## I L L I N O I S 

## O F F I C I A L 

## RE P O R T S Appellate Court

Progressive D irect Insuran ce Co. v . Jungkan s , 2012 IL App (2d) 110939

Appellate Court Caption PROGRES SI VE DI RECT I NSURANCE COMPANY, PlaintiffAppellee , v. KYL E J UNGKA NS, Defe ndant-Appe llant.

District & N o. Second District Docke t No. 2-11-0939

Filed J une 27, 2012

Held (Note : Thi s syl lab us

con s t it ute s no par t of the opi nio n of the cour t but has bee n pre

par ed b y the Repo rt er of D e c i s i o n s f

o r t h e

c o n v e n i e n c e o

f t h e

rea der

. ) An i n s u ranc e company was not entitled to a declara tion that its insu re d violated t heir poli cy ’s cooperation clause when the insured settl ed with the driver of the v eh i cl e t hat injured him, for the limit s of the driver’ s policy
, without notice to the insurer, wher e the driver was judgme nt proof and the insure r wa s not prejudiced by the settlement.

Dec ision Under Review Appea l from the Circuit C o u rt of Kenda ll County
, No. 10-MR-7; the Hon. Timothy

J . McCann, Judge, pr esiding

.

J udg ment J udg ment for plaintiff r ever sed; judg ment for de fenda nt entere d.Counsel on

Appea l Michae l W. Rathsack, of L aw Offic es of M i ch ae l W. Rathsack, of Chicag o, and Kathl ee n T

. Z ellner and Doug las H. J ohnson, both of Kathlee n T. Z ellner & Associates, P.C., of Downer s Grove
, for appellant.

Bill Porter and Reag an F. Goins, both of Chilt on, Yamber t & Porter, L L P, of Ge neva, f

or appe llee.

Panel J USTI CE McLAREN delivere d the judgme nt of the court, with opinion.
J ustices Z enoff

and B irkett conc urre d in the judgme nt and opinion.

OP INION

¶ 1 Def

endant, Ky l e J u n gk an s , was injured while he was riding in a car driven by Billy Watts. He settled with Watts and Watts’ insurer, S tate Fa rm Insuranc e Companies (State Fa rm), for State Fa

rm’s policy limit
, then soug ht underinsure d motorist (UI M) cover ag e under his policy with plaintiff, Prog ressive Direc t Insuranc e Company

. Plaintiff denied

cover ag e, o n t h e b asi s that defe ndant’s failure to notify it in advanc e of the settlement violated the policy ’s cooper ation clause

. Plaintiff filed an action for a decla ratory judgme nt (735 I L CS 5/ 2-701 (West 2010)). The trial court grante d plaintiff summary judgme nt ( 735 I L CS 5/2-1005(c) (West 2010)). Def endant appea ls. We revers e the judgme nt and enter judgme nt for def

endant. ¶ 2 De fe ndant’s policy with plaintiff included UI M cover ag e, with limit s of $250,00 0 p er person and $500,000 per occur renc e. On September 24, 1999, defe ndant was serio u s ly injured while riding in a car driven by Watts. J ennife r Walker owned the car , and her policy with State Fa

rm had limit s of $100,000 per person and $300,000 per occur renc e. Def

endant sued Watts for neg lige nce. On November 6, 2009, he settled with Watts for the policy limit of $100,000. Def

endant and Watts signe d a rele ase discharg ing Watts and Walk er fr om future liability for th e ac cident. Def endant did not notify plaintiff of the rele ase until November

30, 2009. ¶ 3 Def

endant then soug ht UI M cover ag e from plaintiff. P l ai n t i ff d en i ed t h e coverag e,

asser ting that, by rele asing Watts, defe ndant had violated the policy ’s cooper ation clause and had cut off plaintiff’s right o f s ub ro gat i on ag ainst Watts and State Fa rm. Plaintiff filed a complaint for a decla

ratory judgme nt to this eff ect, attaching a copy of the policy

. The two pertinent policy

provisions follow. The first is the coope ration cla use:

“ NOTICE AND CONSENT REQUIREMENTS
An insu red person must notify us in writing at least 30 day s befor e enter ing into any

s et tlement with the own er or operator of an uni nsu red m otor vehicle o r an

-2-und erinsured m otor ve hicle , or any liability insurer. I n order to prese rve our rig ht of subrog ation, we may

elec t to pay

any sum offer ed in settlement by
, or on behalf of, the

owner or operator of an uni nsu red m otor vehicle or an und erinsured m otor vehicle

. I f we do this, the insu red person ag ree s to assig n to us all their rig hts ag ainst the owner

or operator of the uni nsu red m otor vehicle or und erinsured m otor veh i cl e , to the extent of our pay

ment. Any judgme nt or settlement for damag es ag ainst an owner or opera tor o f an uni nsu red m otor vehicle or an und erinsured m otor vehicle that arises out of a lawsuit broug ht without our written conse nt is not bi nding on us .” (Empha ses in orig inal.) The sec ond pertinent provision re ads:

“ OUR RIG HTS TO RECOVER PAY MENT
We are entitled to the rig hts of recovery that the insured person to whom pay ment

was made has ag ainst another
, to the extent of our pay ment. That insured person may be require d to sign documents related to the rec overy and must do whateve r else we require
to help us exercise those rec overy rig hts, and do nothing afte r an acc ident o r loss to prejudice those rights.
Howeve r, w e may not asser t rig hts of recover

y ag ainst the owner or operator of an uni nsu red m otor vehicle or an und erinsured m otor vehicle
, if the person seeking

cover ag e under Part I I I

–Uninsured/Unde rinsured Mo t o ri s t Coverag e provides us with written notice at lea s t 3 0 d ay s p rior to enter ing into a settlement that an offe r of settlement has been made b y , or on behalf of, the owner or operator of an uni nsu red

m otor ve h i cle or an und erinsured m otor vehicle
, and if we do not elec t to pay to, or

on behalf of, that person an amount equal to the amount offe red in full settlement by
, or

on behalf of, the owner or operator of the uni nsu red m otor vehicle or und erinsured

m otor ve hicle

. When an insured person has been paid by us and also rec overs fr o m another
, the
amount rec overe d will be held by the insured person in trust for us and reimburse d to us to the extent of our pay

ment. I f we are not r eimbursed, we may pursue rec overy of that amount direc tly

ag ainst that insured per son. I f an insured person rec overs from another without our written consent, the insured person’ s rig ht to pay

ment under a

ny aff ecte d cover ag e will no longe r exist.
* * * These provisions will be applied in acc ordanc e with state law.” (Emphase s in orig inal.) ¶ 4 Plaintiff’s comp l ai n t contende d that, by rele asing Watts without first timely notifying plaintiff, defe ndant violated the cooper ation clause and dest roy ed plaintiff’s rig ht of subrog ation, and that, as a result, def

endant ha d forf

eited any UI M pay ments. ¶ 5 Def

endant moved to dismiss the complaint (see 735 I L CS 5/2-619(a )(9) (West 2010)). As pertinent here
, he argued that, even if he had violated the cooper ation clause
, plaintiff still could not rec over. That was beca use, since the time of the acc ident, Watts had no signific ant assets, so that plaintiff had suffe red no substantial prejudice from losing its subrog ation rig ht. ¶ 6 Def

endant’ s motion attache d sever al documents. The firs t , a l et t er dated J anuar y 22,

-3-2010, from Edw a r d R. Kirby & Associates, Inc. (Kirby ), a private investigator, to defe ndant’s attorney , Kathlee n T. Z ellner & Associates
, P

