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Illinois Central Railroad Company v. Accident and Casualty Company of Winterthur

November 22, 2000

ILLINOIS CENTRAL RAILROAD COMPANY, PLAINTIFF-APPELLANT,
v.
ACCIDENT AND CASUALTY COMPANY OF WINTERTHUR ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County. No. 97 CH 7647 Honorable Dorothy Kirie Kinnaird, Judge Presiding.

The opinion of the court was delivered by: Justice Barth

This coverage dispute between plaintiff Illinois Central Railroad Company (IC) and its 35 excess insurers (collectively defendants) has been before this court previously. See Kerr v. Illinois Central R.R. Co., 283 Ill. App. 3d 574 (1996). There we held that IC's notice to its first-layer excess insurers was untimely. IC now appeals from the circuit court's March 20, 1998, order granting summary judgment to defendants and its October 20, 1997, order denying IC's motion for partial summary judgment on the issue of trigger of coverage and granting partial summary judgment to defendants on the issues of trigger of coverage, allocation and exhaustion of self-insured retentions (SIR). The circuit court incorporated its October 20, 1997, ruling into its March 20, 1998, final order. These rulings by the circuit court resulted in IC being required to absorb the entire loss stemming from its unsuccessful defense and ultimate settlement of a class action employment discrimination suit. The defense and settlement cost IC more than $13 million for which, in the present litigation, it seeks indemnification.

BACKGROUND

I. The Underlying Discrimination Suit

In 1981, Robert Earl Mister filed a federal civil rights action against IC on behalf of a class of would-be laborers, alleging discriminatory hiring practices (hereafter the Mister litigation). IC prevailed at the district court level, with the court holding that while a prima facie case of disparate treatment had been established, IC had rebutted it by showing that distance from home to workplace and a practice of local hiring accounted for the apparent racial disparity in hiring. Mister v. Illinois Central Gulf R.R. Co., 639 F. Supp. 1560 (S.D. Ill. 1986). On appeal, however, the Seventh Circuit Court of Appeals reversed the district court and remanded the case for proceedings to determine damages. Mister v. Illinois Central Gulf R.R. Co., 832 F.2d 1427 (7th Cir. 1987). In 1993, after commencement but before conclusion of proceedings on remand, the parties agreed to settle the case for $10 million, wherein each of the 583 class members received $5,656.56. During the course of the litigation IC expended approximately $3 million in attorney fees and costs.

II. The First Coverage Dispute

IC gave notice to its insurers of a potential claim in excess of its $1.5 million SIR only after the Seventh Circuit's reversal. Thereafter, in 1991, certain underwriters at Lloyd's, London and certain London Market Insurance Companies (collectively the London Insurers) filed a declaratory judgment action, claiming that IC's notice was untimely pursuant to the policies. Therefore, it was argued, they were not obligated to indemnify IC for losses arising out of the Mister litigation. The London Insurers provided the first layer of coverage in excess of IC's SIR, i.e., between $1.5 million up to $4 million. IC filed a counterclaim against the London Insurers, and also filed a third-party action against several of its other insurers. The circuit court, upon a finding that IC had failed to provide timely notice, granted summary judgment in favor of the London Insurers as to the policies providing the first-layer of coverage and to other third-party defendant insurers which had joined in the motion. This court affirmed the circuit court's judgment. Kerr v. Illinois Central R.R. Co., 283 Ill. App. 3d 574 (1996).

III. The Second Coverage Dispute

Following issuance of the Kerr opinion, the parties were, on IC's motion, realigned in the circuit court so that IC was the plaintiff and its insurers were the defendants. On May 23, 1997, IC filed an amended complaint seeking a declaration that its insurers were obligated to indemnify it for defense and settlement costs resulting from the Mister litigation. The complaint did not distinguish among the various insurers except to say that, during the allegedly relevant time period (June 1, 1975, through June 1, 1979), IC purchased liability insurance from defendants providing four separate layers of coverage. The first layer provided coverage from $1.5 million up to $4 million; the second layer from $4 million up to $6 million; the third layer, from $6 million up to $11 million; and the fourth layer, from $11 million up to $16 million.

In July 1997, IC filed a motion for partial summary judgment concerning the reasonableness of notice to all insurers providing coverage above the first layer of excess coverage. In August 1997, IC filed another motion for partial summary judgment concerning "occurrence" and "trigger of coverage" issues. IC argued that the facts of the Mister litigation and the unambiguous policy language established that the Mister discrimination claims constituted a single, continuing occurrence triggering coverage only under those policies in effect during the 1975-1976 policy period, and that those insurers were obligated to indemnify IC for its $13 million loss, subject only to each policy's upper and lower limits. The occurrence, according to IC, was the delegation of hiring authority to Mary Annette Lane in 1975, for IC's St. Louis, Missouri, division.

The London Insurers, Century Indemnity Company (successor to CIGNA Specialty Insurance Company, f/k/a California Union Insurance Company), Bellefonte (U.S.) Insurance Company and Stonewall Insurance Company responded to IC's motion and filed their own cross-motion for partial summary judgment on the issues of "trigger of coverage" and "allocation." Continental Insurance Company (successor to certain policies issued by Harbor Insurance Company, n/k/a Greenwich Insurance Company) joined in defendants' response and motion.

