Hassan v. State Farm Mutual Automobile Insurance Co. ( 2024 )

2024 IL App (1st) 231382-UFourth Division
Filed February 22, 2024
No. 1-23-1382
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent
except in the limited circumstances allowed under Rule 23(e)(1).
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
)
SUFYAN HASSAN, )
) Appeal from the
Plaintiff and Counterdefendant-Appellant,
) Circuit Court of Cook County
v. )
No. 2020 CH 05785
)
STATE FARM MUTUAL AUTOMOBILE ) The Honorable Joel Chupack,
INSURANCE COMPANY, ) Judge, presiding.
Defendant and Counterplaintiff-Appellee. )
)
JUSTICE OCASIO delivered the judgment of the court.
Presiding Justice Rochford and Justice Martin concurred in the judgment.
ORDER
¶1 Held: The trial court’s order granting the motion to stay arbitration and denying the
motion to compel arbitration is reversed, and the cause remanded, where State
Farm did not waive its right to contest coverage but there remained an unresolved
factual question as to whether it was estopped from doing so. The appeals from
the trial court’s orders denying Hassan’s motion to strike affirmative defenses
and motion to dismiss counterclaim are dismissed for lack of jurisdiction.
¶2 Plaintiff Sufyan Hassan appeals, under Illinois Supreme Court Rule 307(a)(1) (eff. Nov. 1,
2017), the trial court’s interlocutory orders (1) staying arbitration and denying his motion to
compel arbitration, (2) denying his motion to strike defendant State Farm Mutual Automobile
Insurance Company’s (State Farm) affirmative defenses, and (3) denying his motion to dismiss
State Farm’s counterclaim. Because there remains an unresolved question of fact as to whether
Hassan v. State Farm Mutual Automobile Insurance Co.
2024 IL App (1st) 231382-U No. 1-23-1382
State Farm should be estopped from contesting coverage, we reverse the order staying arbitration
and declining to compel arbitration and remand for further proceedings in accordance with
section 2 of the Uniform Arbitration Act. 710 ILCS 5/2 (West 2022). However, we find that we
lack jurisdiction to review the trial court’s orders denying Hassan’s motion to strike affirmative
defenses and motion to dismiss counterclaim, which are neither independently appealable under
Rule 307 nor intertwined with the arbitration order, so we dismiss his appeal from those orders.
¶3 I. BACKGROUND
¶4 A. The Insurance Policy
¶5 This case involves an automobile insurance policy issued by State Farm to Hassan (the Policy)
that was effective from October 26, 2017, to April 26, 2018, and covered a 2007 Cadillac Escalade
owned by Hassan. The Policy included coverage for liability, medical payments (limited to
$10,000 per person), physical damage (including related expenses such as emergency road service,
car rentals, and travel), and uninsured and underinsured motor vehicles. Under the uninsured-
motorist coverage, which was required by section 143a(1) of the Illinois Insurance Code (215
ILCS 5/143a(1) (West 2018)), State Farm agreed to pay Hassan compensatory damages for bodily
injuries sustained in an accident caused by a vehicle that either was not covered by liability
insurance or whose driver or owner could not be identified. The Policy required binding arbitration
of any disputes about two specific questions that might arise under the uninsured-motorist
coverage:
“a. Is the insured legally entitled to recover compensatory
damages from the owner or driver of the uninsured motor vehicle?
b. *** [W]hat is the amount of the compensatory damages that
the insured is legally entitled to recover from the owner or driver of
the uninsured motor vehicle?” (Italics in original.)
The arbitration agreement further provided that arbitrators would “have no authority to decide any
questions of law.”
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¶6 Under the Policy, any person defined as an insured had a duty to “submit to an examination
under oath, provide a statement under oath, or do both, as reasonably often as [State Farm]
require[s].” With respect to the uninsured motor vehicle coverage, the term insured included
(among others) Hassan as the policyholder named on the declarations page, any spouse who
“resid[ed] primarily with” him, and “any person entitled to recover compensatory damages as a
result of bodily injury to an insured.” (Italics in original.) The Policy also contained a provision
entitled “Concealment or Fraud,” which stated as follows:
“There is no coverage under this policy if you or any other
person insured under this policy has made false statements with the
intent to conceal or misrepresent any material fact or circumstance
in connection with any claim under this policy.” (Italics in original.)
¶7 B. Hassan’s Insurance Claim
¶8 In February 2018, Hassan filed a claim under the Policy for losses stemming from an alleged
hit-and-run collision on February 12, 2018. His claim involved physical damage to the car as well
as physical injuries to his person and associated medical expenses sustained during the collision,
including a torn distal bicep tendon in his left arm, which required surgery.
¶9 Materials in the record show that State Farm initially denied the claim as it pertained to
physical damage to the insured vehicle under the belief that the damage pre-existed the alleged
collision, but it later reversed course and paid for repairs. Following those repairs, Hassan
continued experiencing problems with an oil-pressure sensor and a crash sensor, but State Farm
declined to pay to fix those problems after determining that they were not related to the February
12, 2018 incident. The record does not show that State Farm took any action on the claim as it
pertained to medical expenses or uninsured-motorist coverage at that time.
¶ 10 At the time of the alleged hit-and-run collision, Hassan was married to Lieim Yusuf. In July
2018, Yusuf filed for divorce. Several weeks later, her divorce attorney notified the attorney Hassan
had retained in connection with his insurance claim that any “monetary award” in his “personal
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injury case” would be considered a marital asset. Then, in November 2018, Yusuf contacted State
Farm and alleged that Hassan had actually torn his tendon while lifting weights about a week
before the alleged hit-and-run.
¶ 11 In January 2019, State Farm sent Hassan a reservation-of-rights letter. The letter, which was
signed by a claim specialist at State Farm, stated:
“State Farm *** may have no duty to pay, indemnify, defend, or
otherwise perform under the policy *** because:
A question exists as to whether or not there has been a
material misrepresentation as to the facts, circumstances and
alleged injuries surrounding this loss.
It is questionable whether the injury was caused by a hit-
and-run motor vehicle, so as to qualify as an uninsured motor
vehicle under the Uninsured Motor Vehicle coverage.
