Appeal from the Circuit Court of Cook County. 95 CH 1947 Honorable Margaret Stanton McBride, Judge Presiding.
The opinion of the court was delivered by: Justice Zwick
Plaintiffs Schal Bovis, Inc. (Shal), Buck 123 Partnership (Buck) and Northbrook Property & Casualty Company (Northbrook) filed their original complaint for declaratory judgment and other relief on March 3, 1995. The complaint was in seven counts. Counts I-V were based on defendants Casualty Insurance Company's (Casualty) and American States Insurance Company's (American States) alleged wrongful refusal to defend and indemnify Schal and Buck in an underlying tort action. Counts VI and VII were based on defendants Wausau Insurance Company's (Wausau) and Great American Insurance Company's (Great American) alleged tortuous failure to settle the underlying action within their available limits of primary coverage, causing plaintiff Northbrook, an alleged excess insurer, to incur liability following a jury verdict.
Each count was based on the same underlying facts. On June 9, 1989, an accident occurred giving rise to an action in the circuit court titled Keegan v. Schal Associates, Inc., et. al, No. 89 L 13702 (the Keegan action). The Keegan action arose out of events which occurred during construction of a building at 515 North State Street in Chicago. Buck owned the site and Schal was the general contractor. Both were insured by Northbrook.
Various parties were subsequently added to the action. The Ozark Companies, a subcontractor, was insured by Wausau. Ranken Steel and R.S. Erectors, also subcontractors, were insured by Great American. Alcan-United Forming, a subcontractor, was insured by American States. Buck and Schal were made additional insureds on each of these subcontractors' policies.
Schal and Buck tendered their defense in the Keegan action to each of the subcontractors insurers, defendants Wausau, Great American, Casualty and American States. Wausau and Great American accepted the tender. Casualty initially acknowledged its defense obligation, but withdrew before trial. American States denied the tender.
According to the plaintiffs' complaint, Wausau evaluated the "verdict potential" of the Keegan action at over $2 million. It refused, however, to contribute its policy limit of $1 million toward a proposed total settlement of $2 million. Great American was also alleged to have had an opportunity to contribute its $1 million policy limit toward a proposal to settle the case, but declined to do so.
A jury verdict of $2,892,500 was returned in Keegan's favor and judgment was entered thereon. Wausau contributed $1,049,583 and Great American contributed $1,000,000. Northbrook contributed the remaining $842,916.67. Casualty and American States paid nothing.
Plaintiffs subsequently brought their action recover the $842,916.67 paid by Northbrook, as well as other declaratory relief. Only counts I, V, VI and VII are at issue in this appeal.
In count I, Schal and Buck alleged that American States and Casualty were contractually obligated to indemnify them up to their respective policy limits for all amounts assessed as damages against Schal and Buck in the underlying action, but that Casualty and American States had wrongfully refused to make any payment in accordance with the provisions of the respective policies. Schal and Buck requested that the court find and adJudge that Casualty and American States had breached their contracts with Schal and Buck for all amounts that Northbrook paid in settlement of the underlying action.
In Count V, brought by all three plaintiffs, it was alleged that Casualty's and American States' refusal to indemnify the plaintiffs was vexatious and unreasonable under the terms of section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 1994)).
Counts VI and VII, brought by Northbrook and Schal against Wausau and Great American, alleged that Wausau and Great American negligently failed to settle the underlying action by contributing a sum of money less than their respective policy limits towards a proposed $2 million settlement; that by refusing to settle, the named defendants exposed Schal, Buck and Northbrook to a verdict in excess of the primary policy limits; and that this caused Northbrook to incur $842,916.67 in damages which it paid in satisfaction of the judgment. The plaintiffs further alleged that Schal was forced to incur an $842,916.67 reduction in the aggregate limits of its Northbrook policy as a result of that payment. Schal and Northbrook in count VI sought a judgment in their favor in the full amount paid in settlement of the underlying action and subsequent reduction of the aggregate limit under the Northbrook policy, whereas count VII alleged that the refusal of Great American and Wausau to settle within the $1 million limits of their respective primary policies was in bad faith.
All defendants filed motions to dismiss the case pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 1994)). On April 10, 1996, the trial court granted American States' and Casualty's Motion for Judgment on the Pleadings as to counts I and V. The court also granted Wausau's and Great American's motion to dismiss counts VI and VII of the complaint with prejudice. The court stayed counts II, III and IV pending resolution of the appeal of the Keegan action. Finally, the court made a finding that its rulings on Counts I, V, VI and VII was immediately appealable pursuant to Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)).
Plaintiffs thereafter filed a motion asking the court to reconsider its rulings. Included with that motion was an amended complaint. On August 2, 1996, the trial court denied the motion, but modified its prior ruling, sua sponte, such that the dismissal of counts I and V was made "without prejudice" as to Schal and Buck, and the dismissal of counts VI and VII was entered "without prejudice" as to Schal. The dismissal of counts VI and VII remained with prejudice as to Northbrook. In so ruling, the trial court reasoned that Schal and Buck had no standing to bring an action against the defendants in that their excess insurer, Northbrook, had fully satisfied the Keegan judgment. The court also ruled against Northbrook in finding no duty running from a primary insurer to its insured's excess insurer. The court found that it was unnecessary to consider the amended complaint as its rulings had rendered any proposed amendment, which simply added more detailed factual allegations, to be "moot." Plaintiffs filed their notice of appeal from the April 10, 1996 and August 2, 1996 orders on August 13, 1996.
Defendants Casualty and American States initially challenge Schal's and Buck's standing to bring counts I and V. They argue this court does not have jurisdiction to consider Schal's and Buck's claims with respect to these counts because, even though the court made a specific finding that its decision to dismiss counts I, V, VI and VII were "final and appealable," the court also made a specific written finding that the rulings with regard to Schal and Buck were entered "without prejudice." Casualty and American States argue that the "without prejudice" language necessarily means that the court's decision on these issues was not "final." A final judgment is a requirement for appealability under Supreme Court Rule 304(a). City ...