. C

. (Z ellner)
, stated that Kirby ’s “limited investigation” had shown that Watts’ only “re adily identifiable” a s s e ts w e r e th r e e 1 9 95 motor vehicles. Moreove r, there was an unsatisfied 2005 judgme n t against him for $5,249; two pater nity suits had been fil ed aga inst him; and, on J anuar y 8, 2010, he had been sentence d
to four y ear s in prison for ag g ravated driving under the influence of alcohol, appar ently based

on the acc ident t h at had injured defe ndant. The letter conclude d, “Given that [W atts] is

curr ently incar cer ated and we find no immedia t e assets, we are discontinuing any further investigation at this t ime.” ¶ 7 De fe n dant’s motion attache d another letter from Kirby to Z ellner, dated Fe bruar y 18, 2010, stating that a “limited investigation” had reve aled that Walker had no “asse ts of note” other than t wo vehicles, including the car involved in the acc ident. Finally
, the motion attache d a letter dated J anuar y 1 4
, 2010, from Asia Be ll, a claims repr esentative for State Fa rm, to Z ellner. It stated:
“Per our conver sation *** today ***, Billy Watts has no other insurance with State Fa rm and per our policy

holder Ms. W al k er neither one of them [has] any assets. State Fa rm has reimburse d [pl aintiff] the $5,000 in [ s i c ] wh ich they paid for medical
pay ments.” ¶ 8 After the trial court denied defe ndant’s mot i o n t o d i s m i s s , h e fi l ed an answe r that included sever al “af

firmative defe nses,” including that plaintiff had not been prejudice d by his settlement with Watts and that the settlement had not exti nguished its subrog ation rig ht. ¶ 9 T h e p arties filed cross-motions for summ ary judgme nt. Plaintiff’s motion argued tha t , beca use defe ndant had violated the cooper ation clause
, he could not r ecove r UI M benef its. Plaintiff asser

ted that, under Home Insurance Co. v. Hertz Corp.
, 71 I ll. 2d 210, 215 (1978), beca use the unlimit ed rele ase did not specific ally desig nate an amount to cover plaintiff’s subrog ation interest, plaintiff could not bring an action ag ainst Watts unless, befor e the rele ase was executed, Watts or State Fa rm had known of plaintiff’s interest. Howeve r, there

was no evidenc e that either one had known. Addre ssing defe ndant’s no-pre judice argument, plaintiff contende d that a judgme n t aga i n st Watts would not have been limit ed to Watts’ assets at the time of K irby ’s investig ation. Fur ther, it was not for de fenda nt to say whether plaintiff would pursue a

subrog ation action. ¶ 10 D e f

e n d a nt’ s mo ti o n f

o r s u mma ry judgme nt conce ded that he had violated the coope ra ti o n clause . Howeve r, he contende d that the Hertz rule fa vored him bec ause, be fore the re lease

was signe d, Walker (whom defe ndant char acte rized as a tortfea s o r) an d S t ate Fa rm had indeed known of plaintiff’s subrog ation interest. Defenda nt relied on aff

idavits by Walker and Be ll. Walker’s aff

idavit stated that, as of November 6, 2009, she knew that plaintiff had the rig ht to sue her. Be ll’s aff idavit stated as follows. She had proce ssed the settlement of the claim betwee n defe ndant and Watts. State Fa rm reimburse d plaintiff “for the $ 5 0 0 0

. 0 0 in [ sic ] which they

[ sic ] paid for medica l pay ments for [defe ndant].” Be ll “had knowledg e of [pl aintiff’s] subrog ation rig hts with reg ard to [defe ndant’s] c laim pr ior to the rele ase being executed on Nove mber 6, 2009.” ¶ 11 In response to defe ndant’s motion for summary judgme nt, plaintiff asser ted in part that,

-4-under Farmers Automobile Insurance Ass’n v. Suligoy
, 180 I ll. App. 3d 896, 898 (1989), the

