Illinois Official Reports

Appellate Court

Nine Group II, LLC v. Liberty International Underwriters, Inc.,

2020 IL App (1st) 190320

Appellate Court 

Caption

NINE GROUP II, LLC; SY VEGAS PARTNERS, LLC;

LAWRENCE SILVER; and ALAN YOUNG, Plaintiffs-Appellants, v. 

LIBERTY INTERNATIONAL UNDERWRITERS, INC., 

Defendant-Appellee.

District & No. First District, Fourth Division 

No. 1-19-0320

Filed June 28, 2020

Decision Under 

Review

Appeal from the Circuit Court of Cook County, No. 13-CH-25124; the 

Hon. Franklin U. Valderrama, Judge, presiding.

Judgment Affirmed.

Counsel on

Appeal

William J. Quinlan, Lisa H. Quinlan, Sam Royko, and Kamil Z. 

Merchant, of Quinlan Law Firm, LLC, of Chicago, for appellants.

Robert Marc Chemers and William W. Elinski, of Pretzel & Stouffer 

Chtrd., of Chicago, for appellee.
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Panel JUSTICE REYES delivered the judgment of the court, with opinion.

Presiding Justice Gordon and Justice Lampkin concurred in the 

judgment and opinion.

OPINION

¶ 1 Plaintiffs Nine Group II, LLC (Nine Group II); SY Vegas Partners, LLC (SY Vegas);

Lawrence Silver; and Alan Young filed an action in the circuit court of Cook County against 

defendant-insurer Liberty International Underwriters, Inc. (Liberty), following Liberty’s 

denial of the plaintiffs’ claim under a directors and officers (D&O) insurance policy. The

circuit court denied the parties’ cross-motions for summary judgment on the plaintiffs’ breach 

of contract claim and granted partial summary judgment in favor of Liberty on the plaintiffs’ 

claim that Liberty acted in bad faith under section 155 of the Illinois Insurance Code (215 ILCS 

5/155 (West 2012)). On appeal, the plaintiffs contend that the circuit court erred in granting 

partial summary judgment. For the reasons discussed herein, we affirm.

¶ 2 BACKGROUND

¶ 3 The Parties and the Underlying Transaction

¶ 4 The verified complaint provides, in part, as follows. Nine Group II was a Delaware limited 

liability company with its principal place of business in Chicago. Nine Group II’s membership 

was comprised of multiple investors, including SY Vegas; SY Vegas was managed by Silver 

and Young. SY Vegas became the manager of Nine Group II following the resignation of its 

prior manager in late 2010. B In It LLC (BII)—owned by David Blumenfeld—also held a 

membership interest in Nine Group II. SY Vegas held approximately 44% and BII held 

approximately 2% of the Class B membership interests in Nine Group II.

¶ 5 Nine Group II held 50% of the outstanding equity in N-M Ventures II, LLC (NMV II), a 

company that owned and operated several entertainment venues located in the Palms Hotel in 

Las Vegas. F.P. Holdings, L.P. (FPH), owned the other 50% membership interest in NMV II, 

which was managed by George Maloof. 

¶ 6 In early 2012, Nine Group II—through Silver and Young, as managers of SY Vegas—

commenced discussions with FPH concerning the potential purchase of Nine Group II’s 

membership interest in NMV II. Blumenfeld expressed dissatisfaction with various proposed 

terms for the sale, including the purchase price.1 Nine Group II, FPH and other entities entered 

into an interest purchase agreement (the original agreement) dated August 3, 2012, regarding 

the sale of Nine Group II’s interest in NMV II to FPH and other matters. 

¶ 7 On August 24, 2012, before the anticipated closing date of the original agreement, Justin 

Jones, an attorney representing Blumenfeld and other minority investors, sent an e-mail to 

Silver regarding the “recent buyout offer and negotiations” relating to Nine Group II. The email set forth six “key terms of any agreement regarding a buyout of their interest in Nine 

Group II.” Jones stated that if a satisfactory agreement was not reached, “we will have no 

1 The plaintiffs alleged, on information and belief, that Blumenfeld independently (and 

unsuccessfully) attempted to negotiate a sale of his membership interest in Nine Group II to FPH.
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choice but to pursue this matter through litigation.” Jones sent a follow-up e-mail clarifying 

certain points on the same date.

¶ 8 Based on various concerns—including issues involving FPH’s lender, Wells Fargo—the 

original agreement was terminated on or about August 25, 2012. An amendment to the Interest 

Purchase Agreement (the amended agreement) was entered into as of September 6, 2012, and 

the transaction closed shortly thereafter. Although the purchase price and other key terms were 

modified, a “reaffirmation” provision in the amended agreement stated that the original 

agreement otherwise continued to be in full force and effect and was ratified by the parties. 

