In re Liquidation of Legion Indemnity Co. , 2023 IL App (1st) 211370 ( 2023 )

2023 IL App (1st) 211370No. 1-21-1370
Opinion filed May 12, 2023
Fifth Division
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
______________________________________________________________________________
In re LIQUIDATION OF LEGION INDEMNITY ) Appeal from the
COMPANY ) Circuit Court of
) Cook County
(Dana Popish Severinghaus, in Her Official Capacity as )
Director of the Department of Insurance, Acting Solely in )
Her Capacity as the Statutory and Court-Affirmed )
Liquidator of Legion Indemnity Company, )
) No. 02 CH 6695
Liquidator-Appellee, )
)
v. )
)
Catalina Holdings (Bermuda) Limited, ) Honorable
) Celia G. Gamrath,
Claimant-Appellant). ) Judge presiding.
JUSTICE NAVARRO delivered the judgment of the court, with opinion.
Presiding Justice Delort and Justice Lyle concurred in the judgment and opinion.
OPINION
¶1 After being found insolvent, Legion Indemnity Company (Legion) began undergoing
court-ordered liquidation. During the liquidation proceedings, the director of the Department of
Insurance, acting solely in his capacity as the statutory and court-affirmed liquidator of Legion
(Director), demanded arbitration against Catalina Holdings (Bermuda) Limited (Catalina), who
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had assumed responsibility for multiple reinsurance treaties entered into with Legion, for amounts
allegedly owed under the treaties. Catalina counterclaimed for unpaid premiums. The arbitration
panel rejected the claims on behalf of Legion and awarded Catalina the unpaid premiums as well
as attorney fees, costs, and interest, if the award was not timely paid. After having that award
confirmed by a federal court and converted into a judgment, Catalina filed claims in the circuit
court to have its award paid. Ultimately, the circuit court allowed Catalina’s claims and determined
that the unpaid premiums as well as the attorney fees, costs, and arbitration interest were claims of
a general creditor. As a result, Catalina’s claims were afforded the seventh highest priority in the
Illinois Insurance Code’s priority distribution scheme of assets from the estate of an insurance
company undergoing liquidation. See 215 ILCS 5/205(1) (West 2020). In addition to allowing
Catalina’s claims, the court denied Catalina statutory postjudgment interest under section 2-1303
of the Code of Civil Procedure (735 ILCS 5/2-1303 (West 2020)).
¶2 Catalina now appeals the circuit court’s order, contending that, based on the plain language
of the Insurance Code’s priority distribution scheme, its claim solely for attorney fees, costs, and
arbitration interest should be deemed a cost and expense of administration (215 ILCS 5/205(1)(a)
(West 2020)), the highest priority of the Insurance Code’s priority distribution scheme.
Additionally, Catalina posits that it was entitled to statutory postjudgment interest on its arbitration
award that was converted into a judgment under section 2-1303 of the Code of Civil Procedure
(735 ILCS 5/2-1303 (West 2020)). For the reasons that follow, we affirm the circuit court of Cook
County.
¶3 I. BACKGROUND
¶4 A. Legion’s Liquidation
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¶5 Legion was an insurance company licensed in the state of Illinois. Between 1998 and 2001,
Legion entered into multiple quota-share reinsurance treaties with Alea Group Limited and related
entities (the Alea Entities), under which the Alea Entities agreed to reinsure and indemnify Legion
for a portion of certain business written or assumed by Legion. In April 2002, the Director believed
that Legion was financially impaired and filed a complaint for an order of conservation against it.1
Based on the complaint, the circuit court entered an order of conservation against Legion, resulting
in the Director taking possession and control of Legion. Subsequently, the Director filed a
complaint seeking an order of liquidation with a finding that Legion was insolvent.
¶6 In April 2003, the circuit court found that Legion was insolvent and entered an order of
liquidation. That order affirmed the Director as the statutory liquidator and provided him with
various powers listed in the Insurance Code. 2 See, e.g., 215 ILCS 5/191, 193 (West 2002). One
such power included the Director’s ability to “bring any action, claim, suit, or proceeding ***
against any other person with respect to that person’s dealings with [Legion].” Id. § 193(3). The
court’s order also vested the Director “with the right, title and interest in all funds recoverable
under any insurance policies, and any treaties and agreements of excess insurance or reinsurance”
entered into by Legion. In addition, the Director had various obligations, including providing
timely written notice to reinsurers of the pendency of a claim against Legion indicating the policy
or bond reinsured. Id. § 193(8)(b). As a result of the court’s order of liquidation, an estate was
created comprised of all the assets and liabilities of Legion. Id. § 191.
¶7 Throughout the next several years, there were various court-ordered claim deadlines.
Eventually, more than 2200 proofs of claims were timely filed in the liquidation proceedings,
1
At the time, the Director was Nathaniel S. Shapo.
2
At the time, the Director was J. Anthony Clark.
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consisting primarily of priority (g) claims (claims of general creditors). Meanwhile, all priority (a)
claims—those for costs and expenses of administration—were paid on an ongoing basis. By
January 2015, the circuit court had approved a 100% distribution on all timely filed claims in the
liquidation proceedings. Because Legion’s estate had sufficient assets remaining, the court set a
new deadline for any additional claims to be filed in the matter. Over the next few years, the court
continued to approve distributions to claims based on the priority distribution scheme of the
Insurance Code.
¶8 B. Catalina and Legion
¶9 In 2009 and 2014, Catalina bought the Alea Entities. Based on these acquisitions, Catalina
assumed responsibility for the various reinsurance treaties that the Alea Entities had entered into
with Legion. These reinsurance treaties contained mandatory and binding arbitration clauses for
any dispute arising out of the reinsurance agreements except for issues involving injunctive relief.
Additionally, these clauses provided that the arbitrators “may award interest and costs.”
¶ 10 In 2014, the Director sent Catalina a commutation offer claiming a balance of
approximately $1 million owed to Legion’s estate under the various reinsurance treaties.
According to Catalina, this offer was the first time it had received any communication of an issue
regarding the reinsurance treaties with Legion. After Catalina refused to pay, the Director
demanded arbitration to recover the alleged money owed based on the arbitration clauses in the
reinsurance treaties. The Director also sought an award of attorney fees and costs. In response,
Catalina counterclaimed, arguing that it was owed unpaid premiums from Legion under the
reinsurance treaties and sought an award of attorney fees and costs.
