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04/04/94 ILLINOIS NATIONAL INSURANCE CO. v.

April 4, 1994

ILLINOIS NATIONAL INSURANCE CO., PLAINTIFF-APPELLANT,
v.
UNIVERSAL UNDERWRITERS INSURANCE CO., DEFENDANT-APPELLEE. DANNY WESTFALL, PLAINTIFF-APPELLANT, V. DEREK A. GREENWOOD AND JOHN T. RING, DEFENDANTS (UNIVERSAL UNDERWRITERS INSURANCE CO., GARNISHEE-APPELLEE).



Appeal from the Circuit Court of Effingham County. No. 90-L-78. Honorable Richard H. Brummer, Judge Presiding. Appeal from the Circuit Court of Effingham County. No. 87-L-62. Honorable Richard H. Brummer, Judge Presiding.

Petition for Leave to Appeal Denied October 6, 1994.

Lewis, Chapman, Goldenhersh

The opinion of the court was delivered by: Lewis

PRESIDING JUSTICE LEWIS delivered the opinion of the court:

Plaintiffs, Danny Westfall (Danny) and Illinois National Insurance Company (Illinois National), appeal from the circuit court's order granting summary judgment to the defendant and garnishee, Universal Underwriters Insurance Company (Universal).

On appeal, plaintiffs contend that the court erred in granting summary judgment to Universal when it (1) found that Universal was not estopped from denying liability coverage for Derek Greenwood (Derek), (2) found that Derek was not an insured of Universal, and (3) entered judgment against Illinois National, as no motion for summary judgment involving Illinois National was presented or argued to the court. Illinois National also contends that it is entitled to recover on its indemnity action against Universal. We affirm for the reasons set forth below.

Before considering the issues raised on appeal, a procedural and factual history needs to be set forth. The facts are as follows: On or about May 22, 1987, Thomas Greenwood (Thomas), Derek's father, had in his possession a 1982 AMC Spirit automobile owned by Wilson Motor Sales, for test driving. On May 24, 1987, while driving the test vehicle, Derek had an accident in which Danny, who was a passenger in the car, was injured. As a result of the accident, Danny filed a two-count complaint for negligence (Effingham County case No. 87-L-62) against Derek and John T. Ring, the driver of an oncoming vehicle, on December 23, 1987. The count of negligence against John T. Ring was dismissed with prejudice on December 5, 1988, and is not part of this appeal.

At the time of the accident, Thomas had an insurance policy with Illinois National, and Wilson Motor Sales had an insurance policy with Universal. Illinois National hired attorney Vance Kepley to represent Derek in the negligence action filed by Danny. However, at some point in time which cannot be determined from the record, Kepley withdrew from representing Derek because of a conflict that arose between Derek and Illinois National over the settlement negotiations with Danny, and a private attorney, Michael Meyer, took over the representation of Derek.

Michael Meyer sent a letter to Universal on February 2, 1989, in which he stated that Illinois National had tendered the limits of its policy to Danny and that Illinois National had sought to be excused from further defense in the case. Meyer further stated in the letter that the proposed settlement agreement would not be a full release of liability for Derek; therefore, he asked Universal to assume the defense of Derek and provide coverage to him pursuant to the policy issued to Wilson Motor Sales. Universal wrote Meyer on February 8, 1989, that its policy for Wilson Motor Sales did not provide any protection or coverage to Derek on the date of the accident and Universal refused to defend Derek.

Ultimately, Illinois National settled with Danny for its policy limits of $50,000. On July 7, 1989, Danny and Derek entered into a covenant not to enforce judgment, an assignment, and a stipulation. In the stipulation between Danny and Derek, Derek admitted that his negligence was the cause of the accident of May 24, 1989, that Danny was injured as a result of the accident, and that he was liable for Danny's injuries. Danny and Derek stipulated that Derek was liable to Danny in the amount of $150,000, and Danny agreed to limit his claim against Derek to this amount. In the covenant not to enforce judgment, Danny agreed "not to proceed further against Greenwood for the collection of any damages sustained by Westfall and that Plaintiff will limit his collection efforts to satisfy the stipulated liability of Greenwood to Westfall to those financial resources made available to Greenwood through any insurance coverageprovided to Greenwood by and through New Hampshire Insurance Company [Illinois National's parent company] and by and through Universal Underwriters Insurance Company and not from any other assets of Greenwood." The consideration for the covenant not to enforce judgment was the entry of a judgment of $150,000 against Derek, the prompt execution of an authorization to settle the claim with Illinois National, and the assignment of any and all rights Derek had against Universal. The assignment executed that day assigned all the rights Derek had against Universal to Danny as required by the covenant not to enforce judgment. On July 11, 1989, the stipulation of liability was presented to the court, and the court entered a judgment, based upon the stipulation, in favor of Danny and against Derek for $150,000.

As a result of the assignment and the judgment for $150,000, Danny filed an affidavit for a nonwage garnishment against Universal on January 17, 1990, for $104,666.88, the balance of the $150,000 after payment of $50,000 by Illinois National, plus costs and interest. On November 11, 1990, Illinois National filed an indemnity action against Universal for reimbursement of the $50,000 paid by it on Derek's behalf (Effingham County case No. 90-L-78). Universal moved to consolidate the garnishment and indemnity actions. Danny and Illinois National were represented by the same counsel and did not object, and the two cases were consolidated by order of the court on January 9, 1991.

Universal filed a motion for summary judgment on January 7, 1992. Although the cases against Universal were now consolidated, in its motion Universal captioned the case with the negligence action caption and used the Effingham County case No. 87-L-62. On January 14, 1992, plaintiffs' counsel filed a motion for summary judgment, using the same caption as Universal; however, he included the case number of both the negligence action and the indemnity action, i.e., Effingham County case Nos. 87-L-62 and 90-L-78. A hearing was held on the summary judgment motions on January 30, 1992, and, on March 10, 1993, the court entered a written judgment, finding that Derek was not an insured under Universal's policy and that the negligence action filed against Derek gave no potential for coverage under Universal's policy. The court granted Universal's motion for summary judgment and found against Danny and against Illinois National.

We now address the issues raised by plaintiffs on appeal. Although plaintiffs first argue that the court erred in finding that Derek was not an insured under Universal's policy, we will first consider the issue that the court erred in finding that Universal was notestopped from denying liability coverage, since Universal refused to defend Derek under a reservation of rights and failed to file a declaratory judgment action to determine its rights under the policy.

The sole function of a reviewing court when considering the propriety of a trial court's order granting summary judgment is to determine whether the court properly concluded there were no genuine issues of material fact, and, if not, whether judgment for the movant was correct as a matter of law. ( Federal Insurance Co. v. Economy Fire & Casualty Co. (1989), 189 Ill. App. 3d 732, 545 N.E.2d 541, 136 Ill. Dec. 1017.) Here, there were no genuine ...


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