The Northern District of Illinois Highlights the Importance of Involving Insurers Early in the Case

The recent decision in National Fire & Marine Insurance Company v. Community Nursing & Rehabilitation Center LLC et al., by the Northern District of Illinois reminds plaintiffs to make every effort to involve potential insurers of the defendant as early as possible in their cases.

In the underlying case, the deceased passed away at the Community Nursing & Rehabilitation Center (“Community”), where she resided prior to her death. A few months after her passing, the law firm Horwitz, Horwitz & Associates (“Horwitz”) requested all of the deceased person’s records, but did not threaten litigation or indicate that any claim would be pursued against the nursing home. Community forwarded the Horwitz letter to its insurer, National Fire. However, Community did not respond to any communications from National Fire requesting additional information that would confirm whether Horwitz was pursuing a claim against Community.

About ten months after forwarding the Horwitz letter to National Fire, Community filed for Chapter 7 bankruptcy. Horwitz filed a wrongful death suit against Community shortly thereafter. A default judgment was entered against Community in the wrongful death case because Community failed to participate in the case.

While Community forwarded Horwitz’s initial letter to National Fire, it did not inform National Fire about the wrongful death suit Horwitz subsequently filed. After discovering the suit because of Horwitz’s citation to discover assets in the wrongful death action, National Fire filed a declaratory action for a finding that it was not obligated to indemnify or defend Community in the wrongful death action.

The Northern District of Illinois found in favor of National Fire because it held that the Horwitz record request letter could not have put National Fire on notice of a potential suit by Horwitz given that, without further clarification, Horwitz could have requested the records for any number of other reasons. Furthermore, Community’s failure to notify National Fire about the wrongful death suit was fatal to any deceased estates’ pursuit of funds from the insurer.

The Northern District’s decision here puts plaintiffs in a difficult position. Plaintiffs cannot control a policyholder’s compliance with their policy obligations; however, they are beneficiaries of insurance policies and should not lose a potential avenue of redress simply by the inaction of policyholders. Without further guidance from the court, plaintiffs must do everything in their power to make clear their claims to activate the obligations of defendants’ insurers.

The case is National Fire & Marine Insurance Co. v. Community Nursing & Rehabilitation Center LLC et al., Case No. 21 C 4711, in the U.S. District Court for the Northern District of Illinois, Eastern Division.