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Fremont Casualty Insurance Co. v. Ace-Chicago Great Dane Corp.

October 26, 2000

FREMONT CASUALTY INSURANCE COMPANY, FORMERLY KNOWN AS CASUALTY INSURANCE COMPANY,
PLAINTIFF/COUNTERDEFENDANT-APPELLANT,
V.
ACE-CHICAGO GREAT DANE CORPORATION,
DEFENDANT/COUNTERPLAINTIFF-APPELLEE,
AND
FRED GROSSMAN, ELLIS REID,
DEFENDANT.



Appeal from the Circuit Court of Cook County. No. 97 CH 10366 Honorable Judge Presiding.

The opinion of the court was delivered by: Justice Hoffman

Fremont Casualty Insurance Company, formerly known as Casualty Insurance Company, appeals from the trial court's determination that it is required to defend its insured, Ace-Chicago Great Dane Corporation (Ace), in an action for negligent spoliation of evidence filed against it by Fred Grossman. Before discussing and analyzing the issues presented, it is necessary to give a brief recitation of the factual and procedural history of the case.

In 1992, Fred Grossman filed an action against Berg Ladders, Inc. (Berg), seeking damages for injuries he allegedly suffered when, during the course of his employment with Ace, he fell from a ladder manufactured by Berg. In December 1996, Grossman filed an amended complaint in that action, joining Ace as a defendant and asserting against it a claim for negligent spoliation of evidence. In support of that claim, Grossman alleged that, on July 26, 1991, the date of his fall, an Ace employee took the ladder and stored it for safe-keeping and that, subsequently, an Ace agent informed Grossman's attorney that Ace was in possession of the ladder and would keep it at its facility. Grossman further alleged that: Ace knew or should have known that the ladder was a material piece of evidence in his suit against Berg; Ace had a duty to preserve the ladder or turn it over to his attorney; Ace disposed of the ladder without notifying him or his attorney; as a proximate result of Ace's negligence, he would be unable to prove his allegations of negligence and product liability against Berg; and had Ace preserved the ladder, he would have been able to successfully prove those allegations.

Ace tendered defense of the Grossman action to Casualty Insurance Company, which had issued a workers' compensation and employers' liability insurance policy to it. Casualty accepted the tender subject to a reservation of rights. Subsequently, Fremont Compensation Insurance Company (Fremont), as successor in interest to Casualty, filed the instant action against Ace and Grossman, seeking a declaration that it did not have a duty to defend or indemnify Ace in the Grossman litigation. Ace filed an answer and a counterclaim against Fremont seeking a declaration that Fremont did have a duty to defend and indemnify it. *fn1

Subsequently, Grossman voluntarily dismissed his action against Ace. In October 1998, he re-filed the action, this time naming only Ace as a defendant, as summary judgment had been entered in favor of Berg in the earlier action. The allegations against Ace were the same as those contained in the earlier complaint. Ace tendered defense of the re-filed action to Fremont, and Fremont again undertook Ace's defense under a reservation of rights. On May 5, 1999, Fremont amended its complaint for declaratory judgment to seek a declaration that it was not required to defend or indemnify Ace with regard to Grossman's re-filed action. Ace likewise amended its counterclaim to seek a declaration regarding the re-filed action.

On July 22, 1999, Fremont filed a motion for summary judgment. On November 12, 1999, Ace filed a motion for partial summary judgment, seeking judgment only with respect to the issue of Fremont's duty to defend. On January 10, 2000, after hearing the parties' arguments, the trial court entered a written order: denying Fremont's motion for summary judgment; granting Ace's motion for partial summary judgment, stating that Fremont has a duty to defend Ace; and reserving ruling on the question of whether Fremont has a duty to indemnify Ace. The order included Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)) language. The instant, timely-filed appeal followed.

Before considering the merits of the parties' arguments, we must discuss the source of our jurisdiction. Fremont contends that this court has jurisdiction over its appeal pursuant to Supreme Court Rule 304(a) (155 Ill. 2d 304(a)). Rule 304(a) provides that, where a case involves multiple parties or multiple claims, "an appeal may be taken from a final judgment as to one or more but fewer than all of the parties or claims only if the trial court has made an express written finding that there is no just reason for delaying either enforcement or appeal or both." 155 Ill. 2d R. 304(a). Fremont contends that the order does finally dispose of a separate claim, namely its duty to defend Ace, and that, because it contains the language required by Rule 304(a), it is properly appealable.

Ace correctly notes that the presence of Rule 304(a) language does not make a non-final order final or appealable. Elkins v. Huckelberry, 276 Ill. App. 3d 1073, 1075, 659 N.E.2d 462 (1995). It contends that, in the instant case, the presence of Rule 304(a) language does not render the trial court's January 10 order appealable because that order does not finally dispose of a separate claim. According to Ace, the question of Fremont's duty to defend and the question of its duty to indemnify comprise a single claim, of which the trial court has not yet finally disposed, having specifically reserved judgment on the question of Fremont's duty to indemnify.

