this morning it's five million one hundred and eighty thousand five hundred and thirty three patsias versus american family insurance if parties are ready good morning your honor's william s daniel collinsville for the petitioner plaintiff appellant district jeffery patsias as justice barberas may recall from our edwardsville days i like to cut to the chase and get to the bottom line and save the court time with our oral arguments there are in our brief an appeal sixteen grounds to reverse i would like to focus on the main three one waiver by payment two estoppel by payment three waiver by american family insurance not over filing it's declaratory judgment action basic definition that you all are familiar with very briefly waiver involve the intentional relinquishment or abandonment of a known right amfam as we colloquially referred to american family insurance wisconsin amfam always knew of its right to file a dj action but it sat back on its right for over two years actually thirty months a dj action involves action not amfam's inaction to me the key is that payment a recognized form of waiver waiving any objection or dispute or defense or where the item actually being voluntarily and unconditionally paid amfam finally paid the may 18th two thousand and eighteen appraisal award on july nine two thousand and eighteen the bench trial i mean vexatious and unreasonable one hundred and fifty five remaining issues was held on july thirty one two thousand and eighteen which was after july nine two thousand and eighteen when amfam had waived its purported defenses and disputes over coverage by its voluntary unconditional payment five million one hundred and fifty six thousand four hundred and seventy one was the net appraisal award that was paid at certainly a substantial sum it's not deminimous in any way amfam i submit cannot any longer argue some or any bonafide defense after it waived it by paying the net appraisal award on july nine with amfam waving its reported bonafide dispute and coverage issue by its payment then and thereafter there was no need to later file the policy as a trial exhibit on july thirty one two thousand and eighteen because coverage had already been admitted by the july 9th payment of the appraisal award if five million one hundred and fifty six thousand four hundred and seventy one truly was not covered then amfam would not have paid it but it did pay it amfam waived its right to file the dj action by not filing it soon enough or in this case not ever filing it amfam's asserted defense merely an claim adjusters unilateral and selfserving the letter of correspondence never became an actually bonafide defense because it was never presented to a court for judicial term determination it's assertive defense never acquired the stature or status of a bonafide defense no insurance company is compelled or mandated to file a declaratory judgment action on each and every little coverage dispute but it is obligated to file one where coverage is contested and as in this case especially where the contested amount of loss is put into appraisal by litigation we had to compel amfam to name its appraiser but we went to court to get the appraisal umpire appointed by judge mcglynn on the facts i submit the long time chronology of this particular case some were really at several junctures along the way it became the duty and obligation of american family to file it's dj action on it's issue of noncoverage patsias has claim coverage for a while before july 9th payment amfam had unilaterally denied coverage but it never submitted it's issue to a neutral arbiter for a judicial determination of whether its dispute was bonafide or if there was coverage or not is this particular case i think clearly and aptly demonstrates on the record no insurance company especially amfam wisconsin should ever be allowed to be as vexatious and unreasonable with it's delays as we briefed exhaustively as americ amfam was in this patsias case therefore the trial court associate judge which missed the waiver by payment issue in her ruling it should be reversed on this appeal after july 9th when amfam finally paid the may eighteen appraisal award fifty thousand it was then barred or at least it stopped to raise waived policy provisions and it's defense of the vexatious and unreasonable delay claims against it i think that there's been detailed briefing by both sides i could submit more i don't need all my time in my view but of course delighted to answer any questions any of the justices may have and then i'll be back on rebuttal okay thank you you'll time on rebuttal as you said good thank you thank you your honor i appreciate it very much raymond thank you your honors may i please support my name is marcus raymond jury for american family i guess the drawback in benefit of going second is i get to know what's their respond to i too wil keep it brief if the waiver is the main argument that patsias wants to put forward i will address that first the key to all of this and patsias attorney mentioned it briefly is whether or not american family had a bonafide defense the case law is is consistent and cited in the briefing that as long as there's a bonafide defense regarding coverage there can be no vexatious damages i don't think there's a dispute on that i don't think there could be and in this case there was a bonafide defense it had been raised myriads of times before