2014 IL App (1st) 132608
Ill. App. Ct.2015Background
- In 1999–2002, attorney Douglas Tibble missed deadlines representing Tango Music; Tango notified Tibble in Nov. 2002 it would seek redress, and Tibble reported the matter to his insurer in Dec. 2002; Tango sued for malpractice in 2005.
- Tibble joined Brooks, Adams & Tarulis (BAT). Multiple ARDC complaints led to a 2006 disciplinary suspension; BAT disclosed that matter to ISBA when applying for coverage.
- On Dec. 11, 2007 BAT (via partner Tarulis) answered an ISBA application question that, in the prior 5 years, no claim had been made against current members; BAT did not disclose Tango’s 2005 lawsuit because BAT treated the ‘‘claim’’ as having been made in Nov. 2002 (more than 5 years earlier).
- ISBA issued professional liability policies covering 12/30/07–12/30/08 and 12/30/08–12/30/09 (renewal application submitted Dec. 10, 2008). In 2009 three new malpractice suits were filed against BAT and were tendered to ISBA.
- ISBA sued to rescind both the 2008 and 2009 policies based on the alleged misrepresentation in the 2007 application. The trial court rescinded both; BAT appealed.
- The appellate court reversed rescission of both policies: it held the 2008 application did not misrepresent (the Tango ‘‘claim’’ occurred in 2002) and the 2009 renewal could not be rescinded based on a prior application’s misrepresentation where the 2009 application/policy did not incorporate the earlier application.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a misrepresentation in a prior application permits rescission of a later renewal when the renewal/applicant made no misrepresentation | ISBA: earlier false answer infects renewal and justifies rescission of 2009 policy | BAT: renewal application contained no misrepresentation; statute requires misstatement in that specific application or policy | Reversed: 2009 policy cannot be rescinded on basis of prior application absent incorporation or a misstatement in the renewal application |
| Whether BAT materially misrepresented existence of a claim in its 2007 application (question asking if any claim made in past 5 years) | ISBA: BAT failed to disclose Tango’s malpractice suit and thus answered "No" falsely and materially | BAT: Tango’s claim was made in Nov. 2002 (when Tango first threatened suit), outside 5‑year lookback, so "No" was true | Reversed: under policy definition of "claim" and industry usage, Tango’s claim arose in 2002; BAT’s answer was not a misrepresentation |
Key Cases Cited
- Lee v. John Deere Insurance Co., 208 Ill. 2d 38 (de novo review on statutory interpretation)
- A.D. Desmond Co. v. Jackson National Life Insurance Co., 223 Ill. App. 3d 616 (contract ambiguity rules favor insured)
- Phoenix Insurance Co. v. Sukut Construction Co., 186 Cal. Rptr. 513 (demand short of lawsuit can constitute a claim)
- Continental Casualty Co. v. Cuda, 306 Ill. App. 3d 340 (industry practice on claim definitions in lawyer malpractice coverage)
- Quarles v. Nationwide Insurance Co., 66 Ill. App. 3d 455 (construe ambiguities in insurance contract for insured)
- Spinelli v. Immanuel Lutheran Evangelical Congregation, Inc., 118 Ill. 2d 389 (court cannot judicially expand statutory language)