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Oda v. Highway Ins. Co.

NOVEMBER 6, 1963.




Appeal from the Superior Court of Cook County; the Hon. SAMUEL B. EPSTEIN, Judge, presiding. Orders affirmed.


This is an appeal from a decree in a declaratory judgment proceeding denying plaintiffs the relief sought. Multiple parties and multiple causes of action are involved. The principal plaintiffs-appellants are Rae Naiditch, individually, and Irving Naiditch and Saul R. Bernstein, as executors of the last will of Albert Naiditch, and Kenneth Oda (insured plaintiffs). The principal issue involves the duty of a public liability insurer where conflicts of interest arise between insurer and insured and between the insured co-defendants in personal injury suits.

Albert and Rae Naiditch together with Kenneth Oda were the defendants in personal injury suits in which judgments on verdicts totaling $255,000 were entered pursuant to directions of the Supreme Court of Illinois (Dini v. Naiditch, 20 Ill.2d 406, 170 N.E.2d 881). They were insured under a policy issued by the principal defendant, Highway Insurance Company (the insurance company). This policy limited liability to $50,000 with respect to one person and $100,000 for each accident. Notwithstanding the limitation, the insured plaintiffs maintain that the insurance company is liable to them for the difference between the amounts limited by the policy (which the insurance company has paid) and the total amount of the judgments. The principal basis for this claim is that there were conflicts of interest between the Naiditches and Oda and that the insurance company, by failing to employ counsel to represent each of them exclusively, breached the covenant of its policy. Gino Dini and Elizabeth Dini, his wife, and Lillian M. Duller, administratrix of the estate of Edward Duller, who were the plaintiffs in the personal injury cases, and James Dooley, the attorney in the personal injury cases, are also parties defendant in the suit now before us.

The complaint consisted of five counts. Counts 1 and 2 related to the alleged failure of the insurance company to properly defend the insured plaintiffs in the personal injury suits. Count 3 related to the claim of the A.A. Store Fixture Mart Co., Inc., a tenant in the building hereinafter referred to, also a party plaintiff, which sought to hold the insurance company liable for property damages sustained by it. The chancellor sustained the insurance company's motion to strike the three counts and dismissed them for want of equity. The fourth count charged vexatious delay on the part of the insurance company in failing to pay its admitted obligation under the policy in due time and sought to recover attorneys' fees. The chancellor granted defendants' motion and entered summary judgment on that count. The fifth count sought to charge the company with an obligation to defend the insured plaintiffs against a suit of Elizabeth Dini, the wife of Gino Dini, for loss of consortium. To this, defendants filed a counterclaim supported by an uncontroverted affidavit. The chancellor held that the insurance company was no longer required to defend that claim, having paid out the maximum amount provided in its policy with regard to claims arising out of injuries sustained by Gino Dini. It is from these orders that this appeal is taken.

In arriving at his decision the chancellor took into account not only those averments well pleaded in the complaint, but also the facts stated in the opinion in Dini v. Naiditch, 20 Ill.2d 406, 170 N.E.2d 881, and those admitted by counsel before the trial court. The court also took into consideration the uncontroverted averments of an affidavit filed in support of defendants' motion for summary decree as to Counts 4 and 5 and as to defendants' counterclaim to Count 5.

The personal injury suits were the outgrowth of a fire which occurred on April 28, 1955 in a building at the intersection of Milwaukee Avenue and Green Street, in Chicago, in which one fireman, Gino Dini, was injured and another, Edward Duller, was killed. The building, constructed in 1896, consisted of four floors and a basement. It was owned by Albert Naiditch and Rae Naiditch (landlords) in joint tenancy. (They were actually beneficiaries under a trust, but were treated by all parties as the owners.) The second, third and fourth floors, adapted for use as a hotel, apartment hotel or lodging house, were leased to Thomas Sato and Mary Sato, his wife, and Ted Oda, none of whom are parties to the instant suit. Kenneth Oda, although not a party to the lease was a partner with the lessees in the operation of the hotel with the knowledge and consent of the landlords. The fire broke out in that portion of the premises operated by Oda and his partners.

After the fire, the following suits were brought against Albert Naiditch and Rae Naiditch, Thomas Sato and Mary Sato, his wife, and Kenneth Oda:

(1) a suit by Gino Dini for personal injuries;

(2) a suit by Lillian M. Duller, as administratrix of the estate of Edward Duller, under the Illinois Injury Act, for damages due to the death of her husband; and

(3) a suit by Elizabeth Dini for damages due to the loss of consortium resulting from the injuries to her husband.

Upon the death of Thomas Sato, the suits against him and his wife were voluntarily dismissed.

Liability in the personal injury cases was based principally on the charges that the Naiditches and Oda were guilty of the following acts of negligence:

(1) the storage of benzine and paint in close proximity to a stairway which collapsed and caused the death of Duller and the injury to Dini;

(2) violation of certain provisions of the Municipal Code, requiring that structures such as the premises in question have enclosed stairwells, fire-doors and fire extinguishers, and specifying that oil rags and waste be kept in approved waste cans of heavy galvanized iron with self-closing covers during the day and be removed at night, and that rubbish not be allowed to accumulate in any part of the building. (Emphasis added.)

A more complete statement of the facts is contained in the opinion in Dini v. Naiditch, supra.

Following institution of the suits, the insurance company, being advised by the insured plaintiffs of the service of summons and of the complaints, wrote substantially identical letters to them, as follows:

"October 1, 1956.

"Dear Sir:

This will acknowledge receipt of summons in the above matter, and we have referred the same to our attorney, Mr. Robert L. Brody, 330 ...

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