Pursuant to the amended agreement, FPH purchased Nine Group II’s interests in NMV II. Nine 

Group II distributed most of the consideration from the sale to its members, including 

Blumenfeld.

¶ 9 The Insurance Policy

¶ 10 As part of the transaction, FPH agreed to provide indemnification to Nine Group II against 

essentially all claims except those relating to the consideration paid to the company for the sale 

of its membership interests in NMV II. With the assistance of its broker, Mesirow Financial 

(Mesirow), Nine Group II also applied for a D&O policy with Liberty. The policy issued by 

Liberty provided, in relevant part, for “Directors & Officers and Company Liability” insurance 

on a claims-made basis for a policy period of August 27, 2012, to August 27, 2013. 

¶ 11 In an e-mail sent on September 18, 2012, with the subject line of “[p]otential demand,” the 

plaintiffs’ attorney forwarded the Jones e-mails from August 24 to two Mesirow employees. 

The e-mail from plaintiffs’ counsel stated, in part: “After speaking with your colleague today, 

we realized the following”—i.e., the Jones e-mails—“could potentially be construed as a 

demand from certain members of the [N]ine [G]roup.” Mesirow responded that the Jones emails could possibly constitute notice of a potential claim and thus opined that it would be 

“prudent” to inform Liberty. 

¶ 12 On or about October 17, 2012, based on Mesirow’s recommendation, SY Vegas sent notice 

to Liberty notifying the insurer of the August 24 e-mails and Blumenfeld’s subsequent 

“assertions and threats.” Liberty acknowledged receipt of the letter on October 19, 2012, and 

indicated it would contact the plaintiffs’ attorney but apparently did not do so at that time.

¶ 13 Blumenfeld’s Lawsuit

¶ 14 On March 15, 2013, Blumenfeld (through BII) filed a lawsuit in the district court of Clark 

County, Nevada, captioned, “B In It, LLC, Individually and Derivatively as Nominal Plaintiff 

on Behalf of Real Party in Interest, Nine Group II, LLC v. SY Vegas Partners, LLC, Larry 

Silver, Allan Young, and George Maloof, Case No. A-13-678463-B.” Nine Group II was listed 

as a nominal defendant. The complaint asserted claims for, among other things, breach of 

fiduciary duty, minority member oppression, breach of the covenant of good faith and fair 

dealing, and civil conspiracy; Blumenfeld also sought declaratory relief and an accounting. In 

addition to direct claims, Blumenfeld purportedly brought derivative claims on behalf of Nine 

Group II. Certain of the claims were based on alleged events prior to SY Vegas’s management 

of Nine Group II. Other claims were based on the operations of the Las Vegas venues, as well 

as the sale of Nine Group II’s membership interests in NMV II. 
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¶ 15 The plaintiffs herein and BII eventually settled the lawsuit in 2016. The settlement 

agreement expressly provided it was not intended to affect the claims asserted by the plaintiffs 

in its Illinois litigation against Liberty (described below).

¶ 16 Liberty’s Investigation and Decision 

¶ 17 The plaintiffs herein notified Liberty of the initiation of the Nevada litigation. Nine Group 

II sent written notice to Liberty on March 28, 2013, and again on April 19, 2013, i.e., both 

before and after service of the Nevada complaint. Nine Group II also sent notice to FPH, which 

later denied any obligation to indemnify based on FPH’s interpretation of their agreement. 

¶ 18 The record includes e-mails between plaintiffs’ counsel and Gia Cavellini Guzman 

(Guzman), an attorney who worked as a complex claims specialist for Liberty. The e-mails 

reflect that Guzman and the plaintiffs’ counsel participated in a telephone call on April 24. On 

the following day, the plaintiffs’ counsel e-mailed background materials to Guzman, including 

an organizational chart for NMV II, Nine Group II’s operating agreement, the original 

agreement, and the amended agreement. On May 6, 2013, Guzman requested additional details 

regarding the transaction with FPH and other matters; such information was promptly 

provided. 

¶ 19 In a letter from Guzman dated June 11, 2013, Liberty advised the plaintiffs’ counsel that 

there was no coverage available under the D&O policy for the Nevada litigation. Liberty 

indicated that the allegations in the Nevada complaint and the August 24, 2012, e-mails from 

attorney Jones reflected that the claim arose prior to the policy period, which had commenced 

on August 27, 2012. Liberty also noted, in part, that (a) the plaintiffs would not have sustained 

a “loss” for coverage purposes to the extent FPH provided indemnification, (b) a policy 

exclusion that eliminated coverage for “wrongful acts” potentially applied, and (c) certain of 

Silver’s answers on the insurance application appear to have been not materially true and 

accurate.

