dissenting in part:
I disagree with sections D and E of the majority opinion.
Statewide’s Attorney Fees and Costs
I do not agree that because the settlement funding agreement declares Statewide to be an “assignee” of JCC, Statewide may therefore stand in the shoes of JCC for purposes of seeking sanctions under section 155 of the Insurance Code (215 ILCS 5/155 (West 2006)). The case the majority cites for this proposition, Peerless Enterprises, Inc. v. Kruse, 317 Ill. App. 3d 133, 142, 738 N.E.2d 988 (2000), concerns an assignment from a judgment debtor to a judgment creditor in the course of a garnishment proceeding. “[The judgment debtor] assigned his rights under the insurance contract to [the judgment creditor.]” Peerless Enterprises, Inc., 317 Ill. App. 3d at 142. To state the obvious, JCC is not a judgment debtor to Statewide; nor can the circumstances of this case give rise to an indebtedness that would flow from JCC to Statewide so as to allow Statewide to stand in the shoes of JCC based on the same relationship of the parties in Peerless Enterprises, Inc. It follows, of course, that there are no circumstances under which Statewide could assume the role of judgment creditor to JCC. Cf. Loyola University Medical Center v. Med Care HMO, 180 Ill. App. 3d 471, 481, 535 N.E.2d 1125 (1989) (provider of medical services “became the ‘insured’ “ upon assignment from original insured).
Under the facts of this case, I see no reason to expand the scope of protection afforded by section 155 to Statewide simply because it shares JCC as an insured with Houston General. Stated differently, I am unpersuaded that sanctions provided for in section 155 for the insured’s protection were meant to benefit an insurance company, which must itself provide coverage to the insured from which it received the assigned claim under a separate policy. See Estate of Price v. Universal Casualty Co., 334 Ill. App. 3d 1010, 1016, 779 N.E.2d 384 (2002) (“The purpose of section 155 is to discourage the insurer from using its superior financial position to profit at the insured’s expense”).
Under the Statewide policy, JCC was the primary insured. Under the Houston General policy, JCC, the general contractor, was an additional insured to Dryden, the primary insured and subcontractor. While it is not clear from the record before us, it is reasonable to conclude that Houston General, as the issuer of the commercial general policy to Dryden, “craft[ed] its policy to limit coverage to the additional insureds to negligence resulting from the primary insured’s work.” National Fire Insurance of Hartford v. Walsh Construction, 392 Ill. App. 3d 312, 315, 909 N.E.2d 285 (2009). As an additional insured under the Houston General policy, JCC was covered only for an insurable event connected to Dryden’s own work. Thus, the two policies do not cover the identical loss. Under the Houston General policy, the loss had to be triggered by Dryden’s own work; under the Statewide policy, the loss had to be triggered by JCC’s work. Different interests were covered by the two policies. See National Fire Insurance, 392 Ill. App. 3d at 314 (tender properly rejected by subcontractor’s insurer where “the complaint made no allegation of negligence on the part of [the subcontractor]”).
I submit that Statewide, contractually obligated to provide a defense to JCC under its own policy, falls outside the set of insureds (or their assignees) intended to be protected by section 155 against a separate insurer’s purported vexatious delay, when the assignee does not succeed to “the same position of the insured” under the disputed policy. Garcia v. Lovellette, 265 Ill. App. 3d 724, 728, 639 N.E.2d 935 (1994). See Richardson v. Illinois Power Co., 217 Ill. App. 3d 708, 711, 577 N.E.2d 823 (1991) (by the enactment of section 155 of the Insurance Code, “[t]he legislature intended to provide a remedy to an insured who encounters unnecessary difficulties when an insurer withholds policy benefits”); Stamps v. Caldwell, 133 Ill. App. 2d 524, 528, 273 N.E.2d 524 (1971) (“Section 155 of the Illinois Insurance Code *** is designed to protect insured parties who are forced to expend attorneys’ fees where the insurer refuses to pay under the terms of the policy”). The aim of section 155 is clear: to sanction an insurer “when it fails to provide one of the most important benefits of a liability policy—a defense.” Richardson, 217 Ill. App. 3d at 711. Based on the wrongful denial of this most important benefit of a liability policy, I submit the protection afforded by section 155 is limited to an insured that might otherwise face the risk of becoming a “judgment debtor” in a garnishment action, should judgment be entered in favor of the party filing suit against the putative insured. See Peerless Enterprises, Inc., 317 Ill. App. 3d at 142. When the judgment creditor is assigned the benefits of the insurance policy from the judgment debtor, the consideration from the judgment debtor is clear. In the context of this case, the assignment from JCC to Statewide of whatever rights it had under the policy issued by Houston General strikes me as nothing more than a shifting of the risks Statewide had assumed from the issuance of its own policy to JCC. I submit much mischief can ensue from such an assignment. See BHI Corp. v. Litgen Concrete Cutting & Coring Co., 214 Ill. 2d 356, 827 N.E.2d 435 (2005) (settlement agreements that provided for assignments of plaintiffs’ remaining claims not made in good faith; therefore, the assigned claims could not be pursued). Under well-established case law, Houston General is precluded from asserting any policy defenses it may have to the claim by JCC because it failed to file a reservation of rights or seek a declaratory judgment as to its duties to JCC. See State Farm Fire & Casualty Co. v. Martin, 186 Ill. 2d 367, 371, 710 N.E.2d 1228 (1999) (“If the insurer fails to take either of these actions, it will be estopped from later raising policy defenses to coverage”). In light of this substantial penalty imposed on Houston General, I see no good reason to open the door still further and allow Statewide, a fellow insurer, to recoup attorney fees and costs from Houston General on a claim of vexatious and unreasonable delay to Statewide’s insured based on a bald assignment from JCC.
