Adams v. Emp'rs Ins. Co. of Wausau

• Decision Date: 18 February 2016
• Docket Number: No. 3–15–0418.,3–15–0418.
• Parties: Marcia ADAMS, Rich Clay, Donald Stewart, Bob Wheelis, Romeo Fulz, Charles VanHessen, Harlie Warren, Dorvin Bever, Thomas Hedrick, Ronald Thacker, Patrick O'Neal, William Eoff, Lawrence Belcher, Donovan Lathrop, Doug Martin, Russell Wolland, David Collins, Lawrence Ross, Mervin Boyer, Maria Kreilein, Robert McDonald, Ralph Woepke, William Oswald, John Chandler Smith, Mary Zerkle, Kenneth Garrard, Stephen L. Ahlrich, Roger Warren Martin, Clarance Alton Ambrose, Michael Enoch Carver, John W. Morey Sr., J.T. Smithers, Alma Slivinski, Maurice Milford Logan, Richard Henry Veath, Clyde Allen Ahlfield, William Moore, James Fowler, Gilbert Gillis, Elroy Arnold Christiansen, Richard Dorman Bloss, Charles Leo Joplin, Larry Don McVey, Joseph Henry Wilkinson, Patrick Lee Stafford, Haskel Shook, John Hanlin, Bobby Wallace, David Crews, Carl Duncan, Carol Kitchens, Eugene Mann, and Kelly Frymire, Plaintiffs–Appellants, v. EMPLOYERS INSURANCE COMPANY OF WAUSAU, TIG Insurance Company, Travelers Casualty and Surety Company f/k/a Aetna Casualty and Surety Company, Defendants–Appellees (Sprinkmann Insulation, Inc., Arthur Kremers and Rhonda Kremers, Defendants).
• Court: United States Appellate Court of Illinois

49 N.E.3d 924

Marcia ADAMS, Rich Clay, Donald Stewart, Bob Wheelis, Romeo Fulz, Charles VanHessen, Harlie Warren, Dorvin Bever, Thomas Hedrick, Ronald Thacker, Patrick O'Neal, William Eoff, Lawrence Belcher, Donovan Lathrop, Doug Martin, Russell Wolland, David Collins, Lawrence Ross, Mervin Boyer, Maria Kreilein, Robert McDonald, Ralph Woepke, William Oswald, John Chandler Smith, Mary Zerkle, Kenneth Garrard, Stephen L. Ahlrich, Roger Warren Martin, Clarance Alton Ambrose, Michael Enoch Carver, John W. Morey Sr., J.T. Smithers, Alma Slivinski, Maurice Milford Logan, Richard Henry Veath, Clyde Allen Ahlfield, William Moore, James Fowler, Gilbert Gillis, Elroy Arnold Christiansen, Richard Dorman Bloss, Charles Leo Joplin, Larry Don McVey, Joseph Henry Wilkinson, Patrick Lee Stafford, Haskel Shook, John Hanlin, Bobby Wallace, David Crews, Carl Duncan, Carol Kitchens, Eugene Mann, and Kelly Frymire, Plaintiffs–Appellants

v.EMPLOYERS INSURANCE COMPANY OF WAUSAU, TIG Insurance Company, Travelers Casualty and Surety Company f/k/a Aetna Casualty and Surety Company, Defendants–Appellees (Sprinkmann Insulation, Inc., Arthur Kremers and Rhonda Kremers, Defendants).

No. 3–15–0418.

Appellate Court of Illinois, Third District.

Feb. 18, 2016.

William A. Kohlburn (argued) and Courtney Harashe Gregory, both of Simmons, Hanly & Conroy, LLC, Alton, for appellants.

Lawrence D. Mason and John A. Lee (argued), both of Segal, McCambridge, Singer & Mahoney, Ltd., Chicago, for appellee Employers Insurance Company of Wausau.

Matthew T. Walsh (argued), John D. LaBarbera, and Martha E. Conlin, all of Carroll, McNulty & Kull, LLC, Chicago, for appellee TIG Insurance Company.

