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Occidental Fire & Cas. v. Undwtrs. At Lloyd's

APRIL 8, 1974.




APPEAL from the Circuit Court of Cook County; the Hon. ABRAHAM W. BRUSSELL, Judge, presiding.


The defendant Underwriters, the excess carrier, appeals from a summary judgment that it pay to the plaintiff Virginia Surety, the primary insurer, $35,939.17, as its pro rata share of the costs (legal fees and expenses, etc.) of an earlier unsuccessful appeal by the latter of a personal injury judgment against B.L. Cartage Co., insured by both of them, well in excess of their limits.

In 1954 suit was filed against the Cartage Company and one of its drivers for injuries arising out a collision between one of its trucks and a passenger vehicle. After protracted litigation, judgments were entered in November of 1965 against the Cartage Co. for $100,000 for the driver of the other vehicle and for another $20,000 for the passenger. The assured's attorneys had been selected and paid by Virginia Surety and, after said judgment, at the sole direction of Virginia Surety, they took an appeal to this court which (110 Ill. App.2d 260), in 1969, affirmed.

Two days later Virginia Surety notified the Cartage Co. and Underwriters that it was tendering the limits of its policy and would take no further appeal or other action. Underwriters then, at its own expense, including interest on the judgments from and after Virginia Surety's tender, filed a petition for leave to appeal, which was denied by the supreme court. The judgments were then satisfied in January of 1970, with Virginia Surety paying $20,000, Underwriters paying $50,000 and the Cartage Co. paying the balance of $50,000. Virginia Surety also paid all expenses and costs, including interest, up to the date of its tender; Underwriters paid all expenses and costs of the petition for leave to appeal, including interest on the judgments from the date of the tender to the date the judgments were actually satisfied; and the Cartage Co. itself paid no expenses, costs or interest whatsoever.

In February of 1970, Virginia Surety sued Underwriters, setting out the basic facts above outlined, attaching copies of both policies and contending: (1) that, under Condition 12 of its policy, where the assured had "other insurance" against the same loss, it was not liable for more than its pro rata share of such loss; (2) that, under Condition 1(c) of Underwriters' policy, where the sum for which such claim may be adjustable exceeds the primary limit and Underwriters consents to the proceedings continuing, it shall contribute pro rata to such costs; and (3) that it was therefore entitled to recover $35,305.69 from Underwriters as the latter's pro rata share of said costs. In June of 1970, a Count II, seeking another $16,391.52 as Underwriters' pro rata share of the costs in the trial court, prior to the date of the basic judgments, was filed.

Underwriters answered, including the affirmative defenses: (1) that Virginia Surety lacked standing to sue, in that it had no contractual relationship with Underwriters and was not a third-party beneficiary of that contract; (2) that, under Underwriters' policy, it need not pay any portion of such costs (a) because they were not incurred by the assured personally, (b) because all such costs were covered and paid by the primary insurer, and (c) because Underwriters did not in writing authorize the assured to incur them; and (3) that Underwriters policy is "excess" insurance, not "other insurance" within the meaning of the clause relied upon.

Both parties moved for summary judgment. In September of 1972, the trial court entered summary judgment for Underwriters insofar as Virginia Surety sought (in Count II) a pro rata recovery for its costs and expenses in the trial court up to the date of the judgments; and Virginia Surety has not cross appealed. The trial court did, however, enter summary judgment (on Count I) that Underwriters pay Virginia Surety $35,939.17, as its pro rata share of the costs (legal fees and expenses, etc.) of its said earlier unsuccessful appeal of the personal injury judgments.

Virginia Surety's primary layer policy, after providing the assured with coverages up to $10,000 for personal injuries to any one person and up to $20,000 for total personal injuries in any one action, in pertinent parts further provided as follows:

"Defense, Settlement, Supplementary Payments

As respects the insurance afforded by the other terms of this policy under coverages A and B the company shall:

(a) defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient;

(c) pay all expenses incurred by the company, all costs taxed against the insured in any such suit and all interest accruing after entry of judgment until the company has paid, tendered or deposited in court such part of such judgment as does not exceed the limit of the company's liability thereon;

The amounts incurred under this insuring agreement, except settlements of claims and suits, are payable by the company in addition to the applicable limit of liability of this policy.


12. Other Insurance — Coverages A and B. If the insured has "other insurance against a loss covered by this policy the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable liability of all valid and collectible insurance against such loss; provided, however, the insurance with respect to temporary substitute automobiles under Insuring Agreement IV or other automobiles under Insuring Agreement V shall be excess insurance over any other valid and collectible insurance available to the insured, either as an insured under a policy applicable with respect to said automobiles or otherwise."

Underwriters' policy, in pertinent parts, provided as follows:

"THIS INSURANCE, subject to the terms, conditions, limitations and exclusions hereinafter mentioned, is to indemnify the Assured in respect of accidents * * * for any and all sums which the Assured shall by law become liable to pay and shall pay or by final judgment be adjudged to pay to any person or persons * * * as damages

(a) for bodily injuries, including death at any time resulting therefrom, caused by accident, hereinafter referred to as `Bodily Injury', * * * arising out of the hazards covered by and as defined in the underlying policy/ies specified in the Schedule herein and issued by the ...

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