¶ 20 In a letter to Guzman dated June 17, 2013, the plaintiffs’ attorney detailed various 

“misunderstandings” in Liberty’s coverage denial letter and “inaccuracies” in the Nevada 

complaint. The plaintiffs asserted, in part, that the potential litigation referenced in the Jones 

e-mails related to the disposition of the membership interests of certain investors (including 

Blumenfeld) in Nine Group II, and not the sale of Nine Group II’s assets—which the plaintiffs’ 

attorney characterized as “two entirely different causes of action.” (Emphasis in original.) The 

plaintiffs also posited that the six-month gap between Jones’s e-mails in August 2012 and the 

Nevada lawsuit in March 2013 suggested the “eventual litigation filed was unrelated to the 

threats made by investors in the August 24, 2012 email.”

¶ 21 The Plaintiffs’ Complaint Against Liberty

¶ 22 On November 6, 2013, the plaintiffs filed a verified complaint in the circuit court of Cook 

County against Liberty, as well as FPH and two individuals affiliated with FPH—Michael 

Connolly and Peter Nolan. The counts against FPH, Connolly, and Nolan—counts I, III, and 

VI—were eventually dismissed. In count II against Liberty, the plaintiffs sought a declaration 

that they are entitled to coverage and indemnification from Liberty for the Blumenfeld claims. 

In count IV, the plaintiffs alleged that Liberty breached the insurance contract by refusing to 

provide coverage and indemnification. In count V—a “bad faith” count against Liberty—the 

plaintiffs alleged that the insurer’s conduct was “vexatious and unreasonable” because it failed 
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to properly investigate Blumenfeld’s claims, delayed in considering the plaintiffs’ request for 

coverage, refused to promptly respond to inquiries from the plaintiffs, and denied coverage 

without a reasonable basis for doing so.

¶ 23 Summary Judgment Motions

¶ 24 In September 2017, the plaintiffs filed a motion for summary judgment as to the remaining 

counts to the complaint: count II (declaratory relief), count IV (breach of contract), and count 

V (bad faith). The attachments to the motion included select pages of the deposition testimony 

of (a) Silver; (b) Young; (c) Guzman; (d) Liberty’s corporate representative, John Van 

Amburg; and (e) Craig Goesel, a senior managing director at Mesirow, the insurance broker. 

Young testified that the transaction pursuant to the amended agreement was a “[d]ifferent deal” 

with “totally different terms” than the original agreement executed one month earlier. Guzman 

testified, in part, that she did not recall reaching out to the underwriter on the D&O policy or 

communicating with Mesirow regarding the plaintiffs’ claim. When asked if there was an 

“aspirational period of time” between notice of a claim and Liberty’s coverage determination, 

Van Amburg answered that Liberty typically would want to make a coverage determination 

within 30 days, but he noted that such “benchmark” may not be possible based on a lack of 

information or cooperation from an insured.

¶ 25 Liberty filed a response in opposition to the plaintiffs’ motion for summary judgment and 

a cross-motion for summary judgment. Liberty contended a policy exclusion precluded 

coverage because the Nevada litigation was based on or attributable to substantially the same 

facts as Blumenfeld’s claim which was made through his counsel on August 24, 2012, Nine 

Group II had an indemnification right from FPH and thus had no “loss” under the policy, false 

information was provided in Nine Group II’s insurance application, and the allegations raised 

in the Nevada litigation were not covered under the policy pursuant to the “known loss 

doctrine” where Nine Group II knew or had reason to know there was a substantial probability 

that they would suffer a loss in relation to Blumenfeld’s claims prior to the inception date of 

the policy. Liberty also argued that bad faith did not exist because there was a “bona fide” 

coverage dispute. 

¶ 26 The attachments to Liberty’s response and cross-motion for summary judgment included 

the full depositions of Silver, Young, Goesel, and Guzman. The attachments also included emails between the parties in July 2013 to schedule a telephone call regarding the plaintiffs’ 

June 17 letter responding to Guzman’s coverage denial. In response to a July 29, 2013, e-mail 

from Guzman, the plaintiffs’ attorney had provided a brief update regarding the status of the 

Nevada litigation.

¶ 27 Circuit Court’s Rulings

¶ 28 The circuit court granted the plaintiffs’ motion for voluntary dismissal of count II—the 

declaratory judgment count. As to the two remaining counts, the circuit court (a) denied the 

parties’ cross-motions for summary judgment on count IV (breach of contract) and (b) granted 

Liberty’s motion and denied the plaintiffs’ motion for summary judgment on count V (bad 

faith). 

¶ 29 The plaintiffs filed a motion to reconsider the court’s rulings as to count V; in the 

alternative, the plaintiffs sought a Rule 304(a) finding (Ill. S. Ct. R. 304(a) (eff. Mar. 8, 2016)). 