“knowledg e issue” was an aff irmative defe nse that defe ndant had failed to raise in his answe r and thus had forf

eited. Also, plaintiff asser ted, Be ll’s aff

idavit was insufficient to prove that she had known, pre- rele ase, of plaintiff’s specific rig ht of subrog ation ag ainst Watts. Def endant replied that Be ll’s aff idavit imp l i ed that she had known of the specific rig ht involved in this case , and h e ad d ed t h at he had raised the “knowledg e issue” in his aff irmative def

enses. ¶ 12 The trial co u rt gra n t ed s u m m ar y judgme nt to plaintiff (and thus denied summary judgme nt to de fenda

nt), explaining first that Walker’ s aff idavit was irre levant beca use she

was neither the tortfea sor nor the tortfea sor’s insurer. Fur ther, the court noted, the rele ase did
cut off plaintiff’s rig ht of subrog atio n aga i n s t Watts. There was no assura nce that Watts would have been judgme nt-proof–he could have come into a larg e sum of money , howeve r unlikely the possibili ty

–and, even had he been judgme nt-proof, plaintiff would have had the rig ht to file an ac tion ag ainst him any way . Def endant timely

appea led. ¶ 13 On appe al, def endant a dvance s two arguments for why the t rial court err ed in gra nting plaintiff summary judgme nt a nd denying him summary judgme nt. First, plaintiff’s r ight of subro gat i o n survived defe ndant’s settlement with Watts, beca use State Fa

rm knew of
p l ai n t i ff’ s subrog ation rig ht befor e the settlement. Second, plaintiff may not esca pe it s obligations by rely

ing on his violation of the c ooperation c lause, beca use plaintiff failed to establish that it was substantially prejudice d or even to r aise a g enuine fac tual issue on this

score

. Plaint iff responds first that (a) defe ndant waived or forf eited the “knowledg e” defe nse, beca use he did not plead it as an aff irmative defe nse; and (b) defe ndan t fa i l ed to raise a g enuine issue on the matter of fore knowledg e, much less to establish as a matter of law that State Fa rm knew in a dvance of plaintiff’s subr og ation rig ht. Plainti ff r esponds sec ond that it pr oved that defe ndant’s failure to notify it timely of the settlement did c ause it pr ejudice. For the followingrea sons, we agree with defe ndant. ¶ 14 Summary judgme nt is proper when the pleading s, depositions, and other matters on file, when viewed in the light most favor able to the nonmovant, show that t h ere is no g enuine issue of materia l fac t and that the moving party is entitled to judgme nt as a matter of law. 735 I L CS 5/2-1005(c) (West 2010); Shannon v. Boise Cascade Corp.
, 208 I ll. 2 d 5 17, 523-24 (2004). Our

revie w is de novo

. Morris v. Margulis , 197 I ll. 2d 28, 35 (2001). ¶ 15 We turn fi rs t t o t h e “k n o wledg e” issue. Relying on Suligoy
, plaintiff contends that defe ndant forf

eited this defe nse beca

use he failed to plead it in his answe r. Suligoy does state that knowledg e is an a ffirmative defe nse that must be pleade d. Suligoy , 180 I ll. App. 3d at 898. Howeve r, we ag ree with defe ndant that this holding–whic h Suligoy assumed rathe r than supported with case law or rea soni n g– contradicts the established rule that an insurer who invokes a cooper ation clause must aff irmatively show that it was prejudice d by the insured’s failure to notify it in advanc e of his settlement with the tortfea sor. S ee M.F.A. Mutual Insurance Co. v. Cheek

, 66 I ll. 2d 492, 499-500 (1977); Marsh v. Prestige Insurance Group
, 58 I ll. App. 3d 894, 896 (1978). ¶ 16 T h u s , i n R ichter v. Standard Mutual Insurance Co.
, 279 I ll. App. 3d 501 (1996), the insurer contende d that it need not provide cover ag e, beca use the insured had settled with the

-5-tortfea sor without first obtaining the insurer’ s consent. Disag ree ing, the appellate court held

that, once the insured had broug ht his acc ident within the terms of the policy
, the insurer had the burde n to prove that the c ooperation clause a pplied and bar

red recove ry

. Id. at 508-09. Her e, plaintiff has never denied that defe ndant’s UI M claim is within the scope of the policy ; it has instead relied on the cooper ation clause
, and the related subrog ation-rig hts provision,
to defe at an otherwise val id claim. Therefor e, per Richter
, we conclude that defe ndant di d
not need to raise the “knowledg e” issue as an aff irmative defe n s e in his answe r. Parenthe tically
, we note that defe ndant arguably did so, as his answe r alleg ed that plaintiff’s subrog ation right was not exti nguished by his settlement with W atts. ¶ 17 We turn to the merits of defe ndant’s first arg ument on ap p ea l

