Orlofsky ADR Services

Is A Mediation A “Lawsuit?”

In Ill. Tool Works, Inc. v. Ace Specialty Ins. Co., 2019 Ill. App 181945 (1st Div. 2019), the plaintiff received a letter threatening a lawsuit (a copy of a proposed complaint was attached), but inviting the plaintiff to participate in a mediation to resolve the matter. The plaintiff accepted the invitation and the matter settled. The defendant insurer then refused to pay the costs of the mediation because the policy provided that the insurer owed a defense only for “suits.” The court agreed, noting that a mediation, by itself, is not a “suit.” The court further noted that the policy had other provisions that referenced “claims,” which is a broader term than “suits,” implying that had the policy provided a duty of defense for “suits and claims,” the mediation would have been covered.

The result itself is not surprising. It is hard to argue that a letter threatening a lawsuit is an actual lawsuit. The important takeaway, however, is that if you choose to mediate a case before a lawsuit has been filed (a great way to save your client time and money), make sure to check any applicable liability policies before doing so.