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Country Mut. Ins. Co. v. Hilltop View, LLC

Court of Appeals of Illinois, Fourth District

December 22, 2014

COUNTRY MUTUAL INSURANCE COMPANY, Plaintiff-Appellant,
v.
HILLTOP VIEW, LLC, an Illinois Corporation; PROFESSIONAL SWINE MANAGEMENT, LLC, an Illinois Corporation; DONALD WARD; DIANNE WARD; JAMES VAUGHN; MARJEAN VAUGHN; JOE HEATON; PAM HEATON; BILLY JOE TROUTMAN; JULIE TROUTMAN; GARY L. HAND; PAULETTE L. HAND; JAMES A. HOPKINS; KAREN S. HOPKINS; DONALD L. BROWN; AND GAYLEEN J. BROWN, Defendants-Appellees

Appeal from Circuit Court of Schuyler County. No. 09MR7. Honorable Alesia A. McMillen, Judge Presiding.

SYLLABUS

The trial court's contempt orders finding plaintiff insurer to be in indirect civil contempt for failing to obey orders requiring it to pay legal costs and fees in connection with an underlying pollution case involving a swine management company were reversed and the cause was remanded for further proceedings, since the orders arose from the underlying case and a related matter involving declaratory judgment proceedings, and in the underlying case, plaintiff was relieved of any obligation to pay the fees and costs when the trial court stayed that case until the appellate court issued a judgment in the original appeal, and therefore, plaintiff's failure to pay could not constitute contempt; additionally, with regard to the declaratory judgment action, plaintiff's failure to pay was excused by the facts that the trial court never determined an amount to be paid, defendants never established the reasonableness of the fees sought or provided any bill showing a gross amount due or provided time records to support their invoices, and the trial court never found plaintiff's denial of coverage was vexatious and unreasonable.

Kent R. Schnack, of Law Office of Kent R. Schnack, P.C., of Quincy, Keith G. Carlson, of Carlson Law Offices, of Chicago, Michael T. Reagan, of Law Offices of Michael T. Reagan, of Ottawa, and Charles I. Hadden (argued), of Troutman Sanders LLP, of Washington, D.C., for appellant.

Edward W. Dwyer and Jennifer M. Martin, both of Hodge Dwyer & Driver, and Richard J. Wilderson (argued), of Graham & Graham, Ltd., both of Springfield, Charles F. Speer, of Speer Law Firm, P.A., of Kansas City, Missouri, and Ralph D. Davis, of Ralph Davis Law, of Peoria, for appellees.

PRESIDING JUSTICE POPE delivered the judgment of the court, with opinion. Justices Harris and Appleton concurred in the judgment and opinion.

OPINION

Page 212

POPE, PRESIDING JUSTICE.

[¶1] On December 13, 2013, the trial court entered an order finding Country Mutual Insurance Company (Country) willfully failed to comply with orders the court entered on October 26, 2012, and

Page 213

February 21, 2013. As a result, the court found Country to be in indirect civil contempt " for its willful failure and refusal to obey the [c]ourt's October 26, 2012, and February 21, 2013[, o]rders." To purge itself of contempt, the court directed Country to pay the clerk of the court, on behalf of defendants Hilltop View, LLC (Hilltop), and Professional Swine Management, LLC (PSM), $96,990.04, " which includes all reasonable legal costs and fees incurred by [Hilltop and PSM] in connection with this declaratory judgment proceeding" between February 21, 2013, and October 8, 2013. In addition, the court found Country's course of conduct regarding the October and February orders had been " vexatious and unreasonable and in bad faith." The court ordered Country, purportedly pursuant to section 155 of the Illinois Insurance Code (Insurance Code) (215 ILCS 5/155 (West 2010)), to take such actions as are necessary to comply with the February 21, 2013, orders, including payment of all reasonable legal costs and fees incurred by Hilltop and PSM in connection with the case sub judice on a continuing basis until the court discharged that obligation. Country appeals, arguing the court erred in holding it in contempt for violating the October and February orders and for awarding PSM and Hilltop their attorney fees and costs in litigating the case sub judice. We reverse the trial court's contempt order in its entirety and remand for further proceedings pursuant to this opinion and this court's prior opinion in Country Mutual Insurance Co. v. Hilltop View, LLC, 2013 IL App. (4th) 130124, 998 N.E.2d 950, 376 Ill.Dec. 240.

[¶2] I. BACKGROUND

[¶3] Because the background in this case was extensively covered in this court's earlier opinion (see Country Mutual Insurance Co. v. Hilltop View, LLC, 2013 IL App. (4th) 130124, 998 N.E.2d 950, 376 Ill.Dec. 240), we need not repeat background facts here except as necessary. In that appeal, Country argued the trial court erred by (1) denying its motion for partial summary judgment, which relied on the pollution-exclusion clause found in Country's umbrella insurance policy and (2) granting Hilltop's and PSM's respective cross-motions for partial summary judgment, holding Country was responsible for defending them in the underlying case because Country alleged additional, and still unresolved, defenses to coverage under the umbrella policy. We refer to these rulings as the October orders. What occurred after those October orders is at issue in this appeal.

[¶4] After the trial court issued the October orders, on November 5, 2012, attorney Jennifer Martin, who was representing Hilltop and PSM in the declaratory judgment action, wrote a letter to attorney Keith G. Carlson, who was representing Country, demanding payment of Hilltop's and PSM's defense costs in the underlying case in the amount of $176,937. (No itemized time records were attached.)

