In First Mercury Ins. Co. v. Nationwide Sec. Serv's, Inc., No. 1–14–3924, --- N.E.3d ----, 2016 IL App (1st) 143924, 2016 WL 2927799 (Ill. App. Ct., 1st Dist., 3d Div., May 18, 2016), the claimants and the policyholder settled claims for 3,671 "blast faxes" against the policyholder although there were no claims for bad faith against the policyholder's carrier. The carrier at all times denied indemnity coverage for the harm allegedly caused by the policyholder's blast faxes, but provided the policyholder with an independent defense under a reservation of rights.
The policyholder settled anyway. The claimants, who took an assignment of rights against the carrier, asserted that the carrier could not contest the settlement because it acted in bad faith.
However, because neither the claimants nor the policyholder had ever alleged a claim of bad faith against the carrier, instead the Illinois appellate court ruled that they could not estop the carrier to contest the settlement:
¶ 18 As a preliminary matter, we address CE Design's argument that First Mercury breached its duty to settle in good faith and therefore is estopped from contesting coverage. Neither Litt nor CE Design filed a complaint or countercomplaint alleging a cause of action for bad faith refusal to settle. (Citation omitted.) Such an argument is therefore not properly before this court.
The Illinois appellate court affirmed a judgment of no coverage in favor of the carrier in this case.
Please Read The Disclaimer. ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with Supplements). You are invited to visit the author's website here. All rights reserved.
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