our third case for argument this morning is cincinnati insurance against the estate of ch cincinnati turns company's declaratory judgment action seeking a determination of its coverage obligations with respect to its personal umbrella policy issued to same she and tony chee and with respect to an unaligned single  fact that since she was the mother of six children four of them quite young it seems fairly obvious that tension liability for her death would quite likely have and what what the other side of the defendants refer to is a a offer made by state farm to settle for policy limits which was neither of which is not accepted and it was a provisional acceptance as the district  fact there is no settlement there's no settlement docket there's no release of the insured and certainly there's no judgment so that where we're still stood at the stage where state farm is the primary insurer has the duty to you know we have said we have a serious problem state farm is tendered its policy limits it has absolutely nothing at stake in the underlying litigation there's no reason to put up another nickel to defend and your client wrote a policy that gives cincinnati a duty to defend and not an option to defend a duty to defend if the underlying policy is exhausted and more importantly if the claim is covered and that's actually the third issue  if the claim is covered it's if it could be covered that's the doctrine correct and our position is that the injury to an insured exclusion of bars coverage for that that's a completely unacceptable argument because there is an exception to the exception for contribution claims and a contribution claim has been made in what the go ahead but that kicks off the duty to defend there is a pending contribution claim your policy express lee says that there's a duty to defend and maybe a duty to indemnify for such a claim well you know you might think you're going to win or that the defendant will win on the contribution claim but that doesn't affect the duty to defend but it does affect your duty to defend your honor because there are two separate underlying suits there is the there is the suit brought by the state of tony and the state twenty a law against same cheap two parties that's it that is a strict negligence cause of action there is no contribution claim asserted by nor could there be asserted by any party to that case the only potential liability the same she has in that case is arise directly from the claims made by tony chee or the estate of tony che but brought against the treaters the couple doctors in the medical facilities that case relates to medical malpractise liability same she wasn't a party to that case had no potential liability relating to that case until may of two thousand and thirteen when in that point it's just to me the doctors are seeking contribution from sam based on his and the next election loss and you know all of that is your separate not denied that it might have a potential obligation to that counterclaim arising out of the the medical malpractise case since the debt that case is actually not wasn't and coverage regarding the counter claims court in that case actually is party to a part of the suit but it was conflated and brought into the suit and apparently confused or just a court judge since any reserved his rights to the extent that same she has liability that arises from the counter claim filed in the medical malpractise case yes the exception to that exclusion applies to the course we're not there yet because first the medical malpractise folks have to have liability so that so that there's no value to that claim yet and as an umbrella policy we have no obligation to pay until there's some value to  m the issue if we're your confusing duty to defend with a duty to pay i don't see in this case any any way to reach the duty to pay because there hasn't been any decision in the underlying  and we keep saying that until there is a decision of the underlying litigation the duty to indemnify is not right so the only question we have before us at least the only question we ought to be having before us is the duty to d my limits i don't want to offend your honour's right that that it was probably very evident at the outset that potential liability here could exceed the limits of the state farm policy in fact we raise that in our brief because that goes to the issues of on  notice argument did state farm have any incentive to really provide a diligent defense or do a village investigation perhaps not but the fact of the matter is that state farm has not paid nor has anyone else paid to settle is paid even if no one is cashed the check but it's basically all we have is and it is an affidavit from from opposing counsel that says state farm told us they would pay their limits if we released same sheet but they have not done so there's no other no argument or they just starts the record make clear whether state farm has written a check as opposed to written a check that hasn't been cashed as opposed to not writing a check and we know on the record which of these it is that no one's  the consequence on certainty in that respect of not having an answer in the record the the the insurance they have they have the burden of proof to prove their claim comes within coverage again that's illinois using court law you are a plaint directly in federal courts plaintiffs have the burden of proof and the risk of non persuasion and if there is some important issue on which the record is silent the usual rule is the plaintiff lose that's the way federal litigation work sorry and according to the case other we cited your honor in the declaratory judgment it's not necessarily the case since