Home Page The Publication The Editor Contact Information Insurance Key issues Book Subscribe

Vol. 6, Iss. 3
March 22, 2017

Coverage Counsel Sanctioned In Failure To Cooperate Case

I don’t keep track of how often coverage lawyers get sanctioned for litigation conduct. I suspect not too often. And when it does happen it probably involves a discovery issue or some heated battle that went too far. So I mention American Access Casualty Company v. Alcauter, No. 1-16-0775 (Ill. Ct. App. Feb. 9, 2017) here because it involves a coverage lawyer being sanctioned for conduct that went directly to a coverage issue.

There is a lot of who knew what and when in the case. That court needed to get bogged down in all of that, but I’ll focus on the big picture.

Kimberly Krebs and Jose Alcauter were involved in an automobile accident. Krebs filed an arbitration action against Alcauter. American Access Casualty Company was Alcauter’s insurer. Alcauter did not appear at the arbitration hearing and Krebs was awarded $10,000. AACC filed an action seeking a declaratory judgment that it was not required to provide coverage to Alcauter on the basis that he “willfully failed to cooperate with an arbitration hearing pursuant to the policy’s cooperation clause.” However, “at trial on AACC’s declaratory-judgment action, it was revealed that, at the time of the arbitration hearing, Alcauter was in jail for an unrelated offense. Consequently, Alcauter could not possibly have willfully failed to cooperate with the arbitration.” Krebs filed a motion for sanctions against AACC and its coverage counsel arguing that “she had informed [coverage counsel] of Alcauter’s arrest and detention prior to trial and that AACC proceeded to trial anyway. The trial court granted Krebs’s request for sanctions.” [$12,678 in attorney’s fees and $865 in costs].

AACC appealed, arguing that [coverage counsel] “reasonably relied on the representations of counsel assigned to represent Alcauter at the arbitration that Alcauter had been contacted about the arbitration.” The Illinois appeals court affirmed the imposition of sanctions: “The record shows that, well before the scheduled trial date, [coverage counsel] was informed of the possibility that Alcauter had been incarcerated. Yet [coverage counsel] did no serious investigation of that possibility and failed to forthrightly bring Alcauter’s arrest to the attention of the trial court. Instead, AACC and [coverage counsel] elected to proceed to trial, knowing that its declaratory-judgment claim lacked factual support.”

Here is a little more detail, as explained by the court: “[Coverage counsel] failed to forthrightly bring Alcauter’s incarceration to the court’s attention when he learned of it. Krebs’s counsel sent the evidence of Alcauter’s incarceration to [coverage counsel] on April 13, 2015, as evidenced by the certified mail receipt signed by [coverage counsel]. For 29 days, [coverage counsel] did nothing. Then, instead of bringing Alcauter’s incarceration to the court’s attention—or at the very least, asking for more time to investigate the possibility that Alcauter had been in jail—[coverage counsel] filed a witness and exhibit list in anticipation of going to trial. [Coverage counsel] then proceeded to put Krebs through the process of a bench trial on May 20, 2015, all the while knowing that he had no factual basis to support AACC’s position. The trial court did not act unreasonably in concluding that counsel violated Rule 137 by failing to bring Alcauter’s incarceration to its attention and subjecting Krebs and the trial court to the time and expense of proceeding to trial.

AACC claims that [coverage counsel] did not have sufficient time to investigate the possibility that Alcauter had been in police custody before the case went to trial. We reject the notion that, in the six weeks that [coverage counsel] knew of the possibility that Alcauter was incarcerated, he could not have found out that Alcauter was incarcerated. [Coverage counsel] could have easily checked the IDOC [Illinois Department of Corrections] website, as Krebs’s counsel did, or obtained any number of public documents chronicling Alcauter’s arrest, conviction, and subsequent incarceration. But [coverage counsel] did not do that. While the criminal case listed Alcauter’s name as ‘Jose Alcauter-Cruz,’ [coverage counsel] made little effort to ascertain whether Alcauter had, in fact, been incarcerated. Critically, [coverage counsel] did not even request to continue the trial so that he could investigate the information that Krebs’s counsel sent him. Instead, he went to trial as if nothing had happened. Newman’s conduct represents the kind of vexatious and unreasonable behavior that Rule 137 is aimed to punish.”

All this over a $10,000 verdict.

Website by Balderrama Design Copyright Randy Maniloff All Rights Reserved