dissenting:
I respectfully dissent. The majority erroneously concludes that the exception to the exclusion applies in this case, triggering coverage and a duty to defend. The majority comes to this conclusion believing that the doctrine of stare decisis requires such a result.
I recognize the importance of stare decisis upon our legal system. To maintain a uniform body of law and assure that the public may rely on our decisions, we must leave settled points of law undisturbed and may not abandon or modify earlier decisions of this court soon after their adoption. People v. Delatorre, 279 Ill. App. 3d 1014, 1020 (1996). However, the doctrine of stare decisis may not be so rigid as to require us “to veil the injustice resulting from a doctrine in need of reevaluation.” Alvis v. Ribar, 85 Ill. 2d 1, 24 (1981). In this case, I believe there is good and sufficient cause to disavow and depart from Michael Nicholas. Initially, I note that Michael Nicholas itself was a departure from earlier precedent. See Hankins v. Pekin Insurance Co., 305 Ill. App. 3d 1088 (1999). Although Hankins was decided by the Appellate Court, Fifth District, it is no less binding upon this appellate district. See People v. Granados, 172 Ill. 2d 358, 371 (1996) (“There is only one Illinois Appellate Court ***”). In light of this history and its erroneous reasoning, Michael Nicholas requires reevaluation. By following our previous decision in Michael Nicholas, the majority disregards prior precedent, continues a conflict between districts of the appellate court, and subverts logic and public policy.
As the discussion of Michael Nicholas reveals, a party’s tort liability is not necessarily based on that party’s own negligence. See also O’Banner v. McDonald’s Corp., 173 Ill. 2d 208, 213 (1996) (discussing vicarious liability); Carroll v. Faust, 311 Ill. App. 3d 679, 691 (2000) (discussing strict liability). However, the analysis contained in Michael Nicholas characterizes aspects of tort liability that are preexisting and imposed by operation of law, as being assumed under the terms of the indemnification contract in question. The major deficiency with both the majority and Michael Nicholas decisions is that they ignore the distinction between those matters that are imposed by law and those that have been assumed by the insured through the indemnification contract. The joint and several liability analysis in Michael Nicholas presumes that the insured assumed the joint and several liability of all the joint and several tortfeasors. There is no such language in the indemnification contract, and one would not expect such a discussion relating to a preexisting duty imposed by operation of law. Joint and several liability is not assumed by a tortfeasor; if it were, it could be disclaimed or avoided by mere iteration. The aspects of tort liability as discussed by Michael Nicholas are red herrings because they are imposed rather than assumed and they are neither contained in nor contemplated by the indemnification contract or the insurance policy.
Michael Nicholas not only fails to address what is or is not assumed under the indemnification contract, but also fails to discuss the nature and extent of such an assumption. Assuming arguendo joint and several liability was assumed, then it would mean that the nonemployer/indemnitee would be able to obtain total satisfaction of the judgment entered in the original cause in violation of the Construction Contract Indemnification for Negligence Act (the Act) (740 ILCS 35/1 et seq. (West 2000)). Additionally, it would constitute a waiver of all the immunities provided to an employer/indemnitor pursuant to the Workers’ Compensation Act. See 820 ILCS 305/11 (West 2000); Kotecki v. Cyclops Welding Corp., 146 Ill. 2d 155, 165 (1991). The principle that tortfeasors who are held jointly and severally hable are each fully responsible for the entirety of the plaintiffs injury has been explained:
“ ‘Joint and several liability only applies to injuries for which the defendant herself is fully responsible. She is responsible for the entirety of some injury only if her tortious behavior was an actual and proximate cause of the entire injury.’ ” (Emphasis omitted.) Best v. Taylor Machine Works, 179 Ill. 2d 367, 428 (1997), quoting R. Wright, The Logic and Fairness of Joint and Several Liability, 23 Memphis St. U.L. Rev. 45, 54-56 (1992).
