Illinois Appellate Court Reviews Applicability of Insurance Policy Cooperation Clause in a Motor Vehicle Accident Arbitration

In a recent opinion, an Illinois appellate court considered whether an insurance company had a duty to provide coverage to the plaintiff, its insured, related to a motor vehicle accident in light of the fact that the plaintiff violated the cooperation clause in the insurance policy. More specifically, the insurer claimed that the plaintiff failed to appear at a mandatory arbitration proceeding related to the underlying personal injury litigation and the insurance subrogation claim. This resulted in an order from the arbitration judge debarring the plaintiff from rejecting any unfavorable arbitration award.

Following the close of the insurance company’s claim, the defendants filed a motion for judgment in their favor, which the lower court granted. It based its opinion on a finding that despite the insurer’s prima facie showing that the insured failed to cooperate, the insurer failed to provide adequate evidence demonstrating that it suffered substantial prejudice as a result of the insured’s non-cooperation. An appeal followed.

Before delving into its analysis, the appellate court reviewed the rules applicable to court-annexed arbitration. According to Illinois law, certain types of lawsuits are subject to a mandatory arbitration proceeding before a three-person arbitration panel. The panel has the authority to make an award following the arbitration hearing and to dispose of the claims. In general, the award is not binding, and any party at the hearing can file a notice rejecting the award within 30 days and take the matter to trial. While a party represented by legal counsel at the hearing does not waive the right to reject the award if he or she does not appear, the court has discretion to debar the party from rejecting the award if the party’s absence amounted to a failure “to participate in good faith and in a meaningful manner.”

On review, the appellate court made two findings. First, it determined that the lower court did not commit an error when it ruled that the order debarring rejection of the arbitration award by itself did not establish that an insurer suffered substantial prejudice due to the insured’s lack of cooperation under the cooperation clause of an insurance policy. The court did note, however, that it was not foreclosing the possibility that in some cases, a debarring order could show that the insurer suffered substantial prejudice.

Second, the court upheld the lower court’s determination that the insurer failed to provide sufficient evidence to make a prima facie case that its insured’s failure to attend the hearing resulted in substantial prejudice. The appellate court noted that a finding of substantial prejudice is fact-specific and that the burden is on the insurer to provide evidence showing that it was actually prejudiced by its insured’s absence. Here, the insurer offered only speculative testimony from individuals who did not attend the arbitration proceeding.

At Therman Law Offices, we have substantial experience assisting motor vehicle accident victims and their families with seeking compensation after a painful and devastating accident. For many victims, navigating the legal system is a new experience that can add to the stress of recuperating from injuries and coping with the stress of the accident. Our compassionate and knowledgeable team of car accident lawyers will provide your family and you with the personalized and dedicated legal counsel that you deserve. To schedule your free consultation, call us now at 312-588-1900 or contact us online.

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