Lack Of Cooperation Established On Motion
December 15, 2010
The 1st District Appellate Court recently held that an insurer's lack-of-cooperation defense to coverage, including demonstrating the prejudice necessary to sustain such a defense, could be established through a motion under section 2-619(a)(9) of the Illinois Code of Civil Procedure, 735 ILCS 5/2-619(a)(9), which allows dismissal based on "other affirmative matter" barring a claim. Piser v. State Farm Mutual Automobile Insurance Co., 2010 WL 4629043 (1st Dist. Nov. 12, 2010).
The insured, Piser, was represented by Eugene E. Murphy Jr., John N. Hourihane Jr. and John H. Scheid Jr., of Murphy & Hourihane LLC. Rick L. Hammond and Eric W. Moch of Johnson & Bell Ltd. represented the insurer, State Farm.
Piser claimed that his Harley Davidson motorcycle, worth more than $60,000, was stolen. He notified State Farm, and its representative, Ronald Gottardo, investigated the claim. The investigation included an unsworn interview of Piser. In addition, however, Gottardo made a routine request of Piser to execute a financial authorization that would facilitate gathering information to determine if Piser had a financial motive to file a false claim.
State Farm also requested that Piser submit to an examination under oath, and requested documentation regarding Piser's financial status, including tax returns and bank account statements. Except for the unsworn interview, Piser never responded, as a result of which State Farm denied Piser's claim.
He brought this coverage action, in response to which State Farm filed a section 2-619(a)(9) motion to dismiss, claiming that Piser's failure to cooperate barred his claim. The motion was accompanied by an affidavit and various documents, consisting of various correspondence and other documentation evidencing the kind of information being sought by State Farm. The trial court granted the motion, and Piser took this appeal.
In an opinion by Justice Michael P. Toomin, the 1st District affirmed. He began by noting the parameters of section 2-619(a)(9). While it admits the well-pleaded facts of the complaint, it allows the defendant to plead "affirmative matter" encompassing any defense other than a negation of the essential allegations of the plaintiff's cause of action, e.g., something in the nature of an affirmative defense.
Toomin further said an insured's failure to cooperate is a valid defense to coverage, and thus can be set forth as other affirmative matter barring a claim. In this case, State Farm did not simply deny Piser's allegations, but raised appropriate additional affirmative matter.
The cooperation clause in the State Farm policy required Piser to cooperate in gathering evidence and witnesses, and the policy further required that he provide records, receipts and other information as reasonably requested. Compliance with these requirements, moreover, said Toomin, was a condition to bringing an action against State Farm.
Piser argued that the cooperation defense required State Farm to show prejudice from the failure to cooperate, and that prejudice gave rise to fact issues, requiring the denial of State Farm's motion.
Toomin agreed that prejudice is necessary, but he said that where an insured makes virtually no effort to produce relevant information, prejudice is established.
In this case Piser failed to sign a financial authorization form, failed to submit to an examination under oath and failed to provide requested financial documents, and State Farm warned him that it would deny coverage if the information were not received. Piser failed to file a counter affidavit and he thereby admitted the facts set forth in State Farm's affidavit, including the fact that State Farm was prejudiced.
Piser further complained about the adequacy of State Farm's affidavit and attachments, arguing initially that State Farm failed to lay the necessary foundation. Toomin agreed that a foundation is necessary, but that State Farm's affidavit, submitted by Gottardo, was sufficient because it attested to his authority and personal knowledge of the information provided.
To the extent that Piser contended that documents attached to the affidavit violated the hearsay rule, Toomin stated that the documentation was not being offered for the truth of the matter asserted but rather to show that Piser had notice that State Farm was requesting documents and invoking the policy's cooperation clause.
Even if the documents did constitute hearsay, said Toomin, they would be admitted for consideration as business records.
Ultimately, Toomin said even if an issue of fact might otherwise have been found to exist, under section 2-619 motion practice, Piser's failure to properly contest State Farm's affidavit by submitting a counter affidavit was fatal to his cause of action, because the failure to challenge or contradict an affidavit under section 2-619 results in an admission of the facts stated therein.
Thus, if the defendant satisfies its initial burden of proof on a motion to dismiss based on affirmative matter, the burden shifts to the plaintiff to show that the defense is unfounded or requires the resolution of a material fact, and the plaintiff can only make that showing through an affidavit.
The court therefore affirmed the trial court's dismissal and determination of no coverage based on a lack of cooperation.
