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Heather D. Vedder and Standard v. Continental Western Insurance

October 29, 2012


Appeal from the Circuit Court of Montgomery County. No. 11-MR-7 Honorable Douglas L. Jarman, Judge, presiding.

The opinion of the court was delivered by: Justice Welch

Illinois Court of Appeals, District 5



The text of this decision may be changed or corrected prior to the filing of a Petition for Rehearing or the disposition of the same.

JUSTICE WELCH delivered the judgment of the court, with opinion. Justices Spomer and Wexstten concurred in the judgment and opinion.


¶ 1 This is a declaratory judgment action to determine primacy of coverage between two insurers, Standard Mutual Insurance Company (hereinafter Standard Mutual), which insured Heather D. Vedder (the defendant in the underlying suit), and Continental Western Insurance Company (hereinafter Continental), which insured Nokomis/Witt Area Ambulance Service (hereinafter NWAA), for whom Vedder was working as a volunteer.

¶ 2 The conflict arises out of an underlying personal injury lawsuit brought by William Kroeger against Vedder and NWAA to recover for personal injuries he suffered when the motorcycle he was driving was struck by a vehicle being driven by Vedder. At the time of the collision, Vedder was driving her personally owned vehicle but was acting as a volunteer for NWAA. Vedder's vehicle was insured by Standard Mutual; NWAA was insured by Continental. Count I of Kroeger's complaint sought damages against Vedder based on her negligence, and count II sought damages against NWAA under the theory of respondeat superior.

¶ 3 The business auto policy issued by Continental to NWAA provides coverage for: "all sums an 'insured' legally must pay as damages because of 'bodily injury' or 'property damage' *** caused by an 'accident' and resulting from the ownership, maintenance or use of a covered 'auto'."

¶ 4 Under the business auto policy, a "covered auto" includes any auto, and an "insured" includes any employee or volunteer worker. For purposes of this appeal there is no dispute that under the Continental business auto policy, Vedder, as a volunteer worker of NWAA, is an "insured" and that Vedder's personally owned vehicle is a "covered auto." The Continental business auto policy further contains the following "other insurance" clause:

"a. For any covered 'auto' you own, and any 'commandeered auto' 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 ***."

¶ 5 The insurance policy issued by Standard Mutual to Vedder provides coverage for all sums the insured becomes legally obligated to pay as damages because of bodily injury arising out of the ownership, maintenance, or use of the owned automobile. Persons insured under the policy with respect to the owned automobile include the named insured (Vedder) and "any other person or organization but only with respect to his or its liability because of acts or omissions of [the named insured]." The Standard Mutual policy further contains the following "other insurance" clause:

"If the insured has other insurance against a loss covered by Part I of this Policy the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss ***."

¶ 6 The underlying personal injury action was filed July 1, 2010. From the beginning a dispute arose between the two insurers as to which policy provided primary coverage and which insurer was obligated to provide a defense. Continental learned of the filing of the underlying lawsuit on August 1, 2010, when it was notified by its insured, NWAA. On August 9, 2010, Continental assigned defense counsel to represent both NWAA and Vedder, but shortly thereafter counsel discovered a conflict of interest and withdrew from representation of Vedder. On August 23, 2010, Continental learned that Standard Mutual had retained defense counsel for Vedder. From the beginning, Continental took the position that its coverage, if any, was excess, not primary, because Vedder had been driving her personal vehicle at the time of the accident.

¶ 7 On October 15, 2010, Continental formally tendered to Standard Mutual the defense of NWAA. On December 8, 2010, Standard Mutual accepted the tender of the defense of NWAA, agreeing that the two policies were "co-primary" with respect to NWAA, and offered to pay 50% of the costs of NWAA's defense.

ΒΆ 8 On December 8, 2010, Vedder's counsel sent a letter to Continental asserting that Vedder was an "insured" under the Continental policy and tendering defense and indemnification to Continental. Vedder requested that Continental assume her defense and indemnification exclusively and stated that she did not wish Standard Mutual to participate in her defense and/or indemnification. Vedder stated that she would "deactivate" her prior tender to Standard Mutual, which would ...

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