For these reason(s), and for any other reasons which may
become known, State Farm *** reserves all rights under the policy,
including the right to deny coverage in its entirety.
***
Any action taken by State Farm *** or any of its authorized
representatives to investigate, evaluate, pay, defend, or otherwise
adjust any claim arising out of the alleged loss shall not waive any
of the terms or conditions of the State Farm policy of insurance ***,
nor shall such action waive any of your rights under the policy.”
The letter also stated that State Farm did “not intend *** to waive any policy defenses not stated
above” and it purported to “specifically reserve[] its right to assert such additional policy defenses
at any time.”
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¶ 12 About three weeks later, Hassan’s attorney sent a letter to State Farm asserting that the
reservation-of-rights letter was deficient because the grounds stated in the letter for reserving rights
“lack[ed] any specificity.” He noted that the first ground given in the reservation-of-rights letter
did not “describe with any particularity *** the potential misrepresentations” and that the second
ground was merely “unsupported questioning of established facts.” The record does not contain a
response from State Farm.
¶ 13 Within a week of Hassan responding to the reservation-of-rights letter, State Farm requested
that he submit to an examination under oath as required by the Policy. On February 24, 2019,
counsel for State Farm sent a letter to Hassan’s attorney reflecting that Hassan had agreed to sit
for the examination under oath. The letter also anticipated that the claim could go to arbitration:
“In the event State Farm and Mr. Hassan are unable to agree on
the appropriate measure of damages upon completion of State
Farm’s investigation of this claim, and assuming no coverage
defenses, State Farm is willing to proceed to binding arbitration as
detailed in the applicable policy.”
The letter goes on to detail State Farm’s position about what the appropriate forum for arbitration
would be under the Policy.
¶ 14 That same day, State Farm received a report it had solicited from a firm called Crash Data
Services, LLC, concerning the cause of the damage to Hassan’s Escalade. The report concluded
that, based on the shape, location, and nature of the damage and the absence of paint transfer, the
Escalade had been “backed into a tall, rounded, concrete barrier,” not struck by another vehicle.
The report described Hassan’s account of a hit-and-run collision as “patently false.”
¶ 15 In April 2019, Hassan, as required by the Policy, submitted to an examination under oath. He
testified that, on February 12, 2018, he was parked on the side of the road when a white pick-up
truck struck him from behind and then drove away. He said that, at the moment of impact, he had
his left hand on the steering wheel and was reaching toward the back seat to retrieve his phone,
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which had fallen to the floor. He attributed his bicep injury to the collision, and he denied Yusuf’s
allegation that he had injured his bicep lifting weights. After the examination, State Farm’s attorney
sent an email to Hassan’s attorney stating that his “current view” was that he did not “put weight
in that one-time call by Ms. Yusuf” in view of the “very nasty divorce” and her position that the
claim was a marital asset.
¶ 16 On July 30, 2019, counsel for State Farm sent an email to Hassan’s lawyer suggesting that
they “move this case forward toward arbitration” while “wait[ing] on authority” from State Farm
and asking whether he was “free to discuss evidentiary stipulations and arbitration scheduling”
later that day. On August 11, State Farm’s attorney advised counsel for Hassan that he would accept
service of Hassan’s arbitration demand. Hassan filed the arbitration demand with the American
Arbitration Association (AAA) on August 20, 2019, and served it on State Farm via email. Counsel
for State Farm acknowledged receipt the following morning. AAA sent a letter acknowledging
receipt of the demand to both parties’ attorneys on August 23. The demand itself is not in the
record.
¶ 17 On August 27, 2019, Yusuf forwarded to State Farm a series of emails she had exchanged
with Hassan on February 6, 2018, about one week before the alleged hit-and-run, about an
unspecified injury Hassan was suffering from.
¶ 18 Materials in the record indicate that State Farm paid AAA’s docketing fee on October 9, 2019.
The arbitrator was selected on October 24 and formally appointed on October 30. State Farm was
given until November 19 to indicate whether Hassan had complied with all conditions precedent,
but it did not submit a response.
¶ 19 In early December 2019, at the request of the arbitrator, the parties submitted emails stating
their respective positions on State Farm’s intent to take a statement from Yusuf under oath. State
Farm’s submission stated, in relevant part:
“State Farm’s claim investigation is ongoing, and that
investigation now appears ready to encompass the statement of Mr.
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Hassan’s estranged wife, who has come forward recently with
documentary evidence which, if true, casts the legitimacy of Mr.
Hassan’s claim into doubt. I have shared that information with
counsel and we have discussed it.
Counsel points out that AAA rules don’t entitle a party to pre-
hearing depositions, but that does not foreclose State Farm from
taking this statement if the witness is willing to appear. Even when
an arbitration of a UM claim is on track for a future hearing via
AAA, the terms of the policy still govern the parties while the claim
investigation is ongoing [citation].”
Hassan’s submission acknowledged that he had no basis for preventing State Farm from taking a
voluntary statement from Yusuf. He maintained, however, that State Farm was not entitled to take
a statement under oath under the terms of the Policy because she did not qualify as an “insured.”
Hassan further stated:
“Ms. Yusuf provided alleged contradictory information directly
to State Farm by email dated August 27, 2019, which counsel
provided to me November 12, 2019. State Farm has had plenty of
time to speak with Ms. Yusuf. If State Farm wants to take her
statement, it should do so soon. That does not impact this proceeding
if it will not be a deposition. I do not intend to attend any statement
because there would be no point without cross-examination, which
would not be proper under either a statement nor an examination
under oath. Ms. Yusuf should be presented at the arbitration if State
Farm chooses to rely on her information.”
Hassan also argued that he would object to “much of her potential testimony” based on the spousal-
communications privilege (see 735 ILCS 5/8-801 (West 2018)) and that discovery depositions of
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third parties were not allowed under the AAA rules. The record does not disclose what, if anything,
the arbitrator did in response to these submissions.
¶ 20 Yusuf submitted to a voluntary examination under oath on January 3, 2020. The examination
was conducted by counsel for State Farm. Neither Hassan nor a representative was present. State
Farm’s attorney noted for the record that Hassan’s lawyer had declined an invitation to attend.
