill. 2d 135 (2007).

The disclosure requirements of Rule 213(i) are mandatory and subject to strict compliance by the parties. Sullivan v. Edward Hospital, 209 Ill.2d 100 (2004). To allow a party to ignore its plain language “defeats its purpose and encourages tactical gamesmanship.” Clayton v. County of Cook, 346 Ill. App. 3d 367 (2003).

Enforcing the rule may even go so far as to reverse the jury verdict and require remand for a new trial.  See e.g., Copland v. Stebco Products, 316 Ill. App.3d 932 (2000).

The impact of this violation is obvious: [H]ad Harwell known in 2008 that Fireman’s Fund was limiting its liability to only $50,000, he could have sought settlement with Kipling or changed his trial strategy.  It does Fireman’s Fund no good to argue that it owed its duty to disclose only to Kipling, its insured; Harwell was the opposing party in the original lawsuit, Fireman’s Fund was controlling Kipling’s defense, and Fireman’s Fund therefore had a duty to be forthcoming under [S]upreme [C]ourt rules.

The appellate court added that instead of telling Harwell that the interrogatory answer showing liability coverage of a $1 million limit was also qualified by the additional endorsement information about the hold harmless and other requirements and the fact that the asserted limited of $50,000 was imposed was not persuasive. The $1 million figure was no longer accurate.  But instead of disclosing this information ($50,000 claimed limit), Fireman’s Fund went forward with the trial, handling Kipling’s defense.

At oral argument, Fireman’s Fund’s counsel admitted that no matter what the outcome of trial, Fireman’s Fund would not have paid out on the policy (because of the endorsement limiting liability to $50,000 due to subcontractor involvement and Harwell’s injury). In other words, by not supplementing the interrogatory answer, Kipling and Fireman’s Fund’s counsel fashioned a “heads I win, tails I win” outcome.

Fireman’s Fund’s agenda seems clear:  deny coverage to Kipling, control the flow of information to Harwell, fight Harwell tooth and nail through the original case, and after losing the trial – reveal the endorsement. Harwell relied on the information he was given to his detriment and Fireman’s Fund is now preventing him from collecting his damages.  Here, Kipling was the insured and Fireman’s Fund informed Kipling early on about the endorsement’s effect on liability limit.  But Kipling went out of business at some point in the litigation and in any event seemed to play no role in either lawsuit.

It was Harwell who needed to know about the endorsement and the liability limit to make informed decisions about the litigation and it was Harwell to whom Kipling’s attorney – the ones paid for by Fireman’s Fund – owed a duty to supplement the interrogatory under [S]upreme [C]ourt rules.

In conclusion, the Illinois Appellate Court reversed the summary judgment in favor of Fireman’s Fund stating broad principles of equity – the desire to prevent fraud and injustice – stating emphatically that Fireman’s Fund should not benefit from its attempted ruse.

Harwell v. Fireman’s Fund Insurance Co., 2016 IL App (1st) 152036 (June 30, 2016).

Kreisman Law Offices has been handling worksite injury cases, construction injury cases, truck accident cases, forklift accident cases, warehouse accident injury cases and catastrophic injury cases for individuals and families who have been injured or killed by the negligence of another for more than 40 years, in and around Chicago, Cook County and surrounding areas, including South Chicago Heights, Park Forest, Palos Hills, Thornton, Summit, Streamwood, Hillside, Harvey, Harwood Heights, Clarendon Hills, East Hazel Crest, Country Club Hills, Lynwood, Lyons, Merrionette Park, Morton Grove, Orland Hills, Palos Heights, Chicago (Archer Heights, Ashburn, Marquette Park, Garfield Park, Ravenswood Manor, Rogers Park, Rosehill, UIC, Wrigleyville, Armitage, Armour Square, Avondale, Back of the Yards, Bucktown, Buena Park, Cathedral District, Cragin, DePaul University Area, Diversey Harbor), Niles and Northbrook, Ill.

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