. De fe ndant notes the holding of Home I

nsurance Co , 71 I ll. 2d at 215: “[ A] n unlimit ed rele ase executed by an insured-subr og or for consideration not specific ally including an amount desig nated as cover ing the in s u r e r ’ s s u b r o g a ti o n interest does not b ar a subsequent subrog ation action by an insurer- subrog ee ag ainst the
t o rt fe asor, if the tortfea sor or his insurance car rier had knowledg e of the insurersubrog ee’ s interest prior to the r elea se.” ( Emphasis added.) ¶ 18 Def

endant ob s er v es t h at t h e u s e o f “o r” instead of “and” demonstrates that prior knowledg e by either the tortfea sor or his insurer will prese rve the subrog ation right of the victim’s insure r. See also Richter
, 279 I ll. App. 3d at 507-08 (ac cident victim’s insure r did
not lose subrog ation rig ht by settlement that was obtained without insurer’ s consent, beca use tortfea sor’s insurer knew in advanc e of settlement that insurer had that right). He maintains that Be ll’s affi d av it established that in advanc e of the settlement State Fa rm knew of plaintiff’s rig ht to be subrog ated to defe ndant ag ainst Watts. Plaintiff resp onds that Be ll’s aff idavit wa s i nsufficie nt beca use it stated no fac ts to show that Be ll knew that plaintiff intended “to pursue its subrog ation interest ag ainst Mr. Watts for any monies p aid to [d] efe ndant under

the [UI M] pol icy .” De fenda nt replies that there was no re quirement that State Fa rm know what plaintiff intended to do at some late r point. ¶ 19 We ag ree with defe ndant that there is n o gen u i n e d i s p u t e that State Fa rm knew in advanc e of the settlement t h at plaintiff had a subrog ation rig ht ag ainst Watts and that this was sufficient t o defe at t he invocation of the cooperation clause

. Be ll said plainly that s h e knew in advanc e of plaintiff’s subrog ation rig ht. Although this statement was a conclusion, it hardly require d elabor ation; Be l l wo u l d have known whether she had been awa re of plaintiff’s subrog ation right, a routine fact of insurance litigation. Under the case l aw, that

was sufficie nt. Thus, there is no g enuine issue of fac t as to wh et h er plaintiff reta ined its subrog ation rig ht, espec ially as, per Richter
, it was ultimately plaintiff’s burden to prove that defe ndant’s settlement c ut off that right. ¶ 20 Fur

ther, even wer e we to hold that there was a g enuine issue of materia l fac t on the issue of knowledg e, the judgme nt still cannot stand, beca use plaintiff failed to raise a fac tual issue on whether

it was prejudice d by

defe ndant’s noncomplianc e with the coope ration cla use. ¶ 21 As plaintiff conce des, it may not en fo rc e t h e co operation clause unless it proves that defe ndant’s failure to notify it timely of the settlement substantially prejudice d it. Cheek
, 66 I ll. 2d at 499-500; Marsh
, 58 I ll. App. 3d at 897. Plaintiff contends that it suffe red prejudice

-6-beca use its subrog ation rig ht w as abrog ated by the settlement. Def endant responds that the

mere loss of the subrog ation rig ht does not satisfy the preju d i ce re q u irement and that, beca use all the evidence showed that Watts was judgment-pr oof, t here was , as a matter of law, no prejudice

