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06/30/94 UNITED STATES FIDELITY & GUARANTY CO. v.

June 30, 1994

UNITED STATES FIDELITY & GUARANTY CO., PLAINTIFF-APPELLEE,
v.
JIFFY CAB COMPANY, AN ILLINOIS CORPORATION, ROSALIND SMITH, INDIVIDUALLY AND AS SPECIAL ADMINISTRATOR OF THE ESTATE OF DOUGLAS LOUDEN, DECEASED, VINCENT LOUDEN, MELISSA LOUDEN AND TONY B. ANTHONY, DEFENDANTS-APPELLANTS.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. THE HONORABLE RICHARD L. CURRY, JUDGE PRESIDING.

Gordon, Murray, Cousins, Jr.

The opinion of the court was delivered by: Gordon

JUSTICE GORDON delivered the opinion of the court:

On April 2, 1988, Dwight Martin, who was driving a cab for Jiffy Cab Co. (Jiffy), and two passengers who were riding in his cab, Douglas Louden and Tony Anthony, got into an argument over the route Martin was taking to reach the passengers' designated destination. After the passengers exited the cab, an altercation ensued during the course of which Martin stabbed Louden. Louden died as a result of his wounds.

Rosalind Smith, individually and as special administrator of Douglas Louden, together with Anthony filed a four count complaint against Jiffy and Martin. The first count of that complaint was an action seeking recovery for the wrongful death of Louden. It alleged that "Martin maliciously assaulted, battered and stabbed" Louden for no apparent reason and that Louden died as the result of the wounds Martin inflicted. That count also provided that "said assault, battery and stabbing took place after Plaintiff, decedent exited the taxi cab in which he was a passenger." The second count was a survival action predicated on the same acts alleged in the first count.

The third count of the complaint alleged that Jiffy was negligent in its hiring of Martin. That count recited that Jiffy "carelessly and negligently failed to adequately investigate, screen, or otherwise inquire into the background of cab drivers they hired for the express purpose of transporting the general public areas around Chicagoland and * * * carelessly and negligently selected hired, and employed as cab drivers individuals they knew or through the exercise of reasonable care should have known were of a dangerous and violent nature or character, and unfit for the position sought to be filled."

In the fourth count of the complaint, Anthony sought recovery for emotional distress. That count stated that Martin's actions createda "zone of danger" and that Martin chased Louden and Anthony with a knife after they exited the cab.

Jiffy sought coverage from its insurer United States Fidelity & Guaranty Co. ("USF&G" or "insurer") who defended the underlying action under a reservation of rights. USF&G then brought this declaratory judgment action seeking a declaration that the general automotive liability policy it issued to Jiffy did not provide coverage for the underlying action and that it did not owe Jiffy or Martin a duty to defend. In an order entered November 16, 1990, the trial court entered summary judgment in favor of USF&G, finding that the policy did not provide coverage because the underlying action was not one which "resulted from the ownership, maintenance or use of a covered auto."

After the trial court's grant of summary judgment, plaintiffs in the underlying action filed an amended complaint which added a fifth count. That count alleged that Martin "carelessly and negligently began an altercation with the decedent and [Anthony]; * * * carelessly and negligently decided to use excessive force in his altercation; * * * [and] carelessly and negligently failed to listen to decedent and [Anthony] as to how he should reach their destination." That count deleted any reference to where the assault occurred.

USF&G then filed a supplemental motion for summary judgment seeking a declaration that its policy did not cover the added count V and that it did not owe Jiffy and Martin a duty to defend such action. On May 7, 1991, the trial court entered summary judgment in favor of USF&G pursuant to the supplemental motion, finding that count V of the underlying complaint was not covered by the policy in question. Jiffy, Martin, and the underlying plaintiffs appeal from the trial court's November 16, 1990, order and its order of May 7, 1991.

On appeal, appellants contend that the adjudication of the declaratory judgment action was premature in that it was decided before any discovery was conducted in the underlying case. The appellants also contend that the trial court erred in determining that the insurance policy issued by USF&G did not provide coverage with respect to the underlying action.