The circuit court entered a memorandum opinion and order on January 18, 2019, denying the 
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motion to reconsider and granting the motion for a Rule 304(a) finding. As to the motion to 

reconsider, the circuit court reaffirmed its prior holding that Liberty “met its burden as a matter 

of law that there was a bona fide coverage dispute, and that there was no question of fact as to 

whether Liberty’s denial for claim coverage was reasonable[2] or vexatious.” As to the Rule 

304(a) finding, the circuit court acknowledged that an immediate appeal could result in 

significant delay but opined that a delayed appeal could result in additional expense, as the 

parties may have to relitigate the bad faith claim. The plaintiffs filed this timely appeal.

¶ 30 ANALYSIS

¶ 31 The plaintiffs contend on appeal that the circuit court erred when it granted Liberty’s 

motion for summary judgment as to the plaintiffs’ claim that Liberty denied coverage in bad 

faith pursuant to section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2012)). 

Specifically, the plaintiffs argue that (a) the circuit court erroneously ruled there was a 

bona fide dispute regarding coverage, (b) Liberty’s failure to adequately communicate or to 

timely investigate the claim violated its own policies and constituted bad faith, and (c) genuine 

issues of material fact exist as to whether Liberty denied coverage in bad faith.

¶ 32 Standard of Review

¶ 33 As a preliminary matter, we note that the parties disagree regarding the standard of review. 

The plaintiffs contend we should review the summary judgment rulings on their section 155 

claim de novo. Liberty asserts that the standard of review is abuse of discretion. As discussed 

below, we are persuaded by the plaintiffs’ arguments regarding the standard of review.

¶ 34 Summary judgment is appropriate where there are no genuine issues of material fact and 

the movant is entitled to judgment as a matter of law. Outboard Marine Corp. v. Liberty Mutual 

Insurance Co., 154 Ill. 2d 90, 102 (1992); see also 735 ILCS 5/2-1005(c) (West 2016) (stating 

that “judgment sought shall be rendered without delay if the pleadings, depositions, and 

admissions on file, together with the affidavits, if any, show that there is no genuine issue as 

to any material fact and that the moving party is entitled to a judgment as a matter of law”). A 

genuine issue of material fact exists where the facts are disputed or where reasonable minds 

could draw different inferences from the undisputed facts. GreenPoint Mortgage Funding, Inc. 

v. Hirt, 2018 IL App (1st) 170921, ¶ 17. Summary judgment is a drastic measure and should 

be granted only if the movant’s right to judgment is free and clear from doubt. Outboard 

Marine, 154 Ill. 2d at 102. In appeals from summary judgment rulings, our review is de novo. 

Id. “De novo consideration means the reviewing court performs the same analysis that a trial 

judge would perform.” North Shore Community Bank & Trust Co. v. Sheffield Wellington LLC, 

2014 IL App (1st) 123784, ¶ 117. 

¶ 35 In contrast to the de novo standard applicable in the summary judgment context, courts 

generally apply an abuse of discretion standard when reviewing a circuit court’s decision 

regarding attorney fees and costs under section 155. Illinois Founders Insurance Co. v. 

Williams, 2015 IL App (1st) 122481, ¶ 29; Certain Underwriters at Lloyd’s, London v. Abbott 

Laboratories, 2014 IL App (1st) 132020, ¶ 68. A court abuses its discretion only where its 

2

We believe that the circuit court intended to write “unreasonable,” not “reasonable.”
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ruling is arbitrary, fanciful, or unreasonable, or where no reasonable person would adopt the 

court’s view. Abbott Laboratories, 2014 IL App (1st) 132020, ¶ 68. 

¶ 36 The instant case involves the intersection of the foregoing scenarios—an appeal from a 

summary judgment ruling on a section 155 claim. When considering the disposition of a 

section 155 claim through summary judgment, certain Illinois courts have applied an abuse of 

discretion standard of review. For example, in John T. Doyle Trust v. Country Mutual 

Insurance Co., 2014 IL App (2d) 121238, ¶ 30, in applying an abuse of discretion standard, 

the appellate court found that the trial court “drew on its knowledge of the proceedings in 

deciding that the facts presented did not warrant sanctions.” In Evergreen Real Estate Services, 

LLC v. Hanover Insurance Co., 2019 IL App (1st) 181867, ¶ 35, the appellate court observed 

that section 155 provides that the court “may” impose sanctions when it “appears to the court” 

that the conduct is vexatious and unreasonable, which suggests that “[w]hether to sanction a 

party under section 155 is an exercise that is typically replete with discretion.” (Emphases 

omitted.)

