7th Circ. rules in favor of Bricker client, Selective Insurance

Bricker & Eckler partners Drew Campbell and Ali Haque, and associate Alexandra Parriman successfully represented Selective Insurance Company of the Southeast in an appeal which reversed a judgment related to denial of coverage to the insured, Illinois-based Creation Supply, Inc. (CSI).

In 2012, CSI was sued by a competitor for trade dress infringement. Selective filed suit in state court seeking a declaration that there was no coverage under the policy, which then spawned a series of lawsuits and appeals between the parties.  CSI filed a separate lawsuit in federal court in Chicago in which it asserted a claim for bad faith denial of coverage under Section 155 of the Illinois Insurance Code. In 2019, a trial court judge ruled that Selective was to pay nearly $3 million in coverage to CSI citing “unreasonable and vexatious conduct” under Illinois insurance law.  

On April 26, 2021, however, a three-judge panel in the Seventh Circuit unanimously reversed the lower court’s ruling and concluded that CSI cannot pursue a claim under Section 155. Section 155 allows an insured party to seek extra-contractual damages from the insurer only if there is (1) a dispute related to the amount owed under a policy, (2) if there are delays in settling the claim or (3) if denial of coverage was “unreasonable or vexatious.” The Seventh Circuit found that the case raised “a narrow question of statutory interpretation” since each of these issues had been resolved by the prior state court litigation. The court ruled that the absence of any of the three predicate claims precluded a separate action under Section 155. The trial court judgment was reversed, with instructions to dismiss the claim.