                                  Illinois Official Reports

                                          Appellate Court



                 American Service Insurance v. Miller, 2014 IL App (5th) 130582



Appellate Court              AMERICAN SERVICE INSURANCE, Plaintiff-Appellee and
Caption                      Cross-Appellant, v. DAVID MILLER, Defendant-Appellant and
                             Cross-Appellee (Patricia Lynch, Defendant).



District & No.               Fifth District
                             Docket No. 5-13-0582



Filed                        October 17, 2014



Held                         In a declaratory judgment action filed by plaintiff insurer alleging that
(Note: This syllabus         its insured failed to comply with the requirements of her policy by
constitutes no part of the   giving plaintiff notice of the accident in which she struck the bicycle
opinion of the court but     defendant was riding and of the suit filed by defendant for his
has been prepared by the     damages, the trial court properly imposed sanctions on plaintiff under
Reporter of Decisions        Supreme Court Rules 137 and 219(c) based on plaintiff’s failure to
for the convenience of       produce a true and correct copy of its insured’s policy, since the award
the reader.)                 of $20,000 plus attorney fees and litigation expenses of just over
                             $63,000 was reasonable under the circumstances.



Decision Under               Appeal from the Circuit Court of St. Clair County, No. 06-MR-229;
Review                       the Hon. Brian Babka, Judge, presiding.



Judgment                     Affirmed.
     Counsel on                Rhonda D. Fiss and Michael A. Aguirre, both of Law Office of
     Appeal                    Rhonda D. Fiss, P.C., of Belleville, for appellant.

                               William J. Knapp and Heather Mueller-Jones, both of Knapp, Ohl &
                               Green, of Edwardsville, for appellee.



     Panel                     JUSTICE SPOMER delivered the judgment of the court, with opinion.
                               Justices Stewart and Cates concurred in the judgment and opinion.


                                                OPINION

¶1         Defendant David Miller appeals the orders of the circuit court of St. Clair County that
       awarded Miller sanctions. The plaintiff, American Service Insurance, cross-appeals. For the
       following reasons, we affirm.

¶2                                                 FACTS
¶3         The facts necessary to our disposition of this appeal are as follows. On August 15, 2006,
       the plaintiff filed a complaint for declaratory judgment against defendants Patricia Lynch and
       David Miller. Therein, the plaintiff alleged that Lynch was a former insured of the plaintiff,
       and that she was a named defendant in a lawsuit filed by Miller arising from damages Miller
       allegedly sustained when Lynch, then insured by the plaintiff, struck the bicycle he was
       riding with her automobile on February 12, 2003. The plaintiff further alleged that, in
       contravention of the requirements of the notice and cooperation clauses of her automobile
       insurance policy with the plaintiff, Lynch did not provide the plaintiff with notice of the
       accident in which she struck Miller and did not provide the plaintiff with notice of the lawsuit
       filed by Miller against her. The plaintiff asked the circuit court to, inter alia, find and declare
       that the plaintiff therefore had no obligation to defend or indemnify Lynch in the action
       brought by Miller. Paragraph 4 of the complaint stated that “[a] copy of the policy is attached
       hereto and incorporated herein as Exhibit A.” Attached to the plaintiff’s complaint was,
       inter alia, Exhibit A. The first page of Exhibit A included the signed certification of
       Veronica Maldonado, an underwriter for the plaintiff, that Exhibit A was “a true and correct
       copy” of the insurance policy issued by the plaintiff to Lynch and in effect at the time of
       Lynch’s collision with Miller. Discovery and motion traffic not relevant to this appeal
       followed for the next several years.
¶4         The case finally came to trial on March 19, 2013. On that date, during the direct
       examination of witness Scott St. John, a claims adjuster employed by the plaintiff, counsel
       for the plaintiff adduced testimony from St. John that on May 19, 2004, St. John requested a
       “certified copy” of Lynch’s policy from the plaintiff’s underwriting department, and that on
       May 24, 2004, St. John sent the policy he received from underwriting to counsel for Miller.
       St. John testified about discrepancies between the policy he initially sent to counsel for
       Miller and the policy attached to the complaint as Exhibit A, and to explain these