¶ 11 In June 2018, following an arbitration hearing, a panel issued an “Initial Final Award,”
determining that Legion failed to comply with the Insurance Code as well as the reinsurance
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treaties concerning obligations to provide notice to Catalina within a reasonable time after each
proof of claim was filed in the liquidation proceedings. Because of this failure, the panel concluded
that Legion’s claims were time-barred and Catalina was relieved of all obligations to pay any
amounts owed. Additionally, the panel concluded that Catalina proved it was entitled to unpaid
premiums and awarded it $76,602.63. Lastly, the panel noted that, given the circumstances, it was
“unreasonable for [Catalina] to bear the costs of having to respond to and defend” the arbitration
brought by Legion and granted Catalina “an adverse award of fees and costs incurred” due to
proceedings. On July 31, 2018, the arbitration panel issued its “Final Award” that reaffirmed and
incorporated its initial final award. The panel also awarded Catalina $437,501.04 in attorney fees
and costs to be paid by Legion. Further, the panel ordered Legion to pay Catalina the amounts
owed within 30 days, otherwise interest would accrue at 6% per annum, compounded quarterly,
until Catalina was paid in full. Catalina subsequently filed a petition to confirm the arbitration
award in the United States District Court for the Northern District of Illinois. On April 6, 2020,
the district court confirmed the award and converted it into a judgment in favor of Catalina and
against the Director, as liquidator of Legion.
¶ 12 Catalina sought to have the Director pay the entire judgment outside of the liquidation
proceedings. But the Director’s attorney informed Catalina that the Director could not pay the
judgment without court approval and Catalina had to file a proof of claim with the Office of the
Special Deputy Receiver (OSDR), a nonprofit corporation representing the Director under the
Insurance Code. See 215 ILCS 5/202 (West 2020). In June 2020, Catalina submitted four proof of
claim forms with the OSDR totaling $76,602.63. Those four claims were based on the reinsurance
treaties and corresponded to the unpaid premiums owed to Catalina, as determined by the
arbitration panel.
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¶ 13 The following month, Catalina issued a citation to discover assets against the Director in a
separate case outside the liquidation proceedings. According to the Director, because Catalina
could only enforce the arbitration judgment through the original liquidation proceedings, he
requested Catalina dismiss the citation and follow the proper procedure. In October 2020, because
Catalina had not voluntarily dismissed its citation, the Director accepted service of the citation and
moved to dismiss it. The circuit court granted the motion finding, in part, the Insurance Code
expressly provided that only the liquidation court had jurisdiction to distribute assets of the estate
of an insurance company undergoing liquidation. 3
¶ 14 C. The Priority of Catalina’s Claims
¶ 15 In November 2020, the Director filed a motion in the liquidation case to allow Catalina’s
claims at the priority (g) level for claims of general creditors. See id. § 205(1)(g). 4 The Director
argued that all claims arising out of reinsurance agreements are claims of general creditors. As a
result, the Director requested an order approving his recommendation that Catalina’s claims of
$76,602.63 in unpaid premiums and $437,501.04 in attorney fees and costs be allowed for
purposes of participating in any second-round distribution on late-filed claims from assets of
Legion’s estate at the priority (g) level. The Director’s motion did not mention the interest awarded
by the arbitration panel.
¶ 16 In response, Catalina initially conceded that its claims for unpaid premiums should be
allowed at the priority (g) level. However, Catalina contested the amount of the attorney fees and
costs claim as stated in the Director’s motion to allow and posited that the Director’s motion did
not include the accrued interest to date. To this end, Catalina claimed that it was owed $535,661.21,
3
This dismissal order was entered by Judge Patrick J. Heneghan.
4
At the time of the filing, the Director was Robert H. Muriel.
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which consisted of $437,501.04 in attorney fees and costs as well as $98,160.17 in interest. The
amount of interest included the interest awarded by the arbitration panel at 6% per annum,
compounded quarterly, from 30 days after the award until April 6, 2020, when the district court
granted Catalina’s petition to confirm the award and converted the award into a judgment.
Following this judgment, according to Catalina, interest began to accrue at 9% per annum as
postjudgment interest under 2-1303 of the Code of Civil Procedure (735 ILCS 5/2-1303 (West
2020)). With the amount of its claim accurately calculated, Catalina argued its adverse award of
attorney fees, costs, and interest were costs and expenses of administration and should be allowed
at the priority (a) level.
¶ 17 The Director filed a reply in support of its motion to allow, asserting that Catalina was not
entitled to any interest on its claim. 5 The Director argued that Catalina’s claim for attorney fees
and costs were not costs and expenses of administering Legion’s estate but rather arose from a
contract dispute over reinsurance treaties. As such, the Director argued that, under settled law,
these claims had to be administered at the priority (g) level for claims of general creditors. The
Director therefore requested that the court approve her request, as stated in the motion to allow.
¶ 18 Following a September 2021 hearing on the Director’s motion, the circuit court took the
matter under advisement, but ordered Catalina’s attorney to provide the court with a calculation of
the claimed interest owed. Later that month, Catalina provided the court with its calculation of
interest asserting that it was entitled to $43,712.50 in interest from August 30, 2018—30 days after
the final arbitration award—until April 6, 2020—when the district court granted Catalina’s petition
to confirm and converted the arbitration award into a judgment. And Catalina asserted it was
5
At the time of the filing, the Director was Dana Popish Severinghaus.
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entitled to $63,242.42 in postjudgment interest under section 2-1303 of the Code of Civil
Procedure (id.) from April 7, 2020, until September 22, 2021, calculated at 9% per annum. In total,
Catalina posited that it was owed $544,455.96.
¶ 19 On September 27, 2021, the circuit court granted the Director’s motion to allow Catalina’s
claim of $76,602.63 in unpaid premiums, $437,501.04 in attorney fees and costs, and $43,712.50
in interest at a rate of 6% from August 30, 2018—30 days after the final arbitration award—until
April 6, 2020, when the federal district court granted Catalina’s petition to confirm and converted
the arbitration award into a judgment in favor of Catalina. 6 The court concluded that all amounts
owed to Catalina were to be assessed at the priority (g) level for claims of general creditors for
purposes of participating in any second-round distribution of assets from Legion’s estate on late-
filed claims and rejected Catalina’s argument that its attorney fees, costs, and interest should be
considered costs and expenses of administration. The court allowed the 6% interest, as awarded
by the arbitration panel and confirmed by the federal district court, but denied Catalina any
statutory postjudgment interest relying on In re Liquidation of Pine Top Insurance Co., 322 Ill.
App. 3d 693 (2001). Additionally, the court acknowledged that, based on the statutory language,
postjudgment interest under section 2-1303 of the Code of Civil Procedure (735 ILCS 5/2-1303
(West 2020)) was mandatory. But it found that, pursuant to Finley v. Finley, 81 Ill. 2d 317 (1980),
it had discretion as a chancery court to disallow postjudgment interest when it would not comport
with justice and equity. To this end, the court determined that allowing postjudgment interest in
the instant case “would not comport with justice and equity.”
¶ 20 Thereafter, Catalina timely appealed.
6
This order was entered by Judge Celia G. Gamrath.
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¶ 21 II. ANALYSIS
¶ 22 A. Priority Distribution Scheme
¶ 23 Catalina first contends that the circuit court erred in determining that its adverse award of
attorney fees, costs, and interest should be distributed at the priority (g) level for claims of general
creditors rather than at the priority (a) level for costs and expenses of administration. This
contention requires us to interpret the Insurance Code’s priority distribution scheme of assets from
the estate of an insurance company undergoing liquation. See 215 ILCS 5/205(1) (West 2020).