The fact that the parties are construction companies does not mean, ipso facto, as determined by Michael Nicholas, that the parties must have intended something that makes the definition declared in Hankins ambiguous. The majority correctly recites and then misapplies the well-settled principle that a term is ambiguous only if it is susceptible to at least two reasonable interpretations. 337 Ill. App. 3d at 704. Both the majority and Michael Nicholas assert that it is reasonable to interpret the indemnification contract as declaring that the employer/indemnitor assumed the tort liability of the nonemployer/ indemnitee. In light of the Act’s prohibition against indemnification in this context, this interpretation is not reasonable. An interpretation that violates a statute cannot be considered reasonable. See Swavely v. Freeway Ford Truck Sales, Inc., 298 Ill. App. 3d 969, 976 (1998) (“There is no exception to the rule that a contract that violates a valid statute is void, as the law cannot enforce a contract which it prohibits”).
Further, parties are assumed to know the law. The fact that this exception to an exclusion may not apply in some or most instances does not mean it can never apply. During oral argument, the employer/ indemnitor correctly observed that the “insured contract” exception is not devoid of benefit to an insured in the construction industry. For example, if the employer/indemnitor entered into a lease for office space, the Act would not apply and the employer/indemnitor/lessee could agree to indemnify the lessor against its own negligence, i.e., to assume the lessor’s tort liability. When interpreting an insurance policy, the court must consider the type of insurance purchased, the types of risks involved, and the overall purpose of the contract. Fuller’s Car Wash, Inc. v. Liberty Mutual Insurance Co., 298 Ill. App. 3d 167, 170 (1998). However, we may not interpret a contract so as to violate public policy or statutory law as was the case in Michael Nicholas. See State Farm Mutual Automobile Insurance Co. v. Collins, 258 Ill. App. 3d 1, 3 (1994). The fact that the parties anticipated that most of the employer/indemnitor’s contracts would involve construction does not alter that proscription. Adopting the Michael Nicholas interpretation would sanction an interpretation that is against public policy as expressed in the Act. Contract provisions that are void as against public policy are unenforceable and have no legal effect. Swavely, 298 Ill. App. 3d at 976. This court is constrained to interpret the language of the contract in such a way that is deemed reasonable and consistent with established law and public policy. See Collins, 258 Ill. App. 3d at 3. Thus, Michael Nicholas improperly creates an ambiguity by constructing an unreasonable interpretation of “insured contract” and improperly presuming an assumption of a liability imposed by law.
Michael Nicholas fails to address the paradox that one cannot assume a preexisting duty. Had it addressed the paradox, it would have realized the illusory distinction made to create the ambiguity it found to exist. See Johnson v. Maki & Associates, Inc., 289 Ill. App. 3d 1023 (1997). The preexisting duty rule states that there is no consideration where a party does what it is already legally obligated to do. Johnson, 289 Ill. App. 3d at 1028. The majority and Michael Nicholas both equate a preexisting duty with one assumed under a contract and then use this invalid premise as a basis for their conclusion that there is coverage under the contract.
Michael Nicholas also found an assumption of tort liability by the insured’s waiver of the Kotecki cap. In this case, the employer/ indemnitor argues that an insured who waives the Kotecki cap is merely waiving an affirmative defense and is not assuming any tort liability that did not already exist in its own pro rata share of negligence liability. I agree. The waiver of the Kotecki cap is a waiver of a right to a credit or offset that is provided by law and would reduce the amount of money due from the insured. See Kotecki, 146 Ill. 2d at 165. Neither reducing nor increasing the out-of-pocket expense of the employer/ indemnitor means that the proportionate shares of liability have been altered. The pro rata share of the employer/indemnitor remains intact as does the pro rata share of the nonemployer/indemnitee. Were the employer/indemnitor to actually agree to alter and enlarge its pro rata share, it would then be agreeing to indemnify the other party for a portion of its negligence. Again, such an agreement is against public policy as expressed in the Act (740 ILCS 35/1 et seq. (West 2000)), something that Michael Nicholas failed to recognize. Although the relationship between the insured/employer/indemnitor and the insurer in Christy-Foltz, Inc. v. Safety Mutual Casualty Corp., 309 Ill. App. 3d 686, 693 (2000), is different from that in the case at bar, the ChristyFoltz court determined that the Kotecki cap waiver was a waiver of a right and not an assumption of another party’s liability. The ChristyFoltz court explained:
“In agreeing to waive the right to invoke Kotecki as an affirmative defense, the plaintiff voluntarily assumed contribution liability in excess of the liability limitations provided to employers under the Compensation Act.” (Emphasis added.) Christy-Foltz, 309 Ill. App. 3d at 693.
