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12/22/89 the Northern Trust Company v. Aetna Life and Surety

December 22, 1989





549 N.E.2d 712, 192 Ill. App. 3d 901, 140 Ill. Dec. 61 1989.IL.2013

Appeal from the Circuit Court of Cook County; the Hon. Thomas E. Hoffman, Judge, presiding.


JUSTICE McNAMARA delivered the opinion of the court. LORENZ and LaPORTA, JJ., concur.


Plaintiff, The Northern Trust Company, sued its insurer, defendant Aetna Life & Surety Company, for its failure to pay attorney fees which Northern incurred defending a suit against it. The trial court dismissed Northern's complaint pursuant to section 2-619 of the Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, par. 2-619) on the grounds of collateral estoppel. Northern appeals, contending that the complaint is not barred by prior litigation.

On November 20, 1972, Hillard W. Marks died, and his will engendered many disputes. (See In re Estate of Marks (1979), 74 Ill. App. 3d 599, 393 N.E.2d 538.) Helen S. Baron, Marks' common-law wife, was beneficiary and co-executor of the Marks estate along with Northern. In 1975, Baron sued Northern and others. The suit included the allegation that Northern "[a]ttempted to interfere with the attorney client relationship existing between [Baron] and her counsel by repeatedly advising [Baron's] counsel that [Baron] was a liar, a person of low morals and untrustworthy, all of which [Northern] knew was untrue, with the intent of persuading [Baron's] counsel to withdraw and thereby coerce plaintiff into giving up her interests in [Marks'] estate."

Aetna insured Northern under a policy covering occurrences and offenses committed during the relevant period, including "all sums which [Northern] shall become legally obligated to pay" arising out of Northern's business, including "the publication or utterance of a libel or slander or of other defamatory or disparaging material, or a publication or utterance in violation of an individual's right of privacy." The policy also covered claims against Northern arising out of "malicious prosecution."

In addition, under the policy Aetna had "the right and duty to defend any suit against [Northern] seeking damages on account of such personal injury even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient."

Northern tendered the defense of the Baron complaint to Aetna. Because Aetna appointed an attorney only to monitor the case, Northern conducted its own defense and paid its own attorney fees. On April 2, 1976, Aetna sent Northern a reservation of rights letter in the Baron case, stating that it "defended" Northern under a reservation of rights due to the defamation allegation in the Baron case, which Aetna recognized was potentially covered under the policy. On January 18, 1977, Aetna notified Northern that a declaratory action would be filed by Aetna. On March 22, 1978, Aetna filed the declaratory action.

In the meantime, the trial court in Baron dismissed from the Baron complaint all allegations against Northern. This court affirmed in part and reversed in part. (Baron v. The Northern Trust Co. (1st Dist. 1982), No. 81 -- 1972 (unpublished order under Supreme Court Rule 23).) In a supplemental Rule 23 order, this court specifically upheld the dismissal of the defamation allegation against Northern. Baron v. The Northern Trust Co. (1st Dist. 1984), No. 81 -- 1972 (unpublished order under Supreme Court Rule 23).

After this court issued its supplemental order, Aetna moved for summary judgment in the declaratory action. Aetna averred in the motion that the "only allegation in the Baron complaint directed against Northern which could be construed as alleging potential coverage under Aetna's policy" was the defamation allegation. Aetna stated further that the Baron complaint "potentially could be construed by a court as alleging defamation. Thus, there was a potential for coverage under Aetna's policy. Accordingly, Aetna provided a defense for Northern under a Reservation of Rights."

Aetna argued further that, because this court dismissed the defamation allegations against Northern, "Aetna no longer has a duty to defend or indemnify Northern for the allegations contained in the Baron lawsuit . . . and that therefore, Aetna is entitled to summary judgment in its favor and against" Northern. (Emphasis added.) In its prayer for summary judgment, Aetna again stated that the defamation claims were "the only allegations in the said [ Baron ] complaint which allege potential coverage under Aetna's policy."

On May 6, 1986, the trial court denied Aetna's motion for summary judgment, reasoning that disputed facts remained as to whether certain allegations could be construed as "property damage" under the policy. The court did not refer to the defamation allegations. Both Aetna and Northern filed motions to reconsider. The trial court granted Aetna's motion for reconsideration, which argued that certain trust property was not covered. The court denied Northern's motion for reconsideration, which had argued that a "malicious prosecution" allegation was covered under the policy. Northern appealed, and this court affirmed the trial court's ...

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