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Philadelphia Indemnity Ins. Co v. Chicago Title Ins. Co. and Western Capital Partners

June 10, 2012


The opinion of the court was delivered by: Matthew F. Kennelly, District Judge


Western Capital and Philadelphia have each filed motions asking the Court to enter judgment in their favor without holding a trial. Western Capital seeks summary judgment on its claims for declaratory judgment regarding Chicago Title's defense obligations and for breach of contract, and Philadelphia has moved for the entry of a monetary judgment in its favor.

In addition to opposing both of these motions, Chicago Title has asked the Court to alter or amend portions of its May 11, 2012 order. See Philadelphia Indem. Ins. Co. v. Chicago Title Ins. Co., No. 09 C 7063, 2012 WL 1658291 (N.D. Ill. May 11, 2012). Chicago Title claims that the settlement agreement between Philadelphia and Western Capital rendered moot Philadelphia's claim for declaratory judgment, on which the Court previously granted summary judgment. Chicago Title also alleges that some of the claims in the underlying lawsuit were never been re-pled, which if true might affect what fees from that litigation Chicago Title is obliged to pay.

The Court assumes familiarity with its prior decisions in this case. For the reasons stated below, the Court grants Western Capital's motion in part and denies Philadelphia's and Chicago Title's motions.

A. Philadelphia's claim

Philadelphia contends that it is entitled to, in effect, step into Western Capital's shoes and recover from Chicago Title the attorney's fees and expenses that Western Capital incurred in the underlying litigation that Philadelphia has paid or for which it has reimbursed Western Capital. Philadelphia argues that the entry of a monetary judgment is the natural corollary to the Court's decision granting summary judgment in Philadelphia's favor on its claim for a declaratory judgment that Chicago Title was required to defend Western Capital in the underlying litigation.

1. Amendment of Philadelphia's complaint

Chicago Title protests that Philadelphia has not sought monetary relief in its complaint and therefore cannot obtain it. Consequently, Philadelphia has sought leave to amend its complaint pursuant to Federal Rule of Civil Procedure 15(a)(2) to add a claim for equitable subrogation. Chicago Title argues that Philadelphia is not entitled to add this claim so late in the litigation. Chicago Title contends that it will be prejudiced if the Court permits Philadelphia to amend because it will be unable to properly challenge Philadelphia's claim.

The Court concludes that Philadelphia is entitled to add the claim for damages. The claim does not involve arguments or subject matter that differ significantly from what Philadelphia (and, for that matter, Western Capital) have asserted throughout this case. Moreover, Chicago Title has had the opportunity to challenge the claim in its response to Philadelphia's motion seeking a monetary judgment. It has asserted several substantive arguments regarding why the equitable subrogation claim is not viable, and the Court has considered these arguments. Chicago Title's contention that it has been deprived of the opportunity to assert additional defenses is unsupported by any specifics and is thoroughly unpersuasive.

2. Mootness

Chicago Title also argues that count one of Philadelphia's original complaint, in which Philadelphia sought a declaratory judgment that its policy was excess to Western Capital's policy, was rendered moot by the settlement agreement that Philadelphia and Western Capital concluded in March 2011. In this agreement, in consideration for a monetary payment by Philadelphia to Western Capital, Philadelphia and Western Capital agreed to certain parameters governing Philadelphia's defense obligations to Western Capital in the underlying lawsuit. According to Chicago Title, the settlement agreement fixed and resolved the scope of Philadelphia's obligations. Thus, Chicago Title argues, the settlement agreement likewise resolved any issue that Philadelphia might have had regarding Chicago Title's obligations -- Philadelphia's obligations to Western Capital are fixed by the settlement and will not change irrespective of what Chicago Title's obligations to Western Capital turn out to be. Chicago Title argues that the Court should therefore vacate its earlier decision granting Philadelphia's request for a declaratory judgment regarding the scope of Chicago Title's defense obligations.

The Court disagrees with Chicago Title's contentions. First, to the extent that Chicago Title relies on Taco Bell Corp. v. Continental Cas. Co., 388 F.3d 1069 (7th Cir. 2004), for the premise that a settlement agreement of the sort at issue here renders moot a claim by an insured against its primary insurer, the contention is unavailing. In that case, Taco Bell sued its two liability insurers, Zurich and Continental, seeking a declaration that the companies had a duty to pay for its defense. Taco Bell settled with Continental. On summary judgment, the district court issued declaratory relief against both insurers and ordered both to pay for defense costs already insured. Continental argued on appeal that the district court should not have entered a judgment against it after it settled with Taco Bell. The Seventh Circuit agreed, noting that the settlement "ended [Continental's] dispute with Taco Bell, so there was no longer a controversy for the court to resolve." Id. at 1078. The case does not bear on whether a settlement between an insured and one insurer moots a claim between the insured and the other insurer, or a claim between the two insurers.

Second, as the Court will discuss below, Western Capital seeks summary judgment on essentially the same claim on which Philadelphia earlier sought summary judgment: a declaration regarding Chicago Title's obligations to Western Capital. This claim requires exactly the same analysis in which the Court engaged earlier with respect to Philadelphia's claim. Thus even if Philadelphia's original claim were moot, that would provide no basis to vacate the Court's earlier decision.

Third, the question of what rights Philadelphia has with respect to Chicago Title remains a live issue in this case. This is shown by Philadelphia's assertion of a claim for damages based on equitable subrogation. In that claim, Philadelphia contends that it took actions on behalf of Western Capital that it would not have taken but for Chicago Title's failure to live up to its obligations. Philadelphia argues that, as a result, it is entitled to reimbursement from Chicago Title based on its breach of its contractual obligations to Western Capital. The legal relationship between Philadelphia and Chicago Title as it relates to Western Capital, which depends ...

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