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Liberty Mutual Insurance Co. v. Lumbermens Mutual Casualty Co.

July 25, 2008


The opinion of the court was delivered by: Elaine E. Bucklo United States District Judge


On December 4, 2006, Liberty Mutual Insurance Company brought this equitable contribution action to recover a portion of the costs it incurred to defend its insured, Sears, Roebuck and Company ("Sears"), against class action lawsuits brought in California and Illinois.*fn1 On December 20, 2007, Liberty Mutual Fire Insurance Company ("Liberty") was substituted as the plaintiff. Defendant Lumbermens Mutual Casualty Company ("Lumbermens") has moved for summary judgment, in whole or in part, on the ground that Liberty's claim is time-barred, and further argues that Liberty lacks standing. For the reasons discussed below, Lumbermens' motion is denied.


At times relevant to this lawsuit, Liberty and Lumbermens (sometimes referred to as "Kemper"*fn2 ) were general insurers of Sears. Sears held Lumbermens general liability policies prior to October 1, 1997, and it held Liberty general liability policies with various coverage periods beginning on or after October 1, 1997. In 1999, Sears was sued in class actions in California (the "UCAN action") and Illinois (the "Bovay," "Triezenberg," and "Clark" actions, collectively, the "Illinois actions"). The class action complaints alleged wrongful conduct both before and after October 1, 1997.

Sears apparently tendered the UCAN and Illinois actions to both Liberty and Lumbermens. Both insurers responded with letters stating their positions regarding coverage for defense and liability. Liberty agreed to defend Sears in all four lawsuits, subject to certain reservations. Because the class actions against Sears alleged conduct that preceded the Liberty policy periods, however, Liberty also requested that Sears inform its prior carrier of the actions in order to share the cost of Sears' defense. Lumbermens, for its part, indicated in "reservation of rights" letters (which Liberty sometimes refers to as "coverage position" letters) that it would defend and/or indemnify Sears, subject to certain conditions and restrictions. Lumbermens' position has evolved over time, however, and it was murky, at best, for a considerable period.

In fact, it is not clear at what point Liberty became aware that Lumbermens was Sears' prior insurance carrier. Some evidence suggests that as late as January of 2003, Liberty still did not know the identity of Sears' previous insurer.*fn3 (Rouillard Aff., Exh. D.) It appears, however, that at least by June of 2003, Liberty had become aware that Sears was insured by Lumbermens, and that by July 2003, Liberty expected that Liberty, Lumbermens, and Sears would each contribute one-third of the settlement costs in the UCAN and Illinois actions. (Rouillard Aff., Exh. G.) The basis for that expectation, though, is not apparent from the record.

The parties do not dispute that Liberty first received copies of Lumbermens' reservation of rights letters on July 6, 2006. The letters themselves are dated April 24, 2000 (relating to UCAN), August 1, 2002 (Triezenberg), August 19, 2002 (Bovay), July 10, 2003 (Clark), and July 10, 2003 (UCAN). (Rouillard Aff. Exhs. T-X) Other than these letters, and Liberty's own coverage position letters to Sears, the record is composed primarily of correspondence between Liberty and Sears regarding the defense and settlement of the UCAN and Illinois actions. Although that correspondence is peppered with Liberty's requests for Lumbermens' coverage position, nothing in the record makes any representations about Lumbermens' coverage position. Indeed, Liberty's requests were apparently met either with silence from Sears, with excuses for why no substantive response was forthcoming (that Sears could not identify a contact at Lumbermens (Rouillard Aff. Exh. N)), or with misinformation (that Sears had not actually received coverage position letters from Lumbermens (Rouillard Aff. Exh. I)). Occasionally, the correspondence between Liberty and Sears bears a "cc" to Lumbermens, (e.g., Rouillard Aff. Exhs. F, G), but there is no evidence that Lumbermens received or responded to the messages on which it was copied. Other than these "cc"s, there is no evidence that Liberty attempted to obtain Lumbermens' coverage position letters directly from Lumbermens.

By March of 2005, Sears threw up its hands and told Liberty that if it wanted to obtain contribution from Lumbermens for defense costs, it would have to initiate litigation against Lumbermens. (Rouillard Aff. Exh. N) In August of 2005, however, Sears informed Liberty that the Lumbermens policies had been "novated," that "now Sears stands in Kemper's shoes," and that it would be "between Liberty and Sears" to resolve the matter of contribution. (Rouillard Aff. Exh. O)

The parties do not dispute that it was Liberty who defended Sears in the UCAN and Illinois actions, or that Liberty incurred defense fees and costs in excess of $1,500,000. The parties also agree that Liberty contributed $525,000 to the settlement of the UCAN lawsuit. It is not clear whether Lumbermens also paid a portion of the UCAN settlement, though a reasonable interpretation of some evidence in the record (e.g., Rouillard Aff. Exh. G) is that Lumbermens did do so. As far as the record shows, the Illinois actions have been consolidated but have not yet been resolved.


Summary judgment is appropriate where the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(e). It is not the court's function, at the summary judgment stage, to weigh the evidence and decide on the merits, but rather to determine whether there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). I must construe the evidence in the light most favorable to the non-moving party and draw all reasonable and justifiable inferences that party's favor. Id., at 255. Nevertheless, the non-movant must present sufficient evidence to enable a reasonable fact finder to find in his or her favor, and merely "a scintilla of evidence" is not enough to avoid summary judgment. Anderson, at 252.

Actions for equitable contribution under Illinois law are subject to a two year statute of limitations. 735 ILCS 13/204 ("Section 204"). The moment at which the limitations period begins to run depends on the circumstances of the action. The statute identifies two separate scenarios in which claims for contribution may be brought, and it identifies the relevant limitations triggers under each. Paragraph (a) of Section 204 states:

In instances where no underlying action seeking recovery for injury to or death of a person or injury or damage to property has been filed by a claimant, no action for contribution or indemnity may be commenced with respect to any payment made to that claimant more than 2 years after the party seeking contribution or ...

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