We first address appellants' contention that the adjudication of the insurer's declaratory judgment action was premature. It is well established that when an insurer is uncertain as to whether it should defend or refuse to defend, it can file a declaratory judgment action to determine its obligations and rights. ( Apex Mutual Insurance Co. v. Christner (1968), 99 Ill. App. 2d 153; 240 N.E.2d 742; seealso State Farm Fire & Casualty Co. v. Hatherley (1993), 250 Ill. App. 3d 333, 621 N.E.2d 39, 190 Ill. Dec. 170.) It has been held that a declaratory judgment action should not be decided prior to the adjudication of the underlying action where the issues to be decided in both actions are substantially similar. ( Bituminous Casualty Corp. v. Fulkerson (1991), 212 Ill. App. 3d 556, 571 N.E.2d 256; Maryland Casualty v. Chicago & North Western Transportation Co. (1984), 126 Ill. App. 3d 150, 466 N.E.2d 1091, 81 Ill. Dec. 289; see also United States Fidelity & Guaranty v. Wilkin Insulation Co. (1989), 193 Ill. App. 3d 1087, 550 N.E.2d 1032, aff'd (1991), 144 Ill. 2d 64, 578 N.E.2d 926, 161 Ill. Dec. 280.) The rationale for this proscription is to prevent the declaratory action, through the subsequent application of the doctrine of collateral estoppel, from preempting the determination of the issues in the underlying tort litigation. ( Murphy v. Urso (1981), 88 Ill. 2d 444, 455, 430 N.E.2d 1079, 58 Ill. Dec. 828 ("the result of the declaratory judgment would be controlling in the underlying suit. * * * Declaratory judgment would be only a forerunner of the accident trial, and would resolve nothing different.").) As such, "a court in a declaratory judgment action may not determine whether the insured is actually liable nor may it determine any facts upon which the insured's liability is based." State Farm Fire & Casualty Co. v. Hatherley, 250 Ill. App. 3d at 336.

An adjudication of a declaratory judgment action concerning coverage is not considered premature, however, "where the issues in an underlying suit and a declaratory judgment action are separable [because] deciding the question of coverage in a collateral proceeding prejudices no party." ( Murphy, 88 Ill. 2d at 455.) The case before us presents such a situation. The issue to be resolved in the coverage action is wholly separable from any of the issues involved in the underlying action. The sole issue to be resolved in the coverage action is whether the underlying claim resulted from the use, operation, or maintenance of a covered auto. The determination of that issue will not predetermine, through the application of the doctrine of collateral estoppel, the insured's liability in the underlying tort action.

On point is Illinois State Medical Insurance Co. v. Cichon (1994), 196 Ill. Dec. 277, Ill. App. 3d , 629 N.E.2d 822. There the claimants contended that the trial court's determination in a declaratory judgment action that the insured had no duty to indemnify was premature as it should not have been made until the insured's medical malpractice had been established. The appellate court rejected this contention because the "the issues [were not] substantially the same so that collateral estoppel would apply to control the resolution of issues in the underlying suit." ( Illinois State Medical Insurance, 258 Ill. App. 3d at 807, 629 N.E.2d at 825.) In so holding, the court noted that the issues raised in the coverage action, namely whether the underlying claim fell within a policy exclusion, whether the insured was in breach of his duty to notify the insurer of certain facts as required by the policy, and whether the underlying claimants' psychological injuries came within the policies' coverage for personal injuries, did not control the outcome of the underlying litigation. Rather, the plaintiffs had to prove in the underlying action that the insured deviated from the standard of care and that his actions proximately caused the injuries in question. (Illinois State Medical Insurance, Ill. App. 3d at , 629 N.E.2d at 825; accord State Farm Fire & Casualty, 250 Ill. App. 3d at 336 (rejecting contention that declaratory judgment action was premature; trial court's ruling in declaratory judgment action had no bearing on whether insured was liable for property damage or upon the facts upon which insureds' liability would be based).) Appellants' contentions that the trial court should have waited until discovery was ...


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