¶ 24 When we interpret a statute, our primary goal is to determine and give effect to the intent
of our legislature in enacting the particular provision at issue. Cassidy v. China Vitamins, LLC,
2018 IL 122873, ¶ 17. “The statutory language, given its plain and ordinary meaning, is generally
the most reliable indicator of that legislative intent, but a literal reading must fail if it yields absurd,
inconvenient, or unjust results.” Id. If the words of a particular provision are not defined in the
statute, we will interpret them using their common and ordinary meaning. Midwest Sanitary
Service, Inc. v. Sandberg, Phoenix & Von Gontard, P.C., 2022 IL 127327, ¶ 24. Although a
particular provision of a statute may be at issue, we cannot view the provision in isolation, but
rather must view the provision in the context of the statute at large and consider its subject matter
and overall purpose. Lawler v. University of Chicago Medical Center, 2017 IL 120745, ¶ 12. When
the language of a statute is clear and unambiguous, we must adhere to its plain language and
meaning. Id. We cannot “read[ ] into it exceptions, limitations, or conditions that the legislature
did not express.” Id. However, if the language is ambiguous, we may utilize aids of statutory
construction and other sources to determine the legislature’s intent. In re Marriage of Heroy, 2017
IL 120205, ¶ 13. The interpretation of a statute is a question of law, which means our review
proceeds de novo. Midwest, 2022 IL 127327, ¶ 19.
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¶ 25 Article XIII of the Insurance Code provides the general framework for the liquidation of
an insolvent insurance company like Legion. See 215 ILCS 5/187 to 221 (West 2020). After the
circuit court enters an order of liquidation, title to all the property, contracts, and rights in action
of the insurance company undergoing liquidation becomes vested by operation of law in the
Director and his or her successors. Id. § 191. The court’s order of liquidation creates an estate of
the company undergoing liquidation that includes all of its assets and liabilities. Id. Article XIII of
the Insurance Code further details the duties and responsibilities of the Director, as liquidator, how
parties can file claims and, ultimately, how a claim is allowed, which generally requires the
approval of the circuit court. See id. §§ 191, 193, 208 to 209. Important for this case, article XIII
of the Insurance Code provides a distribution scheme of the assets of the company undergoing
liquidation based on priority. See id. § 205. Our legislature created the priority distribution scheme,
in part, to provide an orderly, efficient, and comprehensive process for liquidating the assets of
insolvent insurance companies. In re Liquidation of Lumbermens Mutual Casualty Co., 2018 IL
App (1st) 170996, ¶ 31. The scheme “protect[s] individual policyholders and other claimants
without permitting certain classes of creditors to place themselves in a superior position.” Lincoln
Towers Insurance Agency, Inc. v. Boozell, 291 Ill. App. 3d 965, 970 (1997).
¶ 26 The priority distribution scheme has nine levels of priority, beginning with priority (a) and
ending with priority (i). 215 ILCS 5/205(1)(a) to (i) (West 2020). Priority (a), the highest priority,
consists of “[t]he costs and expenses of administration.” Id. § 205(1)(a). Next comes priority (b),
which is for secured claims, followed by employee wage claims (priority (c)), claims by
policyholders, beneficiaries, and insureds under various policies and agreements with the insolvent
insurance company (priority (d) and (e)), and then, any claims due the federal government (priority
(f)). Id. § 205(1)(b) to (f). The next priority is priority (g), which is for “[a]ll other claims of general
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creditors not falling within any other priority under this Section including claims for taxes and
debts due any state or local government which are not secured claims and claims for attorneys’
fees incurred by the company in contesting its conservation, rehabilitation, or liquidation.” Id.
§ 205(1)(g). The final two priorities are not relevant for this appeal. Under the priority distribution
scheme, the claimants of the higher priority level must be satisfied in full before the claimants of
a lower priority level can receive a distribution. See In re Liquidations of Reserve Insurance Co.,
122 Ill. 2d 555, 558 (1988). If there are insufficient assets to fully satisfy higher priority claims,
then all lower priority claims receive no distribution of assets from the liquidation proceedings. Id.¶ 27 Our supreme court has interpreted the Insurance Code’s priority distribution scheme in the
context of reinsurance agreements. In In re Liquidations of Reserve, two insurance companies were
undergoing liquidation, and the Director, as the liquidator of both companies, filed a petition in
both cases seeking a determination “that all claims against [the companies] as reinsurers [were]
‘claims of general creditors.’ ” Id. at 557. The cases were consolidated and reached our supreme
court, which stated the issue was “whether claims arising out of reinsurance agreements between
insurance companies” were claims of general creditors or claims of policyholders, beneficiaries,
and insureds under insurance policies and insurance contracts issued by the companies undergoing
liquidation. Id. at 558. The court highlighted that reinsurance agreements were different than
traditional insurance contracts in both form and substance given that reinsurance agreements could
only be entered into by certain insurance companies and the original policyholders were not a party
to the reinsurance agreements. Id. at 561-62. As such, the interests involved in reinsurance
agreements were different than in direct insurance agreements. Id. at 562. Furthermore, the court
determined that, based upon various provisions of the Insurance Code, the terms “ ‘insurance’ ”
and “ ‘reinsurance’ ” were intended to have different meanings. Id. at 563. As a result, the court
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found that reinsurance agreements could not be subsumed into any provision simply using the term
“insurance contract.” Id. The court asserted that, had the legislature “intended to include
reinsurance agreements” along with traditional insurance contracts in terms of priority, “it would
have explicitly mentioned reinsurance agreements.” Id. Having failed to do so, our supreme court
concluded that “all claims against [the two insurance companies undergoing liquidation] arising
out of reinsurance agreements *** are claims of general creditors.” Id. at 563-64, 568.
¶ 28 Given our supreme court’s decision in In re Liquidations of Reserve, Catalina concedes, as
it did in proceedings below, that its claims for the unpaid premiums owed to Catalina totaling
$76,602.63 must be assigned to priority level (g) for claims of general creditors (215 ILCS
5/205(1)(g) (West 2020)). However, Catalina argues that its adverse arbitration award of attorney
fees, costs, and interest was a liability incurred by the Director, as liquidator, in the active
administration of Legion’s estate, thus qualifying as a cost and expense of administration and
assigned the highest level of priority. See id. § 205(1)(a).
¶ 29 The phrase “costs and expenses of administration” is not defined in the Insurance Code,
and neither are its constituent words. However, our legislature has given clues about the phrase by
expressly including certain costs and expenses as costs and expenses of administration. First, costs
and expenses of administration include:
“[t]he reasonable expenses of the Illinois Insurance Guaranty Fund, the Illinois Life
and Health Insurance Guaranty Association, and the Illinois Health Maintenance
Organization Guaranty Association and of any similar organization in any other
state, including overhead, salaries, and other general administrative expenses
allocable to the receivership (administrative and claims handling expenses and
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expenses in connection with arrangements for ongoing coverage).” Id.
§ 205(1)(a)(i).