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     discrepancies, described the standard process by which the plaintiff created certified copies
     of policies, which, according to St. John, was to take “the declarations page that was initially
     issued and [send] that along with the body of the policy that was current at the time of the
     request” for a certified copy. Counsel for the plaintiff then attempted to introduce into
     evidence, as plaintiff’s Exhibit 14, a copy of Exhibit A, which St. John described as “a
     certified copy of Patricia Lynch’s policy.” Counsel for Miller objected, stating “this is not the
     policy that was in effect at the time of this incident,” because, as St. John’s testimony about
     the plaintiff’s standard process demonstrated, the only document that “existed” at the time of
     the incident was the declarations page: the policy itself was “a copy of a policy that was in
     effect at the time we requested a certified copy, rather than the policy that was in effect at the
     time of this incident.” Counsel pointed out that the purported certified copy could not have
     been in existence at the time of the incident, because it contained an address in Elk Grove
     Village not occupied by the plaintiff until several months after the incident, which also could
     not have been the address to which Lynch was required to give notice of any accidents during
     the pendency of the policy.
¶5       The court noted that the policy that had been produced “require[d] cooperation and
     notification by an insured *** by telephone” to a telephone number that did not exist at the
     time of the incident, located at an office that did not exist at the time of the incident. Counsel
     for the plaintiff responded that Miller had admitted, via a request to admit, “that this was the
     policy in effect at that time.” Miller objected, positing that the request to admit sent to Miller
     by the plaintiff must have been fraudulent as well. Although counsel for the plaintiff opined
     that the process used by the plaintiff to certify the policy “is the practice by which certified
     copies are generated in the insurance industry,” no expert testimony was offered as to this
     alleged standard practice, and the court declined, in the absence of additional foundation, to
     consider St. John’s testimony as such expert testimony. The court also noted that it had “an
     issue with sending someone what purports to be a certified copy and not clearly telling them
     this is a representative policy, it’s not the policy in question.” When counsel for the plaintiff
     eventually stated that the only difference “between this policy and the prior policy is the
     address information,” the court responded: “How would we know that? We’d have to take
     your word for it. We’d have to take the witness’s word without his ability to say how he
     knows that unless he memorized verbatim the prior policy.”
¶6       Subsequently, counsel for Miller moved to have the plaintiff’s pleadings “stricken for
     discovery fraud and for abuse of this entire process,” and requested “leave to submit a
     request for sanctions at the end of this hearing.” The court took the motions under
     advisement, and eventually the questioning of St. John resumed. On cross-examination, St.
     John conceded that the copy of the policy that was attached to the complaint for declaratory
     judgment was “not the policy that Ms. Lynch had in her possession at the time of [the]
     accident.” At the conclusion of the hearing, counsel for Miller moved for a directed verdict,
     pointing out that because the plaintiff had been unable to produce the policy in question, the
     plaintiff could not establish what the terms of that policy were and therefore could never
     prove that Lynch had failed to comply with the purported notice and cooperation provisions.
     In response, the court noted that the evidence at the hearing demonstrated that
     correspondence sent by the plaintiff to Lynch after the incident made reference to paragraphs,
     purportedly relating to the notice and cooperation provisions of the policy, that did not match
     up with the policy subsequently produced by the plaintiff for trial. The court took the matter