. For the following rea sons, we ag ree with defe ndant both that a judgme ntproof tortfe asor de feats a claim of pr ejudice a nd that Watts fit t his description. ¶ 22 Appar ently
, only one I llinois opinion addre sses whether a j u d gm en t -p ro of tortfe asor neg ates an insurer’ s claim of s ub s t antial prejudice from its insured’s violation of a cooper ation clause . The import of that opinion is unclear , howeve r. In Mulholland v. State Farm Mutual Automobile Insurance Co.
, 171 I ll. App. 3d 600 (1988), cited by neither party , the plaintiff settled a g ainst Rudy , one of the alleg ed tortfe asors in the a ccide nt that injured three people whose estates the pla intiff repr esente d. Rudy paid the limit of her policy with Allstate. The plaintiff did not timely notify State Fa rm of the sett l em en t b u t soug ht UI M benef its from State Fa

rm. In response , State Fa rm invoked a cooperation clause
, which disallowed UI M benefi t s t o an i nsured who settled a lawsuit without consent and there by “hurt[ ]” State Fa

rm’s rig ht to rec over from the tortfea sor. The trial court held that the clause d id not apply

. It explained that State Fa rm had not been “hurt” by a settlement bec au s e nothing in the rec ord showed that Rudy
, who had been 16 y ear s old at the time, had had any assets other tha

n the Allstate policy

. Id. at 605. ¶ 23 The appellate court aff irmed. The court ag ree d with the trial court that State Fa rm could
not have been “hurt” by the plaintiff’s settlement with a tortfea sor who had had no signific ant assets other than the insurance policy that had supplied all the money for the settlement. Id. This holding would appe ar to ha ve been dispositi ve by

itself; it meant that the cooper ation clause did not apply

. Nonethele ss, the court went on to consider State Fa rm’s arg ument that it had been “hurt” by the loss of its subrog ation rig hts, reg ardle ss of their value or lack of it. Th e court did not decide whether the mere loss of subrog ation rights established harm. I n stead it ruled that State Fa rm’s subroga

tion rig hts had not been cut off, because Al l s t at e had known befor e the settlement was rea ched of State Fa rm’s subrog ation rights. Id. at 607. ¶ 24 Mulholland ’s import is unclea r. Read in i s o l at i o n , t h e fi rs t holding that we have summarized would seem to establish that showing “substantial prejudice ” require s proving

more than the loss of subroga t i on rig hts; it require s proving further that those rights wer e actua lly worth som et h i n g o ther than the abili ty to litigate. Although the holding turned on the meaning of the word “hurt” in the cooper ation clause
, we see no differ ence b etween saying that an insurer is “hurt” by noncooper ation and saying that the insurer is “pre judiced” by it. Thus, for p ra ct ical purposes, the Mulholland court held that a judgme nt-proof tortfea sor, such as Rudy
, defe ats an insurer’ s claim that it was substantially prejudice d by the insured’s violation of a cooper ation clause

. Nonethele ss, the court went on to consider
separ ately State Fa

rm’s argument that it had been “hurt” mere ly by the loss of its subrog ation rig hts, even t h oug h the court had just stated that those rig hts wer e worthless. Thus, 1

As Ma rsh not ed, the “ap par ent purpos e” of a coo per at ion cl aus e is to pro te ct the ins ura nce 1 company’s sub rogat ion ri ghts. Ma rsh
, 58 I ll

. App. 3d at 897; acc ord Sta te Farm Mu tua l Aut omobi le Ins ura nce Co. v. Fenn ema , 2005- NMSC-010, ¶ 9, 137 N.M. 275, 110 P.3d 491. T hus , it is curi ous

-7-Mulholland does not appea r t o be int erna lly consi s t en t

. As I llinois case law is unclea r, we turn to fore ign jur isdictions, where the law is both clea r and c onsistent. ¶ 25 Numerous jurisdictions have held that an ins urer may not rely on a technica l v i o l at i o n of a cooper ation clause to deny cover ag e if the tortfea sor with whom the insured settled was judgme nt-proof. See Muth v. AI U Insurance Co.
, 982 So. 2d 749, 752 (F la. Dist. Ct. App. 2 2 0 0 8 ); Bantz v. Bongard
, 864 P.2d 618, 623-24 (I daho 1993); Kapadia v. Preferred Ris k Mutual Insurance Co.
, 418 N.W.2d 848, 852 (I owa 1988); Gree nvall v. Maine Mutual Fire Insurance Co.
, 1998 ME 204, ¶¶ 11, 12, 715 A.2d 949; MacI nnis v. Aetna Life & Casualty Co.
, 526 N.E.2d 1255, 1259-60 (Mass. 19 8 8 ) ; S o re n s e n v