¶ 37 While our supreme court in Employers Insurance of Wausau v. Ehlco Liquidating Trust, 

186 Ill. 2d 127, 160 (1999), recognized that an abuse of discretion standard generally is utilized 

to review a circuit court’s decision to award attorney fees and costs under section 155, the 

Ehlco court applied a de novo standard where the circuit court granted the insured’s motion for 

judgment on the pleadings. Applying Ehlco in the instant case, we must utilize the standard of 

review that is appropriate for a summary judgment motion; our review is thus de novo. See 

Illinois Founders Insurance, 2015 IL App (1st) 122481, ¶ 29; accord Central Illinois 

Compounding, Inc. v. Pharmacists Mutual Insurance Co., 2018 IL App (3d) 170809, ¶ 10; 

Green4All Energy Solutions, Inc. v. State Farm Fire & Casualty Co., 2017 IL App (1st) 

162499, ¶ 21; Edwards v. State Farm Insurance Co., 2012 IL App (1st) 112176, ¶ 5; West 

American Insurance Co. v. J.R. Construction Co., 334 Ill. App. 3d 75, 88 (2002); Mobil Oil 

Corp. v. Maryland Casualty Co., 288 Ill. App. 3d 743, 751 (1997). We now turn to the merits.

¶ 38 Section 155—General Principles

¶ 39 Section 155 of the Illinois Insurance Code provides an extracontractual remedy to an 

insured who encounters unnecessary difficulties when an insurer withholds policy benefits.3

Evergreen Real Estate Services, 2019 IL App (1st) 181867, ¶ 36; McGee v. State Farm Fire 

& Casualty Co., 315 Ill. App. 3d 673, 680-81 (2000); Green v. International Insurance Co., 

238 Ill. App. 3d 929, 935 (1992). The statute provides, in pertinent part, that 

“[i]n any action by or against a company wherein there is in issue the liability of a 

company on a policy or policies of insurance or the amount of the loss payable 

thereunder, or for an unreasonable delay in settling a claim, and it appears to the court 

that such action or delay is vexatious and unreasonable, the court may allow as part of 

the taxable costs in the action reasonable attorney fees, other costs, plus [additional 

amounts set forth in the statute.]” 215 ILCS 5/155(1) (West 2012). 

3

E.g., Ehlco, 186 Ill. 2d at 159 (stating that section 155 provides a remedy where an insurer has 

acted vexatiously and unreasonably in refusing to defend its insured); West American Insurance, 334 

Ill. App. 3d at 88 (noting that section 155 provides that an insured may collect attorney fees and costs 

where an insurer creates a vexatious and unreasonable delay in settling a claim).
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¶ 40 The statute is intended to make lawsuits by policyholders economically feasible and to 

punish insurers for misconduct. O’Connor v. Country Mutual Insurance Co., 2013 IL App (3d) 

110870, ¶ 13; McGee, 315 Ill. App. 3d at 681; see also Keller v. State Farm Insurance Co., 

180 Ill. App. 3d 539, 556 (1989) (providing that the purpose of section 155 is “not only to aid 

the insured, but also to discourage insurers from profiting by their superior financial positions 

while delaying in the payment of contractual obligations”).

¶ 41 The key question in a section 155 claim is whether an insurer’s conduct is vexatious and 

unreasonable. Uhlich Children’s Advantage Network v. National Union Fire Co. of Pittsburgh, 

398 Ill. App. 3d 710, 723 (2010). “Whether a delay is vexatious and unreasonable is a question 

of fact that must be assessed based on the totality of the circumstances, taken in broad focus.” 

Cook v. AAA Life Insurance Co., 2014 IL App (1st) 123700, ¶ 48; accord West American 

Insurance, 334 Ill. App. 3d at 88; Kohlmeier v. Shelter Insurance Co., 170 Ill. App. 3d 643, 

659 (1988). No single factor—e.g., the length of time or the amount of money involved—is 

controlling. Cook, 2014 IL App (1st) 123700, ¶ 48. In examining the circumstances, courts 

have considered the insurer’s attitude, whether the insured was forced to file suit to recover, 

and whether the insured was deprived use of its property. Id.; see also Rosalind Franklin 

University of Medicine & Science v. Lexington Insurance Co., 2014 IL App (1st) 113755, ¶ 110 

(noting that the insurer’s “ ‘attitude’ ” must be examined). “Additional considerations include 

whether there is a bona fide dispute concerning coverage, the extent of the insurance 

company’s evaluation and investigation of the claim, and the adequacy of communications 

between the insurance company and the insured.” Cook, 2014 IL App (1st) 123700, ¶ 48.

¶ 42 The plaintiffs contend that Liberty’s refusal to provide coverage for the Nevada litigation 

was vexatious and unreasonable under section 155. According to the plaintiffs, the circuit court 

erred in (a) ruling there was a bona fide dispute regarding coverage, (b) denying coverage 

where Liberty allegedly failed to adequately investigate the claim or communicate with the 

plaintiffs, and (c) granting summary judgment where there are genuine issues of material fact. 

We discuss each argument in turn below.