ninety actually a federal court federal court of appeals once said that and they got reversed nine to nothing by the supreme court that's about three years ago we're not going to repeat that or very well there's no record evidence that state farm has made any payment and exhausted from its and by virtue of cincinnati's ensuring agreement and the definitions in the policy since it has no obligations until unless that  the vehicular negligence case it's the only case on which either side has introduced and brought the third quarter in that case there is no claim for contribution asserted by any party same she's only liability in that case treat yes the exceptions the exclusion would bar cincinnati from asserting that and that's in concert with the language of the policy and in concert with the illinois statute which is why it's in the policy i'm not case within that case the contribution claims asserted that brings same she into that case which is then the only reason why cincinnati has anything to do with the case and because it's a counterclaim relating as you as your honour's quickly noted a counter claim that says same tree you have cause the underlying battle the injury to mistreat cincinnati cannot assert its exclusion to liability that might arise for same tree as a result of that kind of claim in the med and medical malpractise action and since it has not has not stated that it would and since they did not deny coverage for that claim since they reserve rights and said we'll proceed with that we'll work with you same she will work with your defense counsel and with state farm in the defense of that action if in fact the state proves a claim against the medical malpractise dependents and those defendants then successfully prove their kind of claim then that those damages whatever that might be is not precluded by the by the exclusion and if it exceeds two fifty then since it has got the excess of  if i might with respect to the to the notice issue your honor which we haven't we haven't touched on at all it's under spirited and it's and it's it's very clear in the record that this was an auto accident in august of two thousand and ten the first time that cincinnati learned anything about the and since i responded to that to say well this is this is liability policy you can't make a first party claim and secondarily obviously you're insured on the policy and there's a bodily injury to the insured exclusion since any person hears about the claim or his potential exposure or damages from same cittie in october of two thousand and twelve after the cases are filed but if we if we if we go with and we have in the brief we go with the fact that since i was first notice at all from any part of the occurrence here the claim here was in december of two thousand and eleven we're dealing with sixteen sixteen months of delay and under the under illinois supreme court law there's a number of factors that we look to under as stated in both contr west american versus yorkville we look to the policy specific notice provision we look to the insured sophistication in commerce and insurance to look to the insured awareness of an event that may trigger insurance coverage look to the insurance diligence of prejudice to cincinnati by virtue of the fact that sixteen months had passed before since then it was even advised that anything had happened and so he was robbed of any opportunity to do anything for the full sixteen months and as as your your honor has already mentioned we know that state farm for example may have had no real reason to do much on its own so we can't rely upon in the case law suggests that we're not since his position isn't watered down or neutralized by the fact that there was a noted the within ten days or a week of the accident news chief unfortunately passed which obviously i think is it is pretty clear indication to mr chief that the value of a case and as your honor already indicated the potential value of the case was pretty evident from the outset that mr chief should have known that the potential his potential exposure there was going to exceed the state farm limits and yet for sixteen months we heard nothing is there to duty or procedure where the primary insurer also looks into excess when they see this before them i think there can be and sometimes duties arise with respect to obligations to settle a claim within the primary layer but but in terms of actually notifying the access i don't know your honor that there's a there's a national do that that they need to do that and i was excess would you then when you finally did get notice turn to the primary and to go on to pay up or do something that were i don't know what would an excess is close to do with it's a five million dollar and i also don't know what the five hundred thousand dollars per that that speaks to that issue but one since i did get notice row coverage letters and in fact again this is something we've discussed the initial notice that came to cincinnati from the same she was originally the  claim by the estate this is a vehicle or negligence case against same shion and that was the only case filed in august of two thousand and twelve that involves so that case came and since and i took a look at it said well in its response and  a coverage letter and then also in the complaint that we filed which tracks the same thing he said ok we've we have some questions on this we believe that that you breached policies notice condition we weren't aware of anything happening we also believe that this case the case that you  eight months later may of two thousand and thirteen contribution claims are filed in that separate action that was tendered since we got