{ "id": 5305693, "name": "John Thomas Kavanaugh, Plaintiff-Appellee, v. Interstate Fire and Casualty Company et al., Defendants-Appellants", "name_abbreviation": "Kavanaugh v. Interstate Fire & Casualty Co.", "decision_date": "1975-10-10", "docket_number": "No. 59541", "first_page": "350", "last_page": "357", "citations": [ { "type": "official", "cite": "35 Ill. App. 3d 350" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "216 N.E.2d 198", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "69 Ill.App.2d 196", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 2591754 ], "opinion_index": 0, "case_paths": [ "/ill-app-2d/69/0196-01" ] }, { "cite": "301 N.E.2d 19", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "13 Ill.App.3d 809", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5340426 ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/13/0809-01" ] }, { "cite": "429 F.2d 1388", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 2236081 ], "opinion_index": 0, "case_paths": [ "/f2d/429/1388-01" ] }, { "cite": "194 N.E.2d 489", "category": "reporters:state_regional", "reporter": "N.E.2d", "pin_cites": [ { "page": "499" } ], "opinion_index": 0 }, { "cite": "44 Ill.App.2d 235", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 5243247 ], "pin_cites": [ { "page": "253" } ], "opinion_index": 0, "case_paths": [ "/ill-app-2d/44/0235-01" ] }, { "cite": "232 N.E.2d 155", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "88 Ill.App.2d 343", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 8499378 ], "opinion_index": 0, "case_paths": [ "/ill-app-2d/88/0343-01" ] }, { "cite": "196 F.2d 96", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 499570 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/f2d/196/0096-01" ] }, { "cite": "60 N.E.2d 896", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1952, "opinion_index": 0 }, { "cite": "325 Ill.App. 649", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 4950663 ], "year": 1952, "opinion_index": 0, "case_paths": [ "/ill-app/325/0649-01" ] }, { "cite": "229 N.E.2d 504", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "37 Ill.2d 494", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 2866138 ], "opinion_index": 0, "case_paths": [ "/ill-2d/37/0494-01" ] }, { "cite": "62 C 588", "category": "reporters:state", "reporter": "Cow.", "opinion_index": 0 } ], "analysis": { "cardinality": 788, "char_count": 17206, "ocr_confidence": 0.735, "pagerank": { "raw": 2.1844944730549657e-07, "percentile": 0.7730541433110579 }, "sha256": "217946fa1ab92c0883d04b8b47801752a76bf2ee51cc914d7bbc39c7eb6ef6f0", "simhash": "1:40e735d3dfe785d4", "word_count": 2771 }, "last_updated": "2023-07-14T15:45:45.042916+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "John Thomas Kavanaugh, Plaintiff-Appellee, v. Interstate Fire and Casualty Company et al., Defendants-Appellants." ], "opinions": [ { "text": "Mr. JUSTICE LORENZ\ndelivered the opinion of the court:\nDefendants appeal from a judgment for plaintiff (hereinafter Kava-naugh) in the amount of $20,000 representing Kavanaugh\u2019s excess liability above his combined insurance policy limits. Defendant, Royal Indemnity Company (Royal), also appeals from a separate judgment of $25,000 in punitive damages in Kavanaugh\u2019s favor. Both defendants contend that the trial court erred when it did not grant a directed verdict or a judgment n.o.v. since Kavanaugh\u2019s evidence did not prove that defendants breached any duty owed him under their insurance policies. Royal additionally contends that the court erred when it: (1) refused to withdraw Kavanaugh\u2019s willful and wanton count from the jury\u2019s consideration, (2) allowed Kavanaugh to admit Royal\u2019s balance sheet in evidence, (3) commented during the direct examination of one of. Royal\u2019s witnesses, and (4) admitted the testimony of Kavanaugh\u2019s expert witness.\nInterstate additionally contends that the trial court erred when it: (1) imposed a duty upon the insurance company to settle within the policy limits when there was no opportunity. to settle, (2) found that it caused Kavanaugh\u2019s loss, (3) allowed Kavanaugh to amend his comr plaint at trial and gave certain prejudicial instructions based upon those amendments, and (4) restricted their cross-examination and refused to admit certain documentary evidence.