According to the affidavit of Hassan’s attorney, he chose not to attend because Yusuf refused to go
forward with the examination if Hassan was there, a condition that would have impaired his ability
to cross-examine her. Yusuf testified that, several days before the alleged hit-and-run, Hassan told
her that he had injured his arm lifting weights and showed her his bicep injury. The day after that,
she overheard Hassan telling a friend on the telephone that he was planning to attribute his injury
and an electrical problem he was having with his car to an accident so he could recover from his
insurance company.
¶ 21 C. Hassan’s Complaint
¶ 22 On February 14, 2020, Hassan filed a three-count complaint against State Farm in the Circuit
Court of Lake County. Count I alleged that, contrary to the insurance policy’s arbitration, State
Farm was refusing to arbitrate his claim under the uninsured-motorist coverage. It sought specific
performance of State Farm’s arbitration obligation. Count II alleged that State Farm had breached
the Policy by refusing to pay out the full value of Hassan’s claim for vehicle damage. It prayed for
damages. Count III alleged that State Farm had engaged in unreasonable and vexatious actions in
connection with the claims arising from the alleged hit-and-run. It sought an award of attorney
fees under section 155 of the Illinois Insurance Code. 215 ILCS 5/155 (West 2020).
¶ 23 At the time Hassan filed suit, State Farm had not formally denied the uninsured-motorist
claim, but it did so less than one week later. On February 20, State Farm sent Hassan (courtesy of
his attorney) a letter notifying him that it was denying coverage on the uninsured-motorist claim.
The letter identified four grounds for its denial of coverage. First, it stated that the alleged hit-and-
run was not a “loss” or an “accident” under the Policy. Second, it stated that Hassan had violated
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the concealment-or-fraud provision of the Policy by “materially misrepresenting the facts and
circumstances” surrounding the alleged hit-and-run. Third, it stated that the medical-payments
coverage did not apply because Hassan’s medical expenses were not the result of an injury
sustained in the alleged hit-and-run. Fourth, it stated that the uninsured-motorist coverage did not
apply because his injuries were not the result of a hit and run.
¶ 24 In May 2020, State Farm filed a motion to transfer based on forum non conveniens. While
that motion was still pending, in July 2020, Hassan filed a motion to compel arbitration. The court
granted State Farm’s transfer motion in August 2020, and the case was transferred to the Circuit
Court of Cook County. 1 The arbitration proceeding remained pending until November 2020, when
AAA closed it after neither party agreed to pay an additional fee to keep it open.
¶ 25 D. State Farm’s Answer, Affirmative Defenses, and Counterclaim
¶ 26 Following the change of venue, on January 7, 2023, State Farm filed an answer denying
essential allegations in all three counts of the complaint. As relevant here, State Farm admitted that
February 12, 2018, was within the effective period of the Policy. It asserted, however, that there
was “no coverage under [the] policy” for the incident that Hassan alleged had taken place on that
date because Hassan had breached the Policy’s concealment-or-fraud provision, voiding the Policy.
¶ 27 State Farm also raised two affirmative defenses. In its first affirmative defense, State Farm
alleged that Hassan was not entitled to judgment on his claims because he had breached the
concealment-or-fraud provision of the Policy, which provided that there was “no coverage under
[the] policy” if Hassan or another insured “had made false statements with the intent to conceal or
misrepresent any material fact or circumstances in connection with any claim under [the] policy.”
State Farm’s second affirmative defense went only to Count III. It alleged that State Farm’s denial
1
The motion to transfer and the order granting the motion to transfer are not included in the record
on appeal, but we may take judicial notice of court records. May Department Stores Co. v.
Teamsters Union Local No. 743, 64 Ill. 2d 153, 159 (1976).
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of coverage was justified or, at minimum, based on the existence of a good-faith dispute over
coverage.
¶ 28 In addition to its answer, State Farm filed a counterclaim for a declaratory judgment. The
counterclaim alleged that Hassan had violated the concealment-or-fraud provision of the Policy by
falsely representing that a hit-and-run accident had occurred on February 12, 2018. It alleged that
Hassan’s bicep injury had occurred before the supposed accident, that he had conspired with a
friend to stage an accident so he could recover from State Farm, and that a forensic analysis of the
vehicle showed that it had not been struck from behind by a hit-and-run vehicle. It sought a
declaration that there was no coverage under the Policy for the February 12, 2018 incident and that
it had no duty to pay Hassan’s claims associated with that incident.
¶ 29 E. The Parties’ Motions and the Trial Court’s Interlocutory Orders
¶ 30 Between January and March 2023, the parties filed a series of motions, responses, and replies.
All of those motions were resolved by written orders entered by the trial court on July 7, 2023. For
the sake of clarity, we will describe the motions and the trial court’s associated rulings one at a
time.
¶ 31 1. Motion to Compel Arbitration and Cross-Motion to Stay Arbitration
¶ 32 The day before State Farm filed its answer, affirmative defenses, and counterclaim, Hassan
filed an amended motion to compel arbitration. Anticipating a dispute over coverage, the motion
to compel argued that State Farm had waived any coverage defense under the rules governing the
arbitration and that it should be estopped from denying coverage because it had led Hassan to
believe that any coverage issues would be resolved in arbitration and that Hassan had relied on
that belief to his detriment when he paid the $450 arbitration fee.
¶ 33 The next day, along with its answer and counterclaim, State Farm filed a cross-motion to stay
arbitration, which also served as its response to Hassan’s motion to compel. In its cross-motion,
State Farm asserted that there was no coverage under the Policy because no hit-and-run accident
had occurred and because Hassan had breached the Policy’s concealment-or-fraud provision. It
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argued that it had not waived its coverage defense because arbitration was ultimately not conducted
and because it had notified AAA that it objected to continuing to participate in the arbitration. 2
State Farm also argued that it was not estopped from raising its coverage defense because it had
expressly reserved its rights in its January 2019 letter and because at the time State Farm “initially
agreed to participate in arbitration,” it had not yet obtained Yusuf’s statement under oath.
¶ 34 In his response, Hassan characterized State Farm’s cross-motion to stay arbitration as a
request for the court to “decide its Counterclaim prior to arbitration,” and argued that State Farm’s
counterclaim was not proper for the reasons given in his motion to dismiss, which is discussed
below.
