Illinois Court Protects Insurers from Unripe Coverage Disputes

Byer Clinic & Chiropractic, Ltd. v. State Farm Fire & Cas. Co. (Illinois Appellate Court Mar. 12, 2013)

An Illinois Appellate Court recently held that an insurer’s defense obligation is not ripe for adjudication if that insurer is defending its insured in an underlying court action, even if subject to a reservation of rights. The plaintiff filed a class-action complaint against the insured, Kapraun, P.C., and Dr. Michael Kapraun, alleging a violation of the Telephone Consumer Protection Act of 1991 (TCPA). Thereafter, the plaintiff filed a declaratory judgment action against the insured and its liability insurer, seeking a declaration “concerning the rights and obligations under the commercial general liability policies issued” to the insured. The insurer moved to dismiss and, in its reply papers, argued that a justiciable controversy did not exist because it was defending the insured in the underlying TCPA action, albeit subject to a reservation of rights. The trial court granted the insurer’s motion to dismiss and, thereafter, denied the plaintiff’s motion for reconsideration. On appeal, the plaintiff argued that it was common practice to litigate the duty to defend when an insurer reserves rights to contest coverage. The appellate court disagreed, observing that a “declaratory judgment action is not intended to permit moot or hypothetical cases, or to enable parties to secure advisory opinions or legal advice from the court with respect to anticipated future difficulties.” Interestingly, the insurer had already filed a declaratory judgment action in Michigan, which the plaintiff argued estopped it from contending that no case or controversy existed. The appellate court held that the plaintiff waived the estoppel argument because it failed to argue the elements of judicial estoppel in its motion to reconsider and appellate brief.

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