Appeal from the Circuit Court of Cook County. Honorable Albert Green, Judge Presiding.
The Honorable Justice Quinn delivered the opinion of the court. Greiman, P.j., and Theis, J., concur.
The opinion of the court was delivered by: Quinn
The Honorable Justice QUINN delivered the opinion of the court:
Plaintiff, the Home Insurance Company of Illinois (Home), filed a declaratory judgment action to determine whether a selfinsured retention provision of an insurance policy issued to Lester Engineering Corporation (Lester) was a condition precedent requiring Lester to make actual payment of the first $250,000 in damages before Home was liable for the policy limits of the subject liability policy. The defendants, Carl Hooper and Deborah Hooper (Hoopers) and Lester moved for summary judgment, alleging, inter alia, that the self-insured retention provision of the insurance policy was invalid as a violation of section 388 of the Illinois Insurance Code (215 ILCS 5/388 (West 1994)) and that the language of the policy provided drop down coverage paying Lester's self- insured retention if Lester became bankrupt or otherwise insolvent. The trial court granted Home's motion for summary judgment. The defendants appeal.
For the following reasons we reverse in part, affirm in part, and remand with instructions.
The pertinent facts adduced from the record are as follows. Carl Hooper (Hooper) sustained personal injuries on January 27, 1989, while performing work on a dye casting and injection molding machine which was manufactured by Lester Engineering Corporation (Lester). Plaintiff, Home Insurance Company of Illinois (Home), previously issued an insurance policy to Lester for the policy period of February 14, 1988, to February 14, 1989. The policy provided comprehensive liability and product liability coverage up to $1 million per occurrence and was in full force and effect at the time Hooper suffered his injury. The policy was also subject to a self-insured retention of $250,000 per occurrence and $750,000 in aggregate. Application of Lester's self-insured retention is set forth in endorsement No. 4, which provides in pertinent part as follows:
"SELF-INSURED RETENTIONS - OCCURRENCE POLICY -
REDUCTION IN INDEMNITY ONLY
In consideration of the premium paid, it is hereby understood and agreed that Section I of the policy is amended by deleting existing paragraph B, and adding new paragraph B as follows:
B. (1) With regard to such insurance as is afforded by this policy, it shall be a condition precedent to the company's liability under this policy that the Named Insured make actual payment, by way of settlement or judgment of damages, of the amount(s) stated in the declarations and in any endorsements thereto as the Named Insured's Self-Insured Retention(s). The Named Insured's obligations to make actual payment for the Self-Insured Retention(s) shall not be satisfied in whole or in part by the payment by the Named Insured of:
(a) any hospital, medical or funeral charges incurred in the adjustment, investigation or defense of any claim,
(b) any sums paid or payable as salaries, wages compensation, fees, charges, interest or expenses for doctors, nurses, attorneys, investigators and any other persons, as a result of the adjustment, investigation or defense of any claim, and
(c) any other expenses incurred in the adjustment, investigation or defense of any claim.
The Named Insured's obligation to make actual payment for the Self-Insured Retention(s) shall only be satisfied by payment by the Named Insured of actual damages for bodily injury or property damage to which this insurance applies. The company shall only be liable for ultimate net loss over and above the amount(s) stated in the declarations as the Named Insured's Self-Insured Retention(s), subject to the limits of liability ...