¶ 35 The trial court denied Hassan’s motion to compel, granted State Farm’s motion to stay, and
ordered a stay of arbitration:
“[T]he Court must first determine whether Hassan violated the
Concealment or Fraud provision of the Policy. If he did, then there
is no coverage and nothing to arbitrate. If he did not, then there may
be coverage subject to arbitration. Until this determination is made,
the Arbitration should be stayed.”
In the order, the court also rejected Hassan’s waiver and estoppel arguments. Reasoning that “no
arbitration was conducted” and that State Farm notified AAA of its objection once it had obtained
Yusuf’s statement under oath, it found that State Farm had not waived arbitrability under the AAA
Rules. It also found that the January 2019 reservation-of-rights letter “insulate[d] State Farm from
estoppel.”
2
The record does not disclose when State Farm filed its objection. Hassan appears to concede
that an objection was filed at some point, but he asserts that it was more than 30 days after AAA
acknowledged the arbitration demand, which State Farm does not dispute.
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¶ 36 2. Motion to Strike Affirmative Defenses
¶ 37 Hassan filed a motion to strike State Farm’s affirmative defenses. The motion to strike argued
that State Farm’s noncoverage defense, which stated the reasons why State Farm had denied the
underlying claim, were premature because Hassan was only seeking specific performance of the
arbitration agreement, not damages for breaching the contract by denying his claim. The motion
also argued that State Farm’s defenses did not raise any affirmative matters that would defeat his
claims but instead denied the allegations of the complaint, which meant that they were not properly
raised as affirmative defenses.
¶ 38 The trial court denied the motion to strike. It found that State Farm’s noncoverage defense
was “not a mere denial of the well-pled facts of the specific performance count” because, if proven,
there would be no coverage under the Policy and the arbitration provision could not be invoked.
Noting that the existence of a bona fide coverage dispute would defeat the allegation of Count III
of the complaint that State Farm’s conduct was vexatious and unreasonable, it also found that such
a dispute was an affirmative defense to a claim for attorney fees under section 155.
¶ 39 3. Motion to Dismiss Counterclaim
¶ 40 Hassan also filed a combined motion to dismiss State Farm’s counterclaim under sections
2-615 and 2-619 of the Code of Civil Procedure. 735 ILCS 5/2-615, 2-619 (West 2022); see
id. § 2-619.1 (authorizing a combined motion to dismiss). The motion argued that, for two reasons,
State Farm’s counterclaim was subject to dismissal under section 2-615 because it failed to state a
claim upon which relief could be granted. First, it argued that the counterclaim improperly sought
an advisory opinion as to nonliability for its denial of Hassan’s claim. Second, it argued that,
because the alleged misrepresentations were not made in the Policy or his policy application, they
did not provide a basis for invalidating the Policy. The motion sought involuntary dismissal of the
counterclaim under section 2-619(a)(9) because it was based on privileged marital
communications. It also sought involuntary dismissal under section 2-619(a)(3) on the basis that
there was a pending arbitration, arguing that State Farm’s conduct during the aborted arbitration
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proceedings had waived its noncoverage defense that it was estopped from asserting its coverage
defense due to its conduct leading up to arbitration, its delaying the denial of Hassan’s claim until
after he filed suit to compel arbitration, and by failing to provide Hassan with a copy of an
amendatory endorsement to the Policy that prevented it from relying on Yusef’s statements to deny
coverage.
¶ 41 The trial court denied Hassan’s motion to dismiss on the grounds that State Farm had
articulated in its response. It found that, because the counterclaim sought a finding that there was
no coverage under the Policy for any claims related to the February 12, 2018 incident, not just the
uninsured-motorist claim, declaratory relief could be appropriate. It found that Hassan’s alleged
misrepresentations about the February 12, 2018 incident would be a legally proper basis for
denying coverage under the Policy’s concealment-or-fraud provision. It found that, due to the
absence of a developed record, it would be premature to determine whether the spousal-
communications privilege applied and that, in any event, State Farm’s counterclaim relied on
allegations derived from sources other than Hassan’s ex-wife. Finally, it found that the
counterclaim was not subject to dismissal under section 2-619(a)(3) because the arbitration and
the counterclaim did “not constitute the same action.” The court’s order denying the motion to
dismiss acknowledged, but did not resolve, Hassan’s argument that State Farm had waived and
was estopped from asserting its coverage defense.
¶ 42 Hassan filed a notice of appeal from all three July 7, 2023 orders.
¶ 43 II. ANALYSIS
¶ 44 At the outset, we note that we have jurisdiction under Illinois Supreme Court Rule 307(a)(1)
(eff. Nov. 1, 2017) over the trial court’s interlocutory order granting a stay of arbitration and
denying Hassan’s motion to compel arbitration. Glazer’s Distributors of Illinois, Inc. v. NWS-
Illinois, LLC, 376 Ill. App. 3d 411, 419 (2007). The parties disagree about whether we have
jurisdiction to reach the trial court’s orders denying Hassan’s motions to strike affirmative defenses
and dismiss the counterclaim. As discussed below, whether we have jurisdiction over those orders
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turns on the extent to which they are bound up with the appeal of the arbitration order, so we begin
our analysis with the trial court’s resolution of the parties’ arbitration motions.
¶ 45 A. Arbitration
¶ 46 The primary issue in this interlocutory appeal is whether the trial court correctly denied
Hassan’s motion to compel arbitration, granted State Farm’s motion to stay arbitration, and ordered
arbitration stayed until the court resolves whether Hassan violated the concealment-or-fraud
provision of the Policy. The question before us is “whether there was a sufficient showing to sustain
the order of the trial court.” Bass v. SMG, Inc., 328 Ill. App. 3d 492, 496 (2002). The trial court
did not hold an evidentiary hearing or make any findings of historical fact, so our review is de
novo. Clanton v. Oakbrook Healthcare Centre, Ltd., 2023 IL 129067, ¶ 31.