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       under advisement and noted that by agreement of the parties, the question of possible
       sanctions would be raised by written motion.
¶7         On April 5, 2013, counsel for Miller filed her motion for sanctions pursuant to Illinois
       Supreme Court Rules 137 (eff. Jan. 4, 2013) and 219(c) (eff. July 1, 2002). On April 22,
       2013, the plaintiff filed a response to the motion for sanctions, as well as a motion for leave
       to amend the complaint and substitute an exhibit, and a proposed first amended complaint for
       declaratory judgment, attached to which was Exhibit A1. The first page of Exhibit A1
       included the signed certification of Helen Piton, an underwriter for the plaintiff, dated April
       2, 2013, that Exhibit A1 was “a true and correct copy” of the insurance policy issued by the
       plaintiff to Lynch and in effect at the time of Lynch’s collision with Miller.
¶8         On May 8, 2013, a hearing was held on the motions. Following the hearing, counsel for
       Miller was granted leave to file a supplemental motion for sanctions, and the plaintiff was
       granted leave to respond thereto. Counsel for Miller filed her supplemental motion on May
       22, 2013. On June 12, 2013, the plaintiff filed a corrected motion for leave to amend the
       complaint and substitute an exhibit, a response to Miller’s supplemental motion for sanctions,
       the affidavit of the plaintiff’s litigation manager, Robert McKenna, and a document styled as
       “Exhibit A2.” The first page of Exhibit A2 included the signed certification of underwriter
       Piton, dated June 11, 2013, that Exhibit A2 was “a true and correct copy” of the insurance
       policy issued by the plaintiff to Lynch and in effect at the time of Lynch’s collision with
       Miller. In his affidavit, McKenna purported to explain why the plaintiff had encountered so
       many difficulties when attempting to produce a certified copy of Lynch’s insurance policy
       and averred that: (1) the relevant policy provisions in all the policies produced by the
       plaintiff were the same; (2) Exhibit A2 was the correct policy; and (3) “the errors associated
       with the creation of the certified copies of the subject policy were wholly inadvertent and
       were not intentional, fraudulent, deceptive or done with an intention to deceive or conceal.”
       On June 20, 2013, Miller filed a response to the plaintiff’s documents.
¶9         On July 29, 2013, the circuit court entered its order on the appropriateness of sanctions.
       The first section of the order, which was styled “Sanctions per Supreme Court Rule 137,”
       found that despite multiple attempts to do so, the plaintiff still had not produced “the right
       policy,” because even Exhibit A2 did not “comport” with correspondence the plaintiff had
       sent to Lynch regarding the policy issued to her and therefore could not be a true and correct
       copy of her policy. The order found Rule 137 sanctions to be appropriate against the plaintiff,
       but not against the plaintiff’s counsel. The second section of the order, which was styled
       “Sanctions per Supreme Court Rule 219(c),” found that the plaintiff had abused the rules of
       discovery when the plaintiff sent Miller a request to admit the genuineness of “a false copy of
       the insurance policy in question.” As a sanction for the discovery abuse, the order struck the
       plaintiff’s complaint for declaratory judgment and ruled that because the attempts to amend
       the complaint still did not include the correct policy, those documents would be stricken or
       leave to file them would be denied. The order noted that the cavalier attitude demonstrated by
       the plaintiff “in submitting sworn documentation that it later admits is incorrect is shocking
       at worst, and severely lacking in due diligence at best.” The order found that sanctions
       pursuant to both Rule 137 and Rule 219(c) were appropriate against the plaintiff, but not
       against the plaintiff’s counsel.
¶ 10       Following additional motion traffic not relevant to this appeal, a hearing was held on
       November 5, 2013, to determine the appropriate amount of sanctions. At the hearing, exhibits

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       were presented and entered into evidence, and argument was heard. Following the hearing,
       the circuit court took the matter under advisement. On December 5, 2013, the court entered
       both a handwritten order and a typed one. Read together, the orders reference only Rule 137,
       not Rule 219(c), and award sanctions to Miller in the amount of: (1) “$20,000 plus interest at
       a statutory rate of 9% per annum,” beginning on August 28, 2008, “which is interest accrued
       to date of $9,339.44 and continuing to accrue at a rate of $4.93 per day until paid”; (2)
       attorney fees in the amount of $60,040.50; and (3) litigation expenses in the amount of
       $3,948.53. The typed order further states, “There is no evidence of intentional concealment
       or willful misconduct on the part of [the plaintiff] which would warrant the award of
       monetary sanctions beyond those set forth above.” Miller filed a timely notice of appeal, and
       the plaintiff filed a timely notice of cross-appeal.