\nIn September, 1965, prior to the instant action, Kavanaugh had been a codefendant in a suit brought by Carol Sheehan in the United States District Court for the Northern District of Illinois, Eastern Division. (Carol Sheehan v. Verne F. Dennis, et al., No. 62 C 588.) Sheehan was the injured passenger in Kavanaugh\u2019s automobile when it collided from behind with a truck on the East-West Tollway on August 9, 1961. At the time of the collision the truck was itself being towed by another codefendant\u2019s tractor. The Sheehan suit alleged negligence on the part of the trucking and towing companies, and willful and wanton conduct on the part of Kavanaugh in violation of the Illinois Guest Statute. Sheehan was represented at trial by her attorney, James Dooley.\nAt the time of the collision, Kavanaugh had personal liability insurance coverage with Royal covering losses to one person in the amount of $10,000. In addition to this primary coverage, Kavanaugh also had $15,000 excess coverage from Interstate. Under the terms of its policy, Royal\u2019s counsel, Donn Johnson, represented Kavanaugh in the Sheehan case. While Interstate did not represent Kavanaugh in that case, the record discloses that its attorney, Clark King, was aware of the progress of the trial.\nThe jury in the bifurcated Sheehan case returned a finding of liability against Kavanaugh alone on September 30, 1965. On October 4, 1965, the jury assessed damages against Kavanaugh in the amount of $45,000, thus exposing Kavanaugh to personal liability for $20,000 in excess of his combined insurance coverage.\nOn November 2, 1967, Kavanaugh commenced the instant suit in the circuit court of Cook County against Interstate alone. It went to trial on his amended complaint against both Royal and Interstate. In Count I of his amended complaint Kavanaugh alleged that Royal knew or should have known that Sheehan\u2019s claims exceeded the $10,000 policy limit; that it was Royal\u2019s duty to attempt to settle the claim within policy limits; that Royal\u2019s attorney wrongfully represented Kavanaugh\u2019s coverage to be only $10,000 to Sheehan\u2019s attorney, Dooley, and then refused to settle for more than $7,500 despite Dooley\u2019s offer to settle for $10,000; that both Royal and Interstate tendered $25,000 in settlement after the finding on Kavanaugh\u2019s liability and before the $45,000 damages verdict was returned, but Sheehan refused to settle; that Royal\u2019s failure to settle was deliberate, willful and arbitrary in breach of its obligation to Kavanaugh. In Count II of his amended complaint, Kavanaugh alleged that Interstate knew or should have known that Sheehan\u2019s claims exceeded the policy limits; that it was Interstate\u2019s duty to settle this claim on Kavanaugh\u2019s behalf within policy limits; that Interstate\u2019s liability arose on September 30, 1965, when Royal tendered the full amount of its primary coverage in open court, but Interstate failed to accept or otherwise respond to a settlement; that Interstate\u2019s failure to tender its $15,000 limit prior to a finding on liability was deliberate, willful and arbitrary entitling Kavanaugh to punitive and exemplary damages. In both counts Kavanaugh prayed for $20,000 in actual damages and $250,000 in punitive damages.\nRoyal filed a motion to dismiss Kavanaugh\u2019s amended complaint on the grounds that Kavanaugh\u2019s loss was occasioned by Interstate\u2019s, not Royal\u2019s, refusal to tender; that punitive damages were unprecedented; and that no cause of action was stated. Royal\u2019s motion was denied on November 6, 1970.\nInterstate\u2019s answer denied that Sheehan offered to settle the case for $25,000 at any time and that it had breached its legal or contractual duties.\nThe following pertinent evidence was adduced at trial.