¶ 47 1. The Uniform Arbitration Act
¶ 48 Proceedings related to arbitration in Illinois courts are governed by our state’s Uniform
Arbitration Act (Illinois UAA) (710 ILCS 5/1 et seq. (West 2022)). Sturgill v. Santander Consumer
USA, Inc., 2016 IL App (5th) 140380, ¶ 23. The Illinois UAA is based on, and substantially adopts
the provisions of, the 1956 version of the uniform act bearing the same name. See Uniform
Arbitration Act (1956), 7 U.L.A. 99-796 (West 2009) (UAA (1956)). By its own terms, the Illinois
UAA is to be construed “to make uniform the law of those states which enact” the uniform act it
is based on. 710 ILCS 5/20 (West 2022); see UAA (1956) § 21.3 Thus, Illinois courts “show greater
than usual deference to the opinions of the courts of other jurisdictions” when interpreting the
Illinois UAA. Lee B. Stern & Co. v. Zimmerman, 277 Ill. App. 3d 423, 426 (1995).
¶ 49 As relevant here, section 2 of the Illinois UAA provides the mechanism used to enforce
arbitration agreements in Illinois courts. Section 2 allows parties to request, by “application,” a
court order either compelling or staying arbitration. 710 ILCS 5/2 (West 2022). Under section 2(a),
3
The Illinois UAA omits section 15 of the UAA (1956). Consequently, section 15 of the Illinois
UAA corresponds to section 16 of the UAA (1956); section 16 of the Illinois UAA corresponds
to section 17 of the UAA (1956), and so on.
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a party can obtain an order compelling a dispute to arbitration by showing that a valid agreement
to arbitrate the controversy exists and that the opposing party is refusing to submit to arbitration.
Id. § 2(a). Conversely, under section 2(b), a party can seek an order staying a “commenced or
threatened” arbitration by showing that there is no agreement to arbitrate the dispute. Id. § 2(b). In
either situation, the applicant bears the burden of establishing that it is entitled to an order
compelling or staying arbitration. See Sturgill, 2016 IL App (5th) 140380, ¶ 26.
¶ 50 A court should not compel resolution of a dispute in arbitration unless it is “of the type that
the parties have agreed should be submitted to arbitration.” United Cable Television Corp. v.
Northwest Illinois Cable Corp., 128 Ill. 2d 301, 306 (1989). At the same time, one of the chief
advantages of arbitration is that it is “an effective, expeditious, and cost-efficient method of dispute
resolution.” Salsitz v. Kreiss, 198 Ill. 2d 1, 13 (2001). Lengthy and expensive litigation over issues
connected with arbitration would, of course, undermine that benefit. So, an express purpose of the
uniform act, and thus the Illinois UAA, is to “provide an efficient procedure” when court oversight
of arbitration issues becomes necessary. See UAA (1956) Prefatory Note, 7 U.L.A. 100. To that
end, section 2 requires courts to resolve disputes about arbitrability—i.e., whether a given claim
must be decided in arbitration—“summarily” and dispose of motions to compel or stay arbitration
accordingly. 710 ILCS 5/2(a), (b) (West 2022); accord UAA (1956) § 2(a), (b).
¶ 51 To be clear, the summary proceeding contemplated by section 2 “is not one which merely
disposes of the motion in a conclusory fashion.” Sturgill, 2016 IL App (5th) 140380, ¶ 24. The
directive to proceed summarily means only that the “trial court should act expeditiously and
without a jury trial to determine whether a valid arbitration agreement exists.” Uniform Arbitration
Act (2000) § 7, cmt., 7 U.L.A. 32 (discussing section 2 of the UAA (1956)). When arbitrability is
put into dispute, the court must “substantively dispose[] of the issues presented.” Herns v.
Symphony Jackson Square LLC, 2021 IL App (1st) 201064, ¶ 31. Section 2 requires a “considered
disposition” in which the trial court “separately addresses each issue raised by the motion” and
“support[s] its resolution of each issue with specific factual findings or legal reasons.” Sturgill,
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2016 IL App (5th) 140380, ¶ 24. The trial court should start by identifying the issues raised by the
parties and considering the affidavits, pleadings, stipulations, and any other evidence that is before
it. Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 269 (Tex. 1992); accord J.A. Walker Co., Inc.
v. Cambria Corp., 159 P.3d 126, 130 (Colo. 2007) (interpreting the Uniform Arbitration Act of
2000); Safeway, Inc. v. Nordic PCL Construction, Inc., 130 Hawai’i 517, 531 (Ct. App. 2013)
(same). To the extent that there are no factual disputes and the issues can be resolved as a matter
of law, no evidentiary hearing is required. Bass, 328 Ill. App. 3d at 496. Any remaining dispute of
material fact should be resolved expeditiously at an evidentiary hearing. Jack B. Anglin, 824
S.W.2d at 269; accord J.A. Walker Co., 159 P.3d at 130; Safeway, 130 Hawai'i at 531. Because that
evidentiary hearing is part of the summary proceeding required by section 2, it may be “conducted
‘[w]ithout the usual formalities [and] without a jury.’ ” (Alterations in original.) Nitro Distributing,
Inc. v. Dunn, 194 S.W.3d 339, 351 (Mo. 2006) (quoting Black’s Law Dictionary 1476 (8th ed.
1999)).
¶ 52 Here, in its response to Hassan’s motion to compel arbitration and its cross-motion to stay
arbitration, State Farm argued that there was no coverage for the alleged collision because no hit-
and-run accident had occurred and because Hassan has violated the concealment-or-fraud
provision of the Policy. In terms of section 2 of the Illinois UAA, State Farm’s response “denie[d]
the existence of the agreement to arbitrate,” and its cross-motion asserted that “there [was] no
agreement to arbitrate.” 710 ILCS 5/2(a), (b) (West 2022). There is no dispute that, standing alone,
the Policy only called for the parties to arbitrate the liability of the hit-and-run driver or owner and
the extent of damages—not coverage. Hence, once raised, “the issue of coverage should have been
summarily tried [citation] because questions of law or fact concerning coverage cannot under [the]
agreement be submitted to arbitration.” Clark v. Country Mutual Insurance Co., 131 Ill. App. 3d
633, 637 (1985). The trial court was therefore required to “act expeditiously and without a jury
trial to make a substantive determination of whether a valid arbitration agreement exist[ed], and to
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resolve any other issues raised by” the parties’ cross-motions. Sturgill, 2016 IL App (5th) 140380,
¶ 25 (describing the summary proceeding contemplated by section 2).
