Pattern Instructions Show Age, Found Inadequate in Failure-to-Settle Case

April 4, 2018 / Writing and Speaking

By Don R. Sampen, published, Chicago Daily Law Bulletin
[April 3, 2018]

The 1st District Appellate Court recently held that Illinois Pattern Jury Instructions addressing a bad-faith claim against an insurance company for failure to settle did not accurately reflect the current state of Illinois law.

The case is Hana v. Illinois State Medical Inter-Insurance Exchange Mutual Insurance Co., 2018 IL App (1st) 162166 (March 16, 2018). The plaintiffs in the bad-faith action, the underlying claimants, Alizabeth and Elvin Hana, were represented by Burke Wise Morrissey & Kaveny LLC. Michael T. Reagan of Ottawa represented the insurer, ISMIE.

The plaintiffs obtained a judgment for medical-malpractice against the ISMIE insureds, two obstetricians, Albert and Joyce Chams, and their practice group. The judgment was for a total of $6.17 million.

Following a setoff for a pretrial settlement involving other parties and ISMIE’s payment of its policy limit, the Chamses were responsible for a $1.35 million balance.

In exchange for a covenant not to enforce, the Chamses assigned to the plaintiffs whatever rights they had for ISMIE’s alleged bad faith for failure to settle. The plaintiffs then sued ISMIE, seeking both $1.35 million in compensatory damages plus punitive damages.

A six-person jury thereafter awarded the plaintiffs the $1.35 million plus $13 million in punitive damages. The trial court allowed another $1.5 million in costs and fees. ISMIE took this appeal.

Six-person jury unconstitutional

In an opinion by Justice Mary K. Rochford, the 1st District Appellate Court reversed. She initially addressed ISMIE’s constitutional argument that it was denied the right to a 12-person jury in the bad-faith action.

Rochford agreed. She found that the legislation providing for a six-person jury, 735 ILCS 5/2-1105(b), had been found unconstitutional in Kakos v. Butler, 2016 IL 120377. The trial, therefore, was void ab initio, and the case was remanded for a new trial.

Errors in evidence and instructions

Notwithstanding the need for remand on constitutional grounds, Rochford found it appropriate to address several issues that were likely to recur on remand to provide guidance to the trial court and thereby expedite ultimate termination of the litigation. She thus took up three additional issues addressed by the parties.

The first was whether error occurred in the trial court when the plaintiffs were allowed to introduce into evidence a letter from plaintiffs’ counsel to ISMIE offering to settle the bad-faith lawsuit for $1.35 million and related testimony.

The plaintiffs argued that the letter established that ISMIE’s bad faith continued well after the excess verdict was entered in the underlying case.

Rochford disagreed. She found that evidence of settlement negotiations is generally prohibited by Illinois Rule of Evidence 408. That rule does recognize some exceptions, such as for “establishing bad faith.”

Relying in part on federal and out-of-state authority, however, she found that the exception did not permit the introduction of settlement negotiations in the present case to establish bad-faith handling of the underlying case. She further found that the evidence having to do with the present case would be irrelevant to determining bad faith in the underlying case.

The second issue had to do with Illinois Pattern Jury Instructions, Civil, Nos. 710.02 and 710.03. These instructions were written for use in bad-faith failure-to-settle cases against insurance companies. They provided generally that a plaintiff must establish that the insurer had a “reasonable opportunity” to settle the underlying lawsuit to establish liability.

Rochford noted that the instructions had not been amended in decades.

Moreover, they did not reflect current Illinois law as established by Haddick ex rel. Griffith v. Valor Insurance, 198 Ill.2d 409 (2001). Haddick requires that the plaintiff show a reasonable probability of a finding of liability and a reasonable probability of a recovery in excess of limits.

While pattern instructions are presumed to be accurate, Rochford said that they are not themselves law and not exempt from challenge.

Because the two pattern instructions did not adequately state Illinois law, the parties were directed to create non-pattern instructions on remand.

The third issue had to do with yet another jury instruction used in the trial court, this one patterned after IPI No. 710.07. That instruction assists the jury in computing the damages to be awarded against an insurance company, at least in situations where there is no dispute as to the dollar amount of the damages if liability is found.

Rochford found that this instruction used in the trial court was error because it did not properly state the amount of the plaintiffs’ damages and included an unnecessary sentence out of compliance with the pattern instruction. It, therefore, should not be reused on remand.

In addition, Rochford noted that ISMIE appealed from the denial of its post-judgment request for entry of judgment not withstanding the verdict.

She found that it would not be appropriate for the court to rule on that aspect of the appeal at this time because of the remand on constitutional grounds. If the court were to rule on it, however, she said the court would reject it because the evidence was not so overwhelmingly in ISMIE’s favor to justify judgment non obstante veredicto.

The 1st District, therefore, reversed and remanded for a new trial.

Key points

  • A trial court’s denial of party’s request for a 12-person jury renders the resulting trial void ab initio.
  • Evidence of settlement negotiations concerning a party’s bad-faith claim for failure to settle against an insurance company is not admissible in the bad-faith trial for purposes of showing the insurer’s bad faith in the underlying lawsuit.
  • Illinois Pattern Jury Instructions, Civil, Nos. 710.02 and 710.03, do not reflect current Illinois law in regard to claims against insurance companies for bad-faith failure to settle; nonpattern instructions based on Haddick should be used in place of the pattern instructions.
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