No. 2--96--0467
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
THE CINCINNATI COMPANIES, ) Appeal from the Circuit
) Court of Du Page County.
Plaintiff-Appellee, )
)
v. ) No. 93--MR--407
)
WEST AMERICAN INSURANCE )
COMPANY, ) Honorable
) Bonnie M. Wheaton,
Defendant-Appellant. ) Judge, Presiding.
PRESIDING JUSTICE GEIGER delivered the opinion of the court:
The defendant, West American Insurance Company (West
American), appeals from the April 8, 1996, order of the circuit
court of Du Page County granting summary judgment in favor of the
plaintiff, the Cincinnati Companies (Cincinnati), on its
complaint
for declaratory judgment. The trial court ruled that West
American
was liable to Cincinnati for an equitable share of Cincinnati's
expenses in the defense and settlement of a personal injury
action
filed in the circuit court of Will County. West American's
equitable share was determined to be $29,384.50, and judgment was
subsequently entered against West American in that amount. We
affirm.
In 1989, Lorren Kessel filed a personal injury lawsuit in
the
circuit court of Will County (the underlying action). The
underlying action arose out of injuries Kessel sustained while
performing construction work at the Lockport train station.
Among
the defendants named in the underlying action were Baird Land
Surveyors (Baird) and William Grady, doing business as B&D Home
Repair and Builders (B&D).
Cincinnati had issued an insurance policy to another
contractor on the project, Champion Drywall. This policy named
Baird as an additional insured. Upon receipt of service of
process
in the underlying action, Baird tendered the action to its own
insurer, which, in turn, tendered the defense to Cincinnati.
Cincinnati then retained counsel to defend Baird in the
underlying
action.
West American had issued an insurance policy to B&D.
Pursuant
to this policy, West American retained counsel to defend B&D in
the
underlying action. This policy also named Baird as an additional
insured. Baird, however, was not aware that it was an additional
insured under the West American policy.
During the course of litigation, Baird propounded
interrogatories to B&D which specifically requested that B&D
identify the name of each insured under the West American policy.
In response to this inquiry, B&D failed to disclose that Baird
was
named as an additional insured. Baird also requested that B&D
produce a copy of the West American policy. Although B&D
responded
to the production request, it did not provide a copy of the
policy
endorsement that named Baird as an additional insured. B&D's
responses to these discovery requests were signed by the attorney
retained by West American to defend B&D in the underlying action.
The underlying action was scheduled for trial on three
separate occasions. On January 27, 1992, which was the third
trial
date, B&D's attorney turned over a document to Baird's attorney
which disclosed that Baird was named as an additional insured
under
the West American policy. Following this disclosure, Baird's
attorney discussed the matter with Baird's president, Barbara
Baird, and then immediately tendered the defense to West
American.
West American rejected the tender.
On February 17, 1992, the underlying action was settled
between the parties. Cincinnati paid Kessel $30,000 on Baird's
behalf, and West American paid Kessel $30,000 on B&D's behalf.
Prior to settlement, Cincinnati and West American entered into a
stipulation reserving Cincinnati's right to pursue a contribution
action against West American for reimbursement of the settlement
amount, as well as its attorney fees in defending Baird in the
underlying action.
On June 25, 1993, Cincinnati filed the instant action
against
West American seeking a declaration that, pursuant to the
doctrine
of equitable contribution, West American was obligated to
reimburse
Cincinnati for the defense costs and indemnity payments which it
made on behalf of Baird in the underlying action. On January 4,
1995, Cincinnati filed a motion for summary judgment. In support
of its motion, Cincinnati attached the affidavit of Barbara
Baird.
In her affidavit, Barbara Baird averred that (1) a company named
AVA handled all of Baird's insurance matters; (2) she had never
had
any insurance training or classes dealing with insurance; (3) she
was unaware that Baird was listed as an additional insured under
the West American policy until January 27, 1992; and (4) she
considered B&D responsible for the accident at the construction
site and preferred to have B&D's insurance pay for Baird's
defense
and settlement.