¶ 53 With this framework in mind, we turn to Hassan’s arguments that the trial court erred in
denying his motion to compel arbitration by finding that State Farm neither had waived its
coverage defense nor was estopped from asserting it.
¶ 54 2. Waiver
¶ 55 We first consider whether the trial court correctly found that State Farm had not waived its
right to contest coverage. A waiver is “an express or implied voluntary and intentional
relinquishment of a known right.” Illinois Insurance Guaranty Fund v. Nwidor, 2018 IL App (1st)
171378, ¶ 21. Waiver involves “a unilateral act,” and it does not require “detrimental reliance” by
the other party. Lumbermen’s Mutual Casualty Co. v. Sykes, 384 Ill. App. 3d 207, 219 (2008). The
inquiry “focuses exclusively on the conduct of the” party alleged to have waived a right. Id. at 218.
The burden is on the party asserting waiver to show that the other party “knew of its rights” and
“evidenced an intention to waive such rights.” Claxton v. Board of Trustees of City of Alton
Firefighters’ Pension Fund, 2023 IL App (5th) 220200, ¶ 29 (citing Ryder v. Bank of Hickory Hills,
146 Ill. 2d 98, 104 (1991)). The bar for establishing an implied waiver is high. “Implied waiver of
a legal right must be proved by a clear, unequivocal, and decisive act of the party who is alleged
to have committed waiver.” Ryder, 146 Ill. 2d at 105. For instance, a party might impliedly waive
a known right by engaging in “conduct [that] is inconsistent with any other intention than to waive
it.” (Internal quotation mark omitted.) Id. (quoting Kane v. American National Bank & Trust Co.,
21 Ill. App. 3d 1046, 1052 (1974)). An insurer can waive questions as to coverage under a policy
by taking action that “recognizes the continued validity of the policy” (internal quotation marks
omitted), such as assuming the insured’s legal defense without reserving its right to contest
coverage. Nwidor, 2018 IL App (1st) 171378, ¶ 22 (quoting American States Insurance Co. v.
National Cycle, Inc., 260 Ill. App. 3d 299, 306 (1994)).
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¶ 56 On appeal, Hassan points to nothing in the record indicating that State Farm expressly waived
its noncoverage defense. Instead, he argues that State Farm waived its right to contest coverage
through its conduct in the since-abandoned arbitration proceedings by failing to comply with
various procedural rules governing the arbitration. See American Arbitration Association, Illinois
Uninsured/Underinsured Motorist Arbitration and Mediation Rules (eff. Feb. 1, 2016) (AAA
Rules).
¶ 57 We agree, as a general matter, that a party can waive the issue of arbitrability by not raising
it in a timely fashion during arbitration proceedings. See First Health Group Corp. v. Ruddick, 393
Ill. App. 3d 40, 50 (2009). But that rule is a consequence of section 12(b)(5) of Illinois UAA,
which provides that an arbitration award can be vacated on the ground that there was no arbitration
agreement, but only if “the party did not participate in the arbitration hearing without raising the
objection.” 710 ILCS 5/12(a)(5) (West 2022); see Borg Inc. v. Morris Middle School Dist. No. 54,
3 Ill. App. 3d 913, 916 (1972) (“A reading of [section 12(a)(5)] shows clearly that the question of
an agreement to arbitrate an issue can not be raised for the first time after an award.”). In other
words, the right waived by participating in arbitration without raising a timely objection to
arbitrability is the right to contest an award on that basis, not the right to assert non-arbitrability
generally. Here, State Farm is not relying on its coverage defense as grounds for vacating an
arbitration award under section 12(a)(5). Indeed, because the parties never finished arbitration,
there is no award that could be vacated. Hence, there is no implied waiver arising from State Farm’s
alleged failure to contest coverage pursuant to the AAA Rules.
¶ 58 Hassan also contends that State Farm waived the right to have the coverage issue decided by
the court. He notes that AAA Rule 4 contemplates submitting coverage disputes to the arbitrator
by agreement:
“Issues as to coverage, *** may be referred to voluntary
coverage arbitration with the agreement of all parties before the
arbitrator appointed by the AAA. *** In the absence of an agreement
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to submit such issues to arbitration, accident claims arbitrators may
only decide contested issues of coverage, applicable policy limits,
or stacking of policy coverage where ordered to do so by a court or
where so authorized by law.” AAA Rules, R. 4.
Citing Coronado v. Fireman’s Fund Insurance Co., 131 Ill. App. 3d 450 (1985), Hassan suggests
that, by participating in the arbitration process, State Farm implicitly agreed to have the arbitrator
decide its noncoverage defense, thereby waiving its right to have arbitrability decided by the court.
¶ 59 We think this argument misunderstands Coronado. In Coronado, after an arbitration award
was entered on an uninsured-motorist claim, the insurer returned the award for modification on the
ground that it exceeded the limit stated in the insurance policy. Coronado, 131 Ill. App. 3d at 452.
In his opposition to the insurer’s modification request, the claimant apparently argued that a
statutory amendment that increased the mandatory minimum coverage limits retroactively
increased the limits of the policy at issue. See id. at 451-52. The arbitrator agreed with the insurer
and modified the award to reflect the reduced limit stated in the policy. Id. at 452. After a circuit
court confirmed the modified award, the claimant appealed. Id. Among other things, he argued that
the arbitrator had lacked jurisdiction to decide the legal question of whether the statutory
amendment retroactively applied to the policy at issue. Id. at 455. The court, however, found that
the claimant had waived any objection to the arbitrator deciding the issue by submitting a response
to the insurer’s request for a modification on the merits rather than moving to stay the modification
or objecting to the arbitrator’s authority to decide the policy-limit issue. Id.
¶ 60 The situation in this case is not the same. In Coronado, the claimant waived his objection to
the arbitrator deciding a legal question by submitting the issue to the arbitrator. Here, by contrast,
the record does not show that either party asked the arbitrator to decide the coverage issue.
¶ 61 It is true, as Hassan points out, that the parties each sent emails to the arbitrator in December
2019 stating their positions concerning State Farm’s efforts to obtain a sworn statement from Yusuf
and on the applicability of the spousal-communications privilege to whatever she might testify to.
