A state appeals panel has upheld a lower court’s ruling that Country Mutual Insurance must pay $3 million — no more or less — as part of a settlement ending a high school hockey coach’s lawsuit against the family of a player he accused of assault.
The precipitating incident occurred in 1998 when, according to court documents, Fremd High School student Thomas Olsak struck head coach Joseph Pecoraro and caused a severe head injury. After Olsak pleaded guilty to battery, Pecoraro sued Olsak and his stepfather, Ed Pudlo, who had two policies through Country Mutual and was one of seven hockey club board members. Because Pecoraro alleged intentional conduct, Country defended Pudlo, but not Olsak.
In 2005, Country sought a declaratory judgment that it wasn’t obligated to defend or indemnify Olsak. In 2006, Olsak and Pecoraro reached a settlement under which the player assigned the coach his rights under the policies in exchange for a release from the 1998 lawsuit. Then in 2007, Olsak and Pecoraro together filed a counterclaim against Country, alleging a breach of duty to defend Olsak by failing to disclose a conflict of interest between Olsak and Pudlo, and failing to tell Olsak he could retain a different lawyer at Country’s expense.
Norman Lerum
| Lerum Law Firm
In 2010, Olsak and Pecoraro modified their settlement to reflect a $6 million payment. A First District Appellate Court panel sent the case back to Cook County Circuit for a reasonableness hearing. Cook County District Judge Michael Mullen in April 2020 then found no evidence of collusion. But he determined Country’s liability was capped at its $3 million policy limits. He also didn’t award damages under the Illinois Insurance Code.
All the parties appealed Mullen’s ruling. Among other issues, Country challenged the settlement, while Olsak and Pecoraro argued against limiting the payout.
First District Appellate Justice Carl Walker wrote the opinion on the consolidated appeals, issued June 22; Justices Michael Hyman and Mary Coghlan concurred.
According to the panel, Country primarily claimed the 2010 settlement was unreasonable because attorneys Norman Lerum, of Chicago, and James Messineo, of Inverness, “represented both Olsak and Pecoraro during” negotiations. The company claimed this could only result in collusion. Walker agreed that arrangement “was an obvious conflict of interest,” and said the facts of the matter “are troubling and represent a stunning lack of judgment."
But the appeals panel was unable to show the joint representation, alone, forces them to find the outcome unreasonable.
“The totality of the circumstances surrounding the creation of the 2010 amended settlement does not demonstrate that Olsak and Pecoraro set out to artificially inflate Pecoraro’s recovery against Country,” Walker wrote. “Olsak and Pecoraro did not establish a dollar amount in the 2006 agreement, but instead agreed to be bound by a later determination from a court or jury. This action does not demonstrate a plan or concerted effort to inflate the settlement amount. On the contrary, leaving the determination of Pecoraro’s damages to a neutral factfinder demonstrates an attempt to have a fair and reasonable outcome. Likewise, their decision to modify the original agreement was not the result of collusion but, instead, was prompted by Country Mutual’s argument that the 2006 settlement was invalid for lacking a specific dollar amount.”
Although Judge Mullen concluded the $6 million settlement “was fair and reasonable in light of Pecoraro’s injuries and a review of the voluminous medical records, discovery and evidence depositions,” Walker wrote, and although the panel agreed that determination aligned with evidence, it also affirmed the legal principle that an insurer isn’t exposed to liability beyond its policy limits, even if it commits a breach of duty to defend.
Even if Country defended Olsak from the beginning of Pecoraro’s lawsuit, its liability still would be the $3 million policy cap. The panel found no evidence that Country’s breach of duty — which the First District determined in 2009 — is the proximate cause of an extra $3 million worked into the 2010 settlement. That $6 million total, the panel continued, was based on injuries from the 1998 punch, which did not worsen even while the litigation proceeded.
Attorneys Keith G. Carlson, Jeffery A. Bier and David M. Jenkins, of Carlson Bier Associates, of Chicago, represented Country Mutual in the matter.
Olsak and Pecoraro continued to be represented by attorneys Lerum and Messineo.