Donna J. Vobornik (argued) and Daniel E. Feinberg, both of Dentons US LLP, Chicago, for appellee Travelers Casualty and Surety Company.

Michael C. Dorf, of Adducci, Dorf, Lehner, Mitchell & Blankenship, PC, Chicago, and Laura A. Foggan, of Wiley Rein LLP, Washington, D.C., for amicus curiae Complex Insurance Claims Litigation Association.

OPINION

Justice McDADE

delivered the judgment of the court, with opinion.

¶ 1 The plaintiffs, numerous individuals who were diagnosed with mesothelioma

and lung cancer, filed a complaint for declaratory judgment against numerous defendants, including Employers Insurance Company of Wausau, Travelers Casualty and Surety Company, and TIG Insurance Company (collectively, Defendant Insurers). The Defendant Insurers filed motions to dismiss. The circuit court granted the dismissal, finding that the action was barred by section 12.80 of the Business Corporation Act of 1983 (Act) (805 ILCS 5/12.80 (West 2012) ) and the prohibition on direct actions against insurers. On appeal, the plaintiffs argue that the circuit court erred when it dismissed the complaint. We affirm.

¶ 2 FACTS

¶ 3 Sprinkmann Sons Corporation of Illinois (Old Sprinkmann) was an insulation contractor that used asbestos products. Arthur B. Kremers and Rhonda Kremers owned the company and were its only two shareholders. After the Kremerses decided to retire, Old Sprinkmann's vice president bought certain assets of Old Sprinkmann and formed a new corporation, Sprinkmann Insulation, Inc. (New Sprinkmann). New Sprinkmann neither purchased any of Old Sprinkmann's liabilities nor acquired Old Sprinkmann's liability insurance policies. Old Sprinkmann was dissolved on February 7, 2003.

¶ 4 On September 23, 2011, the plaintiffs filed a complaint for declaratory judgment against the Defendant Insurers, New Sprinkmann, and the Kremerses. The complaint alleged that the plaintiffs are persons who worked with and around and/or came into contact with asbestos-containing materials that were manufactured, fabricated, sold, distributed, supplied, furnished, installed, applied and removed by Old Sprinkmann prior to its dissolution. The complaint admitted that the plaintiffs' causes of action for negligence did not accrue until after the five-year statutory wind-up period (805 ILCS 5/12.80 (West 2010)

) for Old Sprinkmann. Due to this statutory ban, the plaintiffs did not sue Old Sprinkmann, but instead sought a ruling that New Sprinkmann and the Kremerses could be sued as nominal defendants “so that liability and damages may be established.” The complaint alleged that the ownership of Old Sprinkmann's liability policies was either acquired by New Sprinkmann or passed to the Kremerses at the time of Old Sprinkmann's dissolution. The complaint also sought a ruling that the Defendant Insurers had duties to defend and indemnify, but the plaintiffs were not seeking a liability judgment against the Defendant Insurers.

¶ 5 On January 16, 2015, the Defendant Insurers each filed a motion to dismiss the complaint pursuant to sections 2–615

and 2–619 of the Code of Civil Procedure (Code) (735 ILCS 5/2–615, 2–619 (West 2012)). In their motions, the Defendant Insurers argued, inter alia, that section 12.80 of the Act prohibited the plaintiffs' suit because Old Sprinkmann could not be sued and therefore could not be subject to a liability ruling; accordingly, the plaintiffs' action constituted a direct action against insurance companies, which was prohibited by Illinois law.

¶ 6 On April 30, 2015, the circuit court held a hearing on the Defendant Insurers' motions. After hearing arguments, the court took the matter under advisement. The court issued a written order on May 8, 2015, granting the motions to dismiss. In so ruling, the court found that the case presented an issue of first impression in that the plaintiffs were asking the court “to create an equitable avenue of recovery for their particular circumstance.” The court noted that the legislature had looked at this type of issue three times, with the last time being a rejection of the very type of remedy sought by the plaintiffs in this case. After noting that the legislature was in a better position to create this type of remedy, the court stated that it would exercise restraint and leave the creation of a new remedy to the legislature. Accordingly, the court ruled that section 12.80 of the Act barred an action against Old Sprinkmann and that the indemnification issue was not ripe, as no liability determination had been made.

