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08/08/88 Continental Casualty v. Roper Corporation

August 8, 1988

CONTINENTAL CASUALTY COMPANY, PLAINTIFF AND COUNTERDEFENDANT-APPELLEE

v.

ROPER CORPORATION, DEFENDANT AND COUNTERPLAINTIFF-APPELLANT



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIRST DIVISION

527 N.E.2d 998, 173 Ill. App. 3d 760, 123 Ill. Dec. 360 1988.IL.1234

Appeal from the Circuit Court of Cook County; the Hon. Thomas J. O'Brien, Judge, presiding.

APPELLATE Judges:

PRESIDING JUSTICE CAMPBELL delivered the opinion of the court. QUINLAN and O'CONNOR, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE CAMPBELL

This appeal is predicated upon an umbrella excess third-party liability policy (the policy) issued by plaintiff-counterdefendant, Continental Casualty Company, to defendant-counterplaintiff, Roper Corporation. Roper appeals from three orders entered by the trial court: (1) the April 23, 1987, order holding that coverage A of the policy, not coverage B, applied to the claims at issue; (2) the June 23, 1987, order allowing Continental to file its affirmative defense in response to Roper's second amended counterclaim; and (3) the September 15, 1987, order denying the relief requested by Roper in its second amended counter-claim. On appeal, Roper contends that the trial court erred in entering each of the above orders. For the following reasons, we affirm the judgments of the trial court.

The Policy issued by Continental to Roper contained two coverage provisions relevant to this appeal:

"1. COVERAGE A -- EXCESS LIABILITY INDEMNITY

The company will indemnify the insured for loss in excess of the total applicable limits of liability of underlying insurance stated in the schedule. The provisions of the immediate underlying policy are, with respect to Coverage A, incorporated as a part of this policy except for any obligation to investigate and defend and pay for costs and expenses . . .."

"2. COVERAGE B -- EXCESS LIABILITY INDEMNITY OVER RETAINED LIMIT.

The company will indemnify the insured, with respect to any occurrence not covered by underlying insurance, or with respect to damages not covered by underlying insurance but which results from an occurrence covered by underlying insurance, for ultimate net loss in excess of the insured's retained limit which the insured shall become obligated to pay as damages by reason of liability imposed upon the insured by law or assumed by the insured under any contract because of personal injury, property damage, or advertising injury to which this coverage applies, caused by an occurrence . . .."

Pursuant to the underlying insurance policy issued to Roper by Columbia Casualty Company, Columbia's limits of liability were $950,000 per occurrence with a $1 million annual aggregate in excess of Roper's self-insured retention of $50,000 per lawsuit. On June 12, 1981, Columbia notified Roper that the policy limits had been reached for claims that arose during the 1975-76 policy year. At that time, 15 lawsuits filed against Roper which would have been covered by Columbia's policy had not the policy limits been reached remained pending. With the exception of two of the pending lawsuits, Mt. Eden and Webster, Continental indemnified Roper for settlement and verdict amounts in excess of Roper's $50,000 per occurrence self-insured retention. The Mt. Eden claim is the subject of a separate action. The Webster claim is the subject of Roper's second amended counterclaim and is at issue on this appeal.

With respect to the Webster claim, the cause of action accrued in March 1975 and a lawsuit was filed against Roper in 1980. As previously stated, because Columbia's policy limits had been exhausted for claims arising in the 1975-76 policy period, Roper sought indemnification from Continental. On April 8, 1982, Webster made a settlement demand of $500,000 to Roper. Roper notified Continental, which responded that it would contribute $50,000 to settlement, contingent upon Roper's payment of its self-insured retention of $50,000. The case was tried on April 12-15, 1982, and a verdict was entered against Roper and Sears for $76,000. Roper appealed on the issue of liability only.

On April 29, 1982, Continental filed a declaratory judgment action seeking a determination that under coverage A of the Policy, Continental had no obligation to defend Roper or to pay for Roper's defense and that Roper was not entitled to apply any amount it expended for its own defense against its per occurrence self-insured retention. On May 19, 1982, Continental informed Roper that if it pursued the Webster appeal, it would accept maximum liability of only $25,000 based on its obligations pursuant to the verdict of $76,000. On June 18, 1982, Roper rejected Continental's position. Shortly thereafter, on July 9, 1982, Roper offered Webster $20,000 to settle. Webster rejected the offer and counteroffered to settle at $70,000. In a letter dated November 9, 1982, Continental requested Roper to immediately negotiate a settlement within its $50,000 self-insured ...


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