litigation during litigation the transcript and we'll show that it was raised the the pleadings at the trial court level also show that it was raised and so so patsias would have known that this was an issue the court the trial court judge juba katz also came to the conclusion that there was a bonafide defense in this case and so if i'm just saying there's a bonafide defense that may be one thing but in this case we have a a neutral learned wellreasoned opinion from a member of the bench saying that there wasn't fact that bonafide defense it it strikes me as logically difficult to come to a conclusion that there was no bonafide defense if a judge was convinced that there was it's not as she she had no stake in it it was just her opinion after reviewing the facts in the law that being said as long as there's a bonafide defense american family cannot be can not be on the hook for any vexatious damages if in fact the argument is that waiver eliminated the bonafide defense then the waiver occurred at the time of payment and as long as in the facts that are pled patsias believe led to a vexatious refusal in this case all happened before the payment it'd be difficult to argue that things after payment were vexatious because they got what they wanted so it it strikes me as logical difficult position for patsias to take while you have these defenses then you waived them and but all the things that happened that we think you did wrong before he waived them now you don't have the bonafide defense because in fact the bonafide defense wasn't back in existence almost i think patsias is admitting that there was a bonafide defense if there's a waiver because there had to have been something that had to have been waived aside from that this this case involves an abuse of discretion standard of review judge julie katz i don't think it could be said she shot from the hip on this the order that she wrote is six pages long twenty four paragraphs cited case law side of the record the the argument in the motion for a new trial you know was conducted it took several it was a ranking hearing she apines on the record why she ruled that she did this was a case that involved testimonial evidence she was in a position to see both mister patsias and ron cleveland who was the adjuster for american family who's mentioned in the record she's got to see both of their demeanor's in their testimony and she's afforded deference under the charter case that was cited by both sides and the briefs charter says the ultimate decision regarding sanctions under section one hundred and fifty five penalties is reviewed for an abuse of discretion and also stays the legislative intent was to invest this decision with the trial court she gave them enough reasons and wellreasoned legal opinion regarding why she ruled that she did though this this court can obviously take a look at that i think she has afforded discretion and it's difficult for this court to overrule what she came up with the patsias is is is never satisfactorily answered a question that was asked at the trial court level which was why didn't you or why didn't patsias is file a breach of contract claim at the beginning instead this this fire happened in two thousand and sixteen there was never a breach of contract claim or declaratory judgment action filed by patsias there isn't a reason why has could not have done so patsias is savvy enough to have made it to this court presumed patsias could have filed a breach of contract claim which is how this normally would have been resolved and it would have been resolved probably without an appearance here today correct me if i'm wrong but didn't patsias alleged suggest that is was the amfam's responsibility to file a dj action and that's because they didn't find that there was any ambiguity or any issue with the coverage that it their assertion your honor yes that not when was that brought to amfam's attention the first time i remember it your honor was during the arguments on this particular issue so then after the after the payment had already been made and the argument is is is based on korte or korte k o r t e is where that comes from and that case is not applicable here this is a property damage case between insured and insurer the korte case is a liability case in which the insured was trying to get coverage for a wrongful death action and in the korte court said well when that happens the insurer has three options they can file a dj action defend or defend under reservation of rights that case is totally not applicable here there is no legal jeopardy that patsias was faced in in this dispute there is no ticking gun of the answer or ticking time bomb of the answer being due it was a distinction that was picked up by judge katz as well it's it was i think cited in a way that wil not let your honor's see what that case was about by patsias the case law is that is before this court does not support any notion your honor that that american family has a duty to every time there is a contractual dispute between a insurer and insured to file a declaratory judgment action i imagine most people would not want to be called into court every time there was a dispute most of these things are worked out and if patsias felt strongly about this he could've filed a breach of contract claim i'm sure your honor's see more than a few of those up here between insured and a insurance company so that notion