¶ 11                                            ANALYSIS
¶ 12       On appeal, Miller contends the trial court erred because: (1) the court’s denial of Miller’s
       request for a monetary fine against the plaintiff was “contrary to the manifest weight of the
       evidence and therefore an abuse of discretion”; (2) the court’s denial of Miller’s request for
       sanctions against the plaintiff’s attorney “was contrary to the manifest weight of the
       evidence”; (3) the court’s finding that the plaintiff’s policy with Lynch had a limit of $20,000
       was against the manifest weight of the evidence; and (4) the court erred in its calculation of
       the interest due pursuant to its sanctions. On cross-appeal, the plaintiff contends no sanctions
       should have been awarded.
¶ 13       We begin with an examination of the law relevant to sanctions awarded under Illinois
       Supreme Court Rule 137. Rule 137 requires that “[e]very pleading, motion and other
       document of a party” be well grounded in fact and warranted by existing law or a good-faith
       argument for the extension, modification, or reversal of existing law. Ill. S. Ct. R. 137(a) (eff.
       July 1, 2013). “Rule 137 contains an implicit requirement that an attorney promptly dismiss a
       lawsuit once it becomes evident that it is unfounded,” and this court has held that “[a]
       violation of this continuing duty of inquiry is sanctionable.” Rankin v. Heidlebaugh, 321 Ill.
       App. 3d 255, 267 (2001). When a pleading or other document is filed in violation of Rule
       137, the court may impose an appropriate sanction, which may include an order to pay the
       reasonable expenses incurred by the other party as a result of the filing of the pleading or
       other document, including reasonable attorney fees. Ill. S. Ct. R. 137(a) (eff. July 1, 2013).
       “Good faith alone is not a defense to sanctionable conduct.” Rankin v. Heidlebaugh, 321 Ill.
       App. 3d 255, 267 (2001). Subsection (d) of Rule 137 requires the trial judge to “set forth with
       specificity the reasons and basis of any sanction so imposed either in the judgment order
       itself or in a separate written order.” Ill. S. Ct. R. 137(d) (eff. July 1, 2013). We review a
       circuit court’s award of Rule 137 sanctions under the abuse of discretion standard.
       In re Parentage of Rocca, 2013 IL App (2d) 121147, ¶ 30. A trial court exceeds its discretion
       on sanctions only where no reasonable person would take the view adopted by it. Mandziara
       v. Canulli, 299 Ill. App. 3d 593, 602 (1998).
¶ 14       In the case at bar, as described in detail above, the trial court found that sanctions against
       the plaintiff pursuant to Rule 137 were warranted because despite multiple attempts to do so,
       the plaintiff still had not produced and filed with the court “the right policy,” because even
       Exhibit A2 did not “comport” with correspondence the plaintiff had sent to Lynch regarding
       the policy issued to her, and therefore could not be a true and correct copy of her policy, as

