An Illinois appellate court has revived a Canadian insurer's bid to settle which of two conflicting judgments takes priority.
The First District Appellate Court of Illinois reversed a Cook County circuit court's dismissal of the case on September 8, finding that Sandbox Mutual Insurance Co. had presented a justiciable dispute. The lower court had ruled the matter premature because the opposing party was not actively trying to collect on its judgment.
The dispute traces to 2005, when CE Design, an Illinois corporation in the business of litigating Telephone Consumer Protection Act violations, filed a class action against Homegrown Advertising, a now-defunct Canadian marketing firm. Sandbox Mutual had issued Homegrown a commercial liability policy with $2 million in limits for a period ending in January 2005.
Homegrown never notified Sandbox Mutual of the lawsuit. When the insurer learned of the litigation in May 2006, it determined the policy did not cover the claims and sent a denial the following month.
CE Design and Homegrown later settled. Under the deal, Homegrown assigned its rights under the policy to CE Design - a mechanism that allowed the class representative to pursue the insurer directly on a policy it was never party to. A Lake County circuit court entered a $5 million consent judgment against Homegrown in February 2007, payable only from Sandbox Mutual's policy. That court later entered a default judgment against the insurer for roughly $5.1 million after Sandbox Mutual said it never received notice of a motion to turn over policy proceeds.
Sandbox Mutual challenged the judgment in Canada. In 2008, a Saskatchewan court found the insurer had never been properly notified of the Illinois proceedings. In 2021, Saskatchewan's Court of Appeal ruled that Sandbox Mutual had no duty to defend or pay under the policy.
Facing two directly contradictory rulings from different countries over the same policy, Sandbox Mutual filed a declaratory judgment action in Cook County in April 2024, seeking a finding that the Canadian judgments take priority. The Cook County circuit court dismissed, finding no live controversy because CE Design was not actively enforcing.
The appellate court disagreed. It found the existence of conflicting judgments - one eliminating coverage, the other imposing a multimillion-dollar obligation - presented an actual controversy that did not require active enforcement to be ripe. The court noted Sandbox Mutual's claims of ongoing harm, including reporting obligations to regulators and reinsurers and constraints on placing assets in the US.
The case returns to Cook County, where the circuit court must first resolve whether venue there is proper before reaching the priority question.