In addition, our legislature has expressly included:
“[t]he expenses expressly approved or ratified by the Director as liquidator or
rehabilitator, including, but not limited to, the following:
(1) the actual and necessary costs of preserving or recovering the
property of the insurer;
(2) reasonable compensation for all services rendered on behalf of
the administrative supervisor or receiver;
(3) any necessary filing fees;
(4) the fees and mileage payable to witnesses;
(5) unsecured loans obtained by the receiver; and
(6) expenses approved by the conservator or rehabilitator of the
insurer, if any, incurred in the course of the conservation or rehabilitation
that are unpaid at the time of the entry of the order of liquidation.” Id.
§ 205(1)(a)(ii).
Although these express costs and expenses of administration were added to section 205 of the
Insurance Code in 2017 (see Pub. Act 100-410, § 5 (eff. Aug. 25, 2017) (amending 215 ILCS
5/205)), our review of the legislative history of the public act did not reveal any guidance as to
what our legislature intended by the phrase “costs and expenses of administration.” But still, as
noted, the express costs and expenses of administration are themselves helpful. Section
205(1)(a)(i) allows Illinois guaranty entities—entities that act as a safety net for the payment of
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covered claims in the event an insurer becomes insolvent (see 215 ILCS 5/531.02, 532 (West
2020))—and other similar organizations in other states to recover their reasonable expenses, such
as overhead, salaries, and other general administrative expenses. See also In re Liquidation of
Lumbermens, 2018 IL App (1st) 170996, ¶ 32 (finding the plain and unambiguous language of
section 205(1)(a)(i) was to allow guaranty associations the ability “to recover their ‘reasonable
expenses’ ”). Meanwhile, section 205(1)(a)(ii) involves the expenses incurred, and approved or
ratified by the Director, in his or her role as the statutory and court-affirmed liquidator or
rehabilitator, in the process of liquidating or rehabilitating an insurance company.
¶ 30 While the legislature has expressly included certain costs and expenses as those of
administration, we can also look to the dictionary, particularly Black’s Law Dictionary, for
guidance on the plain and ordinary meaning of the phrase “costs and expenses of administration.”
See Midwest, 2022 IL 127327, ¶ 24; Rosenbach v. Six Flags Entertainment Corp., 2019 IL 123186,
¶ 32. According to Black’s Law Dictionary, “administration” means “[t]he management or
performance of the executive duties of a government, institution, or business; collectively, all the
actions that are involved in managing the work of an organization” or “[i]n public law, the practical
management and direction of the executive department and its agencies.” Black’s Law Dictionary
(11th ed. 2019). Additionally, Black’s Law Dictionary defines “expense” as “[a]n expenditure of
money, time, labor, or resources to accomplish a result” and “cost” as “[t]he amount paid or
charged for something.” Black’s Law Dictionary (11th ed. 2019). Putting the constituent words
together, the plain and ordinary meaning of “costs and expenses of administration” is generally
the amount paid or charged for something, or the expenditure of money, time, labor, or resources
to accomplish a result during the management or performance of liquidating or rehabilitating an
insolvent insurance company. This general definition dovetails with the costs and expenses our
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legislature has expressly included as being costs and expenses of administration, particularly those
approved or ratified by the Director.
¶ 31 Given the plain and ordinary meaning of the phrase “costs and expenses of administration”
and the express inclusion of certain costs and expenses by our legislature, we can deduce what our
legislature intended by that phrase. In doing so, our legislature intended two prongs of costs and
expenses. First, our legislature intended to cover the reasonable expenses, such as overhead,
salaries and other general administrative expenses, of guaranty associations in Illinois and other
states. And second, our legislature intended to cover the amounts paid or charged, or the
expenditure of money, time, labor, or resources of the Director, or those on his or her behalf,
marshaling and distributing the insolvent insurer’s assets. Moreover, implicit in the term “of
administration” is the fact that the costs and expenses have a postliquidation or postrehabilitation
basis because there can only be an administration of the estate of an insolvent insurance company
after an order of liquidation or rehabilitation. Given this legislative intent, our legislature did not
intend to include as costs and expenses of administration an adverse award of attorney fees, costs,
and interest of a claimant incurred while defending a claim from the Director, as liquidator, in
arbitration that had a preliquidation genesis. Furthermore, as discussed, in In re Liquidations of
Reserve, 122 Ill. 2d at 558, 563-64, 568, our supreme court held that “all claims [against an
insurance company undergoing liquidation] arising out of reinsurance agreements” are claims of
general creditors. And in the instant case, the attorney fees, costs, and interest awarded to Catalina
in arbitration arose out of the reinsurance treaties between it and Legion. Those treaties contained
binding arbitration clauses for any dispute arising out of the reinsurance agreements and allowed
the arbitrators to award interest and costs if they so decided. Stated otherwise, but for the arbitration
clauses in the reinsurance treaties, Catalina would not have been awarded the attorney fees, costs,
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and interest upon which they base their claim. As such, it was the dispute based on the reinsurance
treaties that led to Catalina being awarded attorney fees, costs, and interest. Therefore, in light of
In re Liquidations of Reserve, Catalina’s award of attorney fees, costs, and interest must be
assigned to priority level (g) for claims of a general creditor.
¶ 32 Nevertheless, Catalina raises several arguments in support of its position that the attorney
fees, costs, and interest awarded to it in arbitration were costs and expenses of administration. For
one, Catalina posits that, based on Merriam-Webster’s definitions of the phrase’s constituent
words, “costs and expenses of administration” include all losses arising from the liquidator’s
management of the estate. Supporting this argument, Catalina notes that section 205(1)(a) uses the
phrase “including, but not limited to” (215 ILCS 5/205(1)(a) (West 2020)), which it asserts
demonstrates a legislative intent to interpret the statutory provision broadly. Catalina is correct that
our legislature’s use of the phrase “including, but not limited to” is an indication that a subsequent
list is not exhaustive. See Zekman v. Direct American Marketers, Inc., 182 Ill. 2d 359, 369 (1998).
When our legislature uses this phrase, “the class of unarticulated things will be interpreted as those
that are similar to the named things.” Id. But here, the costs and expenses of administration
enumerated in section 205(1)(a) are fundamentally different than an adverse award of attorney
fees, costs, and interest to a party in arbitration called upon to defend itself from a claim brought
by the Director on behalf of a company undergoing liquidation. Furthermore, Catalina’s arguments
based on dictionary definitions and statutory canons of construction cannot overcome our supreme
court’s holding in In re Liquidations of Reserve, 122 Ill. 2d at 558, 563-64, 568, that “all claims
[against an insurance company undergoing liquidation] arising out of reinsurance agreements” are
claims of general creditors.
