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No. 1-02-3169

JUSTICE REID delivered the opinion of the court:

Following a mandatory arbitration hearing in thissubrogation action for damages to the vehicle of plaintiff'sinsureds, the arbitration panel awarded plaintiff State FarmMutual Insurance Company $1,770.57 against defendant OrlandoSantiago. Defendant apparently rejected the award, thensubsequently moved to bar plaintiff from presenting testimony orevidence at trial as a sanction for failure to produce theinsureds at the arbitration hearing and for summary judgment. The circuit court granted both motions and entered judgment fordefendant. On appeal, plaintiff contends that the circuit courtabused its discretion in finding that plaintiff failed toparticipate in the arbitration proceedings in good faith, inimposing sanctions against plaintiff, and in finding thatplaintiff violated Supreme Court Rule 237(b) (166 Ill. 2d R.237(b)). For the reasons set forth below, we vacate said ordersof the circuit court and remand this cause for furtherproceedings.

BACKGROUND

On November 6, 2001, plaintiff filed this subrogation actionagainst defendant for allegedly damaging the vehicle of itsinsured, Shari Spraker. The case was assigned to mandatoryarbitration, and a hearing was scheduled for July 17, 2002. Defendant filed a notice to produce pursuant to Supreme CourtRule 237(b), requiring plaintiff, Shari Spraker, and her husbandMatthew Spraker to appear at the arbitration hearing. Defendant's notice to produce did not require the presence of anyparticular employee of plaintiff's or even an employee withdirect knowledge of the insureds' claim involving defendant.

The hearing was attended by counsel for both parties, anadjuster employed by plaintiff, and by defendant. Plaintiff'sinsureds were not present. Plaintiff called defendant as anadverse witness. Defendant testified that he was involved in acollision with the insured vehicle on May 3, 2001. Defendantstated that he was driving approximately 40 miles per hour andthat traffic was heavy. He saw that traffic in front of him wasstopped and applied his vehicle's brakes, but his vehicle failedto stop and collided with the rear of the insured vehicle. Afterthe collision, he saw that there was damage to the insuredvehicle's rear bumper, muffler, exhaust pipe, and shockabsorbers. As a result of the accident, defendant was cited forfailure to maintain a safe distance, a charge to which he pledguilty.

Plaintiff then called its adjuster, Vali Michael Witz, whotestified that plaintiff paid for the damage to the insuredvehicle after the collision with defendant's vehicle. She statedthat plaintiff inspected the damage and found no prior orunrelated damage before commencing repairs. On cross-examination, Witz stated that she did not personally examine theinsured vehicle, that she had not inspected the vehicle prior tothe date of the accident, and that she had no knowledge of thevehicle's condition prior to that date. She also stated thatnone of plaintiff's other employees would know the exactcondition of the vehicle before the collision.

Defendant testified again on his own behalf and stated thathe had never seen the insured vehicle before he collided with it. Plaintiff also submitted evidence of vehicle damages through aSupreme Court Rule 90(c) package (166 Ill. 2d R. 90(c)).

The arbitration panel awarded $1,770.57 and costs in favorof plaintiff and against defendant. The award did not include afinding of bad faith or a finding of noncompliance with Rule237(b).

Defendant moved to bar plaintiff from presenting testimonyor other evidence at trial and for summary judgment againstplaintiff because plaintiff failed to produce its insureds,Matthew and Shari Spraker, or an adjuster with personal knowledgeof damages to the Sprakers' vehicle at the arbitration hearing,and thus failed to participate in good faith and in a meaningfulmanner. Defendant pointed out that plaintiff brought no motionpursuant to Rule 90(g) to excuse the appearance of its insuredsor to strike defendant's notice to produce. Defendant alsoargued that plaintiff failed to prove the element of proximatecause in that plaintiff presented no evidence as to the conditionof the Sprakers' vehicle before the time of the accident. Plaintiff responded that it complied with Rule 237(b) byproducing its adjuster at the hearing and that Rule 237(b) didnot apply to the Sprakers since they were not parties to thecase.

