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Universal Underwriters Insurance Company v. Lkq Smart Parts

December 16, 2011

UNIVERSAL UNDERWRITERS INSURANCE COMPANY,
PLAINTIFF-APPELLEE,
v.
LKQ SMART PARTS, INC., LKQ CORPORATION AND ILLINOIS FARMERS INSURANCE COMPANY,
DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Cook County No. 07 L 12664 Honorable Sophia H. Hall, Judge Presiding.

The opinion of the court was delivered by: Presiding Justice Epstein

PRESIDING JUSTICE EPSTEIN delivered the judgment of the court, with opinion. Justices McBride and Howse concurred in the judgment and opinion.

OPINION

¶ 1 Universal Underwriters Insurance Company (Universal) brought an action for declaratory judgment against its insured, LKQ Corporation and its subsidiary LKQ Smart Parts, Inc. (collectively LKQ), and an alleged additional insured, Illinois Farmers Insurance Company (Farmers), seeking a declaration that its liability insurance policy did not cover a spoliation of evidence claim brought against Farmers and LKQ. On cross-motions for summary judgment, the trial court found that the policy did not cover the spoliation claim and, as a result, Universal had no duty to defend or indemnify Farmers or LKQ. The trial court granted summary judgment in favor of Universal and denied LKQ's and Farmers' summary judgment motions. LKQ appeals the order granting summary judgment in favor of Universal and denying summary judgment to LKQ. For the reasons that follow, we reverse.

¶ 2 BACKGROUND

¶ 3 This appeal arises out of a series of lawsuits involving a single-vehicle accident. On July 2, 2004, Michael Widawski lost control of the Nissan Pathfinder he was driving on a Wisconsin highway. Monika Gramacki, the only passenger, was thrown from the vehicle as it rolled over, and she died from her injuries. Following the accident, the Nissan Pathfinder was initially towed to a collision repair shop in DeForest, Wisconsin. Farmers, as insurer of the vehicle, then contacted LKQ, a vehicle repair, storage, and salvage business, allegedly to hold and secure the vehicle. In late September 2004, LKQ transported the Pathfinder from the DeForest location to its salvage yard in Hustiford, Wisconsin. Sometime after, while the vehicle was at LKQ's salvage yard, the vehicle was destroyed.

¶ 4 John Gramacki, as independent administrator of the estate of his daughter Monika, filed suit against Nissan Motor Company, Ltd., and Nissan North America, Inc., bringing products liability claims based on an allegedly faulty latch in the Pathfinder's rear door. Gramacki also asserted claims against Farmers for spoliation of evidence, alleging that Farmers' "destruction of the subject Nissan Pathfinder deprived Plaintiff of the key piece of evidence necessary to prove an otherwise valid product liability/negligence lawsuit under the Survival and Wrongful Death Acts against the manufacturer of the vehicle." Gramacki claimed that Farmers' "breach of that duty deprived Plaintiff of his ability and right to have the subject Nissan Pathfinder tested and analyzed by experts of his own choice to determine its role in Monika Gramacki's death."

Gramacki further alleged that "prior to the destruction of the subject Nissan Pathfinder, it had a reasonable probability of succeeding in a products liability negligence lawsuit *** against the manufacturer of the vehicle for the latch failure on the door from which decedent, Monika Gramacki, was ejected causing her injury and death."

¶ 5 After Gramacki filed suit, Farmers brought a third-party complaint against LKQ, recounting the allegations in the Gramacki complaint. In a count for contribution, Farmers alleged that "LKQ negligently destroyed the Pathfinder without the knowledge or consent of Farmers or [Gramacki]." Specifically, Farmers alleged that LKQ failed to "exercise reasonable care," "preserve the Pathfinder," or "obtain authorization from Farmers or [Gramacki] prior to the destruction of the Pathfinder." Farmers claimed that "should it be found that [Gramacki] is entitled to recover from Farmers, it will not be solely on account of the conduct of Farmers, but will be based on the negligent acts or omissions of LKQ." Nissan later brought a third-party negligence cause of action against LKQ, complaining that if LKQ had "preserved the condition of the subject Pathfinder, [Nissan] would not have been sued or would have been summarily dismissed from the underlying lawsuit filed by [Gramacki]."

¶ 6 After receiving the third-party complaint from Farmers, LKQ made a claim under an insurance policy issued by Universal and asked Universal to defend against Farmers' claims. Farmers then submitted a claim to Universal, arguing that it was an additional insured under the policy. On November 26, 2007, Universal sought a declaratory judgment that it had no duty to defend or indemnify LKQ or Farmers under the policy. Subsequently, on September 5, 2008, the underlying suit against Nissan and Farmers, with LKQ named as a third-party defendant, was dismissed after the parties settled the action. While LKQ and Farmers were parties to the settlement, Universal did not participate in, or contribute to, the settlement of the underlying suit. On March 19, 2009, LKQ filed a counterclaim in Universal's declaratory judgment action, seeking a declaration that Universal had a duty to defend and indemnify it in connection with Farmers' third-party complaint.

