Dismiss the Plaintiff's First Amended Complaint at 9 (applying Illinois law).
Under Illinois law an insurer that fulfills its obligations to defend a mutual insured can recover from a co-insurer a share of the costs expended in such a defense as well as any indemnity payment -- either under a contribution or subrogation theory. See, e.g., Hartford Casualty Ins. Co. v. Argonaut-Midwest Ins. Co$ N., 854 F.2d 279, 280 (7th Cir. 1988) (citing Illinois cases); Western Casualty & Surety Co. v. Western World Ins. Co$ N., 769 F.2d 381, 383 (7th Cir. 1985) (Illinois permits contribution suits to recover costs even though insured has suffered no loss; rationale applies to primary as well as excess carriers); Home Ins. Co. v. Certain Underwriters at Lloyd's London$ N, 729 F.2d 1132, 1134 (7th Cir. 1984) (equitable action for contribution lies when one insurer pays indemnity debt shared by other insurers); New Amsterdam Casualty Co. v. Certain Underwriters at Lloyd's, London$ N, 34 Ill. 2d 424, 431, 216 N.E.2d 665, 669 (1966) (insurer could recover costs of defense under subrogation theory) ( citing Continental Casualty Co. v. American Fidelity & Casualty Co$ N., 275 F.2d 381 (7th Cir. 1960)); Pekin Ins. Co. v. Cincinnati Ins. Co$ N., 157 Ill. App. 3d 404, 406, 510 N.E.2d 524, 526, 109 Ill. Dec. 656 (1987) (indemnity recoverable under contribution or subrogation theory); Zurich Ins. Co. v. Northbrook Excess & Surplus Ins. Co$ N., 145 Ill. App. 3d 175, 199, 494 N.E.2d 634, 650, 98 Ill. Dec. 512 (1986) (contribution action for indemnity payments and defense costs), aff'd sub nom. Zurich Ins. Co. v. Raymark$ N, 118 Ill. 2d 23, 514 N.E.2d 150, 112 Ill. Dec. 684 (1987); Royal Globe Ins. Co. v. Aetna Ins. Co$ N., 82 Ill. App. 3d 1003, 1005, 403 N.E.2d 680, 682, 38 Ill. Dec. 449 (1980) (contribution action for indemnity payment); Aetna Casualty & Surety Co. v. Coronet Ins. Co$ N., 44 Ill. App. 3d 744, 750, 358 N.E.2d 914, 918, 3 Ill. Dec. 371 (1976) (costs and indemnity recoverable under subrogation theory); Fireman's Fund Indem. Co. v. Freeport Ins. Co$ N., 30 Ill. App. 2d 69, 76, 173 N.E.2d 543, 546 (1961) (costs and indemnity under subrogation theory).
In its reply the defendant claims that these cases are distinguishable since they involved a suit subsequent to the entry of judgment against the insured -- not an attempt to recover defense costs in an ongoing lawsuit. In Colton, however, the court declined to dismiss a third-party complaint brought by the defendant insureds against their insurance company for refusing to defend them in the underlying action. 527 F.2d at 298. The insurer/third-party defendant argued that the complaint should be dismissed because the contract contained a no-action and a no-impleader/joinder clause and because Illinois law prohibited direct actions (and, by implication, impleader) until a final judgment had been entered against the insured. Id. at 299. The court held that when an insurer refuses to defend its insured, the inclusion of the no-action clause does not bar impleader to determine the insurer's liability to the insured -- even though judgment has not yet been entered against the insureds. Id. at 301-03. Furthermore, the court noted, "questions of an insurer's duty to defend are ripe for declaratory relief." Id. at 303 (citing Sears, Roebuck & Co. v. Zurich Ins. Co$ N., 422 F.2d 587, 589 (7th Cir. 1970)). Thus, similar declaratory actions in the context of an ongoing lawsuit against the insured have not been deemed premature. See also Fireman's Fund$ N, 30 Ill. App. 2d at 72, 173 N.E.2d at 544 (declaratory judgment by one insurer who was still defending insured at time of suit). Accordingly, the defendant's arguments are without merit, and the court denies the motion to dismiss.
IV. MOTION TO DISMISS THE THIRD-PARTY COMPLAINT
After Ranger filed its reply brief in support of its motion to dismiss, it then filed a third-party complaint against the insured, Desnoyers, asking for a declaratory judgment that it is not obligated to defend Desnoyers in the underlying suit. Desnoyers then filed a motion to dismiss the third-party complaint,
alleging that impleader is proper only when the third-party defendant could be liable, in whole or in part, to the third-party plaintiff.