On January 12, 1996, West American filed a response to
Cincinnati's motion for summary judgment, along with its own
cross-
motion for summary judgment. On January 17, 1996, West American
also filed a motion to strike the affidavit of Barbara Baird,
alleging that is was conclusory and without foundation.
On April 8, 1996, after a hearing on these motions, the
trial
court granted Cincinnati's motion for summary judgment and denied
West American's cross-motion for summary judgment. As to West
American's motion to strike Barbara Baird's affidavit, the trial
court stated that it would only utilize "those aspects of the
affidavit that complied with the rules." The trial court's order
provides, in pertinent part:
"(1) The court, aware of defendant's motion to
dismiss
the affidavit of Barbara Baird and the [r]esponse thereto,
utilized those aspects of the affidavit that complied with
the
applicable rules.
***
(3) The [a]nswers to [i]nterrogatories provided
to Baird
made no reference to the West American *** policy and
foreclosed Baird's opportunity to make a reasonable judgment
as to tender.
(4) The lack of tender must not be attributed to
Baird
but to West American through the actions of *** B&D['s]
attorney in the [underlying action].
(5) West America should share equitably in
settlement
costs and for reasonable attorney fees incurred in [the
underlying action] from the date of service of the
[i]nterrogatories: January 2, 1991."
On April 18, 1996, Cincinnati filed a motion
seeking the entry
of a money judgment against West American for its equitable share
of the settlement and defense costs of the underlying action.
Cincinnati sought judgment in the amount of $15,000, which was
one-
half of the $30,000 settlement paid by Cincinnati in the
underlying
action, in addition to attorney fees in the amount of $14,384.50,
which represented one-half of the total attorney fees incurred by
Cincinnati in defending the underlying action after the date of
January 2, 1991. On April 24, 1996, the trial court entered
judgment in favor of Cincinnati in the amount of $29,384.50.
West
American filed a timely notice of appeal as to the trial court's
ruling on the cross-motions for summary judgment, as well as the
money judgment entered on Cincinnati's behalf.
West American's first argument on appeal is that the trial
court erred in finding that, as a matter of law, it was liable to
Cincinnati for an equitable share of Cincinnati's settlement and
defense costs. West American argues that an insurer has no
obligation to an insured absent tender of the claim by the
insured.
West American contends that Baird never made such a tender in the
underlying action and that the trial court erred in attributing
this lack of tender to the conduct of B&D's attorney.
The purpose of a motion for summary judgment is to determine
whether a genuine issue of triable fact exists (Purtill v. Hess,
111 Ill. 2d 229, 240 (1986)) and should be granted only when "the
pleadings, depositions, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment
as a matter of law" (735 ILCS 5/2--1005(c) (West 1994)). An order
granting summary judgment should be reversed if the evidence
shows
that a genuine issue of material fact exists or if the judgment
was
incorrect as a matter of law. In re Estate of Herwig, 237 Ill.
App. 3d 737, 741 (1992). The disposition of a summary judgment
motion is not discretionary and the standard of review is de
novo.
Quinton v. Kuffer, 221 Ill. App. 3d 466, 471 (1991).
In the context of insurance law, the doctrine of equitable
contribution permits an insurer who has paid the entire loss to
be
reimbursed from other insurers who are also liable for the loss.
Aetna Casualty & Surety Co. v. James J. Benes & Associates, Inc.,
229 Ill. App. 3d 413, 417 (1992). This rule is applied in cases
where one insurer has paid a debt equally owed by other insurers.
Benes, 229 Ill. App. 3d at 417. The fact that an insurer
undertakes the burden of a full settlement payment prior to a
possible judgment does not mean that the insurer is a volunteer
and
the insurer, therefore, is not precluded from recovering
contribution from other insurers liable for the same loss.
Benes,
229 Ill. App. 3d at 417.
West American does not contest the fact that Baird was named
as an additional insured under the West American policy and was
covered for the construction accident alleged in the underlying
action. Rather, West American argues that the doctrine of
equitable contribution does not apply in the instant case because
Baird never tendered the defense in the underlying action to West
American. Relying on Institute of London Underwriters v.