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¶ 33 Still, Catalina attempts to distinguish In re Liquidations of Reserve from the instant facts,
arguing that the decision is inapplicable because it involved preliquidation debts incurred by
insurance companies undergoing liquidation, whereas the instant case involves a postliquidation
debt incurred by the Director, as liquidator. We acknowledge the claims in In re Liquidations of
Reserve—nonpayment of certain obligations by the two insurance companies undergoing
liquidation to reinsurers—are unlike Catalina’s claim for attorney fees, costs, and interest based
on an adverse arbitration award. But in In re Liquidations of Reserve, our supreme court did not
make a distinction based upon the nature of the claim from the reinsurer. Rather, our supreme court
used broad and all-encompassing language in arriving at its holding that “all claims [against an
insurance company undergoing liquidation] arising out of reinsurance agreements” are claims of
general creditors. Id. Given this broad and inclusive language, In re Liquidations of Reserve
applies regardless of the fact that the instant case involves a postliquidation debt for attorney fees,
costs, and interest because that award still arose from the reinsurance treaties.
¶ 34 Yet, Catalina posits that its adverse arbitration award did not truly arise out of the
reinsurance treaties with Legion. Catalina highlights that the arbitration panel awarded it attorney
fees and costs because, based on the circumstances, it was “unreasonable” for Catalina to bear the
costs of defending the arbitration brought by Legion. Catalina further highlights that the arbitration
clauses in the reinsurance treaties did not contain a contractual right for the prevailing party to
recover costs. It therefore argues that the treaties did not provide the basis for the arbitration panel’s
award of attorney fees and costs. Rather, according to Catalina, the award arose from the panel’s
consideration of equity and reasonableness, namely the Director’s failure to adhere to the notice
requirement of the Insurance Code. See 215 ILCS 5/193(8)(b) (West 2020). However, there would
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be no adverse award of attorney fees and costs but for the arbitration clauses in the reinsurance
treaties, and thus, its adverse award of attorney fees and costs arose from the reinsurance treaties.
¶ 35 Catalina additionally asserts that rejecting its argument that an adverse award of attorney
fees, costs, and interest are costs and expenses of administration conflicts with section 194(a) of
the Insurance Code (id. § 194(a)), otherwise known as the “fixing provision.” In re Liquidation of
Pine Top, 322 Ill. App. 3d at 703. Under section 194(a), upon the circuit court’s entry of an order
of liquidation, “[t]he rights and liabilities of the [insolvent] company and of its creditors,
policyholders, stockholders or members and all other persons interested in its assets, except
persons entitled to file contingent claims, shall be fixed” unless otherwise ordered by the court.
215 ILCS 5/194(a) (West 2020). This provision “is intended to stop the running of any debts,
including postjudgment interest, against the insolvent insurer in order to give the liquidator an
opportunity to marshal the insurer’s assets and pay its debts.” In re Liquidation of Pine Top, 322
Ill. App. 3d at 703-04.
¶ 36 According to Catalina, the fixing provision creates two distinct time periods: (1) debts that
existed before liquidation, which are fixed as of the date of the court’s order of liquidation, and
(2) debts incurred after the date of the court’s order of liquidation while the Director, as liquidator,
administers and manages the estate of the insolvent insurance company. Implicit in such an
argument is that these latter debts are costs and expenses of administration and priority (a) claims.
However, section 194(a) does not provide for this treatment of postliquidation debts, and the only
case Catalina cites for support, In re Liquidation of Pine Top, merely describes the purpose of the
fixing provision. But assuming arguendo that Catalina’s argument is correct, Catalina’s adverse
award of attorney fees, costs, and interest still has a preliquidation basis because it was the dispute
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based on the reinsurance treaties that led to Catalina’s adverse award. And because this award has
a preliquidation genesis, the award is not a cost or expense of administration.
¶ 37 In addition, Catalina highlights section 202(e)(2) of the Insurance Code (215 ILCS
5/202(e)(2) (West 2020)), which creates a right to indemnification from the assets of the
company’s estate for the Director, his or her employees, and his or her advisors where “a cause of
action is commenced against” them “either personally or in their official capacity” arising out of
their actions “within the scope of their duties or employment involving a company in liquidation.”
The right to indemnification generally includes “all expenses, attorneys’ fees, judgments,
settlements, decrees, fines, penalties, or amounts paid in satisfaction of or incurred in the defense
of the cause of action.” Id. Moreover, “[a]ny indemnification, expense payments, and attorneys’
fees from the company’s assets for actions against” the Director, his or her employees, and his or
her advisors “shall be considered an administrative expense of the estate.” Id. According to
Catalina, it is inconsistent to hold that a judgment against the liquidator personally constitutes an
administrative expense, but a judgment against the liquidator acting as liquidator does not qualify
as such. Catalina argues that, in both cases, the judgment arises from actions taken by the liquidator
within his or her scope of his authority to manage the estate.
¶ 38 However, as aptly noted by the Director, Catalina’s arguments rest on the assumption that
its claim for attorney fees, costs, and interest is a claim against the Director, as liquidator, rather
than a claim against the estate, which is not the case. Catalina’s overall contention is that its claim
for attorney fees, costs, and interest should be assessed at the priority (a) level under section 205(1)
of the Insurance Code. See id. § 205(1). That provision states that “[t]he priorities of distribution
of general assets from the company’s estate is to be as follows.” (Emphasis added.) Id. In other
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words, Catalina’s claim is against Legion’s estate, not the Director, as liquidator. Catalina’s
attempt to find an inconsistency in the statute is unpersuasive.
¶ 39 Catalina also posits that an interpretation that its adverse award of attorney fees, costs, and
interest is not a cost or expense of administration will lead to absurd results, namely creating a
class of general creditors deprived of the ability to file a timely claim under the Insurance Code.
“ ‘[A] court construing the language of a statute will assume that the legislature did not intend to
produce an absurd or unjust result’ [citation], and will avoid a construction leading to an absurd
result, if possible.” Hubble v. Bi-State Development Agency of the Illinois-Missouri Metropolitan
District, 238 Ill. 2d 262, 283 (2010) (quoting State Farm Fire & Casualty Co. v. Yapejian, 152 Ill.
2d 533, 541 (1992)). However, our legislature did not view such a situation as being possibly
absurd or unjust because it explicitly included provisions for claims filed after the court-imposed
deadline, how those late-filed claims can be deemed timely filed, and how, ultimately, those claims
are paid out. See 215 ILCS 5/208(2), (3) (West 2020).
¶ 40 To further support its position that its adverse award of attorney fees, costs, and interest
are costs and expenses of administration, Catalina relies on various decisions based on bankruptcy
proceedings, including Reading Co. v. Brown, 391 U.S. 471 (1968), and its progeny, such as Yorke
v. National Labor Relations Board, 709 F.2d 1138 (7th Cir. 1983), and In re Beyond Words Corp.,
193 B.R. 540 (N.D. Cal. 1996). As acknowledged by the Director, bankruptcy cases can be
persuasive authority. See In re Liquidation of Pine Top, 322 Ill. App. 3d at 704 (“We find support
for our position in cases pertaining to federal bankruptcy and equitable receivership proceedings,
both of which are analogous to proceedings to liquidate an insolvent insurance company.”).
