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American Service Insurance Co. v. China Ocean Shipping Co. (Americas) Inc.

Court of Appeals of Illinois, First District, Second Division

March 4, 2014

AMERICAN SERVICE INSURANCE COMPANY, Plaintiff-Appellant and Cross-Appellee,
v.
CHINA OCEAN SHIPPING COMPANY (AMERICAS) INC., and INTERPOOL TITLING TRUST, as Assignee of TRAC LEASE, INC., Defendants-Appellees and Cross-Appellants (Frontline Transportation Corp., Vincent Zepeda, Kenneth Edward Lipski, Leisure Pursuits, Inc., Kenneth Allen Olson, Peter Penner, Irene Penner, Penner International Company, Ronald G. Sutfin, Carl Klemm, Inc., International Women's Association, Jane Hand, Marita Landa, Cecilia Ellis, Sonia Aladjem, Jeanette Notardonato, Olga L. Buenz, Irma Oppenheimer, Peggy Albert, Gordon Mark, Maria Mejia, Anita Yamada, Millicent Getz, Zarah Soblski, Blovail Corp., Glaxo SmithKline, Appleton Papers, Inc., Midwest Recycling of Illinois, Yumi Ross, Nancy Knapp, Draga Vesseminovich, Carolyn Yelton, Barbara Mack, Ana Manglano, Diane Gottlieb, Unit Equipment Service of AG of Hamburg, Provena St. Joseph's Hospital, State Farm Insurance Company d/b/a Isshi Yamada, Advocate Healthcare Systems, d/b/a Lutheran General f/u/o Gordon Mark, Encompass Insurance Company a/s/o Gordon and Barbara Mark, Defendants)

Page 162

[Copyrighted Material Omitted]

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Appeal from the Circuit Court of Cook County. No. 04 CH 3337. Honorable Mary Mikva, Judge Presiding.

Affirmed.

SYLLABUS

In a dispute over plaintiff insurer's obligation to pay for the defense of an underlying action arising from a multivehicle accident that resulted in numerous deaths and injuries caused by the driver of a truck insured by plaintiff, plaintiff's request for discovery as to funds the owners and lessors of the truck received from others in connection with their defense costs was properly denied on the ground that plaintiff was barred from relitigating that issue by the law of the case doctrine, plaintiff failed to raise any issues warranting an evidentiary hearing on defendants' supplemental fee petition, the doctrine of res judicata did not bar defendants' recovery of fees in their supplemental fee petition and prejudgment interest, the denial of plaintiff's motion to reconsider was not an abuse of discretion, and defendants' requests for sanctions under section 155 of the Insurance Code and Supreme Court Rule 375(b) were properly denied.

For Plaintiff-Appellant: Edward F. Ruberry, James J. Berdelle, David S. Alen, Ruberry, Stalmack, & Garvey LLC, Chicago, IL.

For Defendants-Appellees: Thomas M. Crisham, John P. O'Malley, Clare J. Quish, Michael J. Faley, Schuyer Roche & Crisham, P.C., Chicago, IL.

JUSTICE SIMON delivered the judgment of the court, with opinion. Justice Pierce and Justice Liu concurred in the judgment and opinion.

OPINION

SIMON, JUSTICE

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[¶1] Plaintiff, American Service Insurance Company, appeals from orders of the circuit court of Cook County denying its motion to take discovery regarding the supplemental fee petition filed by defendants, China Ocean Shipping Company (Americas) Inc. (COSCO), and Interpool Titling Trust (Interpool); granting the supplemental fee petition; and denying plaintiff's motion reconsider the orders denying its request for discovery and granting the supplemental fee petition. COSCO and Interpool cross-appeal from the court's order denying their request for attorney fees and costs under section 155 of the Illinois Insurance Code (Insurance Code) (215 ILCS 5/155 (West 2010)). On appeal, plaintiff contends that the court abused its discretion by denying plaintiff's request for discovery on the basis of the law of the case doctrine, denying plaintiff's request for an evidentiary hearing on the

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supplemental fee petition, failing to make any findings as to the reasonableness of the fees set forth therein, and denying plaintiff's motion to reconsider. On cross-appeal, COSCO and Interpool contend that the court erred by denying their request for attorney fees and costs under section 155 of the Insurance Code because all of plaintiff's claims and arguments made in response to the supplemental fee petition had been repeatedly rejected by this court and the circuit court in prior proceedings and that this court should award attorney fees and costs incurred in defending this appeal pursuant to section 155 and Illinois Supreme Court Rule 375(b) (eff. Feb. 1, 1994) because plaintiff's appeal is frivolous and brought in bad faith. For the reasons that follow, we affirm.

[¶2] BACKGROUND

[¶3] This case arises from a multivehicle accident which occurred on October 1, 2003, and resulted in the deaths of eight people and injuries to many others. Multiple lawsuits were filed against Vincent Zepeda; his employer, Frontline Transportation (Frontline); and COSCO and Interpool, which allegedly owned, leased, maintained, and/or controlled the trailer Zepeda was hauling when the accident occurred.