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While this certainly suggests that both parties were contemplating that Yusuf might provide
testimony in the arbitration proceedings, that testimony was not, as Hassan contends, relevant
solely to the issue of coverage. 4 Among other things, Yusuf alleged that Hassan had sustained the
tear to his left distal bicep tendon while exercising before the alleged hit-and-run took place, and
she had provided State Farm with emails that seemingly corroborated that claim. That evidence
tended to show that the injury pre-existed the claimed hit-and-run incident, from which it would
follow that the owner or driver of the hit-and-run vehicle would not be liable to Hassan for that
injury because it had not been sustained during the hit-and-run incident. And under the Policy, the
parties were required to resolve disputes over the hit-and-run driver or vehicle owner’s liability in
arbitration. Because Yusuf’s potential testimony was relevant to a question subject to arbitration
under the Policy, State Farm’s willingness to have the arbitrator consider issues related to securing
and presenting that testimony was fully consistent with an intent to arbitrate only those issues
subject to arbitration under the Policy. In short, it did not necessarily reflect that State Farm
intended to have the arbitrator decide the coverage dispute, so it does not rise to the level of an
unequivocal implied waiver of State Farm’s coverage defense.
¶ 62 As the party asserting waiver, Hassan had the burden of showing that State Farm waived its
right to raise its coverage defense or to have the coverage issue decided by the court. Based on the
record before us, we agree with the trial court that he failed to carry that burden, and we hold that
State Farm did not waive its right to dispute coverage.
¶ 63 3. Estoppel
¶ 64 Hassan next argues that State Farm should be estopped from disputing coverage. “[E]stoppel
refers to an abatement, by operation of law, of the insurer’s rights where it would be inequitable to
permit their assertion.” Nwidor, 2018 IL App (1st) 171378, ¶ 12. “The general rule is that where a
4
We note that, in his complaint, Hassan expressly took the contrary position, arguing that Yusuf’s
testimony “is a subject for arbitration” because it went to whether “the hit-and-run driver is
liable to” Hassan.
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person by his or her statements and conduct leads a party to do something that the party would not
have done but for such statements and conduct, that person will not be allowed to deny his or her
words or acts to the damage of the other party.” Geddes v. Mill Creek Country Club, Inc., 196 Ill.
2d 302, 313 (2001). To estop State Farm from contesting arbitrability, Hassan must put forward
“clear, concise, and unequivocal” evidence showing that: (1) he was misled in some way by State
Farm’s actions or statements, (2) he relied on that conduct or misrepresentation, (3) that reliance
was reasonable, and (4) that reliance prejudiced him. Farmers Insurance Exchange v. Cheekati,
2022 IL App (4th) 210023, ¶ 28.
¶ 65 Here, Hassan argues that State Farm should be estopped from disputing coverage because it
invited him to arbitrate the dispute in a July 30, 2019 email that State Farm’s lawyer sent to
Hassan’s lawyer, which stated as follows:
“Steve:
Let’s move this case forward toward arbitration as I wait on
authority. Are you free to discuss evidentiary stipulations and
arbitration scheduling this afternoon? If so, let me know what time.
I’ll call you.
Regards,
-EWM”
Hassan argues that, in the context of State Farm’s previous communications—including its
reservation-of-rights letter, which identified two coverage defenses, and its February 24, 2019
letter indicating that, once it completed its investigation and “assuming no coverage defenses,” it
would be “willing to proceed to binding arbitration” on any remaining dispute over damages—the
July 30 email suggested that State Farm had completed its investigation and concluded that it did
not have any coverage defenses.
¶ 66 Based strictly on the materials in the record before us, Hassan’s reading of the July 30 email
is a plausible one. It is apparent, though, that we are lacking the full context. For instance, the
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February 24 letter suggests that it is responding to an email sent three days earlier by Hassan’s
attorney that is not in the record. The July 30 email states that counsel for State Farm was
“wait[ing] on authority,” but it does not specify what kind of authority, implying previous
communications that are not found in the record. Indeed, other than the emails exchanged about
Yusuf’s allegation on the night of Hassan’s examination under oath, the record is bereft of
information about any communication between the parties between February 24 and July 30, 2019,
that would shed light on whether it was reasonable to rely on the July 30 email as indicating that
State Farm had completed its investigation and was no longer contesting coverage.
¶ 67 Still, because Hassan’s reading is a plausible one, we do not think that his estoppel argument
was properly rejected purely as a matter of law. When “reasonable people might draw different
conclusions from the evidence,” estoppel is a question for a trier of fact. Sykes, 384 Ill. App. 3d
207, 220 (2008). Because estoppel could not be resolved as a matter of law, the trial court should
have held an evidentiary hearing and then determined, as a question of fact, whether Hassan had
proven the elements of his estoppel claim. We therefore reverse the trial court’s arbitration order
and remand for it to, in accordance with section 2 of the Illinois UAA, hold any proceedings
necessary to decide whether State Farm’s conduct estops it from contesting coverage under the
particular facts of this case, as the court may determine.
¶ 68 4. Coverage
¶ 69 Finally, we note that, in resolving the arbitration motions, the trial court expressly reserved
ruling on the ultimate question of coverage raised by State Farm. Although neither party raises the
point, “denying [a] motion to compel arbitration without ruling on the arbitrability of the dispute”
is error. Comdisco, Inc. v. Dun & Bradstreet Corp., 285 Ill. App. 3d 796, 801 (1996). On remand,
the trial court should not only decide the issue of estoppel but also any other remaining questions
of law or fact—such as State Farm’s noncoverage assertions—needed to substantively resolve
whether the parties’ dispute is within the scope of the arbitration agreement. See 710 ILCS 5/2
(West 2022); Sturgill, 2016 IL App (5th) 140380, ¶ 25.
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¶ 70 B. State Farm’s Affirmative Defenses and Counterclaim
¶ 71 As noted above, our jurisdiction to review the trial court’s arbitration order under Rule
307(a)(1) is clear. The orders denying Hassan’s motion to strike affirmative defenses and his
motion to dismiss the counterclaim are a different matter. Those interlocutory orders are not
independently appealable, either by permission under Rule 306(a) or as of right under Rule 307(a).