The assignment in this case should not be rewarded by upholding an award under section 155 of the Insurance Code between two insurers, each equally obligated to provide a defense to the insured. I dissent from that portion of the majority’s decision.
Westfield’s Duty to JCC
My disagreement with the majority’s position on this issue stems from the relationship between JCC and the two insurers, Westfield and Houston General. JCC is the additional insured under both the Westfield insurance policy and the policy issued by Houston General. That JCC is an additional insured under each policy with different primary insureds makes this case different from the line of cases the majority relies on to reach its conclusion that “JCC deactivated its tender to Westfield.” 397 Ill. App. 3d at 431. I do not believe JCC had the “right to choose or knowingly forgo an insurer’s participation in a claim” (397 Ill. App. 3d at 428) where McCartin’s claim triggered distinct policies covering different subcontractors. The reasons given for recognizing that “[t]he insured may choose to forgo an insurer’s assistance for various reasons, such as the insured’s fear that premiums would be increased or the policy cancelled in the future, and the insured’s ability to forgo a particular insurer’s assistance should be protected,” as the majority writes (397 Ill. App. 3d at 428), ring hollow when the insured in this case is an additional insured under two different policies. Under the circumstances of this case, I am unpersuaded that the factors set out by the supreme court in Cincinnati Cos. v. West American Insurance Co., 183 Ill. 2d 317, 326, 701 N.E.2d 499 (1998), have any application to the general contractor as an additional insured under distinct policies issued to different subcontractors triggered by a common occurrence.
Under the Westfield policy, the primary insured is RC Plumbing; under the Houston General policy, the primary insured is Dryden. Essentially, this case involves subcontractors whose negligence allegedly caused or contributed to McCartin’s injuries; this is not a case where JCC has several insurance policies available covering the same alleged loss. See John Burns Construction Co. v. Indiana Insurance Co., 189 Ill. 2d 570, 576, 727 N.E.2d 211 (2000) (“ ‘if the policy is never triggered, the issue of liability under the “other insurance” clause does not arise’ ”), quoting Institute of London Underwriters v. Hartford Fire Insurance Co., 234 Ill. App. 3d 70, 77, 599 N.E.2d 1311 (1970).
The distinction between this case and the cases relied upon by the majority is that in this case the two policies, one from Westfield, the other from Houston General, were each triggered by the underlying occurrence, making each a co-insurer. “It is only when an insurer’s policy is triggered that the insurer becomes liable for the defense and indemnity costs of a claim and it becomes necessary to allocate the loss among co-insurers. The loss will be allocated according to the terms of the ‘other insurance’ clauses, if any, in the policies that have been triggered. As discussed above, [the general contractor’s] policy was not triggered and its obligation to defend and indemnify [the general contractor] with regard to the [injured party’s] lawsuit was excused by the targeted tender to [the subcontractor’s insurer].” Bituminous Casualty Corp. v. Royal Insurance Co. of America, 301 Ill. App. 3d 720, 726, 704 N.E.2d 74 (1998), cited with approval in John Burns Construction Co., 189 Ill. 2d at 577. I read our supreme court’s statement in John Burns Construction Co. “that the presence of the ‘other insurance’ provision in the [subcontractor’s] policy [does not] serve [ ] by itself to trigger the coverage afforded by [the general contractor’s] policy” to mean that an insured occurrence may trigger coverage under distinct policies issued by co-insurers. John Burns Construction Co., 189 Ill. 2d at 578.