\nJames Dooley\nHe is the attorney who represented Carol Sheehan in the personal injury suit against Kavanaugh. He summarized the circumstances of the accident as they appeared from the depositions of witnesses including the statement of Sheehan that Kavanaugh was only going 60 miles per hour and that she had not remonstrated him for improper driving. Sheehan suffered multiple lacerations on her face, a compound fracture of the left elbow joint, a compound fracture of the right femur, and injury to one clavicle. She lost $13,000-$21,000 in earnings and her medical expenses as of the time of trial were over $11,000. He first discussed a settlement with Royal\u2019s attorney, Donn Johnson, in July, 1965. Johnson stated that Kavanaugh only had a policy for $10,000 with Royal. When he asked why Royal would not pay on the policy, Johnson said he could only pay $8,500. A second offer to settle was made at the pretrial conference. At that time, he demanded $60,000 from all defendants to settle the case. After some discussion, the $60,000 offer was rejected. However, Royal did offer its $10,000 limit in open court on September 29, 1965, but its offer did not include Interstate\u2019s $15,000 limit as Johnson was unable to communicate with them. On cross-examination, he stated that he \u201cstood on sixty\u201d as a settlement figure once the case went to trial.\nJohn Thomas Kavanaugh\nHe is the insured plaintiff in the instant action. He first told Johnson about the $15,000 excess coverage in August, 1964. Although he discussed the possibility of settling the Sheehan- cas\u00e9 with- Johnson, he never specifically directed Johnson to offer the $10,000 'Royal policy limit. Interstate- had no; representative present at these settlement discussions:\nClark King, Jr.\n\u25a0 He is the attorney who represented Interstate in the Sheehan case. Interstate first received notice of the accident in August, 1964. He recommended- that Interstate reserve $14,000 to $16,000 to cover their possible obligation in the suit. He spoke to Johnson six to twelve times before trial, but he never heard a settlement offer of less than $60,000 from Dooley'.- After the court denied Kavanaugh\u2019s motion for a directed Verdict and the day before the Sheehan case went to the jury on the- liability issue, Johnson told him that Royal would offer their $10,000 primary policy limits. The next day the jury found Kavanaugh hable and within 48 hours Interstate offered its $15,000'. The issue of damages was not tried until several days later. He explained that after the court refused to direct a verdict in favor of Kavanaugh, he still felt that since this was a guest case and other defendants might be found liable, he would await the jury\u2019s verdict before tendering the policy limits. He also stated that Interstate\u2019s $15,000 limit was not offered earlier because it would hot settle the case in light of Dooley\u2019s trial demand of $75,000.\nDonn Johnson\nHe is the' attorney who represented Kavanaugh in the Sheehan: case on behalf of Royal. Carol Sheehan gave an explicit statement to- his investigator that there was absolutely nothing wrong with Kavanaugh\u2019s driving- on' the night of the accident. Given' the lesser standard of care under-the guest statute and Sheehan\u2019s exonerating statement he felt' that KaVanaugh would succeed on a motion for directed verdict at the close \u00f3f all\u2019the evidence. He first told Dooley of the excess coverage at the pretrial conference. H\u00e9 discussed the Royal policy and settlement with Dooley in July, 1964, outside the Federal Building. He did so again in the corridor outside the courtroom after his motion for directed verdict was denied. At the second conference Dooley refused to settle for Royal\u2019s $10,000, limit and added that he would not settle \u201ceven if you give me the full twenty-five thousand dollars.\u201d He formally tendered .Royal\u2019s $10,000 in open court on September 29, 1965, and the $25,000 combined coverage, at Interstate\u2019s request, on October 1, 1965. Kavanaugh never demanded that he offer to settle for the Royal\u2019s limits. He stated that Victor Cassato, an associate who represented his firm at a 1962 deposition, never told of an alleged offer to settle for $10,000 from an associate in Dooley\u2019s firm.\nOn cross-examination he could not remember the specific date of the discussion outside the Federal Building.