Delatorre v. Safeway Insurance Co.
989 N.E.2d 268
Ill. App. Ct.2013Background
- Plaintiff Delatorre, as Ruben Delatorre’s assignee, sued Safeway Insurance for breach of the defense duty stemming from Ruben’s personal-injury actions.
- Safeway retained counsel for Ruben and defended under a reservation of rights, but provided little ongoing defense after the defense was engaged.
- Ruben was defaulted in the underlying personal-injury suit, culminating in a $250,000 default judgment.
- Safeway sent the default notice to the defense attorney but had no further meaningful communication or efforts to cure the default.
- Policy limits were exhausted before the default judgment; the trial court granted summary judgment for damages in the amount of $250,000, the default judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Safeway breach its duty to defend Ruben? | Delatorre: retention alone does not satisfy defense duties; insufficient action breached duty. | Safeway argues retention and limited transmission of the default order complied with defense duties. | Yes, Safeway breached the duty to defend. |
| Are damages recoverable beyond policy limits for breach of the duty to defend? | Damages proximately caused by breach may exceed policy limits. | Damages should be capped by policy limits unless bad faith or special causation shown. | Yes, damages beyond policy limits may be recoverable; the default judgment amount was proper. |
| Should the court address count II (vexatious and unreasonable delay) on remand? | Count II should be resolved; damages issue already decided. | Count II remains; need circuit court determination. | Remand to resolve count II. |
Key Cases Cited
- Brocato v. Prairie State Farms Insurance Ass’n, 166 Ill. App. 3d 986 (Ill. App. 1988) (insurer must actively defend; mere retention may breach)
- Thoresen v. Roth, 351 F.2d 573 (7th Cir. 1965) (mere retention of an attorney does not satisfy the duty to defend)
- Conway v. Country Casualty Insurance Co., 92 Ill. 2d 388 (Ill. 1982) (damages for breach may exceed policy limits if not bad faith; focus on causation by breach)
- Reis v. Aetna Casualty & Surety Co. of Illinois, 69 Ill. App. 3d 777 (Ill. App. 1978) (damages not inexorably within policy limits; measure tied to proximate cause)
- Green v. J.C. Penney Auto Insurance Co., 806 F.2d 759 (7th Cir. 1986) (insurer may be liable for excess judgment damages if breach caused the excess)