Because neither RC Plumbing nor Dryden may avoid liability for the insured occurrence if they each contributed to McCartin’s injuries—that is, the primary insured under distinct policies may not avoid its shared liability—it follows that the additional insured under the distinct policies may not absolve the liability of one subcontractor to the detriment of another when the respective liabilities arise independently of each other. I submit that JCC, as the additional insured under distinct commercial general liability policies, has no authority under cases decided to date, to place the tort liability arising from RC Plumbing’s contribution to McCartin’s injury at the feet of Dryden. Nor am I persuaded that we should so decide in this case.
I read the circuit court’s denial of summary judgment to Westfield to reflect Westfield’s involvement in the case was triggered by the alleged liability of its primary insured, RC Plumbing, which in turn triggered coverage for its additional insured JCC under the Westfield policy. I am unpersuaded that because the McCartin lawsuit alleged potential liability against two subcontractors, each of whom obtained a liability policy protecting JCC as an additional insured, the two policies issued by two different insurance companies may be effectively merged into shared coverage for the benefit of JCC. It seems beyond contention that each of the policies, Houston General’s issued to Dryden and Westfield’s issued to RC Plumbing, provides coverage for losses only where the loss stems from the alleged negligence of the respective primary insured, Dryden or RC Plumbing. Assuming McCartin’s claim fell under both the Houston General policy and the Westfield policy, I am unconvinced that because JCC is an additional insured under both policies, JCC may allocate the duty to defend and the duty to indemnify to only Houston General. I agree with the issue as framed by Judge Quinn in the circuit court below: “[I]f Statewide and Westfield evenly split the defense and settlement of the McCartin case, is Westfield damaged by the fact that the split should instead have been with Houston General [instead of Statewide]?” My answer is No.
Under the facts of this case, I believe there is no “paramount *** right of the insured to elect which of its insurers would defend a particular claim.” Richard Marker Associates v. Pekin Insurance Co., 318 Ill. App. 3d 1137, 1142, 743 N.E.2d 1078 (2001). This is so under the facts of this case because the choice is not between “contemporaneous coverage from both [Westfield] and [Houston General].” Richard Marker Associates, 318 Ill. App. 3d at 1143. The coverage is not contemporaneous because the triggering occurrence under the distinct policies must in each instance be linked to the work of the primary insured, either Dryden or RC Plumbing, or both. I submit JCC can no more “deactivate” the tender to Westfield based on an occurrence that triggered the coverage provided to RC Plumbing than JCC can decide that liability arising from the triggering event should fall solely on the shoulders of Dryden. As the circuit court made clear below, there is a concurrent duty to defend and indemnify JCC on the part of both Westfield and Houston General.
To be clear, the position I take is not based on “prejudice” to Houston General arising from JCC’s decision seeking to shift liability to Houston General only, as the Second District discussed the term in Richard Marker Associates, 318 Ill. App. 3d at 1144; rather, it is liability for the underlying occurrence under each subcontractor’s policy that determines whether one or both policies have been triggered. I submit that each policy may be triggered by a loss attributable to each primary insured, RC Plumbing and Dryden. Where the loss is attributable to the primary insured of two distinct policies, then the two policies are necessarily triggered. As the Second District recognized, “an insurer’s liability results from the insurance contract, for which the insurer receives consideration.” Richard Marker Associates, 318 Ill. App. 3d at 1144. The insurance contract between RC Plumbing and Westfield covered only liability arising from RC Plumbing’s work for JCC, with the policy providing coverage to JCC as an additional insured. The insurance contract between Dryden and Houston General covered only liability arising from Dryden’s work for JCC, with the policy providing coverage to JCC as an additional insured. There is no insurance contract from Westfield that covered JCC for Dryden’s work; nor is there an insurance contract from Houston General that covered JCC for RC Plumbing’s work. As to the underlying occurrence, the two policies were triggered. The indisputable fact remains that while JCC was provided coverage under the distinct policies issued by West-field and Houston General, the policies did not provide the same coverage.
I cannot agree with the majority that “Westfield did not have a concurrent obligation to defend and indemnify JCC.” 397 Ill. App. 3d at 431. Therefore, I dissent from the majority’s entry of summary judgment in favor of Westfield.