That is not necessarily dispositive, though. “Rule 307 allows this court to review any prior error
that bears directly upon the question of whether an order on appeal was proper.” Glazer’s
Distributors, 376 Ill. App. 3d at 420. In other words, our review of the trial court’s order staying
arbitration is not limited to the four corners of that particular order but extends to any antecedent
actions that have a direct bearing on the arbitration decision. Cf. Ill. S. Ct. R. 366(a)(5) (granting
reviewing court authority to “enter and judgment and make any order that ought to have been given
or made *** that the case may require”). Among other things, that means we have jurisdiction to
consider any previous order that is “intertwined” with the resolution of the arbitration motions
such that the outcome of the previous order was necessarily dispositive of the arbitration order.
See Weiss v. Waterhouse Securities, Inc., 208 Ill. 2d 439, 448-49 (2004) (finding jurisdiction to
review trial court’s order denying defendant’s motion to strike class allegations because that
decision necessarily required it to also deny defendant’s motion to compel arbitration).
¶ 72 In his briefs, Hassan asserts that we have jurisdiction to review the trial court’s orders denying
his motions to strike State Farm’s affirmative defenses and dismiss its counterclaim because the
“denial of [his] motions attacking [State Farm’s] pleadings made denial of [his] motion compelling
arbitration a foregone conclusion.” We disagree. The Illinois UAA permitted State Farm to raise
its noncoverage defense by way of “den[ying] the existence of an agreement to arbitrate” in its
response to the motion to stay arbitration. 710 ILCS 5/2(a) (West 2022). It also permitted State
Farm to raise that defense in its cross-motion to stay arbitration, which required it to show that
there was no agreement to arbitrate. Id. § 2(b). Because State Farm did not need to plead
noncoverage as an affirmative defense or in a counterclaim to be able to rely on it as a basis for
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defeating Hassan’s motion to compel arbitration, it would not have made any difference if the trial
court had granted Hassan’s motions directed against State Farm’s pleadings.
¶ 73 Hassan also suggests that the trial court’s rulings on his motion to strike and motion to dismiss
were intertwined with its ruling on the arbitration motion because they involved overlapping issues
of waiver and estoppel. Again, we disagree.
¶ 74 Our review of the record discloses that Hassan did not move to strike State Farm’s affirmative
defenses on the basis of either waiver or estoppel. Instead, he argued that its noncoverage defenses
constituted a denial of the allegations in his complaint, which meant that they were not properly
raised as affirmative defenses. The trial court’s order denying the motion to strike did not address
either waiver or estoppel. Hence, that order is not intertwined with the arbitration order, which
means we lack jurisdiction to review it on an interlocutory basis.
¶ 75 Hassan’s motion to dismiss State Farm’s counterclaim asserted both waiver and estoppel, but
it did so within the context of arguing that the counterclaim should be dismissed because the
arbitration proceedings were a pending action involving the same claim. See 735 ILCS
5/2-619(a)(3) (West 2022) (permitting involuntary dismissal of a claim when “there is another
action pending between the same parties for the same cause”). Consequently, although the trial
court’s order denying the motion to dismiss discussed the parties’ arguments concerning waiver
(but not estoppel), it denied the motion on the basis that “the AAA arbitration and the Counterclaim
do not constitute the same action.” That finding had nothing to do with waiver or estoppel, which
means that the trial court’s resolution of the motion to dismiss was not intertwined with its
arbitration order. Again, that means we do not have jurisdiction to review it in this interlocutory
appeal.
¶ 76 In sum, the trial court’s denial of Hassan’s motion to strike State Farm’s affirmative defenses
and his motion to dismiss its counterclaim had no bearing on its resolution of the arbitration
motions. We therefore lack jurisdiction to review those orders on an interlocutory basis, so we
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must dismiss Hassan’s appeal from those orders. See In re Estate of O’Gara, 2022 IL App (1st)
210709, ¶ 35 (dismissing appeal to extent court lacked jurisdiction).
¶ 77 C. Hassan’s Request for Sanctions
¶ 78 In his reply brief, Hassan asks us to sanction State Farm based on various allegations of
misconduct in the trial court and on appeal. But his complaints about conduct in the trial court are
not properly before us, as the record contains no indication that Hassan sought sanctions in the
trial court. In any event, he did not ask for sanctions in his opening brief, and “[i]ssues raised for
the first time in a reply brief do not merit consideration.” Illinois Union Insurance Co. v. Medline
Industries, Inc., 2022 IL App (2d) 210175, ¶ 47; see also Ill. S. Ct. R. 341(j) (eff. Oct. 1, 2020)
(“The reply brief, if any, shall be confined strictly to reply to arguments presented in the brief of
the appellee.”). As for the alleged misconduct in this court, a request for sanctions is properly
brought through a motion, not in a reply brief to which the opposing party has no right of response.
See Ill S. Ct. R 375(b) (eff. Feb. 1, 1994). On our own motion, the portion of Hassan’s reply brief
requesting sanctions against State Farm is stricken for noncompliance with the rules. See
Ittersagen v. Advocate Health & Hospitals Corp., 2021 IL 126507, ¶ 37 (“Where a brief has failed
to comply with the rules, we may strike portions of the brief or dismiss the appeal, should the
circumstances warrant.”).
¶ 79 III. CONCLUSION
¶ 80 We hold that State Farm did not waive its right to contest coverage, but we find that the trial
court erred by rejecting Hassan’s estoppel claim as a matter of law. We therefore reverse the order
denying Hassan’s motion to compel arbitration and granting State Farm’s cross-motion to stay
arbitration, and we remand to the trial court. On remand, consistent with section 2 of the Illinois
UAA (710 ILCS 5/2 (West 2022)), the trial court should make any factual determinations necessary
to resolve Hassan’s estoppel claim, and it should hold any other proceedings that may be needed
for it to resolve the ultimate question of coverage. Because we lack jurisdiction to consider the
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trial court’s orders denying Hassan’s motion to strike affirmative defenses and motion to dismiss
counterclaim, we dismiss his appeal from those orders.
¶ 81 Reversed and remanded in part; dismissed in part.
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