Setoffs for other insurance recovered in dramshop cases where bar owners are defended by the Illinois Insurance Guaranty Fund apply against the owners’ maximum statutory liability and not jury verdicts, the Illinois Supreme Court held today.
Delivered by Justice Mary Jane Theis, the court’s unanimous ruling reverses a decision from the Fifth District Appellate Court over a question certified by the circuit court in Effingham County and remands the case for further proceedings.
The high court’s opinion in this case-- Roy Dean Rogers II, et al. v Gani Imeri, Indv., etc.-- was one of eight handed down today.
In their analysis in Rogers, the justices rejected the holding of the downstate appeals panel that reductions for other insurance recovered under section 546(a) of the Illinois Insurance Code, also known as the Guaranty Fund statute, should apply to the jury’s eventual verdict, and then, if necessary, be reduced to the Dram Shop Act’s statutory maximum of damages.
Pointing to a ruling from the First District Appellate Court over the same certified question presented in Rogers, the high court backed the Fund’s position that the Guaranty Fund statute requires setoffs to be deducted from the statutory cap under the Dram Shop Act.
The issue presented in this case stems from a lawsuit Roy Rogers II and Teresa Rogers brought against Gani Imeri after their son, Roy Rogers III, was killed in a car crash with a drunk driver.
John Winterrowd, the drunk driver, crossed the center lane and into Roy’s vehicle after drinking at Johnny’s Bar and Grill, which Imeri owned.
Shortly after the incident, Winterrowd’s insurer tendered about $26,550 to the Rogers family, which received an additional $80,000 under its insurance policy for a total of $106,550.
The Rogerses in June 2010 filed a dram shop action against Imeri and his bar. Imeri had a dram shop liability policy with Constitutional Casualty Co., but the company liquidated and was declared insolvent while the case was pending.
As a result of the company being deemed insolvent, the Illinois Insurance Guaranty Fund took over as the defense.
The fund, according to its website, was created by statute in 1971 for the purpose of providing “protection for certain ‘covered claims’ of policyholders and claimants under property and casualty insurance policies issued by insolvent member companies.”
As the defendant in the suit, the Fund then filed a motion for summary adjudication of the amount that liability must be reduced.
Before the high court in September, the Fund’s attorney, Hugh C. Griffin, argued that the maximum dram shop liability in the case was set at $130,338.51 and that that amount should then be reduced by the $106,550 that the plaintiffs received from other insurance companies
Griffin said that when the insurance company was declared insolvent, it not only triggered Imeri’s defense by the Fund, but also the application of all of the provisions of the Guaranty Fund statute, including Section 546(a).
Section 546(a) provides that “an insured or claimant shall be required first to exhaust all coverage provided by any other insurance policy … if the claim under such other policy arises from the same facts, injury, or loss that gave rise to the covered claim against the Fund.”
It further provides that “the Fund’s obligation under Section 537.2 shall be reduced by the amount recovered or recoverable, whichever is greater, under such other insurance policy.”
Under this section, Griffin argued that the amount of insurance recovered –$106,550 – should be reduced from the maximum dram shop liability of $130,338.97, which would leave the Fund paying the difference of $23,778.51.
He told the justices that the plaintiffs’ stance, as well as the Fifth District’s reasoning, basically renders Section 546(a) meaningless.
On behalf of the plaintiffs, Christopher A. Koester told the justices in September that the insurance reductions should be applied to the jury verdict and provided a hypothetical situation in which a jury returns a $500,000 verdict.
Koester said the $106,550 of other insurance recovered in this case would be reduced from the jury verdict, which would bring it down to $393,450, an amount that would then be reduced because it exceeds the statutory dram shop maximum of $130,338.51.
Urging the justices to look at the provisions of the Guaranty Fund statue, as well as the Dram Shop Act, Koester told the justices in September that “If you do what the First District did and what the Fund is suggesting we do here, you are completely nullifying the plaintiff’s right to a jury trial, you are completely ignoring the statute that says in every case a jury shall determine damages.”
In their 17-page opinion, the justices noted that the parties’ opposing positions correspond to those taken by the Fifth District in Rogers and the First District in Guzman v. 7513 West Madison Street, Inc.
Garman wrote that the First District in Guzman “correctly rejected” the approach that was offered by the plaintiffs in that case, which was the same as the one suggested by the plaintiffs in Rogers.
“The Guzman court looked to the Dramshop Act, and concluded that the defendant was ‘legally liable’ to the plaintiffs only up to the maximum recovery possible under that Act,” Garman wrote.
She added, “The requirement that a jury determine damages in Dramshop Act cases is simply not relevant to the construction of section 546(a). Under that statute, the Fund’s obligation cannot be expanded by a jury’s verdict; it can only be reduced by other insurance.”
Garman explained, “The setoff of the amount that the Rogerses received from the automobile liability insurance policies should come from Imeri’s maximum dramshop liability.”
As such, the Supreme Court reversed the Fifth District’s ruling over the certified question and remanded for further proceedings.
The court today also issued an opinion in Hartney Fuel Oil Company et al. v. Board of Trustees of the Village of Forest View, etc., et al., which asked the justices to decide whether a business that spans multiple counties has to pay retail taxes based on the location of its headquarters or its sales office.
The Illinois Department of Revenue had determined that Hartney Fuel Oil Co.’s retail sales were attributable to the company’s Forest View office, as opposed to its Village of Mark location, making it subject to the higher retail occupation taxes imposed by Village of Forest View, Cook County and the Regional Transportation Authority.
After being issued a notice of tax liability for about $23.1 million, Hartney paid the assessment under protest and sought relief in the circuit court of Putnam County. Putnam County and the Village of Mark joined Hartney in seeking the relief as it would benefit them in regards to tax revenue.
The Third District Appellate Court affirmed the circuit court’s ruling that Hartney was liable for taxes in the Village of Mark because tax liability is incurred in the location in which purchase orders are accepted.
The Supreme Court, in an opinion written by Chief Justice Rita Garman, affirmed in part and reversed in part the lower court’s ruling.
“We do not disturb the findings by the trial and appellate courts that, under the regulations, Hartney accepted its purchase orders and long-term contracts in Mark,” Garman wrote.
She added, “Because of the Department’s erroneous regulations, the Department has a duty under the Taxpayers’ Bill of Rights Act to abate Hartney’s penalties and retail occupation tax liability of Forest View, Cook County, and the Regional Transportation Authority for the audit period.”
The ruling deemed some of the Department’s regulations regarding jurisdictional questions invalid, saying they “are too inconsistent with the statutes and case law to stand.”
In another ruling issued today, the Supreme Court affirmed the Fourth District Appellate Court’s ruling in The Board of Education of Roxana Community Unit School District No. 1 v. The Pollution Control Board and WRB Refining LLC (Fourth District).
The high court determined that the appeals panel did not err in denying the Madison County school district’s request to intervene in the refinery’s Pollution Control Board proceedings because it was never party to the litigation.
The school district sought to intervene because it argued the board's issuance of the certifications to the refinery would deprive it of tax revenue.
The justices, however, noted that “legitimate concerns may arise when the only parties permitted to participate in the regulatory process are regulators and the companies they regulate.”
“That, however, is a matter for the General Assembly,” Justice Lloyd Karmeier wrote on behalf of the court. “The responsibility for the wisdom of legislation rests with the legislature, and courts may not rewrite statutes to make them consistent with the court’s idea of orderliness and public policy.”