notice of that we again wrote a cover letter to say thank you for tendering that we we have questions it looks like it potentially rises to the same occurrence but we understand that your potential liability here arises from the counter claim has not been filed by the malpractise defendants that appears to us to to fall within the exception to the injury exclusion and therefore rights because we are not exactly sure what's going on here again because we don't have a lot of information reserve rights but we'll work with you let's figure out what's going on in this in this medical malpractise case and we'll work with you and work with your primary key here in your defense  was time goes on were the the two and a line cases are still pending they were found two dozen twelve are still going so there's been no determination of liability in either action not really privy to to where they stand and why that is the case but there but there has been no ruling that since i don't believe for the for the reasons we've discussed and the reasons in its complaint that it has no obligation to same cheap to the extent that on the basis of either late notice or the  insured exclusion for liability that he might occur as a result of the the state's suit against him if and and that's that that's the ruling we see today is a reversal of the court's ruling stating that cincinnati's exclusion does not apply and  flexible here there's there's a this is the only action brought there's no judge around the merits and in fact since and he hasn't even deny the other claims much less filed the declaratory judgment action i see and to my time for  the court honorable judges i represent dr sam chee who was in the automobile accident with his wife so his three children and another one of her children in the  car at the point where a squirrel ran in front of it he swerved to avoid the squirrel and hit a tree it's not a complex car accident where you have a number of vehicles on the interstate or anything like that she she was ok the the three smaller children were ok sam was ok his wife suffered a broken ankle and some broken ribs that were diagnosed a at the hospital though there was a c t scan that showed a break in the cervical vertebrae that went undiagnosed they took the collar off that had been put on there by the m t's on the strength of the reading of that c t scan then at autopsy a week later autopsy doctor found the break then they went back and looked at the c t scan and saw that the break had been there all along it's our position in this case that we have i think a load of the record with facts about the malpractise by the physicians in the hospital and that we have shown that we're not in any way in a situation where dr jean is trying to put anybody up to a malpractise case or tried to get the malpractise case going so that he would have coverage under a policy because one of the state court suit is a suit by the state against how is that even arguably covered by the policy the policy i think talks about occurrences not specific lawsuits and where there's coverage for an occurrence that applies whether there's different law suits or not in this case the exception about acquired right of contribution doesn't talk about anything about separate lawsuits or asserted claim of contribution or whatever just talks about an acquired right of contribution we've established that under illinois law at the moment where the medical malpractise occurred the medical malpractise defendants acquired a right of cows or abuse and the illinois courts call that an coate right of contribution and then in addition to that they've asserted it but i think the point is they have this right of contribution all along and they are the policy language says acquired not asserted and now the insurance companies trying to change the word acquired to assert of or asserted in a particular lawsuit even when that's not the language that they're used in their policy and this happens throughout this case were the insurance companies have a rule against them that's a little different than anybody else it's that if layers of coverage here and duty of defense and that both insurance companies state farm and cincinnati have a duty to protect him they have a duty to protect him by making sure there's a vigorous defense they have a duty to protect him by considering settlements and if they can settle the cases within the policy limits to protect him from personal exposure of his own assets that's what they should be doing and then if there is a settlement or a judgment that they should be paying that and if the judgments higher than five million dollars and state farm in cincinnati have a chance to settle for two fifty and five million dollars and they didn't take it that that would be a breach of the standard of care and the fiduciary duty owed to the in service so that's that's sort of the overall picture as far as dr chee is concerned and that we think that they shouldn't be allowed to change the insuring agreement that he and his wife purchased for the umbrella coverage by making changes in language such as saying acquired now means asserted by saying by reading out for example in the notice provision the provision that says that we have no duty to provide coverage based on a failure to comply if it's prejudicial to us they want to read out the word prejudicial or say wealth that wasn't the only thing that we meant we could have meant also something wasn't prejudicial or if it was prejudicial we've got all these other factors that have to be considered that aren't even in the policy we've got them trying to interpret ultimate net loss which uses the words a and payable in the alternative