Legal Dispute: Country Mutual vs. Clear Spring Insurance Lawsuit

Insurance Industry Update: Legal Dispute Involving Clear Spring

Country Mutual Insurance Company has initiated a lawsuit against Clear Spring Property and Casualty Company over its withdrawal of defense for a policyholder. Filed on February 9, 2026, in the United States District Court for the Northern District of Illinois, the lawsuit stems from a rooftop construction fire at a Chicago condominium in July 2023, leading to extensive property damage. This legal challenge highlights significant questions about regulatory compliance and the insurer's procedural conduct.

The incident involved Galian Painters & Remodeling Co., known as Galian Construction, which faced a subrogation claim after Country Mutual compensated policyholder Carey Koenitz with $409,015.45 for damages. Clear Spring initially provided defense for Galian under a commercial general liability policy. However, after 14 months, Sedgwick Claims, Clear Spring's third-party claims administrator, issued a disclaimer letter citing exclusions for unlicensed contractors, igniting concerns about claims management strategies.

This case has captivated insurance industry attention due to Clear Spring's reported procedural omissions, including the absence of a reservation of rights letter and failure to pursue a declaratory judgment. Such omissions allegedly left Galian's defense vulnerable, culminating in a consent judgment equaling the initial payout by Country Mutual, alongside additional costs. The ongoing legal proceedings underscore the critical need for thorough risk management and compliance in underwriting processes.

Country Mutual seeks a court declaration holding Clear Spring accountable for the judgment, arguing its preclusion from asserting certain coverage defenses. The case is evolving, with potential repercussions on policy defense duties concerning subcontractor exclusions. This serves as a poignant reminder for payers and providers about the necessity of meticulous regulatory compliance and proactive communication within the insurance carrier network.