¶ 41 In Reading, 391 U.S. at 483-85, the United States Supreme Court held “that damages
resulting from the negligence of a receiver acting within the scope of his authority as receiver give
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rise to ‘actual and necessary costs’ ” of operating the business of the debtor under a Chapter 11
bankruptcy case and thus are assigned the highest priority under bankruptcy law as administrative
expenses. However, the instant case does not involve the alleged negligence, let alone any tort, of
the Director in his or her role in liquidating Legion. Rather, in this case, Catalina’s claim for
attorney fees, costs, and interest were based upon discretionary fee-shifting provisions in
arbitration clauses of reinsurance treaties, which themselves were based on a contractual dispute
that predated Legion’s court-ordered liquidation.
¶ 42 To be sure, in In re Jack/Wade Drilling, Inc., 258 F.3d 385 (5th Cir. 2001), the Fifth Circuit
Court of Appeals rejected a similar argument in the bankruptcy context based on Reading to the
one Catalina makes in the instant case. There, two companies, Total Minatome Corporation (Total
Minatome) and Jack/Wade Drilling, Inc. (Jack/Wade), entered into a drilling contract, which
provided for the prevailing party in any dispute under the contract to obtain attorney fees and
expenses. Id. at 386. Thereafter, Jack/Wade filed for Chapter 7 bankruptcy, and its trustee in
bankruptcy sued Total Minatome for breach of contract, alleging that it failed to pay Jack/Wade
for its drilling services. Id. Total Minatome countersued and claimed that Jack/Wade breached the
contract first by failing to properly drill, and ultimately, a jury rejected both claims of breach of
contract at trial. Id. Although the jury rejected both parties’ claims, the district court found that
Total Minatome was the prevailing party and awarded it nearly $500,000 in attorney fees and
expenses. Id. In turn, Total Minatome sought to have its award be given priority as an
administrative expense in Jack/Wade’s bankruptcy proceedings. Id. In rejecting this request, the
Fifth Circuit Court of Appeals found that no circuit court of appeals had “extended Reading to
cover debts incurred by a nonwrongful postpetition action to liquidate a chapter 7 bankruptcy
estate.” Id. at 388. The court concluded that Reading was not “intended to grant priority to post-
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petition attorney fee awards resulting from a trustee’s good faith attempt to liquidate the debtor’s
estate by bringing suit on a pre-petition contract.” Id. at 389.
¶ 43 Similarly, in In re Hemingway Transport, Inc., 954 F.2d 1, 6-7 (1st Cir. 1992), the First
Circuit Court of Appeals denied administrative priority to a claim for attorney fees that arose out
of postbankruptcy petition litigation, which was based on a prepetition contract. There, the court
observed that the party’s request for administrative priority of attorney fees could not “be
distinguished on any principled basis from any other prevailing party’s request for priority
payment of attorney fees incurred in defending against a lawsuit brought by a chapter 7 trustee
engaged in the routine liquidation of the assets of the chapter 7 estate.” Id. The court acknowledged
that “[a] chapter 7 trustee’s lawsuit may indeed impose burdensome litigation expense upon
successful and unsuccessful defendants alike, yet its prepetition genesis ultimately distinguishes it
from the postpetition losses accorded priority” in Reading. (Emphases in original.) Id. at 7.
¶ 44 Like the bankruptcy trustees in In re Jack/Wade Drilling and In re Hemingway Transport,
the Director, as liquidator of Legion’s estate, demanded arbitration against Catalina based on
preliquidation contracts in the process of faithfully carrying out his or her duties to liquidate the
estate. And, as the circuit court observed in granting the Director’s motion to allow, there is no
evidence the Director, as liquidator, instituted the arbitration in bad faith. As such, we find Reading
and its progeny inapposite to the instant circumstances. Furthermore, In re Jack/Wade Drilling and
In re Hemingway Transport only reaffirm our conclusion that Catalina’s adverse award of attorney
fees, costs, and interest are not costs and expenses of administration.
¶ 45 Catalina cites additional bankruptcy cases to support its position that its adverse award of
attorney fees, costs, and interest are costs and expenses of administration. For instance, in In re
E.A. Nord Co., 78 B.R. 289, 292 (Bankr. W.D. Wash. 1987), the United States Bankruptcy Court
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for the Western District of Washington concluded that an arbitrator’s award of attorney fees and
costs arising from a bankruptcy debtor’s pursuit of legally frivolous litigation postpetition
constituted an administrative expense. The court reasoned that such a finding was necessary due
to “the critical need to discourage parties from wasting valuable time and causing needless
expense” by pursuing “frivolous litigation.” Id. But, as discussed, there is no evidence that the
Director’s demand for arbitration was legally frivolous. In re E.A. Nord is therefore inapposite.
¶ 46 In another bankruptcy case, In re Execuair Corp., 125 B.R. 600, 601 (Bankr. C.D. Cal.
1991), Whittaker Corporation (Whittaker) obtained an injunction against Execuair Sales
Corporation (Execuair) that prohibited Execuair from selling certain aircraft parts. After Execuair
allegedly violated the injunction, Whittaker initiated a contempt action. Id. While the contempt
proceedings were ongoing, Execuair filed for bankruptcy. Id. Thereafter, a federal court found that
Execuair had violated the injunction and awarded Whittaker attorney fees. Id. The United States
Bankruptcy Court for the Central District of California concluded that the award of attorney fees
should be considered an administrative expense because it was based on a “post-petition act by the
debtor-in-possession or trustee which was intended to benefit the estate but which led to the injury
of a third party.” Id. at 604. However, In re Kadjevich, 220 F.3d 1016, 1021 n.4 (9th Cir. 2000),
the Ninth Circuit Court of Appeals “disapprove[d]” of the holding in In re Execuair. As such,
Catalina’s reliance on In re Execuair is unavailing.
¶ 47 Lastly, during oral argument in this appeal, Catalina maintained that the proceedings were
fundamentally unfair to it because the Director, as liquidator of Legion, failed to follow the
statutory notice requirements and provide it timely written notice of the pendency of claims. See
215 ILCS 5/193(8)(b) (West 2002). But the arbitration panel attempted to rectify this perceived
unfairness by two means. First, the panel found that the Director’s failure to comply with the
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No. 1-21-1370
Insurance Code relieved Catalina of any obligation to pay any amounts owed under the reinsurance
treaties, which was allegedly close to $1 million. And second, the panel awarded Catalina the
adverse award of attorney fees and costs in the amount of $437,501.04 with interest for which
Legion’s estate became responsible. When entering arbitration, Catalina was staring down the
prospect of a net loss of some $900,000 (when including the alleged unpaid premiums owed to it
by Legion), but Catalina left the arbitration with Legion actually owing it some $500,000, which
was a direct result of the arbitration panel remedying the inequities suffered by Catalina. Given
this result, Catalina cannot credibly argue that the entire liquidation proceedings were so unfair
toward it. And even if the proceedings were fundamentally unfair toward Catalina, resulting in
Catalina being potentially unable to obtain full payment from Legion’s estate on its claim for the
attorney fees, costs, and interest, it does not follow that the adverse arbitration award should be
deemed “costs and expenses of administration” where the plain language of section 205(1)(a) of
the Insurance Code (215 ILCS 5/205(1)(a) (West 2020)) and the case law provide otherwise. See
In re Liquidation of Legion Indemnity Co., 2013 IL App (1st) 120980, ¶ 16 (“[T]he rule of absolute
priority established under section 205 of the [Insurance] Code also limit the Liquidator and trial
court in considering special circumstances, providing preferential treatment, or otherwise
fashioning some form of equitable relief.”).