Hartford
Fire Insurance Co., 234 Ill. App. 3d 70, 80 (1992), West American
argues that an insurer's coverage obligations under an insurance
policy are not triggered until the insured actually tenders the
defense in an action that falls within the policy's coverage.
In Institute of London, Great Lakes was the named insured on
a policy of insurance issued by Hartford, and an additional
insured
on a policy issued by the Institute. 234 Ill. App. 3d at 71.
After a lawsuit was filed against Great Lakes, Great Lakes
tendered
the defense of the suit to the Institute. Institute of London,
234
Ill. App. 3d at 72. Great Lakes never tendered the defense of
the
suit to its own insurer, Hartford. Institute of London, 234 Ill.
App. 3d at 72. After Institute defended Great Lakes and settled
the underlying action, it filed a declaratory judgment action
against Hartford for reimbursement of 50% of the settlement
amount.
Institute of London, 234 Ill. App. 3d at 71. The trial court
granted summary judgment in favor of Hartford. Institute of
London, 234 Ill. App. 3d at 71.
On appeal, the appellate court affirmed the trial court's
decision, finding that Hartford was not obligated to contribute
to
the settlement because Great Lakes had tendered the defense to
the
Institute, rather than Hartford. Institute of London, 234 Ill.
App. 3d at 78-80. The court held that, in instances where two
insurance policies potentially apply to a loss, the insured may
elect which insurer it desires to defend and indemnify the claim
by
tendering the defense to that insurer and not the other.
Institute
of London, 234 Ill. App. 3d at 78-80. Such an election
forecloses
the settling insurer from obtaining contributions from the
nonsettling insurer. Institute of London, 234 Ill. App. 3d at
80.
The court also held that coverage cannot be triggered by tender
from a rival insurer. Institute of London, 234 Ill. App. 3d at
80.
This court has rejected the holding in Institute of London
and
has adopted a different test for determining when an insurer's
coverage obligation is triggered. In Federated Mutual Insurance
Co. v. State Farm Mutual Automobile Insurance Co., 282 Ill. App.
3d
716, 726 (1996), we held that an insurer's duty to defend claims
potentially falling within the terms of a policy is triggered
when
the insurer has actual notice of the lawsuit, regardless of
whether
there has been an actual tender of defense by the insured.
In Federated Mutual, Federated issued an insurance policy
covering a fleet of automobiles that a car dealership permitted
its
service customers to use while their vehicles were being
repaired.
282 Ill. App. 3d at 718. An employee of the car dealership
permitted her friend, Kathleen Gallagher, to drive one of these
vehicles. Federated Mutual, 282 Ill. App. 3d at 718. Gallagher
was subsequently involved in an accident and sued. Federated
Mutual, 282 Ill. App. 3d at 718. Gallagher contacted her own
automobile insurance carrier, State Farm, who in turn sent a
letter
to Federated notifying it of the suit and tendering the defense.
Federated Mutual, 282 Ill. App. 3d at 718-19. Federated then
filed
a declaratory judgment action seeking a determination that it had
no duty to defend Gallagher because she did not tender defense of
the lawsuit to Federated. Federated Mutual, 282 Ill. App. 3d at
719. The trial court granted summary judgment in favor of
Federated, ruling that actual tender of the insured was a
prerequisite to any duty to defend or indemnify. Federated
Mutual,
282 Ill. App. 3d at 719.
On appeal, we reversed the trial court's ruling and held
that
an insured need not tender the defense of a lawsuit to the
insurer
in order to trigger the insurer's duty to defend, noting:
"If it has actual notice a lawsuit has been filed against
one
of its insureds, the insurer understands its insured will
require a defense. Furthermore, based on its experience,
the
insurer should assume its insured will desire the insurer
provide such a defense. ***
* * *
*** [A]n insurer's duty
to defend claims potentially
falling within the terms of a policy is triggered by actual
notice of a lawsuit, regardless of whether the insured is
sophisticated or unsophisticated--provided the insured has
not
selected one insurer to provide an exclusive defense and
there
is no prejudice to the insurer." Federated Mutual, 282 Ill.
