American Standard Ins. Co. v. Basbagill

• Decision Date: 21 August 2002
• Docket Number: No. 2-00-1476.,2-00-1476.
• Citation: 333 Ill. App.3d 11,775 N.E.2d 255,266 Ill.Dec. 693
• Parties: AMERICAN STANDARD INSURANCE COMPANY, a member of American Family Insurance Group, Plaintiff-Appellant, v. Paul BASBAGILL and Peter Bencak, as Independent Co-Adm'rs of the Estate of Peter G. Sawczuk, Deceased; Paul Basbagill and Peter Bencak, as Independent Co-Adm'rs of the Estate of Sharon A. Sawczuk, Deceased; Paul Basbagill and Peter Bencak, as special Co-Adm'rs of the Estate of Elizabeth M. Sawczuk, Deceased; Paul Basbagill and Peter Bencak, as Special Co-Adm'rs of the Estate of Katharine A. Sawczuk, Deceased; Randy E. Bresnahan; and Anthony P. Pease, Indiv. and as Agent of Randy E. Bresnahan, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

775 N.E.2d 255

333 Ill. App.3d 11

266 Ill.Dec. 693

AMERICAN STANDARD INSURANCE COMPANY, a member of American Family Insurance Group, Plaintiff-Appellant, v. Paul BASBAGILL and Peter Bencak, as Independent Co-Adm'rs of the Estate of Peter G. Sawczuk, Deceased; Paul Basbagill and Peter Bencak, as Independent Co-Adm'rs of the Estate of Sharon A. Sawczuk, Deceased; Paul Basbagill and Peter Bencak, as special Co-Adm'rs of the Estate of Elizabeth M. Sawczuk, Deceased; Paul Basbagill and Peter Bencak, as Special Co-Adm'rs of the Estate of Katharine A. Sawczuk, Deceased; Randy E. Bresnahan; and Anthony P. Pease, Indiv. and as Agent of Randy E. Bresnahan, Defendants-Appellees.

No. 2-00-1476.

Appellate Court of Illinois, Second District.

August 21, 2002.

Eileen P. Lenhardt, James M. Hoffman & Associates, Vernon Hills, for American Standard Insurance Co.

James A. Payonk Jr., Bernstein & Payonk, Ltd., Chicago, for Paul Basbagill, Peter Bencak.

Oscar Posterli, Waukegan, for Anthony P. Pease.

James T. Magee, Magee, Negele & Associates, Round Lake, for Randy E. Bresnahan.

Justice KAPALA delivered the opinion of the court:

Plaintiff, American Standard Insurance Company, appeals from an order entered pursuant to a complaint for a declaratory judgment. The order determined that plaintiff had a duty to defend a tort suit (the Sawczuk suit) brought by Paul Basbagill and Peter Bencak, as administrators of the estates of Peter Sawczuk and his family, against plaintiff's insureds, Randy E. Bresnahan and Anthony P. Pease. Bresnahan and Pease were named also as defendants in plaintiff's complaint for declaratory judgment. Plaintiff asserts that, by offering to settle for the policy limit and by tendering that amount to the court via interpleader (see 735 ILCS 5/2-409 (West 2000)), it has discharged its contractual duty to defend even though the Sawczuk suit was still pending. We disagree and affirm.

Plaintiff issued an automobile liability insurance policy to Bresnahan, covering his 1990 Ford Bronco for up to $40,000 per incident. On April 19, 1997, with the policy in force, the Bronco collided with Peter Sawczuk's car, killing Sawczuk, his wife, and their two daughters. On January 27, 1999, Basbagill and Bencak, the administrators of the Sawczuk estates, sued Bresnahan and Pease in the circuit court of Lake County, alleging that, although the identity of the driver was in question, either Bresnahan or Pease was driving the Bronco and was at fault when the Bronco collided with the Sawczuk car.

On March 30, 1999, American Standard filed the two-count complaint in the case now before this court. Count I, for interpleader, states that, although plaintiff does not admit any liability in the Sawczuk suit, the total claims there could equal or exceed the Bresnahan policy's $40,000 limit. In count I plaintiff asks for leave to deposit $40,000 with the clerk of the circuit court so that, when the Sawczuk suit is resolved, the money can be distributed according to an appropriate court order. Count II seeks a declaration that granting plaintiff judgment on count I relieves it of any further duty to defend Bresnahan or Pease in the Sawczuk suit. Plaintiff relies on the following language in part I of the policy:

"We will pay compensatory damages an insured person is legally liable for because of bodily injury and property damage * * *.

We will defend any suit or settle any claim for damages payable under this policy as we think proper. If a suit involves both compensatory and punitive or exemplary damages, we will defend the compensatory damages. We will not defend the punitive or exemplary damage portion of the suit.

HOWEVER, WE WILL NOT DEFEND ANY SUIT AFTER OUR LIMIT OF LIABILITY HAS BEEN OFFERED OR PAID." (Emphasis in original.)

The policy does not define "offered" or "paid."

