Illinois Appellate Court Finds That Illinois Pattern Jury Instruction on Bad Faith Claims Does Not Accurately Express the Current State of Illinois Law

A medical malpractice lawsuit was filed in which the physician’s insurer, Illinois State Medical Inter-Insurance Exchange (ISMIE), refused to pay its $3 million policy limit to settle the case, which was brought by Alizabeth and Alvin Hana. The suit was filed against Drs. Albert and Joyce Chams and Chams Women’s Health Care. At the jury trial, the verdict for the Hanas totaled $6.1 million.

After ISMIE paid its policy limit plus post-judgment interest at 9% and an offset was applied based on a pretrial settlement with other defendants, the doctors were left personally liable for $1.35 million.

The Chamses assigned their bad-faith claim against ISMIE to the Hanas in return for a promise to not enforce the judgment. Then the Hanas sued ISMIE for allegedly breaching its duty to settle.

A 6-person jury found in favor of the Hanas with a $13 million punitive damage award plus $1.35 million in compensatory damages. The Illinois Appellate Court reversed this verdict because ISMIE was entitled to a 12-person jury under Kakos v. Butler, 2016 IL 120377.

According to this opinion in the Hana case, “The principle issues are likely to recur upon remand.” The First District Appellate Court explained that the pattern instructions for bad-faith claims need to be updated based on the cases of Haddick v. Valor Insurance, 198 Ill.2d 409 (2001), and Powell v. American Service Insurance Co., 2014 IL App (1st) 123643.

The appeals panel stated that the trial judge in the Hana case erred in giving a modified version of the pattern instruction on damages. The court found that both IPI Civil No. 710.02, the pattern issues instruction for bad-faith claims against insurers, and IPI Civil No. 710.03, the pattern burden of proof instruction with respect to such claims, provide that a plaintiff must generally establish that the insurer had a “reasonably opportunity” to settle the underlying lawsuit against its insured within the policy limits.

Neither instruction has been amended in decades and each instruction relies upon an understanding that the “Illinois Supreme Court has yet to define the duty or the elements of this cause of action.” Illinois Pattern Jury Instructions, Civil, 710.00 Intro.

The court added that with respect to a bad-faith claim against an insurer for failure to settle a lawsuit against an insured, the Illinois Supreme Court has now specifically ruled:

“The duty does not arise at the time the parties enter into the insurance contract, nor does it depend on whether or not a lawsuit has been filed. The duty of an insurance provider to settle arises when a claim has been made against the insured and there is a reasonable probability of recovering in excess of policy limits and a reasonable probability of a finding of liability against the insured. Since Illinois law generally does not require an insurance provider to initiate settlement negotiations, this duty also does not arise until a third-party demand settlement within the policy limits.” Haddick v. Valor Insurance, 198 Ill.2d 409 (2001).

In explaining this ruling, the appellate court has explained that the “reasonable probability” requirement set out in Haddick essentially means that a plaintiff in a bad-faith suit must establish that liability in excess of the policy limits in the underlying suit was “at least more likely than not, but not necessarily a certainty.” Powell v. American Service Insurance Co., 214 IL App (1st) 1234643.

Pattern jury instructions are presumed to be accurate statements of Illinois law. The jury is instructed using an approved pattern instruction if the trial court determines that it is applicable to the circumstances of the case. Nevertheless, pattern instructions are not themselves law, and our Supreme Court has held that they “are not exempt from challenge.” Powers v. Illinois Central Golf R.R., 91 Ill.2d 375 (1982).

In this case, neither IPI Civil No. 710.02 nor IPI Civil No. 710.03 fairly and accurately reflects the current state of the law.

It was decided that should the jury have found ISMIE to be liable, the amount of plaintiffs’ damages was undisputed: $1.35 million. Moreover, there was no dispute among the parties or the trial court that IPI Civil No. 710.07 generally provided the relevant pattern instruction in this instance.

Once a trial court determines an instruction is to be given, then Illinois Supreme Court Rule 239(a) creates a presumption that one of the pattern instructions will be used. As such, while the trial court had the discretion as to whether to include the final bracketed material, IPI Civil No. 710.07, tailored only to include the relevant facts of this case, should have been given.

The plain language of the pattern instruction and the notes on its use commentary made it clear that here only one numerical value should have been included in the second sentence of this jury instruction: i.e., $1.35 million, the undisputed amount of plaintiffs’ damages caused by ISMIE’s bad faith. Thereafter, in the discretion of the trial court, the instruction could have also included a verbal description of how that figure was calculated.

Therefore, once the trial judge elected to provide such a description as to how the amount of damages was calculated, the second sentence of the instruction in this case should have taken the following general form: “The plaintiffs’ damages are $1,350,000, which is the amount of the judgment entered in favor of the plaintiffs and against the Chamses minus the amount received by the plaintiffs from ISMIE under the policy and minus the amount of the pretrial settlement in the underlying case.”

In conclusion, the appeals panel stated that while on remand, the trial court will retain the discretion to omit or include the bracketed material contained in IPI Civil No. 710.07, should the bracketed portion of this instruction be used, it should be phrased in the general form described above, in accord with the language of the pattern instruction and the commentary. There should be no third sentence.

Hana v. Illinois State Medical Inter-Insurance Exchange, No. 1-16-2166 (March 16, 2018).

Kreisman Law Offices has been handling Illinois jury trials, medical negligence lawsuits, hospital negligence cases, obstetrician negligence cases, labor and delivery negligence lawsuits, birth trauma injury cases and nursing negligence lawsuits for individuals, families and loved ones who have been injured, harmed or killed by the carelessness or negligence of a medical provider for more than 40 years in and around Chicago, Cook County and its surrounding areas, including Schiller Park, Lincolnwood, Lemont, Long Grove, Naperville, New Lenox, Niles, Orland Park, Des Plaines, River Grove, Chicago (Old Town Triangle, Lincoln Square, West Rogers Park, North Lawndale, Austin, Irving Park, Jefferson Park), Vernon Hills, Waukegan, Joliet, Bensenville and Romeoville, Ill.