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.”