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Progressive Insurance Co. v. Universal Casualty Company

March 15, 2004


Appeal from the Circuit Court of Cook County. No. 01 CH 8329 Honorable Sophia H. Hall, Judge Presiding.

The opinion of the court was delivered by: Justice Gordon


This case arises from an auto accident in which Francisco Araujo hit a pedestrian, Luz Mendez, while delivering pizzas for a pizza vendor, Pizza Nova, Inc. Araujo's vehicle was insured by defendant, Universal Casualty Company, while plaintiff, Progressive Insurance Company, provided insurance to Pizza Nova for its business automobiles. Plaintiff Progressive settled a lawsuit filed by Mendez as a result of the accident for $57,500 and brought suit against defendant Universal for reimbursement. Following cross-motions for summary judgment, the trial court granted summary judgment in favor of Progressive and denied Universal's motion. The court awarded Progressive $20,000, Universal's policy limit for a single claimant. Universal now appeals. For the following reasons, we reverse and remand to the trial court for further proceedings.


On January 22, 1999, Luz Mendez was hit by a vehicle driven by Francisco Araujo. The vehicle was owned by Francisco's father, Jose Araujo, and at the time he hit Mendez, Francisco was driving the vehicle in the course of his employment delivering pizza for Pizza Nova. Jose carried insurance on his vehicle with defendant Universal, which provided $20,000 in liability coverage for a single claimant.*fn1 Universal's policy also contained a provision providing for coverage of any person or organization legally responsible for the use of the insured automobile, which later became the basis for Progressive's contention that Pizza Nova was not only an insured of plaintiff Progressive, but an additional insured of defendant Universal. Universal's policy further provided the following policy defenses under the section entitled "Conditions":

"5. *** The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for such immediate medical and surgical relief to others as shall be imperative at the time of accident.

6. *** No action shall lie against the company unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy, nor until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company."

Pizza Nova was the named insured on a policy provided by plaintiff Progressive, which insured any automobiles used in the course Pizza Nova's business, but were not owned by Pizza Nova. Progressive's policy provided a liability limit of $350,000 and contained the following "other insurance" provision: "For any covered 'auto' you own, this Coverage Form provides primary insurance. For any covered 'auto' you don't own, the insurance provided by this Coverage Form is excess over any other collectible insurance."

It appears from the record that both insurance companies were notified of the Araujo-Mendez accident and entered into negotiations with the underlying tort claimant Mendez to settle the case prior to her filing suit. Those negotiations proved unsuccessful, and on January 17, 2001, Mendez filed a complaint naming Araujo and Pizza Nova as defendants. While Pizza Nova was served with process regarding the lawsuit, Mendez was unable to serve the Araujos. On May 1, 2001, Progressive, Pizza Nova's insurance carrier, settled the case with Mendez for $57,500.

Thereafter, Progressive filed a complaint for declaratory judgment in the circuit court, requesting a finding that Universal was the primary insurer of the Araujo vehicle and that Progressive was an excess insurance carrier. Because of its alleged status as an excess carrier, Progressive requested an order directing Universal to reimburse Progressive for its settlement with Mendez. Universal responded that its bodily injury liability limit on the Araujo policy was $20,000, but flatly denied any obligation to reimburse Progressive for its settlement. Universal asserted that its obligation to cover any loss by Araujo was never triggered because two conditions precedent to its policy were not satisfied, namely: (1) the insured's obligation was not "finally determined" by written agreement between the insured, the claimant and the insurer or in a court of law and (2) Progressive's settlement was an unauthorized voluntary payment.

The parties subsequently filed cross-motions for summary judgment, responses, supplemental briefs and a second set of cross-motions for summary judgment.*fn2

In its motion for summary judgment, Progressive realleged that, as the primary insurer of the automobile, Universal was obligated to reimburse Progressive, the excess insurer, for its settlement with Mendez. Progressive further asserted that Universal should be estopped from raising any policy defenses to coverage as it wrongfully declined to defend its insured in the underlying lawsuit when it was filed. Attached to Progressive's motion was a copy of the coverage provisions under its policy, including the "other insurance" clause restated above. Also attached to Progressive's motion was the following: (1) a copy of an unnotarized letter from the underlying tort claimant's attorney, Paul Kesselman, addressed to Universal and Francisco Araujo, dated March 8, 1999, and titled "Notice of Attorney's Lien," stating that Kesselman was retained to represent Mendez for damages resulting from the January 22, 1999, accident; (2) a copy of a letter from Suzanne Weisman, a claims representative for Universal, acknowledging receipt of Kesselman's lien letter and responding that the matter was under investigation; (3) an unsigned letter from Denise Gracon, apparently an employee of Progressive,*fn3 to Universal, referencing a settlement demand from Mendez and requesting a complete copy of Universal's policy for review; (4) an unsigned letter from Lisa Anderson, apparently a second employee of Progressive,*fn4 addressed to Universal, stating that no response was received from the previous letter and requesting a determination regarding the Mendez matter.

Universal's motion reasserted the two policy defenses recounted above and claimed that, although Progressive's attachments amounted to notice of an insurance claim, Universal never received notice of a lawsuit; therefore, its duty to defend the lawsuit never arose and Progressive's estoppel argument regarding Universal's policy defenses did not apply. Universal further argued that Progressive was not an excess insurance carrier, but a co-insurer, and therefore it brought an improper action for reimbursement when it should have brought its action under the doctrine of equitable contribution.

Regarding the issue of whether Universal received notice of the filing of the underlying lawsuit, Universal submitted an affidavit signed by Paul Kesselman, averring that he never notified Universal of the lawsuit and that he was unable to serve the Araujos with summons. The parties further submitted the conflicting affidavits of Brian Germain, an ...

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