Plaintiff American Access Casualty Company (AACC) appeals from the trial court’s imposition of sanctions against it and its coverage counsel, James Newman, pursuant to Illinois Supreme Court Rule 137 (eff. July 1, 2013). The trial court imposed sanctions in relation to AACC’s declaratory judgment action, which sought a declaration that AACC was not required to provide coverage for its insured, defendant Jose Alcauter, for an automobile accident.
AACC’s coverage action was premised on the fact that Alcauter willfully failed to cooperate with an arbitration hearing pursuant to the policy’s cooperation clause. But at trial on AACC’s declaratory judgment action, it was revealed that, at the time of the arbitration hearing, Alcauter was in jail for an unrelated offense. Consequently, Alcauter could not possibly have willfully failed to cooperate with the arbitration. Defendant Kimberly Krebs, the other driver involved in the car accident with Alcauter, filed a motion for sanctions against AACC and Newman, arguing that she had informed Newman of Alcauter’s arrest and detention prior to trial and that AACC proceeded to trial anyway. The trial court granted Krebs’s request for sanctions. AACC appeals, arguing that Newman reasonably relied on the representations of counsel assigned to represent Alcauter at the arbitration that Alcauter had been contacted about the arbitration. While conceding that the facts did not support its declaratory judgment action, AACC argues that it should not be faulted simply for advocating a losing cause.
We affirm the imposition of sanctions. The record shows that, well before the scheduled trial date, Newman was informed of the possibility that Alcauter had been incarcerated. Yet Newman did no serious investigation of that possibility and failed to forthrightly bring Alcauter’s arrest to the attention of the trial court. Instead, AACC and Newman elected to proceed to trial, knowing that its declaratory judgment claim lacked factual support.