\nLeonel Hatch\nHe is the attorney who represented Kavanaugh\u2019s codefendants, Safeway Truck Lines and Robert Lees, in the Sheehan case. He confirmed that Dooley\u2019s offers to settle with all defendants were in the amounts of $60,000 at the' pr\u00e9trial conference and $75,000 during the trial. Prior to the selection of the Sheehan jury, there was an indication that Kavanaugh had $25,000 in coverage available.\nJames Dooley recalled by Kavanaugh\nHe denied having any settlement conversation with Johnson, in the corridor outside the courtroom. He first learned of the excess policy on September 29, 1965, when Johnson tendered Royal\u2019s limits in open court. He never refused to settle for the full $25,000.\nAt the close of all the evidence, Kavanaugh moved to file a second amended complaint to conform the pleadings to the proof. Instead of an allegation that defendants failed to accept a Sheehan offer to settle for $25,000, Kavanaugh alleged that both defendants failed to offer their policy limits before' Kavanaugh was found liable. Defendants moved for a mistrial on the ground that the new allegation substantially changed the theory of the case to defendants\u2019 immediate and irreparable harm. The trial court denied the motion and instructed the jury under the new allegations.\nOn July 19, 1972, judgment was entered on the jury verdict in favor of Kavanaugh and against both defendants for $20,000 plus\u2019 interest, and against Royal alone for $25,000 punitive damages. Defendants post-trial motion praying, inter alia, for judgment n.o.v. was denied and this appeal followed.\nOpinion\nDefendants first contend that the trial court erred when it failed to grant both Royal\u2019s and Interstate\u2019s motion for judgment n.o.v. They argue that Illinois law imposes no absolute duty upon an insurer to offer its policy limits in order to effect a settlement.\nWe must view all the evidence in its aspect most favorable to Kavanaugh in considering whether a judgment n.o.v. should have been granted and determine that the evidence so overwhelmingly favors the defendant that no contrary verdict could, ever stand. \u2022(Pedrick v. Peoria & Eastern R.R. Co., 37 Ill.2d 494, 229 N.E.2d 504. ) When viewed in this light we must assume that Johnson did not disclose the excess coverage until the in-court offer to settle after the denial of his motion for a directed verdict, that Royal\u2019s first offer to \u25a0 settle for its full $10,000 limit did not occur until that same time, and that Interstate\u2019s first offer to settle for its full $15,000 limit came within 48 hours after the judgment on liability, but before the final judgment on damages.\nNumerous decisions by this court and the Seventh Circuit Court of Appeals recognize the principle that an insurer must act as a fiduciary to its insured and may not act negligently nor in bad faith towards the best interests of the insured. (Olympia Fields Country Club v. Bankers Indemnity Insurance Co., 325 Ill.App. 649, 60 N.E.2d 896; Ballard v. Citizens Cas. Co. (7th Cir. 1952), 196 F.2d 96.) Nonetheless, an insurer\u2019s refusal to settle within policy limits does not render it liable per se to its insured. Powell v. Prudence Mutual Casualty Co., 88 Ill.App.2d 343, 232 N.E.2d 155.\nIn the instant case, Kavanaugh\u2019s proof and the allegations in his second amended complaint were based upon the theory that defendants had a legal duty to offer their policy limits before Kavanaugh was found liable. Even when we view the facts to show that the first offers to settle for the policy limits occurred late in the trial proceedings, we cannot hold that the law imposes a duty on an insurance company to initiate negotiations to settle a case. As this court has stated in Oda v. Highway Insurance Co., 44 Ill.App.2d 235, 253, 194 N.E.2d 489, 499, \u201c[t]o impose such a duty upon it would be to put it at a negotiating disadvantage not imposed on any other litigant.\u201d Illinois law does not demand that an insurer must settle within policy limits without exception or else invariably suffer the consequences of an excess liability judgment for breach of its fiduciary duty.