Christy-Foltz does not mention liability limitations under joint and several liability or pro rata shares that determine contribution. The right to contribution in this context means that the pro rata share found by the trier of fact to apply to the parties would neither be affected nor increased beyond that pro rata share of the employer/ indemnitor, e.g., that a judgment of $100,000 for which the insured was 40% liable would not be altered. With or without the Kotecki waiver, the insured would not have assumed liability in an amount greater than $40,000. The issue ought not be transmuted, as Michael Nicholas did, from the insured increasing his out-of-pocket loss to the insured assuming another party’s liability in tort. Until the insured agrees to be liable for $40,001 or more of the judgment, there has not been an assumption of another party’s tort liability. Michael Nicholas violates public policy because, if it is reasonable to interpret the indemnification contract to determine that the insured/employer/ indemnitor may properly increase its pro rata share of the liability, then it must follow that the pro rata share of the nonemployer/ indemnitee has decreased. That again is against public policy because it allows a party to be indemnified for its own negligence in violation of the Act.
The insurance policy at issue contains an exception to its exclusion for “insured contracts.” The policy defines an “insured contract” as a contract “under which [the insured] assume[_s] the tort liability of another party to pay for ‘bodily injury’ or ‘property damage’ to a third person or organization.” (Emphasis added.)
I believe the only reasonable interpretation is that the employer/ indemnitor agreed to indemnify the nonemployer/indemnitee for the employer/indemnitor’s own negligence consistent with the prior precedent as determined in Hankins. There is nothing in the contract between the joint tortfeasors in this case that indicates to the contrary. Further, there is no language that indicates that each party agreed to forego the right of contribution, which might arguably reduce the other party’s pro rata share. There is language that relates to the Kotecki cap, but such language does not affect the joint and several liability between the parties, nor does it alter the pro rata shares of liability of the parties. The indemnification contract does not state that any liability attached to the other party has been assumed by the insured. In the context of the contract language as interpreted by Michael Nicholas, the insured could only have assumed a duty to indemnify in violation of the Act.
Unless the contract entered into by the nonemployer/indemnitee and employer/indemnitor fits the definition of an insured contract, it would not and could not trigger coverage. There is nothing in the contract that plausibly assumes another’s liability in tort. I believe that the Michael Nicholas analysis improperly created an ambiguity by determining that there was an assumption of a preexisting duty that when applied violated the Act.
I submit the following syllogism. Assuming that Michael Nicholas was correct and that tort liability was assumed, the contract provided for indemnity. Such indemnity would have to be something other than a preexisting duty. If it is other than a preexisting duty, and it is a duty rather than a right or benefit, it must result in greater liability than would normally exist. The insured would be required to pay more than its pro rata share of negligence liability. That would result in the nonemployer/indemnitee receiving indemnification for its own negligence, which would be against public policy as expressed in the Act. Therefore, the particular contract (between the nonemployer/ indemnitee and the employer/indemnitor) would be invalid and void because such a contract cannot legally exist within the strictures of the Act. See Swavely, 298 Ill. App. 3d at 976. It follows that such a contract cannot be the basis for the application of the exception clause in the insurance policy relating to such generic types of contracts and cannot trigger the exception clause relating to the exclusion. Because the exception to the exclusion does not apply, the exclusion applies, and there is no coverage and no duty to defend.
Finally, because the majority has reaffirmed Michael Nicholas, it must be applied to this cause upon remand. On remand, there appear to be two possible dispositions: either the trial court will enter a judgment that awards the nonemployer/indemnitee at least one dollar more than its percentage of negligence liability or it will not. The former disposition will be a violation of the Act. The latter disposition will prove that the employer/indemnitor never assumed the tort liability of the nonemployer/indemnitee and that the analysis in Michael Nicholas is a paradox.
I submit the majority has misapplied the principle of stare decisis, continued the conflict between the appellate districts, and reaffirmed a paradox, i.e., coverage based upon an ambiguity created by an unreasonable interpretation violative of public policy. Thus, I must respectfully dissent.