to now say well it has to be paid and we think that's our overall position is that they have a duty to protect him not to nit pick that policy language and try to create ambiguities where none exist and then to try to resolve the ambiguity these in their favor we act just exhaustion of primary coverage i take it state farm on actually pay anything until sam she is released from liability is is that it's typical condition and if so how do excess insurers like cincinnati temple react to such conditions in terms of when to become involved well one of the i think that what happens is the primary carr once they tend to their limits then the typical umbrella carrier access carrier will come into the picture and first of all make a decision about whether they should be defending if the underlying primary carrier not doing a good job or can't be expected to do a good job and then also to evaluate whether in the settlement they should be offering money to protect their insured from a judgment in excess of the policy limits and so i think that's what the common practices in this case though what happened instead was they filed a declaratory judgment action asking that they be completely absolved from any exposure liability under their insurance policy the policy doesn't apply that they have no duties until there's exhaustion we think that we have exhausted the limits with state farm with them making their tender they're protecting their insured dr chee by saying that they want to general release which is common it's also common that in the case of an umbrella policy there is no general release that's going to be executed if there's a chance or probability the verdict could go higher than the primary coverage and we think cincinnati should step up to the plate and provide what dr chee and his wife purchase with regard to  notice up until the lawsuits were filed in state court state farm was treating this matter as an uninsured case because mrs she wasn't insured under the policy she had a claim against dr chee under the under well just a tort claim against dr g and then state farm's position was that because of the same outsold exclusion that dr chee didn't have liability coverage of two hundred fifty thousand that rather he had uninsured coverage for rather he did he didn't have any coverage at all which would give then mrs she as the insured under the policy or her representative two hundred fifty thousand contract lame against the insurance that she had purchased because he's an insurer then state farm changed from viewing it as an uninsured case after state farm i think thought that the medical malpractise case was brought in good faith and so state farm has provided then a defense under the liability coverage and made a tender of its limits under the liability coverage  not only in the malpractise case but also in the car accident case because they they now recognize it's a liability situation that an uninsured state farm's position was that at the very same language about same household and acquiring somebody acquiring as a third party a claim of contribution they've interpretive they asked them to mean that it there is liability coverage under their policy with that language even though cincinnati so based on the same language in the same statute that that is not true that's why i think it is important that we load of the record with the medical malpractise evidence to show that there really is a claim for contributions by those defendants they missed a fracture of the cervical level that we can to her body anywhere below the cervical level she laid in bed nobody could figure out why she was so lethargic they and then she ends up not moving much and she ends up with a pulmonary embolism where everybody had hope she just had a broken ankle and some broken ribs so the malpractise claim we feel is legitimate we feel that they do have under the law a cause of action for contribution against the original tortfeasor and we believe that unfortunately dr chee was in the same medical group has made the bad decision on the c t scan although he worked at a different spittal than the one his wife was there and unfortunately he has to say to the that they committed malpractise  missing that fracture so we think state farm to the that they have a duty of defense whether whether they want to spend another nickel or not but that if in the cincinnati he's worried about it they should step up to the plate and defend if they don't think state farm is doing a good job now before the district court they never claim that state farm is doing a bad job they never presented any proof we put into the record that letter from state farm to its lawyer that it hired not its lawyer but dr she's a lawyer john fleming telling him to defend the case and so if they're accusing state farm now of doing a bad job they're not just accusing state farm but there are accusing this lawyer john fleming of not presenting an adequate defense and that's why they've somehow been prejudiced by this allegedly late notice that they're saying should have been given a week later but to this day to this day they're saying their policy doesn't apply and then that's in one breath and then the other breath they're saying will sam she should have known a week after the accident that the policy applies the the umbrella coverage references the two hundred fifty thousand dollars in underlying coverage the umbrella policy says that if that coverage is not their liability coverage then it's nothing's owed the umbrella policy says it doesn't have anything to do with uninsured coverage and so for that time that state farm was viewing it as an insurer case rather than a liability case under its