Meridian Sec. Ins. Co. v. Roberts

Decision Date12 March 2021
Docket NumberCase No. 3:19-CV-884-NJR
Citation526 F.Supp.3d 352
CourtU.S. District Court — Southern District of Illinois

Jonathan L. Federman, Robert M. Chemers, Pretzel & Stouffer, Chartered, Chicago, IL, for Plaintiff.

Aaron D. Lauter, Frederick & Hagle, Urbana, IL, for Defendant.



Pending before the Court is a Motion for Summary Judgment filed by Defendant Rowdy Roberts ("Roberts") (Doc. 26). Plaintiff Meridian Security Insurance Company ("Meridian") also filed a Cross-Motion for Summary Judgment (Doc. 28). For the reasons set forth below, Meridian's motion is denied, and Roberts's motion is granted.


This is an action for declaratory judgment filed by Meridian to determine whether it has a duty under its insurance policy to provide underinsured motorist ("UIM") coverage benefits to Roberts (Doc. 1).1 Meridian issued an auto liability insurance policy to Roberts for the effective policy period of November 1, 2015 to November 1, 2016 (Id. at p. 2). The policy issued to Roberts provides UIM coverage (Id. at p. 3).

A. Underlying Action & Denial of UIM Coverage

On December 3, 2015, Roberts was in an auto accident in California (Id. at p. 2). The other driver, Jorge Solis ("Solis"), rear-ended Roberts (Id. ). Roberts retained the services of the Traut Firm ("Traut") to prosecute all claims for personal injuries sustained arising out of the December 3, 2015 accident, "and to pursue all legal rights and remedies [Roberts] might have with regard to the December 3, 2015 injuries ...." (Doc. 1-5, pp. 11-12). On March 28, 2016, Traut filed a complaint against Solis for $115,000.00 in the Superior Court Orange County (Doc. 1-5, p. 5).

On August 30, 2016, Roberts settled with Solis for the $15,000 bodily injury limit of his insurance (Doc. 28-1, p. 3). Then, on or around October 13, 2016, Roberts—through Traut—advised Meridian about the accident with the underinsured at-fault driver Solis and that Roberts settled the action (Doc. 1, p. 3). In the same letter, Traut demanded UIM arbitration (Id. ).

Meridian denied Roberts UIM coverage benefits because Traut failed to promptly notify Meridian of "Roberts’ settlement with Loya Casualty Insurance Company on behalf of [ ] Solis, or have an opportunity to preserve and protect Meridian's subrogation rights, which settlement occurred on or about August 30, 2016 and Meridian was first notified of a UIM claim on behalf of Roberts by letter from his counsel dated October 13, 2016" (Id. at p. 7).

B. Professional Negligence Action Against Traut

Following Meridian's denial of UIM coverage benefits, Roberts sued both Traut and Meridian in the Superior Court Orange County (Doc. 1, p. 10). On November 14, 2018, Meridian was dismissed for lack of personal jurisdiction (Id. ; Doc. 28-1, p. 4). The action continued against Traut, however, based on allegations that Traut was professionally negligent when it failed to secure UIM coverage benefits under the Meridian policy (Doc. 28-1, p. 14). Roberts later settled his claims against Traut for $98,500 (Doc. 28-2).

C. Declaratory Judgment Action

On August 13, 2019, Meridian filed its Complaint for Declaratory Judgment seeking a declaration: (1) that it owes no duty or obligation to provide UIM coverage benefits to Roberts for the underlying auto accident because Roberts failed to provide timely written notice of a tentative settlement with Solis (Count I); (2) that Roberts judicially admitted that there is no UIM coverage (Count II); and (3) "in the alternative, that if it has any duties to Roberts pursuant to the policy, it is entitled to a setoff from a settlement that Roberts agreed to with [Traut]" (Count III) (Doc. 28-1, p. 2). On April 15, 2020, Roberts filed its motion for summary judgment against Meridian (Doc. 26). Meridian timely responded and filed a cross-motion for summary judgment against Roberts (Doc. 28).


Summary judgment is "the put up or shut up moment in a lawsuit" where a party lays its proverbial cards on the table, showing what evidence it possesses to convince a trier of fact to agree with its version of the events. Steen v. Myers , 486 F.3d 1017, 1022 (7th Cir. 2007) (quoting Hammel v. Eau Galle Cheese Factory , 407 F.3d 852, 859 (7th Cir. 2005) (citations omitted)). Summary judgment is only appropriate if the movant "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Spurling v. C & M Fine Pack, Inc. , 739 F.3d 1055, 1060 (7th Cir. 2014) (quoting FED. R. CIV. P. 56(a) ). "[T]he burden on the moving party may be discharged by ‘showing’—that is, pointing out to the district court—that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett , 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

A moving party is entitled to judgment as a matter of law where the non-moving party "has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Celotex , 477 U.S. at 323, 106 S.Ct. 2548. "[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. No issue remains for trial "unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (citations omitted). "If the evidence is merely colorable, or is not sufficiently probative, summary judgment may be granted." Id. at 249-50, 106 S.Ct. 2505 (internal citations omitted).