This court agrees. Rule 14, which governs third-party practice, provides as follows:
At any time after commencement of the action, a defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the third-party plaintiff.
Fed.R.Civ.P. 14(a) (emphasis added). According to the plain language of Rule 14(a), therefore, the distinguishing characteristic of a claim filed pursuant to Rule 14(a) is that the defendant is attempting to transfer to the third-party defendant the liability asserted against the defendant by the original plaintiff. E.g., U.S. Gen. v. City of Joliet$ N, 598 F.2d 1050, 1053 (7th Cir. 1979); Parr v. Great Lakes Express Co$ N., 484 F.2d 767, 769 (7th Cir. 1973); Leaseway Warehouses, Inc. v. Carlton$ N, 568 F. Supp. 1041, 1043 (N.D.Ill. 1983); 6 C. Wright & A. Miller, Federal Practice and Procedure § 1446, at 246 (1971) (third-party claim proper only when third party's liability is in some way dependent on outcome of main claim or when third party is secondarily liable to defendant).
The fact that the third-party claim arose out of the same transaction or set of facts is irrelevant, since impleader cannot be used "as a way of combining all controversies having a common relationship." Id. § 1442, at 206.
In this case, Desnoyers in no way could be liable for any of Ranger's liability to Forum; therefore, the attempted impleader was improper under Rule 14(a). Ranger concedes that this position is "technically correct." Ranger Insurance Company's Response to Motion to Dismiss the Third Party Complaint at 3. Ranger argues, however, that two cases, Old Republic Insurance v. Concast, Inc$ N., 99 F.R.D. 566 (S.D.N.Y. 1983), and American Fidelity & Casualty Co. v. Greyhound Corp$ N., 232 F.2d 89 (5th Cir. 1956), have allowed impleader, even though contrary to the literal language of Rule 14(a), when the original suit was a declaratory judgment action, when both the original and the third-party actions turned on substantially the same facts (and impleader therefore would facilitate judicial economy), and when the third-party defendant suffered no undue prejudice from being impleaded.
Even if these cases are correct (which this court does not decide), they do not help the defendant's cause. In both cases an excess insurer sued its insured, seeking a declaratory judgment that it was not liable under the policy. The defendant insured then impleaded a third party, alleging that if the insurer was not obligated to indemnify, the third-party defendant would be liable for any expenses incurred by the insured. The courts held that the classic indemnity model for Rule 14(a), under which impleader is proper only when the third-party defendant's liability derives from or is secondary to that of the defendant, does not apply in the context of a declaratory judgment action when the plaintiff insurer seeks to absolve itself of liability under the contract; in those cases, the courts reasoned, the defendant insured never would be liable to the plaintiff and, therefore, would not be able to "pass on" any of its liability to the third-party defendant. Such an interpretation of Rule 14(a), the courts noted, "makes it logically impossible for defendants [in these situations] to maintain third-party complaints." Old Republic$ N, 99 F.R.D. at 568; see American Fidelity$ N, 232 F.2d at 92 (common issues in two actions closely intertwined; third-party defendant not prejudiced). The courts held that the policy of Rule 14(a), "which is to facilitate judicial economy by avoiding multiple and circuitous suits, . . . should not be defeated by a narrow or technical interpretation of the Rule's requirements." Old Republic$ N, 99 F.R.D. at 568 (citations omitted).
Unlike the third-party plaintiffs in those cases, however, Ranger is not seeking to assert liability against the third-party defendant, but rather to deny that it is liable to the third-party defendant. Impleading a third-party defendant that is not liable to any party in this litigation would require not simply a "liberal construction" of Rule 14(a), but a complete disregard of its language. Furthermore, Ranger's concerns over possible subsequent litigation by Desnoyers (since Desnoyers, not being a party to this litigation, would not be bound by it) are irrelevant to the decision whether to exercise ancillary jurisdiction. What Ranger apparently would like to do -- join Desnoyers as a co-defendant -- is impossible, since joinder of Desnoyers would destroy diversity.
Accordingly, the court grants the third-party defendant's motion to dismiss.
For the foregoing reasons, the court denies Ranger's motion to dismiss Forum's first amended complaint, but grants Desnoyers' motion to dismiss the third-party complaint and, therefore, dismisses the third-party complaint, with prejudice.