Defendants argued that the Mister claims grew out of discriminatory hiring practices spanning many years and involving multiple occurrences. Based upon the Mister class definitions, which included would-be laborers who applied with IC between January 8, 1976, to November 4, 1982, they asserted that the claims arising from the railroad's discriminatory hiring practices implicated six policy periods. *fn1

Defendants further argued that IC must first horizontally exhaust its SIR ($1.5 million) and its first layer of excess coverage ($1.5 million to $4 million) for each of the policy years at issue before it may reach its second layer of coverage provided by defendants.

In September 1997, IC filed a motion for reconsideration apparently in anticipation of the possibility of an adverse ruling on defendants' motion. IC stated that if defendants' motion for partial summary judgment finding multiple occurrences were to be granted, it would then petition the court pursuant to section 2-1401 of the Illinois Code of Civil Procedure (735 ILCS 5/2-1401 (West 1996)), to reconsider its March 21, 1995, ruling (affirmed in Kerr) that IC's notice to the first-layer excess insurers was untimely. IC argued that implicit in the circuit court's late notice ruling was the conclusion that the Mister claims were recoverable from a single policy period. IC claimed that, because its expert's analysis of the Mister case showed a potential exposure of $2 million, it was held, in Kerr, to be under a duty to give notice to the first-layer excess insurers, whose inception amount was $1.5 million. However, IC argued, if the estimated potential $2 million loss were allocated over six years, then the loss attributable to any single policy period would fall far short of the $1.5 million inception. In that case, IC would have been under no duty to give notice to its excess insurers.

On October 20, 1997, the trial court granted IC's motion for partial summary judgment to the extent that it found the Mister claims gave rise to a single occurrence. That occurrence, according to the circuit court, was the delegation of hiring authority to Mary Annette Lane. However, the court granted defendants' motion for partial summary judgment finding that multiple policies in force during the years covered by the Mister class definitions were triggered. Further, the court ruled that liability attached to a triggered policy only for that portion of the damages allocable to the period such policy was in force. The court noted that damages sustained by Mister class members could be "easily allocated." Finally, the circuit court agreed with defendants that IC must first horizontally exhaust its SIR for each triggered policy period before looking to coverage from its excess insurers.

IC moved the circuit court to reconsider its October 20, 1997, ruling, arguing inter alia, that it ignored the so-called "deemer" or "telescope" clause contained in the policies, which had the effect of "sweeping back" all the damages into the 1975-1976 policy. That clause provided that "[e]ach 'occurrence' shall be deemed to commence on the first happening of any material damage not within the period of any previous 'occurrence'." (Emphasis added.)

While IC's motion for reconsideration was pending, the London Insurers filed a motion for summary judgment. They argued that IC must exhaust the first $4 million of losses in each of seven, rather than six as previously argued, relevant policy periods (IC's $1.5 million SIR and its first-layer of excess coverage amounting to $2.5 million) before looking to its second-layer insurers. However, because IC's loss in any given policy period did not exceed $4 million, they argued that IC was not entitled to any reimbursement as a matter of law. Century Indemnity Company filed a motion for summary judgment making an identical argument.

Stonewall Insurance Company also moved for summary judgment, arguing that its policies covered periods prior to the onset of damages. Stonewall further argued that it issued fourth-layer coverage, i.e., coverage in excess of $11 million, and that based upon the circuit court's October 20, 1997, ruling, Stonewall's coverage would never be reached.

On March 20, 1998, the circuit court granted defendants' motions for summary judgment. The order allocated the $10 million settlement and $3,088,547 in defense costs over seven years beginning with the 1975-1976 policy year and ending with the 1981-1982 policy year. The court determined that: (1) IC must horizontally exhaust its $1.5 million SIR in each policy year; (2) IC is not entitled to reimbursement from its first-layer providers (in accordance with this court's Kerr decision); and (3) the loss, as allocated, does not exceed $4 million in any one policy year; therefore, IC was "not entitled to any reimbursement whatever from its excess insurers."

The circuit court also denied IC's motion for reconsideration of its October 20, 1997, order denied IC's motion for reconsideration of its March 21, 1995, ruling as to the timeliness of notice to the first-layer excess insurers and determined that IC's motion for summary judgment as to the timeliness of notice to insurers above the first layer of coverage was moot. IC now appeals.

ANALYSIS

I. Requirement of a Cross-Appeal

Defendants argue that summary judgment in their favor is proper for the separate reason that there was at least one occurrence in each of the relevant policy years. Thus, defendants challenge the trial court's October 20, 1997, ruling that there was a single, continuing occurrence. IC claims that this issue is not properly before this court because part of the trial court's ruling was adverse to defendants and that they failed to file a cross-appeal.

In general, "[a] party cannot complain of error which does not prejudicially affect it, and one who has obtained by judgment all that has been asked for in the trial court cannot appeal from the judgment." Material Service Corp. v. Department of Revenue, 98 Ill. 2d 382, 386 (1983); see also Geer v. Kadera, 173 Ill. 2d 398, 413-14 (1996). Even though a successful party may not agree with the reasons, conclusions or findings of the lower court, it is improper to provide that successful party with a forum in a reviewing court. Geer, 173 Ill. 2d at 414.

IC misconstrues the final judgment entered below. Although the circuit court, on October 20, 1997, rejected defendants' argument that there were at least six separate occurrences, on March 20, 1998, the court entered its final order granting summary judgment in favor of defendants, finding that IC was "not entitled to any reimbursement whatever from its excess insurers." Thus, defendants obtained all that they asked for in the circuit court, albeit on grounds different from what they argued. Because the final judgment is entirely in defendants' favor, specific findings adverse to defendants do not require a cross-appeal in order for this court to ...


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