¶ 48 In sum, based upon the plain and ordinary meaning of the phrase “costs and expenses of
administration” and our supreme court’s decision in In re Liquidations of Reserve, 122 Ill. 2d at
558, 563-64, 568, the circuit court correctly concluded that Catalina’s adverse award of attorney
fees, costs, and arbitration interest should be allowed at the priority level (g) for claims of general
creditors (215 ILCS 5/205(1)(g) (West 2020)) and not at the priority level (a) for costs and
expenses of administration (id. § 205(1)(a)).
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¶ 49 B. Statutory Postjudgment Interest
¶ 50 Catalina next contends that the circuit court erred by not awarding it postjudgment interest
under section 2-1303 of the Code of Civil Procedure (735 ILCS 5/2-1303 (West 2020)), beginning
when the federal district court confirmed its arbitration award and converted it into a judgment and
ending when the circuit court allowed its claim on September 27, 2021. As a purely legal issue,
we review Catalina’s alleged entitlement to postjudgment interest de novo. Eclipse Manufacturing
Co. v. United States Compliance Co., 381 Ill. App. 3d 127, 141 (2007).
¶ 51 Section 2-1303(a) provides that “judgments recovered in any court shall draw interest at
the rate of 9% per annum from the date of the judgment until satisfied,” subject to certain
exceptions not relevant for this appeal. 735 ILCS 5/2-1303(a) (West 2020). In multiple decisions,
this court has found that an award of postjudgment interest under section 2-1303 is mandatory.
See Inman v. Howe Freightways, Inc., 2022 IL App (1st) 210274, ¶ 77 (“The circuit court has no
discretion in awarding interest; rather, the court is required to award interest on a judgment.”);
Certain Underwriters at Lloyd’s, London v. Abbott Laboratories, 2014 IL App (1st) 132020, ¶ 62
(“The trial court has no discretion to deny postjudgment interest, as the imposition of statutory
interest from the date the final judgment was entered is mandatory.”). According to section 2-
1303(a), “[t]he judgment debtor may by tender of payment of judgment, costs and interest accrued
to the date of tender, stop the further accrual of interest on such judgment notwithstanding the
prosecution of an appeal, or other steps to reverse, vacate or modify the judgment.” 735 ILCS 5/2-
1303(a) (West 2020).
¶ 52 In rejecting Catalina’s request for postjudgment interest, the circuit court acknowledged
that postjudgment interest under section 2-1303 was mandatory, but found that, under Finley, 81
Ill. 2d 317, it had discretion as a chancery court to disallow postjudgment interest when it would
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No. 1-21-1370
not comport with justice and equity. In Finley, a mother sought payment from the father of her
children for child-support arrearages and interest on the arrearages. Id. at 322. At the time, there
were no statutes providing for interest on unpaid child support payments. Id. at 331-32. The circuit
court granted the mother’s request for interest on the arrearages. Id. at 322. Ultimately, our
supreme court addressed whether the allowance of interest on the past-due child support was
discretionary or mandatory. Id. at 331. In resolving the question, our supreme court looked at
Bremer v. Bremer, 4 Ill. 2d 190, 192 (1954), and observed that it previously “held that a divorce
proceeding partakes so much of the nature of a chancery proceeding that it must be governed to a
great extent by the rules that are applicable thereto.” Finley, 81 Ill. 2d at 332. And “[i]n a chancery
proceeding, the allowance of interest lies within the sound discretion of the trial judge and is
allowed where warranted by equitable considerations and is disallowed if such an award would
not comport with justice and equity.” Id. In light of this, our supreme court “conclude[d] that the
allowance of interest on past-due periodic support payments is not mandatory” but rather “lies
within the sound discretion of the trial judge.” Id.¶ 53 Years after Finley was decided, our supreme court reexamined the case in Illinois
Department of Healthcare & Family Services ex rel. Wiszowaty v. Wiszowaty, 239 Ill. 2d 483(2011). There, the court observed that Finley stood “for the proposition that, where there are no
controlling statutes defining unpaid support payments as judgments or providing for interest,
interest may be awarded on those payments as a discretionary matter because the divorce
proceeding may be likened to a chancery proceeding.” (Emphasis in original.) Id. at 489. The court
added that Finley did “not stand for the proposition that interest is left to the discretion of the
circuit court even when governing statutes have plainly stated otherwise.” Id. As a result, in the
instant case, given that the plain language of section 2-1303 (735 ILCS 5/2-1303 (West 2020))
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indicates that postjudgment interest is mandatory, Finley did not provide the circuit court
discretion over whether to allow postjudgment interest.
¶ 54 Despite the inapplicability of Finley, that does not mean that postjudgment interest is
proper in this case given the unique nature of liquidation proceedings. This brings us to In re
Liquidation of Pine Top, 322 Ill. App. 3d 693, the second case relied upon by the circuit court in
rejecting Catalina’s request for postjudgment interest. There, a woman was killed in an apartment
building, and her estate filed a lawsuit against the owner of the building, who was covered under
an insurance policy issued by Pine Top Insurance Company. Id. at 695. During the pendency of
the litigation, the circuit court determined that Pine Top was insolvent and ordered it to undergo
liquidation proceedings. Id. Subsequently, the estate of the woman filed a claim against Pine Top,
which the circuit court allowed at the priority (d) level. Id. at 696. Two years later, upon the
Director’s motion, the court approved a 50% distribution on priority (d) claims, resulting in the
Director paying half of the estate’s claim. Id. More than four years after that, the Director moved
for a second 50% distribution on priority (d) claims. Id. In the motion, the Director included
language indicating that the proposed second distribution would fully satisfy Pine Top’s
obligations on the underlying claims. Id. The estate objected to that language and asserted that,
because it was entitled to interest under section 2-1303 from the date its claim was allowed to the
date when the claim was paid at the same priority level as its claim, the proposed second
distribution would not fully satisfy Pine Top’s obligation to the estate. Id. at 697. Ultimately, the
court denied the estate’s claim for postallowance interest. Id.