In a diversity case, the Court applies state law to substantive issues. RLI Ins. Co. v. Conseco, Inc. , 543 F.3d 384, 390 (7th Cir. 2008). When neither party raises a conflict of law issue in a diversity case, the applicable law is that of the state in which the federal court sits. See Koransky, Bouwer & Poracky, P.C. v. Bar Plan Mut. Ins. Co. , 712 F.3d 336, 341 (7th Cir. 2013). Here, the parties have not raised a conflict of law issue and have instead briefed the issues on the merits under Illinois law. The Court, as a result, will apply the law of Illinois.

I. Impact of Failing to Provide Timely Written Notice of Tentative Settlement (Count I)

Meridian alleges there is no UIM coverage because "Roberts failed to provide timely written notice of a tentative settlement with the at fault driver" (Doc. 1, pp. 8-9). Roberts responds in his motion for summary judgment with an argument that Meridian bears the burden of showing it has been substantially prejudiced by the untimely notice, and Meridian cannot show that it has suffered substantial prejudice (Doc. 27, pp. 3-5). For the reasons explained below, the Court agrees with Roberts.

In Illinois, "the established rule [is] that an insurer who invokes a cooperation clause must affirmatively show that it was prejudiced by the insured's failure to notify it in advance of his settlement with the tortfeasor." Progressive Direct Ins. Co. v. Jungkans , 362 Ill.Dec. 92, 972 N.E.2d 807, 811 (Ill. App. Ct. 2012) (citing M.F.A. Mut. Ins. Co. v. Cheek , 66 Ill.2d 492, 6 Ill.Dec. 862, 363 N.E.2d 809, 813 (1977) ). An insurer "may not enforce the cooperation clause unless it proves that defendant's failure to notify it timely of the settlement substantially prejudiced it." Id. , 362 Ill.Dec. 92, 972 N.E.2d at 812 (citing Cheek , 6 Ill.Dec. 862, 363 N.E.2d at 813 ).

To meet its burden, Meridian relies on an unreported district court opinionVasquez v. Meridian Sec. Ins. Co. , 2016 WL 7230403 (S.D. Ill. Dec. 14, 2016). In Vasquez , the insured was injured in an auto accident on February 19, 2014. Id. at *4. The insured did not file suit against the tortfeasor from the auto accident. Id. The insured did not notify Meridian of the settlement offer made by the tortfeasor "prior to the day [p]laintiff accepted the offer and executed the settlement agreement." Id. Also, the insured "did not formally advise Meridian of her intention to accept the offer and execute the general release (in exchange for $100,000) until February 4, 2016 ...." Id. On these facts, the district court found that "Meridian can rely on the unambiguous terms of the Policy to deny coverage in this case." Id. at *12. But the court noted the following:

Today's adverse ruling against [plaintiff-insured] could have been avoided had her counsel exercised one of three options. First, they could have met the notice requirements. Barring that, they could have asked [the tortfeasor] to waive the statute of limitations for a sufficient time to enable [plaintiff-insured] to meet the notice requirements. And failing all that, they could have filed suit against [the tortfeasor], which would have preserved Meridian's subrogation interest.

Id. at *13 (emphasis added).

While using Vasquez , Meridian misstates that Vasquez "further supports that Roberts’ breach of failing to file suit before entering the settlement further prejudiced Meridian" (Doc. 28-1, p. 9). Roberts did not fail to file suit against Solis before settling. On March 28, 2016, Roberts brought suit against Solis in the Superior Court Orange County (Doc. 1-5, p. 5). Then on August 30, 2016, Roberts settled with Solis (Doc. 28-1, p. 3). The crucial fact that Roberts filed suit against Solis before settling makes Vasquez easily distinguishable.

Meridian also attempts to meet its burden by conclusively arguing it was prejudiced by "Roberts’ failure to timely notify it of the underlying claim, Roberts’ failure to timely notify Meridian that the tortfeasor was underinsured, and Roberts’ failure to notify Meridian prior to entering into the settlement and release of the tortfeasor" (Doc. 28-1, p. 9). A judgment-proof tortfeasor, however, defeats a claim of prejudice. Jungkans , 362 Ill.Dec. 92, 972 N.E.2d at 813. Roberts notes that...

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