. Farmers Insurance Exc hange
, 927 P.2d 1002, 1005 (Mont. 1996); Thrower v. Anson
, 752 N.W.2d 555, 563 (Ne b. 2008) (interpr eting statute requiring insurer to prove that it was “adve rsely aff ecte d” b y s ettlement); Fenne ma , 2005-NMSC-010, ¶¶ 11, 12, 137 N.M. 275, 110 P.3d 491; Hasper v. Center Mutual Insurance Co.
, 2006 ND 220, ¶ 18, 723 N.W.2d 409; Fede rated Servic e Insurance Co. v. Granados
, 889 P.2d 1312, 1315-16 (Or. App. 1995); Hernande z v. Gulf Group Lloyds
, 875 S.W .2d 691, 694 (Tex. 1994); State Farm Mutual Automobile Insurance Co. v. Gree n , 2003 UT 48, ¶¶ 31-34, 89 P.3d 97; Thiri nger v. American Motors Insurance Co.
, 588 P.2d 191, 193 (Wash. 1978). The rea son for this rule is straig htforwa rd: the mere rig ht to sue the tortfea sor is of no value if there is no rea sonable likelihood of obtaining a judgme nt that is worth the cost of litigation. As one court said in applying the prejudice rule to reje ct an insurer’ s relianc e on a c oopera tion clause whe re the tortfea sor was judg ment-proof : “A judgme nt ag ainst [t he tortfea sor] would not have been worth the paper it was printed

on and no rea sonable person would have expended the costs, let alone the attorney ’s fee s, it would have require d to g et it. When [ the insurer] lost the opportunity to secur e the judgme nt, it lost nothing. Under o u r l aw , a technica l and illusory ‘loss’ of this kind cannot result in the forfeiture of insurance cover ag e.” Southeastern Fi delity Insurance Co. v. Earnest , 395 So. 2d 230, 231 (Fla. D ist. Ct . App. 1981). ¶ 26 We agree that “[a]ll owing an ins urer to avoid coverag e when it lost subrog ation ri gh t s which car ried no rea sonable possibili ty of collection beyond the tender ed policy limit s would constitute a forf

eiture and ‘would produce an und es er v ed windfall to the insurance

tha t the Mu lho ll and cou rt fi rs t hel d tha t the coo per at ion cl aus e s houl d be di sr egarde d bec aus e the
wort hle ssn ess of Sta te Far m ’s sub rogat ion ri ghts m ean t tha t it had suf fe re d no pre

j u dic e–yet the n

con si der ed S ta te Far m ’s ar gum ent th atit hadbee n pr ej udi cedby the al le ged los s of th ose ri ghts.

T his st at ement doe s not , of cou rs e, inc lud e j uri sdi ct ion s t hat do n ot re qui re a sho wing of 2 sub st ant ia l pre

j udi ce

. H o w e ver , it doe s inc lud e one j uri sdi ct ion (Ne w Me xic o) tha t hol ds tha t the bre ach of a c oope ra ti on c la use cr eat es a rebut ta ble pre sumpti on of prej udi ce (se e Fenn ema , 200 5- NMSC-010, ¶¶ 11, 12, 137 N.M. 275, 110 P.3d 491) , alth ough of cour se the re the bur den of pr oof is re verse d. As Ma rsh m akes cl ear , I ll ino is re qui re s sub st ant ia l pre j udi ce and doe s n ot af

for d the ins ure r a re but ta ble pr esu m pti on o f p re

j udi ce bas ed o n t he mere br eac h.