[¶5] On November 14, 2012, Hilltop and PSM filed a joint petition for further relief pursuant to section 2-701(c) of the Code of Civil Procedure (Procedure Code) (735 ILCS 5/2-701(c) (West 2010)). The petition alleged the following. Attorney Martin received no response to her letter to attorney Carlson. On November 9, 2012, attorney Alexander Bullock, Hilltop and PSM's counsel in the underlying litigation, advised Country of the status of the underlying case and sought confirmation of defense coverage from Country in light of the trial court's October 26, 2012, order. Country responded by electronic mail, stating it did not believe the trial court's October 26, 2012, order was enforceable or appealable at that time pursuant to Illinois Supreme Court Rule 304(a) (eff. Feb. 26,

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2010). Country also indicated to Bullock it had not made a decision with regard to reimbursing the insureds' defense costs in the underlying action.

[¶6] On November 26, 2012, Country filed a motion to vacate and reconsider judgment pursuant to section 2-1203 of the Procedure Code (735 ILCS 5/2-1203 (West 2010)) and a motion to stay enforcement of the judgment. Country argued the trial court erred in denying its partial motion for summary judgment. In the alternative, Country argued the court should vacate its order " granting Defendants' cross-motion, which states that Country is responsible for Defendants' defense, and instead deny Defendants' cross-motions." Country argued the court erred in granting Hilltop's and PSM's cross-motion for partial summary judgment because Country's complaint for declaratory judgment raised many coverage defenses the parties had not briefed and the court did not address.

[¶7] In the motion for a stay, Country stated it also did not agree either of the October orders was final or enforceable. However, in the alternative, given Hilltop's and PSM's attempts to enforce the trial court's determination Country was responsible for the defense in the underlying litigation, Country sought a stay of enforcement of the judgment pending resolution of Country's section 2-1203 motion as well as through the conclusion of any appeal that might be allowed. Country also filed a response to Hilltop and PSM's joint petition for further relief, utilizing the same arguments it made in the motion to vacate and reconsider judgment.

[¶8] On December 18, 2012, Hilltop and PSM filed joint responses to Country's motion to vacate and reconsider the judgment and Country's motion to stay enforcement of the judgment. They argued the trial court did not err in its application of existing law regarding the pollution exclusion found in the umbrella policy. Further, according to Hilltop and PSM, the court's ruling regarding Country's responsibility for their defense in the underlying action was not premature and should not be vacated. Finally, they noted the order granting their motions for summary judgment was a final judgment because it determined Country's obligation to defend the insureds in the underlying action. They did not object to a Rule 304(a) finding on the issue. However, they did oppose Country's request for a stay.

[¶9] On January 10, 2013, the trial court heard arguments on and denied Country's motion for reconsideration and motion to vacate its partial summary judgment order but granted Country's request for a Rule 304(a) finding. The trial court took Hilltop and PSM's joint petition for further relief and Country's motion for stay under consideration.

[¶10] On February 11, 2013, Country filed its notice of appeal for the October orders (No. 4-13-0124). Later that month, on February 21, 2013, the trial court issued orders on Hilltop and PSM's joint petition for further relief and Country's motion to stay enforcement of the judgment. With regard to Hilltop and PSM's joint petition for further relief, the court noted it was ordering a stay of the underlying case (case No. 2008-L-2) negating the need for defense costs in that case. The court also stated it would not take up the issue of past defense costs in the underlying case at that time but would wait for a decision from the appellate court. The court denied a stay as to the proceedings in the declaratory judgment action and found Country was responsible for costs of litigation with regard to the declaratory judgment action. However, the court had never held a section 155 hearing to determine whether Country's decision not to provide

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coverage was vexatious and unreasonable. Neither of the trial court's February orders mentioned above included a Rule 304(a) finding.

[¶11] After the trial court issued these February orders, Country sought leave to amend its existing notice of appeal of the trial court's October orders to include the February orders. Hilltop and PSM opposed the motion. This court denied Country's request because Country had not obtained a Rule 304(a) finding.

[¶12] On May 9, 2013, attorney Martin sent attorney Carlson a letter with an invoice requesting Country pay, pursuant to the trial court's February order, $16,992.69 for the insureds' legal fees in this case for the period between February 21, 2013, and April 30, 2013. (No itemized time records were attached.) On May 30, attorney Carlson responded the summary of fees provided by Martin, " even if there was any obligation to pay these fees," was inadequate and improper under the law.

[¶13] On June 3, 2013, attorney Richard Wilderson, who was also representing Hilltop and PSM, sent attorney Carlson a letter for payment of $3,443.50 in attorney fees for the period between February 11, 2013, to April 30, 2013, pursuant to the trial court's February 21, 2013, order. (No time records were attached.) On June 18, 2013, attorney Carlson responded to attorney Wilderson's letter, repeating what he told attorney Martin.

[¶14] On June 18, 2013, Hilltop and PSM filed a verified joint petition for adjudication of civil contempt. According to the petition, Country had willfully failed to comply with the trial court's October 2012 orders, which held Country was responsible for Hilltop's defense in the underlying litigation, and February 2013 orders, which held that Country was responsible for Hilltop and PSM's legal costs ...


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