Ace asserts that, if Fremont seeks a review of the trial court's January 10 order, its sole avenue to obtain that review is by application for leave to appeal pursuant to Supreme Court Rule 308 (155 Ill. 2d R. 308). In support of that argument, Ace relies on Outboard Marine Corp. v. Liberty Mutual Insurance Co., 212 Ill. App. 3d 231, 570 N.E.2d 1154 (1991), aff'd in part, rev'd in part, 154 Ill. 2d 90, 670 N.E.2d 1204 (1992). In Outboard Marine, the plaintiff filed a declaratory judgment action against multiple insurers, alleging that they had a duty to defend and indemnify it with regard to certain litigation. The plaintiff filed a motion for partial summary judgment, seeking an order that the underlying litigation fell within the coverage of the insurance policies at issue, and the defendants filed cross-motions for summary judgment. The trial court denied the defendants' motions and granted the plaintiff's motion. It then entered an order, pursuant to Rule 308, certifying for appeal the question of whether the underlying litigation sought damages falling within the policies' coverage. This court granted one of the defendants leave to appeal. Outboard Marine, 212 Ill. App. 3d at 238. Ace's reliance on Outboard Marine is misplaced, though, as that case does not state that Rule 308 is the only avenue for obtaining review of an order such as the one at issue here, nor does it state that review of such an order cannot be obtained pursuant to Rule 304(a) where the order contains the requisite finding.

As stated above, Rule 304(a) provides an avenue for appeal from final judgments as to one or more but fewer than all the claims involved in a case. A judgment is final if it terminates the litigation between the parties on the merits or disposes of the parties' rights with regard to either the entire controversy or a separate part of it. R.W. Dunteman Co. v. C/G Enterprises, Inc., 181 Ill. 2d 153, 159, 692 N.E.2d 306 (1998). Our supreme court has defined the word claim, as used in Rule 304(a), as "any right, liability, or matter raised in an action." Marsh v. Evangelical Covenant Church of Hinsdale, 138 Ill. 2d 458, 465, 563 N.E.2d 459 (1990). It has been said that the test for determining whether the order from which a party attempts to appeal pursuant to Rule 304(a) constitutes a final order on a claim is "whether the order appealed from constitutes a final determination of the parties' rights with respect to a definite and separate portion of the subject matter." Krivitskie v. Cramlett, 301 Ill. App. 3d 705, 707, 704 N.E.2d 957 (1998).

Ace contends that the duty to defend and the duty to indemnify, arising out of the same insurance policy and relating to the same underlying litigation, "are not so separate and distinct that a decision on only the duty to defend should be considered termination of a definite and separate claim." We disagree. It is well-settled that an insurer's duty to defend and its duty to indemnify its insured are separate and distinct duties. Zurich Insurance Co. v. Raymark Industries, Inc., 118 Ill. 2d 23, 52, 514 N.E.2d 150 (1987). As such, we find that an order disposing of the parties' right with respect to Fremont's duty to defend, but reserving judgment regarding its duty to indemnify, is a final determination with respect to a definite and separate portion of the litigation. Accordingly, we find that we have jurisdiction over the instant appeal.

We now turn to the merits of the appeal. Fremont argues that the trial court erred in granting Ace's motion for partial summary judgment and denying its own motion for summary judgment. Although the denial of a motion for summary judgment is ordinarily not a final order and is not appealable standing alone (Arangold Corp. v. Zehnder, 187 Ill. 2d 341, 356, 718 N.E.2d 191 (1999)), we may properly review an order denying a motion for summary judgment if, as in the instant case, the appeal from that order is brought in conjunction with the appeal from an order granting a cross motion for summary judgment on the same claim (see Colvin v. Hobart Brothers, 156 Ill. 2d 166, 169-70, 620 N.E.2d 375 (1993)). We note that Fremont moved for summary judgment on the questions of its duty to defend and its duty to indemnify, while Ace moved for summary judgment only with respect to Fremont's duty to defend. Accordingly, we would ordinarily be limited to reviewing the trial court's ruling on the denial of that portion of Fremont's motion for summary judgment directed toward its duty to defend. An insured's duty to defend, however, is broader than its duty to indemnify. Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384, 398, 620 N.E.2d 1073 (1993). Therefore, where no duty to defend exists, no duty to indemnify could ever exist. Crum & Forster Corp., 156 Ill. 2d at 398. In this case, if Fremont is entitled to the entry of summary judgment on the portion of its motion regarding its duty to defend, it is necessarily entitled to the entry of summary judgment on the portion of its motion regarding its duty to indemnify. That being the case, we find it appropriate to review the trial court's ruling on Fremont's motion for summary judgment in its entirety.

Summary judgment is appropriate where the pleadings, depositions, admissions, and affidavits on file, when taken together in the light most favorable to the non-movant, show that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 1998)); Soderlund Brothers, Inc. v. Carrier Corp., 278 Ill. App. 3d 606, 613-14, 663 N.E.2d 1 (1995). By filing cross-motions for summary judgment, the parties invite the court to decide the issues presented as questions of law. Allen v. Meyer, 14 Ill. 2d 284, 292, 152 N.E.2d 576 (1958). Our review of the trial court's ruling on a motion for summary judgment is de novo. In re Estate of Hoover, 155 Ill. 2d 402, 411, 615 N.E.2d 736 (1993).

The question of whether an insurer has a duty to defend its insured against a lawsuit is answered by comparing the allegations of that suit, liberally construed in favor of the insured, with the language of the insurance policy. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 125, 607 N.E.2d 1204 (1992). As a general rule, where the factual allegations of a complaint fall within, or even potentially within, the scope of an insurance policy's coverage, the insurer is obligated to defend its ...


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