-8-company .’ ” Hasper
, 2006 ND 220, ¶ 18, 723 N.W.2d 409 (quoting Bantz
, 864 P.2d at 624). 3

A cooper ation clause ex i s t s t o protec t the insurance company ’s substantial interests, not

mere ly to aff

ord it the chanc e to litigate for the s h ee r j o y o f it. We also note that the substantial-prejudice rule require s ju s t t hat: substantial prejudice

. Thus, the theore tical possibili ty that the t ortfea sor m ight win the l ottery or i nherit m illion s b ef o re t he st atute of limit ations runs (neither having happene d here y et) does not c reate a rea sonable possibili ty that the insurer will obtain signific ant relief by pursuing an action ag ainst him. As one court noted, allowing s uch farfe tche d theore tical pos sibili ties to amount to substantial prejudice would “complete ly

neg ate” the pre

judice re quirement. Earnest , 395 So. 2d at 231. ¶ 27 Although the question of pre judice is ordinar ily

one of f act (see Marsh
, 58 I ll. App. 3d at 896; Hasper , 2006 ND 220, ¶ 19, 723 N .W.2d 409), a question of fa ct may become one of law, amena

ble to dispositi on by summary judgme nt, if the undisputed fac ts allow only one

rea sonable conclusion (see Nolan v. Johns-Manville Asbestos
, 85 I ll. 2d 161, 171 (1981))

. That is the situation here

. We hold that defe ndant was entitled to summary judgme nt beca use he established as a matter of law that plaintiff cannot meet its burden to prove that it suffe red substantial prejudice from defe ndant’s settlement with Watts. Plaintiff adduce d no evidenc e that Watts had any assets of note. Def endant adduce d unrebutted evidenc e t h at , from the 4 time of t he accident through the close of K irby ’s investig ation into Watts’ financ es, W atts had minimal asse ts, w as subject to two unsatisfied judgme nts ( with the possibili ty of more judicially imposed financ ial obligations), and was serving a four- y ear prison term. Not only 5 do these fac ts defe at plaintiff’s motion for summary judgme nt, they establish that defe ndant is entitled to judgme nt as a matter of law beca u s e p l ai n tiff may not invoke its policy ’s
cooper ation clause in order to deny defe ndant UI M cover ag e. We reve rse the judgme nt in favor of plaintiff a

nd enter judgme nt for def

endant ( see I ll. S. C t. R. 366(a) (5) ( eff . Fe b. 1, 1994)).

¶ 28 J udg ment for plaintiff r ever sed; judg ment for de fenda nt entere d.

We not e that sever al cou rt s have held tha t deci din g whet her an ins ure r was prej udi ced by 3 the ins ure d’s viola ti on of a coo per at ion cl aus e re qui re s con si der ing al l of the re le vant fa ct ors , suc h

as the amount of the tor tf

eas or’ s ass et s, the li kelih ood of re covery via sub rogat ion
, the ext ent of the ins ure d’s damag es, and the exp ens es and ri sks of li t igati ng the ins ure d’s cau se of act ion

. See Kapad ia
, 418 N.W.2 d at 852; Hasp er , 2006 ND 220 , ¶ 18, 723 N.W.2 d 409; Gree n , 2003 UT 48, ¶ 33, 89 P.3d 97. T his genera l st at ement is not inc ons is te nt wit h the con cl usi on tha t, if the tor tf eas or is cl ear ly j udgm ent

- pro of, th en t he i nsu re r c ann ot pro ve subs ta nti al pr ej udi ce.

We agree wit h t he t ri al cou rt tha t Wal ker’s fi nan ci al si tua ti on wa s i rr el evant bec aus e s he 4

was nei the r t he t ort fe aso r n or the in sur er

.

Ac c o r d i n g t o the Depa rt m ent of Corr ect ion s We b si te , Wa tt s was pla ced on m and at ory 5
sup er vised re le ase on Sept ember 29, 2011
, and his ant ic ipa te d dis cha rge dat e is Sept ember 29, 2012

. www2.il li noi s.gov/ido c/ Off end er/Pa ges/I nm at eSe ar ch.a spx (l ast visi te d M ay 17, 20 12)

.

-9-