Appeal from the Circuit Court of the 10th Judicial Circuit Peoria County, Illinois No. 97-LM-1901 Honorable Richard E. Grawey Judge, Presiding
The opinion of the court was delivered by: Justice Lytton
Country Companies brought a subrogation action against Mark Seckler and Universal Underwriters Insurance Company ("Universal") based on an auto accident involving Seckler and one of its insureds, Michael Falatko. Seckler filed a counterclaim against Universal seeking a declaration that Universal had a duty to defend and indemnify him. The trial court ruled in favor of Seckler and against Universal, finding that Universal owed him coverage up to $500,000. We affirm.
In July, 1996, Seckler and Falatko had a traffic accident, and Falatko was injured. Falatko filed an action against Seckler, Ruff Electrical Services, Inc. ("Ruff"), and O'Brien Imports of Peoria, Inc. ("O'Brien"), alleging that Seckler negligently caused the accident, that Seckler was driving a vehicle in the course of his employment with Ruff at the time of the accident, and that the vehicle was owned by O'Brien.
Falatko was insured by Country Companies. Seckler was personally insured by State Farm Mutual Automobile Insurance Company ("State Farm"), and O'Brien had a garage policy with Universal at the time of the accident. Ruff was insured by CGU Insurance.
In October, 1997, Country Companies filed suit against Seckler and Universal, seeking subrogation for amounts paid to Falatko. In June, 1998, Falatko and his wife also filed suit against Seckler individually. In September of that year, Seckler filed a "Counterclaim for Declaratory Judgment" in the subrogation action seeking a declaration that Universal owed a duty to defend and indemnify him in both suits. The two cases were subsequently consolidated.
Seckler moved for summary judgment in the declaratory judgment action. Universal opposed the motion and sought leave to file a third party complaint adding State Farm to the counterclaim. The trial court denied Universal's motion and granted summary judgment to Seckler.
After Universal asserted in a motion that Seckler was limited to $20,000 coverage under the policy, Seckler filed a motion to determine policy limits. Universal objected, arguing that there was no basis in the pleadings to grant the motion and that not all necessary parties were joined. The trial court granted the motion and held that Seckler was entitled to $500,000 coverage limits.
On appeal, Universal argues that the trial court erred when it made any finding of the limits of liability for two reasons: 1) Seckler did not join all of the parties that were necessary to the action; and, in any case, 2) Universal's limit of liability to Seckler was $100,000.
Universal maintains that declaratory judgment on this issue was improper because parties that were necessary to a full resolution of the issue were not joined. The company asserts that excess insurers are always necessary to a declaration of the limits of the primary insurer. Therefore, since Seckler's excess insurer, State Farm, was not made a party, this court could not reach the issue.
In order to determine if a party is necessary to an action, two factors must be satisfied. First, the party must have a legal or equitable interest in the subject matter of the suit. American Home Assurance Company v. Northwest Industries, Inc., 50 Ill. App. 3d 807, 812 (1977). Second, that interest must be "a present or substantial interest as distinguished from a mere expectancy or future contingent interest." American Home, 50 Ill. App. 3d at 812.
The first prong of the test is satisfied when an excess insurer bears potential liability if a primary insurer's limits are exceeded. American Home, 50 Ill. App. 3d at 812. However, the second prong of the test is not satisfied unless the primary insurer's liability limits have already been reached, regardless of the likelihood that those limits may later be exhausted. American Home, 50 Ill. ...