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Bitum. Cas. Corp. v. Iowa Nat'l Mut. Ins.

OPINION FILED MARCH 19, 1985.

BITUMINOUS CASUALTY CORPORATION, PLAINTIFF-APPELLANT AND CROSS-APPELLEE

v.

IOWA NATIONAL MUTUAL INSURANCE COMPANY ET AL., DEFENDANTS-APPELLEES AND CROSS-APPELLANTS.



Appeal from the Circuit Court of Peoria County; the Hon. Robert E. Manning, Judge, presiding.

PRESIDING JUSTICE HEIPLE DELIVERED THE OPINION OF THE COURT:

Rehearing denied June 4, 1985.

Bituminous Casualty Corporation (Bituminous) brought the instant complaint for declaratory judgment against Iowa National Mutual Insurance Company (Iowa National). The circuit court dismissed the complaint with prejudice. Iowa National counterclaimed against Bituminous for fees and costs under an assignment of rights from the parties' mutual insured, Pelco Structures, Inc. (Pelco). The counterclaim was also dismissed. We affirm on both counts.

Pelco is a third-party defendant in a personal injury suit brought in Cook County. Bituminous is Pelco's primary insurer for occurrences of the type at issue in that suit. The applicable policy has a $100,000 coverage limit. Iowa National issued an umbrella excess liability policy to Pelco with a $300,000 coverage limit. The duty to defend contained in the Bituminous policy reads as follows:

"II. Defense, Settlement, Supplementary Payments: As respects the insurance afforded by the other terms of this policy the company shall:

(a) defend any proceeding against the insured seeking such benefits and any suit against the insured alleging such injury and seeking damages on account thereof, even if such proceeding or 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 proceeding or suit and interest accruing after entry of judgment until the company has paid or tendered or deposited in court such part of such judgment as does not exceed the limit of the company's liability thereon;

(d) reimburse the insured for all reasonable expenses, other than loss of earnings; incurred at the company's request."

Iowa National's policy also contains a duty to defend clause. The underlying insurance referred to therein is the Bituminous policy.

"When underlying insurance does apply to an occurrence:

This policy does not apply to defense, investigation, settlement or legal expenses covered by underlying insurance, but the company shall have the right and opportunity to associate with the insured in the defense and control of any claim or proceeding reasonably likely to involve the company. In such event the insured and the company shall cooperate fully.

In the event that the limits of liability of the underlying insurance listed in the schedule of underlying insurance are exhausted by occurrence, the company shall be obligated to assume charge of the settlement or defense of any claim or proceeding against the insured resulting from the same occurrence, but only where this policy applies and is immediately in excess of such listed underlying insurance without intervening excess insurance with another insurer."

Bituminous undertook the defense of Pelco upon the filing of the action against it. As the potential exposure of the two insurers became apparent, Iowa National took charge of directing the course of Pelco's defense. Bituminous continued to assume all costs of defending.

Realizing that its policy limits would probably be exhausted by the suit, Bituminous tendered the defense of the suit to Iowa National. The policy limit of $100,000 was tendered toward the settlement of the claim. Iowa National refused. Its position was and continues to be that as primary insurer, Bituminous has a non-delegable duty to defend Pelco against all claims until its policy limits have been exhausted. Consequently, ...


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