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Premature Judgment

By: Derek Hawkins//September 26, 2016//

Premature Judgment

By: Derek Hawkins//September 26, 2016//

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7th Circuit Court of Appeals

Case Name: Landmark American Insurance Company v. Peter Hilger

Case No.: 15-2566

Officials: BAUER, FLAUM, and SYKES, Circuit Judges.

Focus: Premature Judgment

Peter Hilger faces two separate lawsuits alleging that he and several codefendants persuaded credit unions in Michigan and Tennessee to fund loans by overstating the value of the life-insurance policies that would serve as collateral. Hilger tendered his defense to Landmark American Insurance Company under a professional liability policy held by one of his codefendants, O’M and Associates LLC (“O’MA”). Although Hilger is not a named insured under O’MA’s policy, the policy defines “covered persons and entities” to include O’MA’s independent contractors; Hilger sought coverage as such. Landmark responded by filing this action for a declaratory judgment that it has no duty to defend Hilger. The insurance company argued that Hilger did not perform the professional services at issue in the Michigan and Tennessee suits as an O’MA independent contractor and is therefore not covered under O’MA’s policy. The district court, sitting in diversity and applying Illinois law, disagreed and entered judgment on the pleadings for Hilger. Landmark now appeals, arguing that it is entitled to take discovery and offer evidence regarding the true nature of Hilger’s relationship to O’MA. We agree with Landmark that judgment on the pleadings was inappropriate. Under Illinois law an insurer that seeks a declaration of its duty to defend may offer evidence outside the underlying complaint for purposes of establishing that no duty exists. While the insurer may not use a declaratory judgment action to litigate liability in the underlying lawsuit, that limitation is inapplicable to this case. Accordingly, we reverse the judgment and remand for further proceedings.

Reversed and remanded

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.

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