The circuit court granted defendant's motion to bar pursuantto Rule 91(b) (145 Ill. 2d R. 91(b)) and entered summary judgmentfor defendant, finding that the testimony of plaintiff's insuredswas essential to presenting good-faith evidence of the element ofproximate cause. The court also found that plaintiff did notfully comply with defendant's Rule 237(b) notice to producebecause it did not present an employee with direct knowledge ofproximate causation of the claimed damages nor did it secure thepresence of the insureds, as defendant had requested.

On appeal, plaintiff contends that it did participate in thearbitration proceedings in good faith and that the circuit courtabused its discretion in finding to the contrary. Plaintifffurther contends that the sanctions levied by the circuit courtexceed the bounds of reason and that defendant's Rule 237(b)notice to produce does not apply to plaintiff or plaintiff'sinsureds.

ANALYSIS

A circuit court's decision barring a party from presentingevidence at trial and imposing sanctions is subject to an abuseof discretion standard of review. Pickering v. Owens-CorningFiberglas Corp., 265 Ill. App. 3d 806, 820 (1994). An abuse ofdiscretion occurs when the court's ruling is arbitrary or exceedsthe bounds of reason. Williams v. Dorsey, 273 Ill. App. 3d 893,901 (1995).

Rule 91(b) provides that parties to an arbitration mustparticipate in the proceedings in good faith and in a meaningfulmanner. 145 Ill. 2d R. 91(b). Failure by a party to do so mayresult in sanctions as provided in Supreme Court Rule 219(c),including barring the losing party from rejecting an award orfrom presenting evidence or testimony at trial. 145 Ill. 2d R.91(b); 166 Ill. 2d R. 219(c). Parties to an arbitration mustsubject the case to the same type of adversarial testing expectedat trial. Failure to prepare or intentional disregard for thearbitration process may result in a finding of bad faith. Aparty acts in bad faith when it demonstrates a deliberate andpronounced disregard for the rules of the court. Schmidt v.Joseph, 315 Ill. App. 3d 77, 83-85 (2000). The burden is on theoffending party to show that its noncompliance with the rules atarbitration was reasonable or the result of extenuatingcircumstances. Kubian v. Labinksy, 178 Ill. App. 3d 191, 197(1988).

In support of its contention that it acted in good faith andin a meaningful manner, plaintiff relies upon State FarmInsurance Co. v. Harmon, 335 Ill. App. 3d 687 (2002), for theproposition that a plaintiff in arbitration shows good faith andparticipates in meaningful manner when plaintiff's counselappears, when an agent of the plaintiff corporation appears, whenthe plaintiff presents evidence of damages via a Rule 90(c)packet, when the plaintiff elicits testimony from the defendantestablishing liability, and when the arbitration panel makes nofinding that the plaintiff participated in the proceedings in badfaith. Plaintiff also contends that it did not fail to complywith defendant's Rule 237(b) notice to produce because the noticedid not apply to plaintiff's insureds.

We believe that our holding in State Farm Mutual InsuranceCo. v. Nasser, 337 Ill. App. 3d 362 (2003), is instructive. Inthat case, as here, the circuit court granted the defendant'smotion to bar the plaintiff from presenting evidence at trialbecause it determined that the plaintiff had not participated ingood faith when the plaintiff failed to produce its insured atthe arbitration hearing. We vacated the circuit court's order,holding that the plaintiff did not conduct itself in bad faithwhen it appeared through counsel, presented a Rule 90(c) package,and was not found to have participated in bad faith by thearbitration panel. We further held that Rule 237(b) did notreach the insured because the insured was not a party to thelawsuit, and that the proper means of securing the insured'spresence would have been to serve the insured with a subpoena. Finally, we stated that the defendant bore the responsibility forany alleged insufficiency in adversarial testing by failing tosecure evidence in the appropriate manner. Nasser, 337 Ill. App.3d at 367-68; Harmon, 335 Ill. App. 3d at 692.

