Certain Underwriters at Lloyd’s v. Abbott Laboratories
2014 IL App (1st) 132020 (Ill. App., 2014)Words & Phrases
RescissionTrial Judge
Hon. Richard J. Billik, Jr. and Hon. Thomas R. MulroyAppellate Judge
Justice DelortHolding
Rescission claim properly rejected where insured’s “knowledge and belief” set lower standard of accuracy than Section 154 of the Insurance Code.Fact Summary
On appeal from a dispute over the insurance coverage for the losses suffered by defendant pharmaceutical company as a result of a recall of a drug it manufactured, the trial court’s finding rejecting plaintiff insurers’ claim that coverage had been rescinded and the finding that plaintiffs’ ratified coverage and waived rescission were upheld; furthermore, the appellate court affirmed the trial court’s denial of plaintiffs motion to compel production of certain privileged documents, the rejection of defendant’s counterclaims for vexatious delay and prejudgment interest, and the date set from which the award of postjudgment interest to defendant would accrue.
This case involves who should bear the cost of the Italian government’s recall of a prescription drug: the insured or the insurer. The plaintiffs are various underwriters subscribing to certain insurance policies and certificates (the Underwriters). They sued Abbott Laboratories (Abbott) to rescind policies that they had issued to Abbott. Abbott counterclaimed, seeking (1) a declaratory judgment regarding coverage, (2) damages for an alleged breach of contract, and (3) damages for vexatious delay in paying on the policies. An array of professionals from all over the world testified at two extensive bench trials.
At the first trial to determine liability, the trial court rejected the Underwriters’ rescission claim and Abbott’s vexatious delay claim. At the second bench trial as to damages, the trial court found in favor of Abbott on its breach of contract claim, entered judgment against the Underwriters, and awarded Abbott $84.5 million (the limits of the insurance policies at issue here) and certain recoverable costs. The trial court rejected Abbott’s request for prejudgment interest, but granted the request for postjudgment interest, awarding Abbott an additional $739,375.
On appeal, the Underwriters contended that the trial court’s rejection of their rescission claim and its finding that the Underwriters ratified coverage and waived rescission were against the manifest weight of the evidence. The Underwriters raised an additional claim regarding the trial court’s denial of their motion to compel production of certain privileged documents prepared by a witness whom Abbott had withdrawn as an expert witness and presented only as a fact witness. On cross-appeal, Abbott contended that the trial court abused its discretion both in rejecting Abbott’s counterclaim for vexatious delay damages and Abbott’s request for prejudgment interest. Appellate court affirmed.