Condo Association are Birthplaces of Litigation
Barry Zalma
Jul 13, 2023
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Plaintiff, Nationwide Mutual Insurance Company (Nationwide), brought a declaratory judgment action against insureds, Beverly Glen Homeowners’ Association (Association) and members of the board of directors asking the court to declare that Nationwide had no duty to defend or indemnify defendants against claims made by the Association residents in a derivative suit. The trial court granted Nationwide’s motion for judgment on the pleadings, finding that res judicata and collateral estoppel barred defendants from seeking a defense in the derivative suit where judgment rendered in a prior case determined that Nationwide had no duty to defend.
In Nationwide Mutual Insurance Company v. Beverly Glen Homeowners’ Association, et al, No. 3-22-0089, 2023 IL App (3d) 220089-U, Court of Appeals of Illinois, Third District (July 7, 2023)
BACKGROUND
This lawsuit arises out of an ongoing dispute between defendants and Teresa and Katarzyna Jagiello, two Association residents.
On April 14, 2020, the trial court granted Nationwide’s motion. It held that “There are no material issues of fact in dispute and it is clear, as a matter of law, that the lack of cooperation on the part of the insured and its counsel has relieved Nationwide of its duties under its policy …. Nationwide’s insured failed to cooperate with Nationwide, relieving Nationwide of its duties under the policy, and Nationwide owes nothing to its insured… for any legal services. As such, Nationwide owes neither a duty to defend nor indemnify its insured in this matter.”
ANALYSIS
Res Judicata and Collateral Estoppel
The doctrine of res judicata serves to bar actions in which: (1) there was a final judgment on the merits rendered by a court of competent jurisdiction; (2) there is an identity of cause of action; and (3) there is an identity of parties or their privies in both actions. Res judicata prevents the relitigation of issues that could have been decided in the first action along with those issues that were actually decided.
The directors of a Condo Association act as the arms of the Association and for all intents and purposes are one and the same. In other words, there exists a legal relationship in which the directors, acting within their corporate authority, bind the Association.
When a valid and final judgment rendered in an action extinguishes the plaintiff’s clam the claim extinguished includes all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose.
Res judicata is an equitable doctrine that should be applied only as fairness and justice require. It is intended to be used as a shield, not a sword. Nationwide is asserting the doctrine in a declaratory judgment action to obtain a no-duty-to-defend ruling. It is, contrary to defendants’ argument, attempting to use the doctrine as a shield in the underlying derivative suit. Under the circumstances, applying the doctrine to deny defendants coverage in the derivative suit would not be unfair or unjust. Defendants have refused to produce documents, ignored settlement agreements and court orders requiring them to do so, and failed to cooperate with Nationwide counsel in defending their actions.
In continuing to dispute it should come as no surprise to defendants that Nationwide would have no duty to defend or indemnify their actions.
The trial court did not err in granting the motion for declaratory judgment on the pleadings in insurer’s favor based on doctrines of res judicata and collateral estoppel where order entered in the prior case, finding that the insurer had no duty to defend or indemnify insured, involved identical cause of action and parties were in privity with parties in the underlying dispute.
ZALMA OPINION
The basic covenant of good faith and fair dealing requires that neither party to the policy may do anything to deprive the other of the benefits of the policy. When the condo association failed or refused to cooperate in the investigation of a claim a court found the insurer owed neither defense nor indemnity to the association because of the breach by the association. When a new set of directors sought defense of the continuation of the same dispute res judicata applied because the association was the entity involved regardless of who sits on the Board of Directors.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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KEY POINTS
1. Motion for Judgment on the Pleadings: The Plaintiff moved for judgment on the pleadings, which was granted in part and denied in part.
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Plaintiffs Government Employees Insurance Company and other GEICO companies (“GEICO”) sued Defendants Dominic Emeka Onyema, M.D. (“Onyema”), et al (collectively, “Defendants”) alleging breach of a settlement agreement entered into by the parties to resolve a previous, fraud-related lawsuit (the “Settlement Agreement”). GEICO moved the court for default judgment against ...
ZIFL – Volume 29, Issue 14
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You can read the full 20 page issue of the July 15, 2025 issue at https://lnkd.in/giaSdH29
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
This issue contains the following articles about insurance fraud:
The Historical Basis of Punitive Damages
It is axiomatic that when a claim is denied for fraud that the fraudster will sue for breach of contract and the tort of bad faith and seek punitive damages.
The award of punitive-type damages was common in early legal systems and was mentioned in religious law as early as the Book of Exodus. Punitive-type damages were provided for in Babylonian law nearly 4000 years ago in the Code of Hammurabi.
You can read this article and the full 20 page issue of the July 15, 2025 issue at https://zalma.com/blog/wp-content/uploads/2025/07/ZIFL-07-15-2025.pdf
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Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
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See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
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