App. 3d at 725-26.
We therefore held that Federated's duty to defend had been
triggered at the time that it received actual notice of the
lawsuit
from State Farm. Federated Mutual, 282 Ill. App. 3d at 727. We
further concluded that there was no evidence that Gallagher made
a
coverage choice between State Farm and Federated, commenting:
[T]he facts of this case do not indicate that Gallagher made
a choice between State Farm and Federated. There is no
evidence in the record indicating that Gallagher knew she
might be insured under the Federated policy. The record
does
not indicate that Gallagher investigated the matter,
concluded
that she also might be insured by Federated, and then made
the
decision to choose State Farm to defend her instead of
Federated." Federated Mutual, 282 Ill. App. 3d at 724.
Our holding in Federated Mutual specifically
considered and
rejected the rule of law articulated in Institute of London,
commenting:
"Unlike the court in Institute of London ***, we conclude
that--despite any special experience, competence, or
resources
the insured may possess--actual notice of a claim against
the
insured may be sufficient to trigger the insurer's duty to
defend. *** [A]ctual notice means notice sufficient to
permit the insurer to locate and defend the lawsuit."
Federated Mutual, 282 Ill. App. 3d at 726.
We therefore declined to follow Institute of London except
in those
instances where the insured has specifically selected one insurer
to provide an exclusive defense and there is no prejudice to the
insurer. Federated Mutual, 282 Ill. App. 3d at 726. Accord
Continental Casualty Co. v. Security Insurance Co., 279 Ill. App.
3d 815, 821 (1996).
In light of the principles articulated in Federated Mutual,
we
conclude that West American had actual notice of the underlying
action so as to trigger its duty to defend and indemnify Baird.
At
the time that the underlying action was filed, B&D tendered
defense
of the action to West American. In response to this tender, West
American retained counsel to represent B&D. Therefore, from the
very onset of the underlying action, West American was aware that
both of its insureds, Baird and B&D, were named as defendants.
Such information provided sufficient notice for West American to
locate and defend the lawsuit on Baird's behalf.
Furthermore, the facts herein demonstrate that at no time
did
Baird affirmatively select either Cincinnati or West American to
provide an exclusive defense. As was the case of the insured in
Federated Mutual, there is no evidence in the record indicating
that Baird knew that it might be insured under the West American
policy. The record does not indicate that Baird investigated the
matter, concluded that it might be insured by West American, and
then selected Cincinnati to defend it rather than West American.
Moreover, we note that Baird may have been deprived of making
such
a choice due to the manner in which B&D responded to Baird's
discovery requests. As noted above, such discovery responses
failed to disclose that Baird was named as an additional insured
on
the West American policy. As soon as this fact was disclosed,
Cincinnati made an immediate tender of defense to West American
on
behalf of Baird.
Furthermore, we do not believe that triggering West
American's
coverage obligation to Baird will result in undue prejudice.
West
American had actual notice of the lawsuit from the very beginning
of the litigation in the underlying action. Through its retained
counsel for B&D, West American actively participated in the
litigation and settlement of the underlying case. Indeed, the
defense of Baird was tendered before West American settled the
underlying action. The sole reason that the defense of Baird was
not tendered sooner was due to B&D's incomplete responses to
discovery.
The existence of insurance is properly ascertained through
the
use of discovery procedures. People ex rel. Terry v. Fisher, 12
Ill. 2d 231, 238-40 (1957). In responding to Baird's discovery
requests, B&D's attorney was therefore under an obligation to
thoroughly investigate the records available and inquire as to
the
knowledge of all corporate agents. Chicago Park District v.
Chicago & North Western Transportation Co., 240 Ill. App. 3d 839,
865-66 (1992). An attorney retained by the insurer represents
both
the insurer and the insured. Rogers v. Robson, Masters, Ryan,
Brumund & Belom, 74 Ill. App. 3d 467, 471 (1979).