¶ 43 Bona Fide Dispute

¶ 44 Section 155 costs and sanctions are inappropriate when a bona fide dispute regarding 

coverage exists. Id. ¶ 49. “ ‘Bona fide’ ” is defined as “ ‘[r]eal, actual, genuine, and not 

feigned.’ ” McGee, 315 Ill. App. 3d at 683 (quoting Black’s Law Dictionary 177 (6th ed. 

1990)). Where an insurer reasonably relies upon evidence sufficient to form a bona fide

dispute, the insurer has not acted unreasonably and vexatiously under section 155. Illinois 

Founders Insurance, 2015 IL App (1st) 122481, ¶ 32; accord Charter Properties, Inc. v. 

Rockford Mutual Insurance Co., 2018 IL App (2d) 170637, ¶ 30; Morris v. Auto-Owners 

Insurance Co., 239 Ill. App. 3d 500, 506 (1993). 

¶ 45 Liberty indicated that its coverage denial was based, in part, on the fact that the allegations 

in the Nevada complaint and the August 24, 2012, e-mails from attorney Jones reflected that 

the claim arose prior to the policy period, which commenced on August 27, 2012. The plaintiffs 

contend that “the undisputed facts are clear” that the Nevada litigation was covered by the 

policy. As discussed below, we reject the plaintiffs’ contentions and find that a bona fide

coverage dispute exists.

¶ 46 The D&O policy states that coverage applies only to claims that are first made against the 

insured during the policy period. The one-year policy period commenced on August 27, 2012. 
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Three days before the policy period, Jones sent an e-mail to Silver on behalf of Jones’s 

clients—including Blumenfeld—setting forth six “key terms of any agreement regarding a 

buyout of their interest in Nine Group II.” Jones indicated that he was retained to represent his 

clients “with regards to the recent buyout offer and negotiations relating to Nine Group II, 

LLC.” 

¶ 47 The plaintiffs contend that the Jones e-mail “did not relay any demands or request any 

terms for Nine Group II’s sale of its interests in [NMV II] to FPH,” but rather was an attempt 

to obtain a buyout of BII’s interest in Nine Group II. The record on appeal, however, suggests 

otherwise. When the plaintiffs’ attorney forwarded the Jones e-mails to the broker (Mesirow), 

he wrote that “[t]he ‘demand’ below is for a different transaction (12 Million over three years 

vs. 10.5 million paid in one lump sum), but a demand nonetheless.” The $12 million amount 

was the aggregate purchase price for the transactions set forth in the original agreement; the 

amended agreement provided for a $10.5 million purchase price. The plaintiffs’ attorney thus 

acknowledged being on notice that the Jones e-mail was a potential “demand” arising from the 

sale of Nine Group II’s interest in NMV II—which was addressed by both the original 

agreement and the amended agreement. Furthermore, the use of the word “demand” by 

plaintiffs’ counsel—and counsel’s efforts to reach out to Mesirow regarding the import of the 

Jones e-mail—suggests, at a minimum, the plaintiffs’ acknowledgment of a potential coverage 

issue. Although the plaintiffs argue on appeal these communications do not constitute party or 

judicial admissions, we need not make any such determinations for purposes of our analysis.

¶ 48 The complaint in the Nevada litigation alleged, in part, that SY Vegas, Silver, and Young 

sold Nine Group II’s membership interest in NMV II without Blumenfeld’s consent and in a 

transaction that was not the result of arm’s-length negotiation, and Silver and Young personally 

profited from the sale at the expense of the Nine Group II members. The plaintiffs contend on

appeal that the Nevada litigation alleged conduct related solely to the amended agreement—

and not the original agreement—and thus fell within the policy period. The plain language of 

the amended agreement, however, makes clear that the parties were amending the original 

agreement, which was executed prior to the policy period. See Trapani Construction Co. v. 

The Elliot Group, Inc., 2016 IL App (1st) 143734, ¶ 48 (noting that the primary goal when 

interpreting a contract is to give effect to the parties’ intent as ascertained from the plain 

language of the contract). Although the plaintiffs contend that the transaction contemplated by 

the original agreement was terminated and the amended agreement represented a substantially 

different deal, the plain contractual language reflects the two agreements were interrelated.

¶ 49 We are also unpersuaded by the plaintiffs’ contention that BII “specifically admitted in the 

Nevada Litigation that it had not made any demand on Nine Group II, or related to the Nevada 

Litigation before [BII] filed its suit.” While the plaintiffs suggest the purported admission 

indicates that the Jones e-mail from August 24, 2012, did not constitute a prior demand, the 

language of the Nevada complaint paints a decidedly different picture: “No demand has been 

made upon the current management of Nine Group II to bring suit against SY Vegas, Silver, 

and Young because SY Vegas, as the managers and agents of Nine Group II, would have to 

bring suit against themselves.” Blumenfeld’s assessment of the probable futility in demanding 

that the plaintiffs sue themselves does not indicate that his counsel’s communications with 

Silver in August 2012 were unrelated to the transaction with FPH. 