is just not supported under the law and whatsoever that american family had some super duty to file a declaratory judgment action in this case i said i'd be brief i don't want to make myself a liar so i will sit down and let your honor's have a brief period of questions for me thank you very much thank you your honor's daniel thank you justices every bottle american family suggests that the key is that is had a bonafide defense which was never presented in court of course one can not reach a bonafide defense without a dj action with a neutral arbiter a court on a even playing field finding that there was a bonafide defense not just an asserted defense but a bonafide defense it rises to that level we've quoted mariam and black in the brief in the oral arguments you just heard for the appellee i heard an acknowledgement that any vexatious and unreasonable acts and delays were before the payment on july nine i don't think that's tenable i don't think you can do everything they did in this case and then excuse yourself with a fig leaf of a alleged bonafide defense that was never brought to court and there were delays vexatious and unreasonable delays between july nine and july thirty one two thousand and eighteen not filing a declaratory judgment action continued to be vexatious and unreasonable there was no motion that they gave the appraisal award out of fear i take is the most important part american family as is in the record did not pay the appraisal umpire and patsias appraiser until monday july thirty two thousand and eighteen now five hundred and thirty nine thousand seven hundred and five mandates that payment where the award by the umpire matches the figure of the insured's appraiser or the that's in the statue american family in it's pleadings denied that it had any such responsibility contrary to illinois statue i submit that there's no difference in legal principles between the third party insurance case and a first party insurance case mister patsias has been hung out to dry in this case had to fix a burned house out of his own pocket you know from the briefs they paid three hundred and eighty thousand eight hundred and twenty but it cost over five million five hundred thousand by the appraisal work to make those repairs paying seven hundred and thirty five and leaving nine hundred and twenty five to your insured is vexatious and unreasonable we get the vexatious and unreasonable if the waived by their payment the question remains in my final remarks here my submission of what's the optimum method for this court reversing this associate judge trial court although a published opinion is always salutary a rule twenty three order seems to fit the bill better in this particular case and i'll suggest why the waiver by payment issue in this case as i see it is too simple too straight forward too easy for these facts to be a testing hypothetical on the illinois bar exam waiver by payment it's a popped fly this case was also in my view too easy for a law school curriculum class on insurance policy contracts it's too clear waiver by payment this case might be instructive in a college university basic prelaw class waiver by payment as an introductory principle when you pay without a release without a dj action without a reservation of right you waive the entire defense if you haven't really had a bonafide defense in the first place amfam waived it's defense by two things one paying the claim and two not filing it's dj action or after we went to court to get the umpire appointed to get amfam compelled to name it's appraiser amfam did not counterclaim in litigation my client had to bring so the dj action absence and the payment especially waives there defense i think that waiver by payment by american family on july nine two thousand and eighteen there would not be a significant presidential value to this case to be a published opinion that's entirely up to you i think a rule twenty three order may be the best method but either way we respectfully submit to the court thank you i do have a couple of questions yes your honor first under your theory the sole burden is on the defendant to file a dj action correct in this particular case with this procedural posture with us having gone to court first for the umpire and the appraiser for them too assert a coverage offense it's too late they did not they sat back on their rights so if not waivers stopholders really clear okay the other question i have is once you have the payment on the claim after going through arbiter and all those things that issue gets resolved but then you go to a trail and the trail judge hears this claim of the vexatious and unreasonable aren't those essentially two different issues and you had a trail on the second issue and the trail judge found in the defenses favor correct well the problem with that is that the trail court disclaimed any coverage dispute issue being decided that day the only issue was the one hundred and fifty five penalty attorney fee and prejudgment interest but for the court to say there was a bonafide defense she had to actually decide the declaratory judgment coverage question there's no separation there and that's where her honor ran a foul of established law of waiver okay thank you certainly all right thank you very much thank you justices thank you both for your arguments court will take the matter under consideration and issue a ruling in due course