News & Events

Skarzynski Black Defeats Assignee’s Claim under Consent Judgment

March 1, 2016
Skarzynski Black attorneys obtained two favorable rulings for their clients in an action for declaratory judgment and breach of contract, resulting in a final judgment and total victory.  In the action, filed by plaintiffs in the United States District Court for the Northern District of Illinois, Eastern Division, Skarzynski Black represented certain Underwriters at Lloyd’s, London in connection with an attempt by plaintiffs and an insured to maximize recovery under a professional liability policy through a consent judgment and non-recourse settlement and assignment.

Our client’s insureds settled a lawsuit against them in 2012. Pursuant to the settlement agreement, the insured assigned its rights under the policy to the plaintiffs; the parties stipulated to entry of a $5.12 million judgment and the plaintiffs covenanted not to execute the judgment against the insured.

The plaintiff-assignees then sued the Lead Underwriter, Novae Corporate Underwriting, for a declaration of coverage and for breach of contract. U.S. District Judge Sara L. Ellis entered partial summary judgment in favor of Novae, agreeing with Skarzynski Black’s arguments that the agreed judgment was not binding or enforceable against the insurers. Under a unique principle of Texas law applicable under the circumstances, a judgment entered without a “fully adversarial trial” is unenforceable and inadmissible against an insurer.  Without an enforceable judgment, there was no “Loss” — and thus no insurance obligation — under the Lloyd’s policy. Hendricks v. Novae Corporate Underwriting, Ltd., No. 13 C 5422, 2015 WL 1842227, at *14 (N.D. Ill. Apr. 21, 2015).

After Judge Ellis allowed the plaintiffs to amend their remaining breach of contract claim, Skarzynski Black moved to dismiss, arguing that no breach of contract was possible because Novae had no duty or obligation under the policy that it could have breached.  Judge Ellis agreed, dismissing the remainder of plaintiffs’ claims and rejecting the plaintiffs’ new argument that the Underwriters’ coverage denial before the settlement was an anticipatory breach of contract. Hendricks v. Novae Corporate Underwriting, Ltd., No. 13 C 5422, 2016 WL 397286 (N.D. Ill. Feb. 1, 2016). Judge Ellis entered final judgment on March 1, 2016.