¶ 50 The question at the summary judgment stage is whether Liberty had a genuine basis for 

disputing the policy coverage. See Illinois Founders Insurance, 2015 IL App (1st) 122481, 
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¶ 34. Even assuming that the plaintiffs proffered some evidence that might arguably suggest 

that the Nevada litigation fell within the scope of coverage—e.g., Young’s deposition 

testimony that the transaction pursuant to the amended agreement was a “[d]ifferent deal” with 

“totally different terms” than the original agreement—the grant of summary judgment is 

appropriate as long as the evidence before Liberty, in total, created a reasonable, genuine basis 

for dispute. See id. For the reasons stated above, we find there was such a basis for dispute in 

the instant matter. 

¶ 51 In sum, section 155 sanctions are improper when a bona fide dispute exists, as is the case 

herein. Cook, 2014 IL App (1st) 123700, ¶ 49. Since we have determined that there was a 

bona fide dispute regarding whether the Nevada litigation fell within the policy based on the 

coverage period, we need not address the plaintiffs’ other contentions, e.g., that Liberty acted 

unreasonably and vexatiously in denying coverage due to the plaintiffs’ purported wrongful 

acts.

¶ 52 Adequacy and Timing of Liberty’s Investigation and Communications

¶ 53 The plaintiffs also contend that Liberty failed to adequately investigate the claim and 

communicate with the plaintiffs throughout the investigation process. According to the 

plaintiffs, this conduct constituted bad faith and violated Liberty’s own policies. As discussed 

below, we are unconvinced by the plaintiffs’ contentions.

¶ 54 The plaintiffs assert on appeal that “the undisputed facts established that the claims 

specialist could not recall any specific documents she reviewed prior to denying [the 

plaintiffs’] claim and had no independent recollection of the bases for the denial of coverage 

‘other than just reading [the Coverage Letter] out loud and regurgitating what’s in the letter.’ ” 

It is true that Guzman acknowledged during her deposition that she could not independently 

recall the details of the investigation or the bases for denial of the plaintiffs’ claim. By the time 

of her deposition in February 2017, however, Guzman was employed by a different insurance 

company and more than four years had passed since the events in question. The attachments 

to the summary judgment motions—including the coverage denial letter and multiple e-mail 

communications between Guzman and plaintiffs’ counsel during the claims investigation 

process—demonstrate that Guzman requested and reviewed the salient documentation.4

¶ 55 We are unpersuaded by the plaintiffs’ reliance on Norman v. American National Fire 

Insurance Co., 198 Ill. App. 3d 269 (1990). In Norman, the appellate court found an adequate 

basis for the trial court’s award of section 155 damages where the insurer delayed in denying 

the plaintiffs’ claim based on its theory that a house fire was intentionally set, despite 

investigations by two disinterested parties—the local fire department and the state fire 

marshal’s office—which had ruled out arson as a possibility. Id. at 306. While the plaintiffs 

herein focus on Guzman’s inability to independently recall the details of the investigation years 

later, her various communications made contemporaneously with the investigation indicate 

there were no “major infirmities” (id.) with Liberty’s investigation, in contrast to Norman. 

¶ 56 These same communications belie the plaintiffs’ contention that Liberty failed to 

communicate with the plaintiffs or their agents throughout the investigation process. Although 

the plaintiffs argue that Guzman did not communicate with Mesirow throughout the claims 

4

In fact, when the plaintiffs’ counsel inadvertently e-mailed a mislabeled attachment, Guzman 

questioned its relevance—indicating, at a minimum, that she had reviewed the attachment.
- 11 -

investigation, the plaintiffs offer no support for the proposition that an insurer is required to so 

communicate with the insureds’ broker. See Ill. S. Ct. R. 341(h)(7) (eff. May 25, 2018). The 

record reflects that Guzman communicated on multiple occasions with the plaintiffs’ 

attorneys—both telephonically and in writing—during the investigation process. Furthermore, 

we observe that certain questions e-mailed by Guzman to the plaintiffs’ attorneys in May 2013 

appear to reflect her efforts to fully understand the details of the plaintiffs’ claim. 