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       had been attested by the plaintiff when the policy was filed with the plaintiff’s complaint.
       The court found Rule 137 sanctions to be appropriate against the plaintiff, but not against the
       plaintiff’s counsel. In subsequent orders, the court awarded sanctions to Miller in the amount
       of: (1) “$20,000 plus interest at a statutory rate of 9% per annum,” beginning on August 28,
       2008, “which is interest accrued to date of $9,339.44 and continuing to accrue at a rate of
       $4.93 per day until paid”; (2) attorney fees in the amount of $60,040.50; and (3) litigation
       expenses in the amount of $3,948.53. The court ruled that “[t]here is no evidence of
       intentional concealment or willful misconduct on the part of [the plaintiff] which would
       warrant the award of monetary sanctions beyond those set forth above.”
¶ 15       On appeal, Miller contends that the sanctions awarded pursuant to Rule 137 did not
       accomplish “the stated purpose of Rule 137,” which Miller notes is to “prevent the abuse of
       the judicial process by penalizing those who bring vexatious or harassing actions without
       sufficient foundation.” Miller posits that in light of the evidence presented by Miller about
       the net worth of the plaintiff, the court should have awarded the $2.6 million in sanctions
       Miller requested, because to fail to do so was to ensure that the plaintiff was not “punished”
       for its bungled handling of the production of Lynch’s insurance policy. Accordingly, Miller
       asks this court to reverse the trial court and remand so that “a monetary penalty” against the
       plaintiff is imposed “that reflects the severity of its misconduct and will deter such
       misconduct in the future.” Miller’s second contention regarding the Rule 137 sanctions is that
       because the plaintiff’s counsel repeatedly failed to produce a correct copy of Lynch’s policy,
       instead continuing to sign and file pleadings that he knew were accompanied by documents
       that were not correct copies of the policy, the trial court erred by limiting the Rule 137
       sanctions only to the plaintiff, rather than to counsel as well. In response, the plaintiff notes,
       inter alia, that no published opinion of a court of review in Illinois has upheld an award of
       sanctions such as that proposed by Miller, and that no evidence was before the trial court that
       would have justified sanctions against the plaintiff’s counsel, because no evidence was ever
       presented that counsel for the plaintiff was aware of the problems with the insurance policies.
       On cross-appeal, the plaintiff contends no sanctions should have been awarded under Rule
       137 at all, because “Miller was not prejudiced” by the actions of the plaintiff, and because the
       evidence presented to the trial court “established only that a mistake was made, not an
       intentional, willful or harassing act that would warrant sanctions.”
¶ 16       After carefully considering the evidence before the court, described in great detail above,
       and the case law regarding sanctions pursuant to Rule 137, also detailed above, we cannot
       conclude that no reasonable person would take the view adopted by the trial court, either with
       regard to the appropriateness of the sanctions, the entities against which sanctions were
       awarded, or the amount of the sanctions. Accordingly, we reject the contentions of Miller and
       the plaintiff with regard to the sanctions awarded pursuant to Rule 137 and affirm the trial
       court.
¶ 17       With regard to Miller’s contention that the trial court’s finding that the plaintiff’s policy
       with Lynch had a limit of $20,000 was against the manifest weight of the evidence, we reject
       this contention as well. Although Miller claims that because the policy was not produced, it
       was “nonexistent” and thus could not have a policy limit of $20,000, we agree with the
       plaintiff that the fact that the plaintiff could not produce Lynch’s policy does not mean the
       policy was “nonexistent”–only that it could not be located by the plaintiff. The evidence
       before the trial court was that although there were serious problems with the various “copies”