In the instant case, West American retained an attorney to
represent B&D in the underlying action. As this attorney was
retained by West American, he was necessarily West American's
agent. See Rogers, 74 Ill. App. 3d at 471. B&D's attorney
therefore acted on West American's behalf when he responded to
Baird's discovery requests. For this reason, we agree with the
trial court that Baird's inability to make a reasonable judgment
as
to tender can be attributed to West American and conclude that
West
American is liable for its equitable share of Cincinnati's
settlement and defense costs in the underlying action.
West American's next argument is that the trial court erred
in
denying its motion to strike Barbara Baird's affidavit. As
detailed above, the affidavit avers that Barbara Baird did not
know
that Baird was named as an additional insured under the West
American policy and that she would have preferred that West
American pay for Baird's defense and settlement. West American
argues that these statements were conclusory and without
foundation.
The sufficiency of an affidavit in support of a motion for
summary judgment is governed by Supreme Court Rule 191 (145 Ill.
2d
R. 191). Rule 191 is satisfied " 'if from the document as a
whole
it appears the affidavit is based on the personal knowledge of
the
affiant and there is a reasonable inference that the affiant
could
competently testify to its contents.' " Allied American
Insurance
Co. v. Mickiewicz, 124 Ill. App. 3d 705, 708 (1984), quoting
Burks
Drywall, Inc. v. Washington Bank & Trust Co., 110 Ill. App. 3d
569,
576 (1982). The granting of a motion to strike a Rule 191
affidavit is within the sound discretion of the trial court.
Lake
County Trust Co. v. Two Bar B, Inc., 238 Ill. App. 3d 589, 599
(1992).
Contrary to West American's assertions, it appears that the
trial court did not consider the portions of the affidavit that
were improper under Rule 191. The trial court made the following
ruling: "Rather than strike the affidavit, I think what I would
prefer to do is simply disregard those provisions which do not
comply with the statute." West American therefore essentially
received the relief it sought by filing the motion to strike.
Rather than striking an affidavit in its entirety, a trial court
should only strike those matters which are improper. Rinchich v.
Village of Bridgeview, 235 Ill. App. 3d 614, 622 (1992). As West
American only objected to two of the affidavit's five paragraphs,
there was no need for the trial court to strike the entire
document.
We additionally note that, even excluding Barbara Baird's
affidavit, the remaining pleadings and evidentiary materials
support the trial court's entry of summary judgment on behalf of
Cincinnati. See Tower Oil & Technology Co. v. Buckley, 99 Ill.
App. 3d 637, 645 (1981). As we have noted above, West American's
coverage obligations were triggered by its actual knowledge of
the
lawsuit. See Federated Mutual, 282 Ill. App. 3d at 726.
Notwithstanding the content of Barbara Baird's affidavit, the
record demonstrates that West American received actual knowledge
of
the lawsuit at the time that B&D made its tender of defense.
As its final argument, West American contends that, if it
does
owe Cincinnati reimbursement for indemnity and expense costs, it
should not be liable for costs incurred by Cincinnati prior to
January 28, 1992, the day on which Cincinnati formally requested
contribution. As noted above, the trial court ruled that West
American was responsible for all costs incurred after January 2,
1991, which was the date that B&D's attorney served responses to
Baird's discovery requests. West American argues that it should
not be held responsible for litigation costs incurred prior to
Cincinnati's tender, as it had no control over the determination
of
how these costs were incurred. We disagree.
West American's coverage obligations were not triggered at
the
time of Cincinnati's tender of defense, but at the time it had
actual knowledge of the underlying action. Federated Mutual, 282
Ill. App. 3d at 726. As we have already discussed, West American
possessed such actual knowledge at the time B&D tendered defense
of
the underlying action, as well as the time B&D's attorney
responded
to Baird's discovery requests concerning coverage under the West
American policy. We therefore agree with the trial court's
determination that West American's obligations to defend and
indemnify also began at this time. If West American desired to
have input or control over the manner in which litigation funds
were expended, it certainly could have become involved once it
was
aware of its coverage obligations to Baird under its policy.
West
American's failure to do so, however, will not excuse its
obligations under the law.
For the foregoing reasons, the judgment of the circuit court
of Du Page County is affirmed.
Affirmed.
THOMAS and RATHJE, JJ., concur.