coverage there would have been no if that if that had held true all along and that developed into a situation where state farm said it's changed now from an insurer to liability we probably  wouldn't be able to say that at least there's an assertive claim we probably would still be seeing there was an acquired claim for contribution broke policy requires interviewing to fifty five hundred yes and that was the state farm policy so if that if that policy had not had liability coverage because of that exclusion for same household then state farm would have correctly been calling it an uninsured claim that tony she would have owned against her own of them because he would be uninsured then it became sort of different he became insured thus the liability the two hundred fifty thousand was there and that triggers and in our view the umbrella specially whereas here the underlying primary carrier has tendered the policy honorable justices may it please court i think it's important that i first did and of mine who i actually represent i represent does the state of a woman who is deceased tony she died as a result of the accident and subsequent medical treatment but the estate is only a vehicle to bring litigation it's not the real party of interest but since the deceased person can't bring your defend lawsuits you have to have an estate the real claimants in this case i will comment she was three weeks old been born bus a syrian birth which caused her mother not to have a seatbelt on the time of the accident what is our role and in this declaratory judgment is my position then we were named a party and i guess that may be a legal requirement but we're really not able to even have standing for many of the issues that are before you just like this these little children had no control of that vehicle when it went off the road and struck a tree then no control of the medical care in the legal case we are  so what is your argument my argument is that at the time of we had no duty because we're not a party to the insurance contract when nobu duty to notice anybody we had no standing to to be ternium day because the real damage in this case the legal being is if the coverage is denied same she will personally be exposed to not having defense and being obligated on the judgment that's the truth of the reality that the legal the legal interaction is between c and she who is the policy holder the damage legally will be to him but i'd like to stress on behalf of the talking about the real parties in the interest the most important repercussion of your decision will be those children whether they have a right to recover because of the wisdom of their parents and purchasing this policy or not purchasing the policy even though the legal standing in the defense of that whether there's coverage and blogs to see and she the repercussions t real practical repercussions will be for the children they will be left with and then a quick recovery some of these issues we did notify cincinnati at the at an early opportunity when we  move forward with litigation and both of those cases are now pending in circuit court in the state of illinois and will be pursued but on this issue about whether there's exhaustion what's what's in my opinion missed in that is that state farm has quote tendered the policy limits but there's a buck to they have to you want to agree with mr reed that the record does not show what that gary why does the record not show what it means i can imagine a lot of meanings that they have cut a track and no one has signed it but they have offered to do it and somebody has objected for some reason  this might actually be important and no one has put the information in the record i think that the answer would require strong some conclusions not speculation drawing some conclusions because state farm went beyond tendering the  don't know what you mean went beyond tendering when we don't know when this record what state farm did concretely they commute we don't know what they did concretely in the record then we don't know what it means to go beyond doing what it is we don't know they did but we know what they did they tendered by meaning they communicated their willingness to pay the limits well then you must be saying that we do know in the record what they did and you just said we know one other thing don't look answer the question with a tender to payment or a check and physically put it in our possession what you mean what i believe is not involvement conversation is they show the willingness to pay the two fifty and were binding themselves but they require the release and release would have released not only state farm same g but cincinnati from any obligation obviously plaintiffs the state could not sign a release that w know if there were a document to that effect in the record or are you just testifying now i'm not testifying well then that's already been referred to by counsel i believe it says there are documents to that effect and  the tender was it's referred to go pensively but if it might be important to the disposition of this case what the record shows about what state farm is done the court would like the parties within a week to inform us exactly what the record shows about what state farm is drawn about why no money has been dispersed and whether it would help us to know whether the parties agree on that statement and where we can look in the record yes ok for one that it might very well if the coverage for dependent on how the medical malpractise case plays out the only case that is before the court today the only case in which we saw the declaratory judgment action with the bid is the healer negligence case brought solely by the