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February 25, 1994


Appeal from the Circuit Court of Kane County. Nos. 91-MR-036, 91-MR-037. Honorable R. Peter Grometer, Judge, Presiding.

As Modified on Denial of Rehearing April 6, 1994. Released for Publication April 6, 1994. Petition for Leave to Appeal Denied October 6, 1994.

Inglis, Geiger, Bowman

The opinion of the court was delivered by: Inglis

PRESIDING JUSTICE INGLIS delivered the opinion of the court:

Defendant, Sheldon Whitehouse, domestic receiver for Canadian Universal Insurance Company (CU), appeals the order of the circuit court of Kane County denying a petition for relief from a default judgment entered by that court against CU and in favor of plaintiff, Safety-Kleen Corporation (Safety-Kleen). For the following reasons, we reverse the decision of the trial court denying defendant's petition for relief from the default judgment.

The common-law record indicates that for a period of 13 1/2 months in 1979 and 1980 CU insured Safety-Kleen, a manufacturer of industrial cleaning solvents. Safety-Kleen is a corporation organized under the laws of the State of Wisconsin and doing business in Kane County, Illinois. CU is an insolvent stock insurance company organized under the laws of Canada and doing business in Kane County, Illinois.

Sometime prior to August 1989, James and Karen Junker sued Safety-Kleen in California for damages arising from James' contraction of an undisclosed disease allegedly caused by exposure to Safety-Kleen's products. In a deposition sometime in 1990, James Junker alleged exposure during the period of CU's coverage of Safety-Kleen. On May 22, 1990, Safety-Kleen notified CU of the suit. On October 30, 1990, CU reserved rights under the policy for failure to notify in a timely manner and failure to pay the $100,000 deductible, among other reasons. In November 1990, Safety-Kleen settled with the Junkers for an undisclosed amount. Safety-Kleen made demand upon CU for $315,300, purportedly representing CU's proportionate share (12.612%) of the settlement.

In January 1991, Safety-Kleen filed a declaratory judgment action in Kane County against CU, seeking a declaration of coverage for the Junker claim. Safety-Kleen also filed for declaratory judgment against its other insurers, Illinois Employers Insurance of Wausau and Employers Insurance of Wausau (Wausau), and later consolidated the claims. CU retained local counsel, Peregrine, Stime, Newman, Ritzman & Bruckner (Peregrine Stime), who filed a general appearance and an answer denying the substantive allegations of the complaint. Safety-Kleen served discovery upon CU, and CU received extended time to respond.

In May 1991 and again in July 1991, Safety-Kleen moved for judgment by default against Wausau. Later in July the trial court permitted Wausau to file an answer instanter, and discovery between these parties began.

In August 1991, CU was placed in receivership in Newfoundland, Canada, and the superintendent of insurance for Newfoundland, Paul Tapper, was appointed provisional liquidator. Shortly thereafter, counsel for Mr. Tapper, Halley Hunt, Barristers & Solicitors, informed Peregrine Stime that Coopers & Lybrand Limited had been appointed provisional liquidator on behalf of Tapper. Halley Hunt further informed Peregrine Stime that because of a wind-up order from the supreme court of Newfoundland, no action could be proceeded with or commenced against CU. Halley Hunt also informed Peregrine Stime that the provisional liquidator would not be responsible for the payment of future fees and that no further instructions were anticipated.

Peregrine Stime then moved to withdraw as counsel for CU, purportedly under orders from CU. Neither the notice of motion, the motion, nor the affidavit attached to the motion contained the last known business address of CU, nor was any of these sent to that address. The circuit court granted the motion to withdraw, instructing counsel to "cover himself" by writing to CU. The record does not demonstrate that counsel ever did so. Safety-Kleen moved for default, but the court said it would not default CU on the day its attorney withdrew. The order entered stated that CU would be subject to default if substitute counsel was not obtained within 21 days.

On November 22, 1991, Safety-Kleen filed a motion for judgment in default. Notice of this motion was sent by registered mail on November 25, 1991, to the last known business address of CU. The court entered an order of default on December 18, 1991.

On March 5 and 16, 1992, Safety-Kleen filed two motions seeking the entry of a default judgment against CU. These motions and the notices of these motions were sent to an address other than the last known address of CU. The motions were identical in all respects, except that in the ad damnum clause of the later-filed motion, the prayer asked for "an amount to be proven before this court." The prayer in the preamble of each motion, and in the ad damnum clause of the initially filed motion, requested a judgment by default in the amount of $250,000.

On March 24, 1992, the court held a proveup hearing on the default. Safety-Kleen presented as evidence only the policy of insurance and the letter whereby Safety-Kleen had notified CU of the Junker claim on May 22, 1990. The trial court then entered a default judgment in the amount of $1,002,754.37. Specifically, the court awarded $633,335.90 in indemnity, $347,543.76 in legal and professional expenses, and $21,574.71 in legal fees for this case.

In April 1992, Safety-Kleen enrolled its judgment in the superior court of Providence, Rhode Island. Safety-Kleen attempted to execute this judgment against an indenture of trust, valued at approximately $1 million, maintained in Rhode Island by CU for the benefit of its domestic policyholders. In June 1992, the Canadian liquidator sought injunctive relief in Rhode Island to prevent Safety-Kleen from executing against the trust. The liquidator dismissed the action when the director of business regulation or the State of Rhode Island ...

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