Attorney receives sanctions as a result of inadequate investigation

 

March 13, 2017

 

The Illinois Appellate Court held that sanctions were proper against the plaintiffs, American Access Casualty Company (AACC), and its coverage counsel, James Newman, because of the plaintiffs failure to properly investigate the continuing validity of the lawsuit, failure to disclose relevant information, and proceeding to trial despite knowing that their suit was no longer factually supported. The case is Am. Access Cas. Co. v. Alcauter, 2017 IL App (1st) 160775.

 

In 2011 the defendants were involved in a car accident. At the time of the accident Alcauter held an auto policy with AACC that included the standard cooperation clause requiring the defendant to assist in the conduct of any legal proceeding in connection with the policy, and a failure to assist in the investigation would bar recovery under the policy. When the defendant failed to appear for an arbitration hearing, despite being notified by receipt of two letters, AACC filed a declaratory judgment stating that Alcauter knew the date and time of the hearing and willingly failed to attend and thus materially breached the insuring contract. The insured was jailed at the time of the arbitration hearing and was physically incapable of attending.

 

At trial it was shown that Alcauter was jailed at the time of the hearing and that the records of his arrest were available to the public, and the evidence proved that the plaintiffs learned about the jailing as many as six weeks prior to trial. The court held that once AACC learned of the incarceration they had a duty to withdraw the action instead of letting it play out. The court decided that Newman should have brought the incarceration to the attention of the court as soon as he discovered it, and the failure to do so increased the expense and time of the trial. Sanctions were implemented against the insurer and Newman.

 

Editor's Note: This judgment exemplifies the importance of attorneys to do a full investigation in good faith. When the attorney in this case withheld information from the court and proceeded with trial in the hopes to not have to pay out the claim, he deceived the court and cost the court time and money. It also reaffirms the duty of the attorney to inform the court that a claim may not be well-grounded in fact, in order to save the courts precious resources.