Illinois Appellate Court Affirms Judgment Against Insurer Who Neglected Injury Case; Delatorre v. Safeway Ins. Co.

In this auto accident case, the defendant insurance company, Safeway Insurance Co., insured Ruben Delatorre under a policy of insurance with a limit of $40,000. Safeway hired an attorney to represent Delatorre in the personal injury lawsuit brought against Delatorre. However, the lawyer for Delatorre/Safeway never submitted a bill and was never paid. The lawyer apparently abandoned the case, and a default judgment was entered against Delatorre in the amount of $250,000. 

Then the plaintiff in the auto-injury case received an assignment from  Delatorre allowing the personal injury plaintiff to sue Safeway directly for the excess judgment. 

The judge in the Circuit Court of Cook County granted the plaintiff’s motion for summary judgment, ruling that Safeway breached its duty to defend and was liable for the entire $250,000 judgment.

Safeway appealed to the Illinois Appellate Court. The Illinois Appellate Court explained that “retaining an attorney, standing alone, does not discharge an insurer’s duty to defend.” The court unanimously concluded that Safeway breached its obligation to defend Delatorre.

There was one dissent in the opinion as to whether Safeway should be liable for the entire default judgment.

The issue discussed by the Illinois Appellate Court was whether an insurer should be responsible for the entire amount of a default judgment entered against its insured in excess of its policy limits. In the case, Conway v. County Casualty Insurance Co., 92 Ill.2d 388 (1982), the insurer, Country Casualty, refused to defend its insurer in a negligence lawsuit arising out of an automobile accident. Country Casualty claimed that it had no duty to defend on the grounds that it had already exhausted its policy limits by paying the underlying plaintiff’s expenses resulting from her injuries. Because the plaintiff in that case never executed a release in exchange for the payment, the lawsuit against Conway, the insured, remained pending. 

After settling with the plaintiff in that case for $10,000, Conway sought to recover this amount from Country Casualty, alleging that it had breached its duty to defend. The Illinois Supreme Court agreed that Country Casualty’s actions constituted a breach of duty to defend; then it considered whether Country Casualty should be liable for the full amount, a $10,000 settlement, when the company had already exhausted the policy limits. 

In the court’s decision, it said that “the mere failure to defend does not, in the absence of that faith, render the insurer liable for that amount of the judgment in excess of the policy limits.” That court also stated that Conway failed to establish that the $10,000 settlement was caused by Country Casualty’s breach of duty to defend and correctly found that Country Casualty had not acted in bad faith.

The Illinois Appellate Court in the Delatorre case stated that an insured may recover an excess judgment based on its insurer’s breach of duty to defend in two cases:  (1) tort-based as a punitive measure, where the insurer has acted in bad faith; or, (2) contract-based, as a compensatory measure, where the insured’s damages are proximately caused by the insurer’s breach of duty. 

In Illinois, it has been found that an accepted measure of damages for the breach of an insurance contract to defend is the amount of the judgment rendered against the insured. Therefore, the Illinois Appellate Court agreed that summary judgment was proper for the full amount of the damages for the breach of duty to defend that Safeway was responsible for.

Delatorre v. Safeway Ins. Co., 2013 IL App. (1st) 120852 (April 17, 2013).

Kreisman Law Offices has been handling automobile accidents, car crashes and truck injury cases for individuals and families who have been harmed, injured or died as a result of the carelessness or negligence of another for more than 37 years in and around Chicago, Cook County and its surrounding areas, including Rosemont, Rolling Meadows, Richton Park, Chicago (Bridgeport), Lindenhurst, Chicago (Lakeview), Evanston, Des Plaines and River Grove, Ill.

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