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       of the policies produced by the plaintiff, the declarations page submitted with each policy in
       this case was the actual declarations page issued to Lynch, and that the page listed the policy
       limit at $20,000. The trial court’s finding was not, by any stretch of the imagination, against
       the manifest weight of the evidence.
¶ 18       We next consider Miller’s contention that the trial court erred in its calculation of the
       interest due pursuant to its Rule 137 sanctions. Specifically, Miller argues that the court
       should have begun its calculation on the date the underlying judgment against Lynch was
       entered in the trial court (June 29, 2006), rather than the date the mandate was issued by this
       court upholding that judgment on appeal (August 28, 2008). However, as the plaintiff points
       out, Miller never requested, in the trial court, that interest even be awarded, let alone that the
       amount of interest be tied to the date of the judgment in the underlying suit against Lynch.
       Accordingly, we find no fault with the trial court’s decision.
¶ 19       Finally, we consider the plaintiff’s argument, on cross-appeal, that sanctions were not
       appropriate under Supreme Court Rule 219(c). As detailed above, the trial court found that
       the plaintiff had abused the rules of discovery when the plaintiff sent Miller a request to
       admit the genuineness of “a false copy of the insurance policy in question.” Pursuant to Rule
       219(c), as a sanction for this discovery abuse, the court struck the plaintiff’s complaint for
       declaratory judgment and ruled that because the attempts to amend the complaint still did not
       include the correct policy, those documents would be stricken, or leave to file them would be
       denied. The court noted that the cavalier attitude demonstrated by the plaintiff “in submitting
       sworn documentation that it later admits is incorrect is shocking at worst, and severely
       lacking in due diligence at best.” As was the case with the sanctions pursuant to Rule 137,
       the court found that sanctions pursuant to Rule 219(c) were appropriate against the plaintiff,
       but not against the plaintiff’s counsel.
¶ 20       Our supreme court has delineated the rules to be employed when determining whether
       sanctions pursuant to Rule 219(c) are appropriate. The trial court must consider the following
       factors: “(1) the surprise to the adverse party; (2) the prejudicial effect of the proffered
       testimony or evidence; (3) the nature of the testimony or evidence; (4) the diligence of the
       adverse party in seeking discovery; (5) the timeliness of the adverse party’s objection to the
       testimony or evidence; and (6) the good faith of the party offering the testimony or
       evidence.” Shimanovsky v. General Motors Corp., 181 Ill. 2d 112, 124 (1998). No single
       factor is determinative. Id. A sanction that results in a dismissal with prejudice or a default
       judgment is a drastic one “to be invoked only in those cases where the party’s actions show a
       deliberate, contumacious or unwarranted disregard of the court’s authority.” Id. at 123. We
       will reverse a trial court’s imposition of a sanction only “when the record establishes a clear
       abuse of discretion.” Id. To determine whether such an abuse of discretion has occurred, we
       “look to the criteria upon which the trial court relied in making its determination of an
       appropriate sanction.” Id.
¶ 21       In the case at bar, the plaintiff contends that the trial court did not support the sanction
       imposed under Rule 219(c) “with any actual facts showing any deliberate, contumacious or
       unwarranted disregard of the [t]rial [c]ourt’s authority,” and that Miller was not prejudiced
       by the plaintiff’s “inadvertent failure to initially provide the correct version of the policy.” In
       support of this second argument, the plaintiff continues to contend that “[a]ll policies before
       the [c]ourt had the same substantive Notice and Cooperation provisions.” The problem with
       this argument, as the plaintiff even now appears to fail to grasp, is that the plaintiff has not, to

                                                    -7-
       this date, produced Lynch’s actual policy, and therefore it is irrelevant what provisions are
       contained within all of the incorrect policies produced by the plaintiff, as they prove nothing
       about what was included within Lynch’s actual policy. Moreover, with regard to deliberate,
       contumacious, or unwarranted disregard of the trial court’s authority, the court’s order speaks
       for itself, specifically referencing the plaintiff’s cavalier attitude, and noting that the plaintiff
       repeatedly submitted “sworn documentation that it later admit[ted] is incorrect,” and ruling
       that the plaintiff’s behavior was “shocking at worst, and severely lacking in due diligence at
       best.” The plaintiff also contends that there was before the trial court “no evidence in this
       case that [the plaintiff] or its counsel set out to deceive anyone or to intentionally violate
       discovery rules or orders.” We disagree. A reasonable interpretation of the evidence
       presented to the trial court was that the plaintiff knew that it could not produce Lynch’s
       policy, and therefore could not prove what notice and cooperation terms were or were not
       contained within that policy, and that the plaintiff hoped to trick Miller and the court into
       thinking there was no issue about the contents of the policy by getting Miller to acquiesce in
       the plaintiff’s request to admit the genuineness of a false policy, the plaintiff-friendly terms
       of which could then be substituted for the unknown terms of Lynch’s actual policy. The trial
       court did not err in imposing sanctions under Rule 219(c). Moreover, we agree with Miller
       that even if the court had erred in imposing sanctions pursuant to Rule 219(c), that error
       would have been harmless, as there is no way the plaintiff could now prevail on its complaint
       for declaratory judgment when it cannot produce Lynch’s policy and therefore cannot prove
       what terms that policy contained.

¶ 22                                        CONCLUSION
¶ 23       For the foregoing reasons, we affirm the orders of the circuit court of St. Clair County.

¶ 24       Affirmed.




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