¶ 7 The plaintiffs sought and obtained a ruling pursuant to Illinois Supreme Court Rule 304(a)

(eff. Feb. 26, 2010) that there was no just reason to delay an appeal, and they subsequently appealed.

¶ 8 ANALYSIS

¶ 9 On appeal, the plaintiffs argue that the circuit court erred when it dismissed the complaint. In support of their argument, the plaintiffs variously contend: (1) they have vested rights in Old Sprinkmann's liability insurance that cannot be extinguished by Old Sprinkmann or the Defendant Insurers; (2) Old Sprinkmann's liability coverage passed either to New Sprinkmann or the Kremerses; (3) the courts have the inherent authority to fashion a remedy in the interests of justice; (4) absent a remedy, the defendant insurers receive a windfall by retaining funds intended to pay liability claims; (5) the legislature's failure to fashion a remedy is not an impediment to the courts' ability to do so; (6) the matter is ripe for adjudication of coverage because the Defendant Insurers have denied that they have a duty to defend or indemnify and because the case attempts to present an avenue to obtain a liability determination; (7) the case does not constitute a direct action against the Defendant Insurers; and (8) section 12.80 of the Act does not prohibit this action because the plaintiffs are not suing a dissolved corporation.

¶ 10 A motion to dismiss brought pursuant to section 2–615

of the Code challenges the legal sufficiency of the complaint by alleging defects on its face. 735 ILCS 5/2–615(a) (West 2012). A motion to dismiss brought pursuant to section 2–619 of the Code admits the legal sufficiency of the complaint, but asserts some affirmative matter that defeats the complaint's allegations. 735 ILCS 5/2–619 (West 2012). Section 2–619.1 allows these otherwise-contradictory motions to be brought in a single motion. 735 ILCS 5/2–619.1 (West 2012). We review a circuit court's decision to dismiss a complaint pursuant to section 2–615 or section 2–619

de novo.

King v. First Capital Financial Services Corp., 215 Ill.2d 1, 12, 293 Ill.Dec. 657, 828 N.E.2d 1155 (2005).

¶ 11 Of paramount importance to this case is section 12.80 of the Act, which provides:

“The dissolution of a corporation either (1) by filing articles of dissolution in accordance with Section 12.20 of this Act, (2) by the issuance of a certificate of dissolution in accordance with Section 12.40 of this Act, (3) by a judgment of dissolution by a circuit court of this State, or (4) by expiration of its period of duration, shall not take away nor impair any civil remedy available to or against such corporation, its directors, or shareholders, for any right or claim existing, or any liability incurred, prior to such dissolution if action or other proceeding thereon is commenced within five years after the date of such dissolution. Any such action or proceeding by or against the corporation may be prosecuted or defended by the corporation in its corporate name.” 805 ILCS 5/12.80 (West 2012)

.

Section 12.80 of the Act reflects the purposes of allowing otherwise-prohibited actions to be brought by and against the dissolved corporation, yet also providing a definite point at which the corporation's liability ceases, rather than existing in perpetuity. Blankenship v. Demmler Manufacturing Co., 89 Ill.App.3d 569, 574, 44 Ill.Dec. 787, 411 N.E.2d 1153 (1980)

; Pielet v. Pielet, 407 Ill.App.3d 474, 495, 347 Ill.Dec. 403, 942 N.E.2d 606 (2010), rev'd, 2012 IL 112064, 365 Ill.Dec. 497, 978 N.E.2d 1000. Thus, even if the plaintiffs had some “vested” rights in the liability policies, as they claim, those rights were effectively divested—not by Old Sprinkmann, New Sprinkmann,

or the Kremerses—but by the legislature's enactment of what is in essence a statute of repose that times out the...