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St. Paul Fire & Marine Ins. v. Michelin Tire Corp

MAY 15, 1973.




APPEAL from the Circuit Court of Cook County; the Hon. JOSEPH M. WOSIK, Judge, presiding.


Rehearing denied June 5, 1973.

This is an indemnity action which seeks recovery of sums paid in settlement to the estates of four individuals killed in a 1962 collision between the car in which they were riding and a truck operated by plaintiff's insured. The case was tried upon a theory of strict liability in tort for the manufacture and sale of a defective product. After a bench trial judgment for plaintiff was entered in the stipulated amount of $39,000. Two contentions are raised on appeal: (1) that plaintiff's failure to give notice to defendants prior to settling the initial litigation imposed upon plaintiff the duty to subsequently prove the liability of its insured (in order to avoid the status of a volunteer) and the reasonableness of the settlement, and that such burden was not met; (2) that the evidence on the issue of a manufacturing defect required a finding in favor of defendants, or, in the alternative, that the finding in favor of plaintiff on that issue was contrary to the manifest weight of the evidence.

On August 29, 1962 a truck operated by an employee of the Pillsbury Company (hereinafter referred to as Pillsbury) collided head-on with an automobile occupied by four individuals, all of whom were killed. The immediate cause of the collision was apparently a blowout in the truck's front left tire, causing the truck to swerve into the path of the oncoming car. The tire in question was manufactured by defendant Michelin Tire Corporation (hereinafter referred to as Michelin) and sold by defendant Smith Tire Company (hereinafter referred to as Smith). Lawsuits on behalf of the estates of each of the deceased occupants were filed in the Circuit Court of Cook County against Pillsbury, the driver of the truck and the lessor of the truck. *fn1 The complaints alleged numerous negligent and careless acts and omissions, including failure to maintain the truck in a safe operating condition and failure to equip the truck with safe tires. Pillsbury and its insurance carrier, St. Paul Fire and Marine Insurance Company, settled all these claims for the total amount of $38,950. Subsequently, Pillsbury filed a complaint for indemnity against defendants, alleging that the tire on the truck was defective and was the proximate cause of the collision. In a second amended complaint, St. Paul Fire & Marine Insurance Company, which had paid the entire settlement, was substituted as plaintiff.


Defendant's first contention is that the settlement of the initial lawsuit, without notice to the prospective indemnitors, imposed upon plaintiff the burden of proving that plaintiff's insured was in fact liable to the four estates and that the settlement amounts were reasonable. It is asserted that this burden, in addition to the burden of proving the primary liability of the indemnitor, is assumed by any party who voluntarily pays a settlement without such notice. No direct authority is cited for this proposition, and our research has uncovered no case concerning the precise issue. It is a matter of first impression in Illinois.

• 1, 2 We hold that, in addition to proving the primary liability of the indemnitor for the injury occasioning a settlement, an indemnitee who settles without notice to the prospective indemnitor need prove only that, by settling, he was responding to a reasonable anticipation of personal liability rather than acting as a mere volunteer. The reasonableness of the amounts paid in settlement is a matter bearing solely upon the issue of damages.

That a party in plaintiff's posture need not prove his or his insured's negligence, but need only establish potential liability, is supported by case law and by policy considerations. In Sleck v. Butler Brothers, 53 Ill. App.2d 7, 202 N.E.2d 64, an injured workman sued the owners of the building in which he had been injured and the general contractor for the job on which he had been working. The complaint alleged general negligence and violation of the Structural Work Act. Defendants filed third party complaints against plaintiff's immediate employer, seeking indemnity on a theory of active-passive negligence. After giving notice to the employer, defendants settled with plaintiff, and an appropriate consent order was entered. The indemnity action proceeded to a bench trial and a directed verdict for third party defendant. On appeal, third party defendant asserted that the judgment in its favor was justified by the gratuitousness of the settlement by third party plaintiffs; that the evidence clearly showed that third party plaintiffs were not "in charge" of the operation in which plaintiff had been injured and could not have incurred liability. In rejecting this contention, the appellate court enunciated and applied the appropriate rule as follows:

"[T]he third-party plaintiffs are not volunteers; a party may seek contribution even though it has not been judicially determined that it is liable to the injured party. The Sack and Gulf cases heretofore cited are in point. It is necessary only that the person seeking contribution has been subjected to liability because of the wrongful conduct of another. In Boston v. Old Orchard Business Dist., Inc., 26 Ill. App.2d 324, 329, 168 N.E.2d 52 (1960), the court stated:

`Whether the legal principle upon which the third party complaint is based is contribution or indemnity, in either case the fact that a party against whom a legal liability is asserted made a fair settlement in good faith without a judgment having been entered against him does not prevent his seeking to enforce a claim for reimbursement against another person primarily responsible for the injury suffered by the plaintiff. * * *'

In the instant case the third-party plaintiffs were subjected to tort liability by the wrongful acts of the third-party defendant. Third-party plaintiffs Butler and Canal owned the building and had inspected the elevator before the third-party defendant began its work at the building. Third-party plaintiff Gallaher had contracted with the owners of the building to do the work in question and then subcontracted that work to the third-party defendant. These circumstances could reasonably be considered to create a question of fact as to whether the third-party plaintiffs were technically responsible for the work being done and technically liable to Sleck for failing to discharge a supervisory responsibility even though they were not guilty of any active common law negligence or any active violations of the Structural Work Act." 53 Ill. App.2d 7, 17-18.

Defendants have offered no cogent reason why an indemnitee's failure to give pre-settlement notice to a prospective indemnitor would warrant a different approach. See also, Allied Mutual Casualty Corp. v. General Motors Corp. (10th Cir.), 279 F.2d 455; Popkin Bros. Inc. v. Volk's Tire Co., 20 N.J. Misc. 1, 23 A.2d 162.

• 3 We see no way in which plaintiff's settlement either did or could prejudice defendants by depriving them of any defenses, whether negative or affirmative, which would otherwise have been available to them; that situation, of course, would be a very different matter. Our position is further supported by the established tenet that the law favors the amicable compromise and settlement of litigation. (I.L.P. Compromise and Settlement par. 2) A defendant who might otherwise be amenable to settlement in the initial action might well elect to seek vindication in that action, in which plaintiff would carry the burden of proving negligence, rather than in a subsequent indemnity action in which, under defendants' contention, he would carry that burden. Settlements would be discouraged and a multiplicity of actions fostered.

• 4 In the case at bar it is manifest that plaintiff's insured was confronted with a reasonable anticipation of liability. The pleadings filed on behalf of the decedents' estates alleged facts and a variety of negligent acts and omissions by Pillsbury which could have supported a substantial judgment. *fn2 Although we do not believe that it would be fatal to plaintiff's action if those complaints had alleged only "active" negligence (Miller v. DeWitt, 37 Ill.2d 273, 290-291, 226 N.E.2d 630; Blaszak v. Union Tank Car Co., 37 Ill. App.2d 12, 184 N.E.2d 808; cf. D'Amico v. Moriarty Meat Co., 47 Ill. App.2d 63, 197 N.E.2d 445; Halligan v. Shulman, 31 Ill. App.2d 168; 175 N.E.2d 590), we note that Pillsbury was charged with failure to properly maintain and equip its vehicle, omissions which might constitute only "passive" negligence. (Shell Oil Co. v. Hercules Construction Co., 74 Ill. App.2d 166, 219 N.E.2d 392; Savage v. Blancett, 47 Ill. App.2d 355, 198 N.E.2d 120.) The parties stipulated to damages in the amount of $39,000, thus relieving plaintiff of its obligation to prove the settlement amounts. ...

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