[¶4] On February 24, 2004, plaintiff filed a complaint in which it asserted that Frontline and Zepeda were insureds under a policy it had issued which contained a liability limit of $1 million and that it was seeking to provide the court with the entire policy limit of $1 million for equitable distribution. Plaintiff requested that the court enter an order declaring that it had no further duty under the policy, including any duty to defend Frontline, Zepeda, or any other party. COSCO and Interpool filed a counterclaim, alleging that plaintiff had a contractual duty to defend them in the underlying actions and that plaintiff had breached that duty by failing to agree to pay for the costs incurred in their defense. Plaintiff subsequently filed a third amended complaint in which it sought a declaration that it had no further duty under the policy, including any duty to defend COSCO, Frontline, Zepeda, or any other party. In July 2006, the parties filed cross-motions for summary judgment, and, on January 25, 2007, the court entered an order denying plaintiff's motion for summary judgment, granting the motion for summary judgment filed by COSCO and Interpool, and declaring that plaintiff was required to defend and indemnify COSCO and Interpool in the underlying actions because they qualified as " insureds" under the policy issued by plaintiff.

[¶5] On March 12, 2007, COSCO and Interpool filed a petition for further relief, asserting that plaintiff had failed to reimburse them for the costs and attorney fees incurred in the defense of the underlying action in violation of the court's order declaring that plaintiff had a duty to defend and indemnify them. The court granted the petition and permitted COSCO and Interpool to file a petition for fees and costs, which they filed on December 18, 2007. On May 29, 2008, the court granted the petition and ordered plaintiff to pay COSCO and Interpool $1,074,676.86 in attorney fees and costs and prejudgment interest and to pay any further attorney fees and costs incurred in the ongoing defense of the underlying actions. In doing so, the court stated that COSCO and Interpool had made a prima facie showing that the fees in the petition were reasonable as the billing was detailed and there was no dispute that the bills had been paid.

[¶6] Plaintiff appealed, contending that it did not have a duty to defend COSCO and Interpool because they were not insureds

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under the policy, it was relieved of any duty to defend them by its deposit of the policy limits with the court, and the award of attorney fees and costs was improper. American Service Insurance Co. v. China Ocean Shipping Company (Americas), Inc., 402 Ill.App.3d 513, 514, 932 N.E.2d 8, 342 Ill.Dec. 117 (2010). This court held that plaintiff owed COSCO and Interpool a duty to defend because they were " insureds" under the relevant policy and plaintiff had actual notice of the underlying claims and that plaintiff could not discharge its duty to defend by depositing the policy limits with the court. Id. at 523-29. Regarding attorney fees, we held that the circuit court did not abuse its discretion by failing to conduct an evidentiary hearing on the fee petition and that the claim for attorney fees and costs was ripe for adjudication. Id. at 529-31. We also held that plaintiff forfeited its claims that it should not be required to pay fees incurred by COSCO prior to February 4, 2004, or fees incurred by Interpool prior to March 30, 2005, that it was not given a sufficient opportunity to conduct discovery on the reasonableness of the fee petition, that the court improperly awarded fees for office expenses and for prosecuting a cross-complaint filed by COSCO against Frontline in the underling action, and that the fee award was unreasonable in light of the costs incurred by Frontline in the underlying actions. Id. at 531.

[¶7] On December 22, 2011, COSCO and Interpool filed a supplemental fee petition, seeking an order requiring plaintiff to pay $623,400.40 for attorney fees and costs incurred during the period of May 1, 2008, through October 31, 2011, and $62,193.75 in prejudgment interest for a total amount of $685,594.15. COSCO and Interpool asserted that this court's decision on appeal required plaintiff to pay attorney fees and costs incurred by COSCO and Interpool in defending the underlying actions and that plaintiff was barred from challenging the reasonableness of the legal defense costs by the law of the case doctrine and principles of res judicata . COSCO and Interpool also asserted that the court should impose statutory penalties pursuant to section 155 of the Illinois Insurance Code (Insurance Code) (215 ILCS 5/155 (West 2010)) because plaintiff had engaged in vexatious and unreasonable conduct throughout the litigation. COSCO and Interpool attached various invoices for legal fees incurred from May 1, 2008, through October 31, 2011, to the supplemental fee petition.

[¶8] Plaintiff subsequently filed a request for COSCO and Interpool to produce documents, including any documents regarding any funds COSCO and Interpool received from any entity or insurance carrier other than plaintiff in connection with defense costs, bills, or invoices for which they were seeking to be indemnified by plaintiff and any tender and/or targeted tender letters they sent to plaintiff. On February 7, 2012, the court denied plaintiff's discovery requests, finding that the requested discovery was barred by the law of the case doctrine because this court had already held that plaintiff owed COSCO and Interpool a duty to defend and had affirmed the prior rulings denying plaintiff the discovery it was currently seeking.

[¶9] On February 22, 2012, plaintiff filed a response to the supplemental fee petition in which it requested an evidentiary hearing and asserted that the fees sought in the supplemental petition were excessive when compared to the fees incurred by Frontline and Zepeda, some of the entries were unreasonable, and a number of entries constituted impermissible " block billing." ...


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