¶ 57 The plaintiffs further assert that “[i]t is undisputed that Liberty failed to abide by its own 

policies for providing a coverage determination within 30 days or less.” As noted above, when 

asked whether there was an “aspirational period of time” within which Liberty makes a claim 

determination, Van Amburg responded: “Sure. Typically, you would want to have, you know, 

a coverage determination within 30 days or less. That might not always be possible given the 

information or lack thereof relating to the claim and the cooperation of the insured but that is 

a benchmark that we typically would aim for, if not better.” Simply put, Van Amburg’s 

testimony did not suggest that Liberty’s failure to make a coverage decision within 30 days 

“violated Liberty’s own stated policies,” as the plaintiffs contend. Furthermore, in light of the 

relative complexity of the transactions and claims at issue in this matter, we cannot find, as a 

matter of law, that Liberty engaged in vexatious and unreasonable conduct with respect to the 

timing of its coverage decision in June 2013 when the underlying complaint was served in 

April 2013. Cf. Buais v. Safeway Insurance Co., 275 Ill. App. 3d 587, 591-92 (1995) (reversing 

the dismissal of a section 155 claim where the complaint alleged that the insurer waited out a 

30-month period from the time of the automobile accident until the arbitrator’s decision was 

announced, despite knowing the whole time that it would be required to pay out the full amount 

of the policy). In any event, where there is a bona fide dispute over coverage—as was the case 

herein—a delay in settling a claim may not violate the statute. Abbott Laboratories, 2014 IL 

App (1st) 132020, ¶ 68; accord Morris, 239 Ill. App. 3d at 503; Green, 238 Ill. App. 3d at 935. 

¶ 58 For the foregoing reasons, we reject the plaintiffs’ contentions regarding the adequacy and 

timing of Liberty’s investigation and communications.

¶ 59 Genuine Issues of Material Fact

¶ 60 The plaintiffs also argue that, at a minimum, genuine issues of material fact exist as to 

whether Liberty denied coverage in bad faith and thus the circuit court erroneously entered 

judgment in Liberty’s favor on the section 155 count. We again reject this contention.

¶ 61 The parties herein filed cross-motions for summary judgment. Where parties have filed 

cross-motions for summary judgment, they agree that only a question of law is involved and 

invite the court to decide the issues based on the record. Evergreen Real Estate Services, 2019 

IL App (1st) 181867, ¶ 16; Morningside North Apartments I, LLC v. 1000 N. La Salle, LLC, 

2017 IL App (1st) 162274, ¶ 11. We recognize that the filing of such cross-motions does not 

establish that there are no genuine issues of material fact or obligate a court to render summary 

judgment. Morningside North Apartments, 2017 IL App (1st) 162274, ¶ 11. In the instant case, 

however, for the reasons discussed above, we find that there are no genuine issues of material 

fact as to whether Liberty’s coverage denial was vexatious and unreasonable. Among other 

things, the existence of a bona fide dispute precludes the plaintiff’s recovery under section 155 

as a matter of law. 

¶ 62 We further observe that even if the circuit court ultimately determines that Liberty violated 

the policy by improperly denying coverage under the remaining breach of contract count, “[a]n 
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insurer is not liable for a violation of section 155 when it takes a reasonable but erroneous 

position on its coverage obligations where its position is at least arguable,” as is the case herein. 

Evergreen Real Estate Services, 2019 IL App (1st) 181867, ¶ 38; see also McGee, 315 Ill. App. 

3d at 681 (noting that an insurer does not violate section 155 “merely because it unsuccessfully 

litigates a dispute involving the scope of coverage or the magnitude of the loss”); accord Uhlich 

Children’s Advantage Network, 398 Ill. App. 3d at 723. As the circuit court accurately 

observed in its order denying the motion for reconsideration, “[w]hether Liberty’s coverage 

defense is valid is a question properly raised in accordance with the breach of contract claim, 

not the bad faith claim.”

¶ 63 The plaintiffs cite St. Paul Mercury Insurance Co. v. Foster, 268 F. Supp. 2d 1035, 1049 

(C.D. Ill. 2003), for the proposition that summary judgment on their section 155 claim is not 

appropriate at this stage of the litigation. Not only is this federal district court holding not 

precedential or binding (County of Du Page v. Lake Street Spa, Inc., 395 Ill. App. 3d 110, 122 

(2009)), but also the Illinois Appellate Court has expressly found that “[w]here there is a 

bona fide dispute concerning coverage, the assessment of costs and statutory sanctions is 

inappropriate, even if the court later rejects the insurer’s position” (Dominick’s Finer Foods v. 

Indiana Insurance Co., 2018 IL App (1st) 161864, ¶ 94).

¶ 64 CONCLUSION

¶ 65 For the reasons discussed herein, we find, as a matter of law, that Liberty did not act 

vexatiously or unreasonably in denying coverage to the plaintiff for the Nevada litigation under 

the D&O policy. We thus affirm the circuit court’s grant of summary judgment in favor of 

Liberty and denial of the plaintiffs’ motion for summary judgment as to the bad faith count 

(count V) of the complaint. Nothing in this opinion is intended to constitute an assessment of 

the merits of the plaintiffs’ remaining claim for breach of contract (count IV).

¶ 66 Affirmed.