Pease filed an answer to the complaint. Bresnahan did not file an answer. Plaintiff moved for summary judgment on both counts of the complaint. In seeking summary judgment on count II, plaintiff argued that, under Zurich Insurance Co. v. Raymark Industries, Inc., 118 Ill.2d 23, 112 Ill.Dec. 684, 514 N.E.2d 150 (1987), and Novak v. American Family Mutual Insurance Co., 183 Wis.2d 133, 515 N.W.2d 504 (1994), part I of the policy implies that its duty to defend the Sawczuk suit would end when it tendered the $40,000 policy limit to the court via interpleader. Pease did not oppose summary judgment for plaintiff on count I, but he argued that plaintiff could not discharge its contractual duty merely by tendering its policy limit to the court before the Sawczuk suit had been resolved.

The trial court initially granted plaintiff summary judgment on both counts of its complaint. Pease moved to reconsider the judgment on count II, arguing that, under Douglas v. Allied American Insurance, 312 Ill.App.3d 535, 245 Ill.Dec. 123, 727 N.E.2d 376 (2000), plaintiff had not discharged its contractual duty to defend and that to allow plaintiff to withdraw from the defense of its insured while the tort suit awaited resolution would violate public policy.

Plaintiff responded that Douglas was both distinguishable and wrongly decided. Plaintiff also filed the affidavit of Charles Swearingen, its casualty claims specialist. Swearingen stated that in 1998 he wrote to Pease and the representatives of the Sawczuk estates. Pease, who may have been the passenger in Bresnahan's Bronco, and the Sawczuk estates had potential claims under Bresnahan's policy. Swearingen proposed to discharge plaintiff's liability as insurer by paying each party $8,000, thus exhausting the $40,000 liability limit. The offer was rejected.

The trial court vacated the summary judgment on count II and held a bench trial on that count. The sole witness, Charles Swearingen, testified consistently with his affidavit. The trial court ruled in favor of Pease on count II. (Plaintiff received a default judgment against Bresnahan on this count.)

The court gave two reasons for its holding. First, plaintiff had not satisfied its contractual duty to defend. Finding the term "offered or paid" ambiguous and construing it against plaintiff, the court reasoned that the $40,000 policy limit would not be "paid" until a claimant received it via a settlement or judgment establishing plaintiff's legal liability. Thus, the money had been tendered to the court, but it had not been "paid." Also, because the equal distribution that Swearingen had proposed lacked any proven relation to the relative merits of the parties' claims, there had been no valid "offer."

Second, the court held that under Douglas, public policy would not allow plaintiff to withdraw from the defense of the Sawczuk suit in mid-course. Thus, regardless of the proper construction of the policy, plaintiff could not use an interpleader judgment to free itself of the duty to defend.

Plaintiff timely appealed. Pease has not filed an appellee's brief. However, the record is short and we choose to decide the merits of the appeal. See First Capitol Mortgage Corp. v. Talandis Construction Corp., 63 Ill.2d 128, 133, 345 N.E.2d 493 (1976).

On appeal, plaintiff argues that the trial court erred in entering judgment for Pease on count II of the complaint. Plaintiff reasons that its duty to defend arises solely from the Bresnahan policy and that it met its duty (a) when it "offered" to divide the $40,000 limit equally among the four Sawczuk estates and Pease; and (b) when it "paid" the limit by tendering $40,000 to the court under the interpleader judgment. Plaintiff also argues that Douglas is unsound and that nothing in public policy prevents plaintiff from limiting its duty to defend.

The judgment on count I of the complaint, for interpleader, is not on appeal. Only the judgment on count II is at issue. We agree with the trial court that plaintiff has not fulfilled its contractual duty to defend. We affirm the judgment without deciding whether the duty to defend clause violates public policy.

In arguing that it is relieved of its contractual duty to defend, plaintiff relies on the policy's statement that plaintiff will not defend any suit against an insured after the policy's liability limit has been "offered or paid." The policy does not define "offered or paid." However, plaintiff asserts that this language is unambiguous and that the undisputed facts prove that plaintiff has "offered" and "paid" the policy limit. We disagree.

We hold first that plaintiff has waived any assertion that it discharged its duty to defend by "offering" to divide the policy limit among the four Sawczuk estates and Pease. Although plaintiff raised this argument at the trial, its complaint nowhere alleges this theory or any facts to support it. A party must recover, if at all, according to the case he has made for himself by his pleadings. Lempa v. Finkel, 278 Ill.App.3d 417, 424, 215 Ill.Dec. 408, 663 N.E.2d 158 (1996). Proof without pleadings is as defective as pleadings without proof. Colonial Inn Motor Lodge, Inc. v. Gay, 288 Ill.App.3d 32, 40, 223 Ill.Dec. 674, 680 N.E.2d 407 (1997). Thus, plaintiff may not now rely on the unpleaded assertion that it "offered" the policy limit and thus discharged its duty to defend.

Two days after we heard oral argument, plaintiff moved to amend count II to allege that plaintiff "offered" the $40,000 policy limit when Swearingen proposed distributing the money among the five remaining parties in the Sawczuk suit. We denied this motion. On appeal, a party may move to amend its pleadings. 155 Ill.2d R. 362(a). However, no such motion will be considered "if made after the cause has been submitted for decision." 155 Ill.2d R. 362(e). By the time plaintiff filed its motion to amend, the cause had been submitted for decision. See Geise v. Phoenix Co. of Chicago, Inc., 159 Ill.2d 507, 515, 203 Ill.Dec. 454, 639 N.E.2d 1273 (1994); Lee Shell Co. v. Model Food Center, Inc., 111 Ill.App.2d 235, 247-48, 250 N.E.2d 666 (1969). Therefore, the proposed amendme...