¶ 55 On appeal, this court framed the question as “whether a claimant whose claim is allowed
against an insolvent insurance company in liquidation proceedings under Article XIII of the
Insurance Code is entitled to interest on its claim pursuant to section 2-1303 of the Code of Civil
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Procedure, payable at the same priority level as the claim itself.” Id. at 699. In resolving this
question, we highlighted the fixing provision of the liquidation statute and its purpose “to stop the
running of any debts, including postjudgment interest, against the insolvent insurer in order to give
the liquidator an opportunity to marshal the insurer’s assets and pay its debts.” Id. at 703-04. We
then analogized to proceedings under the liquidation provisions of the Insurance Code to federal
bankruptcy and equitable receivership proceedings. Id. at 704. In turn, this court observed that the
United States Supreme Court had “offered several policy reasons for the rule against allowing the
payment of any interest accruing after the filing of a bankruptcy petition or the appointment of a
receiver,” including:
“(1) that the delay in paying the claimants the amount owed them is a necessary
incident to the settlement of the estate and that, as such, the accrual of interest as a
penalty for nonpayment is not appropriate; (2) that considerable administrative
inconvenience would be caused by requiring continuous recomputation of interest
and, correspondingly, continuous recomputation of claims; and (3) that different
creditors would unfairly experience gain or loss based on the dates on which their
claims were paid.” Id. (citing Nicholas v. United States, 384 U.S. 678, 689 (1966);
Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 163-64
(1946)).
¶ 56 This court found the same policy reasons “support a finding that postallowance interest
should not be allowed on claims against an insolvent insurance company in a liquidation
proceeding.” Id. at 705. First, this court observed that the Director, as liquidator, cannot pay each
claim at the time it was allowed due, in part, to the priority distribution scheme. Id. Second, we
noted that payment of postallowance interest would cause the amount of a claim to be constantly
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No. 1-21-1370
recomputed, which would cause administrative delays and inconvenience. Id. Lastly, this court
asserted that permitting postallowance interest would harm certain creditors and benefit others
based upon events the creditors largely have no control over. Id. at 705-06. Therefore, we affirmed
the circuit court’s denial of the estate’s request for postallowance interest at the same priority level
as its claim.
¶ 57 Turning to the present case, we acknowledge that the interest request in this case is different
than in In re Liquidation of Pine Top Insurance, where a claimant sought only postallowance
interest. Here, on the other hand, Catalina seeks interest beginning when the federal district court
confirmed its arbitration award and converted it into a judgment until the time the circuit court
allowed its claim. Despite Catalina’s request for postjudgment interest not aligning perfectly with
the estate’s request for postallowance interest in In re Liquidation of Pine Top Insurance, the
policy reasons for precluding postallowance interest are similar to the policy reasons precluding
postjudgment interest here. First, allowing postjudgment interest would artificially inflate the
amount of Catalina’s claim. The federal district court granted Catalina’s petition to confirm its
arbitration award and converted that award into a judgment in April 2020. It took Catalina two
months to file proofs of claims with the OSDR, which it did only concerning the unpaid premiums.
And ultimately, in November 2020, the Director filed a motion to allow Catalina’s claims, which
included the adverse award of attorney fees and costs despite Catalina never filing an actual proof
of claim on this award. The Director only included the adverse award of attorney fees and costs in
his motion to allow because he knew this claim was still outstanding. Although in the instant case,
it was the Director who filed the motion to allow Catalina’s claims, nothing prevented Catalina
itself from filing the motion to allow, as it seemed to acknowledge during argument in the circuit
court on the Director’s motion to allow. This timeline shows that allowing postjudgment interest
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No. 1-21-1370
could open liquidation proceedings up to potential gamesmanship by claimants, who could
increase their claim amounts by using various delay tactics. “[J]udgment interest that is awarded
pursuant to section 2-1303 of the Code of Civil Procedure merely preserves the value of the
liquidated obligation by compensating the judgment creditor for delays in payment.” Illinois State
Toll Highway Authority v. Heritage Standard Bank & Trust Co., 157 Ill. 2d 282, 295 (1993). It
would be incongruous with the purpose of postjudgment interest if a claimant itself could delay
payment and then reap the reward of its own delay.
¶ 58 Additionally, allowing postjudgment interest would cause administrative burdens and
thwart the purpose of the priority distribution scheme. If claimants could make tactical decisions
and delay filing claims, as Catalina possibly did in this case, it would create a disorderly and
inefficient process for liquidating the assets of insolvent insurance companies, which is antithetical
to the purpose of the priority distribution scheme. See In re Liquidation of Lumbermens, 2018 IL
App (1st) 170996, ¶ 31. Finally, allowing postjudgment interest would also penalize the estate of
an insolvent insurance company based on reasons beyond the control of the Director, as liquidator.
Because of the priority distribution scheme, the Director cannot pay claimants immediately upon
allowance of their claims. Rather, the Director must go through the statutory process, which
generally requires court approval and contains a specific priority of distribution. See 215 ILCS
5/205, 209(13) (West 2020). It would be unfair to award postjudgment interest as a penalty for
nonpayment. See In re Liquidation of Pine Top, 322 Ill. App. 3d at 705 (“[A]s the liquidator
cannot, for reasons beyond his control, pay claims on the date on which they are allowed, it would
be unfair to award postallowance interest as a penalty for nonpayment.”).
¶ 59 As such, similar to In re Liquidation of Pine Top, we conclude that it is inconsistent with
the priority distribution scheme to allow the award of postjudgment interest on claims against an
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No. 1-21-1370
insolvent insurance company in liquidation under section 2-1303 of the Code of Civil Procedure
(735 ILCS 5/2-1303 (West 2020)). Still, Catalina tries to distinguish the instant case from In re
Liquidation of Pine Top and notes that the decision involved a preliquidation debt that was subject
to the Insurance Code’s fixing provision (see 215 ILCS 5/194(a) (West 2020)), whereas the instant
case involves a postliquidation debt not subject to the Insurance Code’s fixing provision. This
claimed distinction does not negate the critical policy rationales for not allowing postjudgment
interest emanating from claims in liquidation proceedings. Although this court has held that
postjudgment interest under section 2-1303 is mandatory (see Inman, 2022 IL App (1st) 210274,
¶ 77), article XIII of the Insurance Code nonetheless provides that “[t]he pleadings and
proceedings insofar as not otherwise regulated by [Article XIII], shall be as in other civil
proceedings.” 215 ILCS 5/190(4) (West 2020). Because the priority distribution scheme regulates
the payment of claims, we find section 190(4) of the Insurance Code supersedes the mandatory
nature of postjudgment interest under section 2-1303 of the Code of Civil Procedure (735 ILCS
5/2-1303 (West 2020)). Accordingly, the circuit court correctly concluded that Catalina was not
entitled to any postjudgment interest under section 2-1303.
¶ 60 III. CONCLUSION
¶ 61 For the foregoing reasons, we affirm the judgment of the circuit court of Cook County.
¶ 62 Affirmed.
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In re Liquidation of Legion Indemnity Co., 2023 IL App (1st) 211370Decision Under Review: Appeal from the Circuit Court of Cook County, No. 02-CH-
06695; the Hon. Celia G. Gamrath, Judge, presiding.
Attorneys Neal R. Novak and Jennifer E. Arnold, of Novak Law Offices,
for of Chicago, for appellant.
Appellant:
Attorneys J. Kevin Baldwin, Daniel A. Guberman, and Dale A. Coonrod,
for of Special Deputy Receiver’s Office, and Patrick Morales-Doyle
Appellee: and Ryan J. Gehbauer, of Thompson Coburn LLP, both of
Chicago, for appellee.
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