\nThere is a well-recognized exception to the general principle when the probability of an adverse finding on liability is great and the amount of probable damages would greatly exceed the coverage. Thus, in Bailey v. Prudence Mutual Casualty Co. (7th Cir. 1970), 429 F.2d 1388, defendant acted in bad faith when it failed to settle within its policy limits on four separate occasions, told plaintiff not to retain private counsel, and failed to advise plaintiff of the adverse verdict and the statutory time to appeal. Similarly, in Smiley v. Manchester Insurance ir Indemnity Co., 13 Ill.App.3d 809, 301 N.E.2d 19, and in Cernocky v. Indemnity Insurance Co., 69 Ill.App.2d 196, 216 N.E.2d 198, the insureds made numerous demands upon the insurers to accept offers to settle within the policy limits when the probability of favorable liability findings were minimal. The insurers\u2019 failures to settle were held to be negfigent and bad faith breaches of their duty to the insured.\nThe exception clearly does not apply to the facts in the instant case. Here, the issue of liability was not clear cut. Kavanaugh was subject to a low degree of care under the Illinois guest statute whereas his co-defendants were charged with simple negligence, thus favoring his probability of success. Moreover, Johnson possessed a statement from the claimant Sheehan exonerating Kavanaugh from any charge of speeding and admitting that she had never questioned his ability to control the automobile on the night of the accident. Trial attorneys are not endowed with the gift of prophecy so as to be able to predict the precise outcome of personal injury litigation. Nor does the mere fact that the insurance company was unsuccessful in the trial of a case show that their defense was made in bad faith. See Ballard v. Citizens Cas. Co. (7th Cir. 1952), 196 F.2d 96.\nIn addition, when Royal\u2019s motion for a directed verdict was denied, Johnson offered Royal\u2019s limits. Likewise, when King received Johnson\u2019s report that the motion had been denied and that Royal had offered its limits, he authorized Johnson within 48 hours to offer Interstate\u2019s full limits also. The fact that the j'ury returned an adverse verdict on the liability issue in the interim between Royal\u2019s offer and Interstate\u2019s offer does not belie the evidence which shows that King acted reasonably in adding Interstate\u2019s limits to Royal\u2019s pending settlement offer. Therefore, we hold that neither Royal, through Johnson, nor Interstate, through King, were negligent or in bad faith before offering their policy limits.\nIn light of our decision the order denying the defendants\u2019 motion for judgment n.o.v. is reversed and the cause is remanded with directions to enter judgments n.o.v. in favor of defendants.\nReversed and remanded with directions.\nBARRETT, P. J., and DRUCKER, J., concur.\nInterstate\u2019s excess coverage policy provided that \u201c[l]iability under this policy shall not attach unless and until the primary insurers have admitted liability for the primary limit or limits, or unless or until the assured has, by final judgment, been adjudged to pay a sum which exceeds such primary limit or limits.\u201d", "type": "majority", "author": "Mr. JUSTICE LORENZ" } ], "attorneys": [ "Lord, Bissell & Brook, of Chicago (Richard E. Mueller and Hugh C. Griffin, of counsel), for appellant Interstate Fire and Casualty Co.", "Menk, Johnson & Bishop, of Chicago (John C. Menk, of counsel),.for appellant Royal Indemnity Co.", "Leonard M. Ring, of Chicago, for appellee." ], "corrections": "", "head_matter": "John Thomas Kavanaugh, Plaintiff-Appellee, v. Interstate Fire and Casualty Company et al., Defendants-Appellants.\nFirst District (5th Division)\nNo. 59541\nRehearing denied February 11, 1976.\nOpinion filed October 10, 1975.\nLord, Bissell & Brook, of Chicago (Richard E. Mueller and Hugh C. Griffin, of counsel), for appellant Interstate Fire and Casualty Co.\nMenk, Johnson & Bishop, of Chicago (John C. Menk, of counsel),.for appellant Royal Indemnity Co.\nLeonard M. Ring, of Chicago, for appellee." }, "file_name": "0350-01", "first_page_order": 376, "last_page_order": 383 }