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LASALLE NAT'L BANK v. MASSACHUSETTS BAY INS. CO.

March 12, 1997

LaSALLE NATIONAL BANK, et al., Plaintiffs,
v.
MASSACHUSETTS BAY INSURANCE COMPANY, et al., Defendants.



The opinion of the court was delivered by: WILLIAMS

 In a motion for partial summary judgment filed seven years after this case commenced and four days after the trial was to begin, plaintiffs argue that defendants cannot maintain their counterclaims against Plaintiff Stanley Berg. The motion raises an interesting and important issue that plaintiffs should have raised months or years ago. For reasons set forth below, the court denies plaintiffs' motion for partial summary judgment.

 Background

 Until November 16, 1988, Plaintiffs Stanley and Ingrid Berg ("the Bergs") lived in a house at 117 Shore Acres Drive in Lake Bluff, Illinois. Plaintiff LaSalle National Bank held legal title to the Bergs' house. Defendants Massachusetts Bay Insurance Company, Hanover Insurance Company, State Mutual Life Assurance Company of America, and SMA Financial Corporation ("insurance companies") issued a homeowners insurance policy to the Bergs on June 17, 1988. (Pls.' 12(M) PP 1-5, 8-14; Defs.' 12(N) PP 1-5, 8-14.) *fn1" This policy expressly excluded losses caused by intentional acts of an insured. (Pls.' 12(M), Ex. 2, insurance policy, ยง I Exclusions, P 1(h).)

 On November 16, 1988, fire destroyed the Bergs' house. Since the time of the fire, defendant insurance companies have refused to pay Plaintiff Stanley Berg for damages incurred as a result of the fire, claiming that he intentionally caused the fire to be set and knowingly misrepresented his losses. However, defendant insurance companies made various payments to Ingrid Berg, after concluding that she did not cause the fire or misrepresent her losses. In addition, defendant insurance companies have made payments to two mortgagees of the property. (Pls.' 12(M), Ex. 4, defendants' answer, affirmative defenses and counterclaim.).

 In their counterclaim, defendant insurance companies seek judgment against Stanley Berg in the amount of the monies they have paid (or will pay) to Ingrid Berg and to the two mortgagees under the terms of the homeowners insurance policy. Defendant insurance companies bring their counterclaim against Stanley Berg "as subrogee of Ingrid Berg." (Pls.' 12(M), Ex. 4, defendants' answer, affirmative defenses and counterclaim.) *fn2"

 Analysis

 Plaintiffs move for partial summary judgment under Rule 56 of the Federal Rules of Civil Procedure. The court will render summary judgment only if the factual record shows "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Bratton v. Roadway Package Sys., Inc., 77 F.3d 168, 173 (7th Cir. 1996) (quoting Fed. R. Civ. P. 56(c)). The court will not render summary judgment if "a reasonable jury could return a verdict for the nonmoving party." Sullivan v. Cox, 78 F.3d 322, 325 (7th Cir. 1996) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986)). In ruling on a motion for summary judgment, the court views the facts in the light most favorable to the nonmoving party. Bratton, 77 F.3d at 171 (citation omitted); Sullivan, 78 F.3d at 325 (citation omitted).

 On a motion for summary judgment, the moving party "bears the initial burden of showing that no genuine issue of material fact exists." Hudson Ins. Co. v. City of Chicago Heights, 48 F.3d 234, 237 (7th Cir. 1995) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)). Then the burden shifts to the nonmoving party, which "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e); accord, NLFC, Inc. v. Devcom Mid-America, Inc., 45 F.3d 231, 234 (7th Cir. 1995) (citations omitted), cert. denied, 132 L. Ed. 2d 257, 115 S. Ct. 2249 (1995).

 These burdens are reflected in Rule 12 of the Local General Rules for the Northern District of Illinois. Waldridge v. American Hoechst Corp., 24 F.3d 918, 921-22 (7th Cir. 1994). Under Rule 12(M)(3), the moving party must submit a statement of material facts in the form of short numbered paragraphs supported by specific references to the factual record. Under Rule 12(N)(3), the nonmoving party must submit a response to each such paragraph, including (in the case of disagreement) specific references to the factual record. *fn3"

 In their motion for summary judgment, plaintiffs argue that defendants cannot maintain their counterclaim because "it is a well settled principle of Illinois law that an insurer possesses no subrogation rights against its own insured." (Pl.'s Mem. in Supp. at 5.) *fn4" In support of this argument, plaintiffs cite two Illinois cases: Reich v. Tharp, 167 Ill. App. 3d 496, 521 N.E.2d 530, 118 Ill. Dec. 248 (Ill. App. Ct. 5th Dist. 1987), and Dix Mutual Ins. Co. v. LaFramboise, 149 Ill. 2d 314, 597 N.E.2d 622, 173 Ill. Dec. 648 (Ill. 1992).

 In Reich v. Tharp, an Illinois appellate court laid out the general principles of subrogation as follows:

 
The doctrine of subrogation is designed to place the ultimate responsibility for a loss upon the one on whom in good conscience it ought to fall and to reimburse the innocent party who is compelled to pay. Under this doctrine a person who, pursuant to a legal liability, has paid for a loss or injury resulting from the negligence or wrongful act of another will be subrogated to the rights of the injured person against such a wrongdoer. It is axiomatic that for a right of subrogation to exist, the subrogor must possess a right that he could enforce against a third party and that the subrogee must seek to enforce the subrogor's right. The subrogee can have no greater rights than the subrogor and can enforce only such rights as the subrogor could enforce against the third party. Thus, it is commonly stated that the subrogee . . . must step into the shoes of or be substituted for the subrogor. No right of subrogation can arise in favor of an insurer against its own insured since, by definition, subrogation arises only with respect to rights of the insured against third persons to whom the insurer owes no duty. No right of subrogation arises against a person who holds the status of an additional insured. Where the insured is required by contract or lease to carry insurance for the benefit of another, the other party may attain the status of a coinsured, and no subrogation may be taken against such a party, in the absence of a design or fraud on the part of the coinsured. The doctrine of subrogation originates in the general principles of equity and will be applied or not according to the dictates of equity and good conscience and considerations of public policy.

 Reich, 521 N.E.2d at 533-34 (citations omitted). *fn5" ...


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