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Cincinnati Insurance Co. v. Baur's Opera House Inc.

April 24, 1998

THE CINCINNATI INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
BAUR'S OPERA HOUSE, INC., A DELAWARE CORPORATION, D/B/A BAUR'S OPERA HOUSE, AND MARK W. STEARNES, DEFENDANTS-APPELLEES.



Appeal from Circuit Court of Sangamon County No. 96MR001 Honorable Robert J. Eggers, Judge Presiding.

The opinion of the court was delivered by: Justice Knecht

THE COURT OF APPEALS OF THE STATE OF ILLINOIS

Defendant Mark W. Stearnes filed a personal injury lawsuit in state court against defendant Baur's Opera House, Inc. (Baur's). Baur's was insured by plaintiff, the Cincinnati Insurance Company (Cincinnati). Cincinnati filed a declaratory judgment action against defendants alleging it was not obligated to defend or indemnify Baur's because neither of the defendants notified it of the state lawsuit, thereby breaching the insurance policy. Cincinnati and Stearnes filed cross-motions for summary judgment arguing whether Cincinnati received reasonable notice of the lawsuit. The trial court denied Cincinnati's motion and granted Stearnes' motion. We find insufficient evidence proving Cincinnati received reasonable notice of the state lawsuit. We reverse and remand the trial court's judgment.

I. BACKGROUND

In January 1991, Stearnes filed a complaint in the United States District Court for the Central District of Illinois. The origin of the complaint was an altercation between Stearnes and Baur's employees in February 1990. The complaint alleged Baur's employees discriminated against Stearnes based on his race. The complaint further alleged negligence, false imprisonment, false arrest, and malicious prosecution claims against Baur's. Baur's was served with a summons and copy of the complaint in January 1991. Baur's notified Cincinnati of the federal lawsuit and Cincinnati retained attorneys to defend Baur's.

Cincinnati's attorneys conducted discovery, filed interrogatories, and took 14 depositions in response to Stearnes' cause of action. In February 1992, the attorneys filed a motion for summary judgment, which was granted in March 1992. See Stearnes v. Baur's Opera House, Inc., 788 F. Supp. 375, 379 (C.D. Ill. 1992). In a letter dated April 1992, the attorneys notified Cincinnati of the district court's decision and stated "[w]e can anticipate [p]laintiff's attorney refiling the [s]tate claims in [s]tate [c]court." The district court's decision was appealed to the United States Court of Appeals for the Seventh Circuit, and upon remand, the complaint was dismissed for lack of jurisdiction in November 1993. See Stearnes v. Baur's Opera House, Inc., 3 F.3d 1142, 1145 (7th Cir. 1993).

In March 1993, before Stearnes' time ran out for filing a complaint in state court (735 ILCS 5/13-217 (West 1992)), he filed a complaint in the circuit court of Sangamon County, alleging state law claims identical to those alleged in the federal complaint. In April 1993, George W. Baur (George), principal owner of Baur's, was served with a summons and a copy of the state complaint. In June 1993, George died. After his death, Cincinnati's attorneys continued to represent Baur's in the federal lawsuit. However, George's estate failed to notify Cincinnati or its attorneys of the state lawsuit. In January 1994, Paul Presney, Sr., an attorney not retained by Cincinnati, filed an appearance on behalf of Baur's in the state lawsuit.

In July 1995, Baur's filed bankruptcy. As a result, Stearnes' state lawsuit was automatically stayed. In September 1995, the bankruptcy court granted Stearnes relief from the automatic stay and provided him with leave to pursue any available insurance. In October 1995, Stearnes' attorney contacted Cincinnati regarding settlement negotiations. In November 1995, Cincinnati responded by stating it was investigating the claim and would contact Stearnes after it reviewed the case. Cincinnati also sent a letter to the bankruptcy trustee, Mariann Pogge, notifying her it intended to defend Baur's pursuant to its reservation of rights. In December 1995, Cincinnati sent a second letter to Pogge informing her coverage was being denied because Baur's failed to provide reasonable notice of Stearnes' state lawsuit.

In January 1996, Cincinnati filed this declaratory judgment action, arguing it did not receive reasonable notice of the state lawsuit. Cincinnati argued Baur's insurance policy was breached; therefore, it did not have a duty to defend, indemnify, or otherwise cover Baur's in regard to the state lawsuit. Stearnes responded arguing Cincinnati, via the federal lawsuit, received sufficient notice of the state cause of action. Baur's never responded to the declaratory judgment action.

Cincinnati and Stearnes filed cross-motions for summary judgment arguing whether Cincinnati received reasonable notice. In April 1997, the trial court granted Stearnes' motion. In May 1997, the trial court denied Cincinnati's motion to reconsider. In July 1997, as a result of Baur's failure to appear or otherwise plead, the court entered a finding pursuant to Illinois Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)), which permitted Cincinnati to file this appeal.

II. ANALYSIS

On appeal, Cincinnati contends the trial court erred in denying its summary judgment motion and granting Stearnes' summary judgment motion. When reviewing summary judgment motions, the evidence is reviewed de novo and construed in the light most favorable to the non-movant. See Walker v. Rogers, 272 Ill. App. 3d 86, 89, 650 N.E.2d 272, 274 (1995), citing Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511, 518, 622 N.E.2d 788, 792 (1993). Summary judgment is properly entered when the pleadings, depositions, admissions, and affidavits fail to establish a genuine issue of material fact, thereby entitling the movant to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 1994).

Further, the movant bears the burden of persuasion and the initial burden of production. Carruthers v. B.C. Christopher & Co., 57 Ill. 2d 376, 380, 313 N.E.2d 457, 459 (1974); Rice v. AAA Aerostar, Inc., 294 Ill. App. 3d 801, 805, 690 N.E.2d 1067, 1070 (1998). Only if the movant satisfies the initial burden of production does the burden shift to the non-movant to present some factual basis arguably entitling him or her to a favorable judgment. See Carruthers, 57 Ill. 2d at 380, 313 N.E.2d at 459; Rice, 294 Ill. App. 3d at 805, 690 N.E.2d at 1070.

Baur's insurance policy requires its proprietors to notify Cincinnati of any lawsuit filed against Baur's. The ...


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