In this case, plaintiff presented evidence of damages to theinsured vehicle through a Rule 90(c) package, appeared at thearbitration hearing through counsel and through its adjuster, andcalled defendant as an adverse witness to establish hisnegligence. The arbitrators did not find that plaintiff failedto participate in good faith or to comply with defendant's Rule237(b) notice to produce.

We note that plaintiff offered no explanation either in itsresponse to defendant's motion or in its brief that its failureto produce the insureds at the arbitration hearing was reasonableor due to extenuating circumstances, and that there is noindication from the record that plaintiff made reasonable effortsto procure the insureds as witnesses. However, the insuredsshould have been subpoenaed. Nasser, 337 Ill. App. 3d 362. Inaccordance with our holding in Nasser, we see no indication thatplaintiff's conduct amounted to a deliberate or pronounceddisregard for the rules of arbitration. Plaintiff substantiallycomplied with defendant's Rule 237(b) notice to produce when itappeared through counsel and presented the testimony of itsadjustor. Defendant bore the responsibility for securing thepresence of the insureds by means of subpoena. Therefore, weconclude that the trial court improperly sanctioned plaintiff forfailing to produce the Sprakers pursuant to Rule 237(b).

We are aware of our recent decision in State Farm MutualInsurance Co. v. Koscelnik, 342 Ill. App. 3d 808 (2003), in whichwe held that the plaintiff in a subrogation action could notprove its claim of negligence by the defendant where neither theplaintiff's insured, the defendant, nor any other eyewitnesstestified at the arbitration hearing as to who caused theaccident for which the plaintiff was seeking recovery. In thecase before us, defendant made a similar contention in his motionto bar, alleging that plaintiff failed to prove the proximatecause of the damage to the insured vehicle when it failed to callits insureds and the adjustor who personally handled theinsureds' claim. Defendant argued that plaintiff's failure topresent evidence establishing that all of the repairs for whichplaintiff paid were necessitated by defendant's negligenceamounted to participation in bad faith and warranted thesanctions imposed by the circuit court. We disagree.

We find the facts of Koscelnik and the case now before usdistinguishable. In Koscelnik, the plaintiff presented only itsRule 90(c) package and the testimony of one of its adjustors atthe arbitration hearing. The parties contested liability. Neither the plaintiff's insureds nor the defendant testified. The arbitration panel entered an award for defendant, whosubsequently moved to bar plaintiff from rejecting the award. The circuit court granted the defendant's motion, finding thatthe plaintiff had failed to participate in the arbitrationhearing in good faith. We affirmed the circuit court's order,stating that, without any evidence to establish liability on thepart of the defendant, the plaintiff failed to meet the standardof adversarial testing expected at trial.

In this case, plaintiff examined defendant as an adversewitness, and defendant admitted his liability for the accidentand that he noticed damage to the insured vehicle after hisvehicle collided with it. Also, there was testimony by theclaims adjuster that the insured vehicle was examined and thatthere was no preexisting damage. Plaintiff did in fact presentevidence that defendant's negligence proximately caused thedamage to the insured vehicle, and the arbitrators found thatevidence persuasive in entering an award for plaintiff in theamount sought. Defendant speculates that if he had been allowedto examine the insureds, he may have been able to refuteplaintiff's evidence of proximate cause. Under thesecircumstances, it was defendant's responsibility to subject theelement of proximate cause to adversarial testing, either byissuing subpoenas to the Sprakers or specifying an agent ofplaintiff's with specific knowledge of the insured vehicle in hisRule 237(b) notice to produce.

CONCLUSION

For the foregoing reasons, we vacate the orders of thecircuit court that found plaintiff to have failed to participatein the arbitration proceedings in good faith, that imposedsanctions against plaintiff, and that entered judgment fordefendant and remand this cause for further proceedings.

Vacated and remanded.

CAMPBELL, P.J. and HARTIGAN, J., concur.