¶ 7 In the trial court, the parties focused their arguments regarding coverage on two policy sections. The first, entitled "Auto Inventory Physical Damages" provides, in relevant part:

"WE will pay for LOSS of or to a COVERED AUTO from any cause, including sums an INSURED legally must pay as damages as a result of LOSS to a CUSTOMER'S AUTO, except as stated otherwise in the declarations or excluded. WE have the right and duty to defend any suit for damages for LOSS to a CUSTOMER'S AUTO. However, WE have no such duty for LOSS not covered by this Coverage Part. COVERED AUTO means an AUTO (1) owned by or acquired by YOU or (2) not owned by YOU but in YOUR care, custody, or control.

CUSTOMER'S AUTO means a COVERED AUTO not owned or acquired by YOU but in YOUR care, custody or control for safekeeping, storage, service or repair.

LOSS means direct and accidental physical loss or damage, occurring during the Coverage Part period. LOSS, with respect to a CUSTOMER'S AUTO, includes resulting loss of use."

In a separate section, simply called "Garage," the policy further provides:

"WE will pay all sums the INSURED legally must pay as DAMAGES (including punitive DAMAGES where insurable by law) because of INJURY to which the insurance applies caused by an OCCURRENCE arising out of GARAGE OPERATIONS or AUTO HAZARD.

WE have the right and duty to defend any SUIT asking for these DAMAGES. WE have no right or duty to defend SUITS for DAMAGES not covered by or declared for this Coverage Part.

DAMAGES means amounts awardable by a court of law.

INJURY means, with respect to: Group 1--bodily injury, sickness, disease or disability (including death resulting from any of these)or damage to or loss of use of tangible property ***."

¶ 8 Universal filed a motion for summary judgment requesting the circuit court to declare that it had no duty to defend or indemnify either LKQ or Farmers under the policy under either the auto inventory or garage policy parts. LKQ and Farmers both filed motions for summary judgment, requesting that the court declare that Universal had a duty to defend and indemnify under the policy. Concluding that Universal had no duty to indemnify or defend LKQ or Farmers under the policy, the circuit court entered an order granting Universal's motion for summary judgment and denying the motions for summary judgment of LKQ and Farmers. LKQ and Farmers filed a joint notice of appeal.

¶ 9 ANALYSIS

¶ 10 At the outset, we address Universal's request to dismiss the appeal of Farmers for failure to comply with Illinois Supreme Court Rule 343 (Ill. S. Ct. R. 343 (eff. July 1, 2008)). After filing a joint notice of appeal with LKQ, Farmers did not file a docketing statements as required by Illinois Supreme Court Rule 312, nor did it pay the necessary docketing fee as required by Illinois Supreme Court Rule 313. Ill. S. Ct. R. 312 (eff. Feb. 10, 2006); Ill. S. Ct. R. 313 (eff. Feb. 1, 1994). Farmers also did not file an appellant's brief as required by Illinois Supreme Court Rule 343 and did not join in LKQ's briefs. Ill. S. Ct. R. 343 (eff. July 1, 2008); see also First Capitol Mortgage Corp. v. Talandis Construction Corp., 63 Ill. 2d 128, 131 (1976) ("[I]t is permissible for a reviewing court in the exercise of its inherent authority to dismiss an appeal for the appellant's failure to file its brief within the time prescribed by rules of this court as suggested by the committee comment to our Rule 343."); Steinbrecher v. Steinbrecher, 312 Ill. App. 3d 289 (2000) (dismissing appellant's appeal where he did not file a brief or join in briefs filed by co-appellant), rev'd on other grounds, 197 Ill. 2d 514 (2001). Farmers has never appeared, and after being served with Universal's appellee brief requesting dismissal of Farmers' appeal, Farmers did not respond. It is apparent that after filing a notice of appeal with LKQ, Farmers has abandoned the appeal. Accordingly, we exercise our authority under the Illinois Supreme Court Rules to dismiss the appeal of Farmers. We will address the arguments raised by LKQ on appeal.

ΒΆ 11 LKQ argues that the trial court erred in granting Universal's motion for summary judgment and denying LKQ's motion for summary judgment. Summary judgment is appropriate where "the pleadings, depositions, 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 moving party is entitled to judgment as a matter of law." 735 ILCS 5/2-1005(c) (West 2008). "Although the denial of a motion for summary judgment is ordinarily not a final order and is not appealable standing alone [citation], 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 ...


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