American States Ins. Co. v. Cfm Const. Co.

• Decision Date: 12 January 2010
• Docket Number: No. 2-08-0781.,2-08-0781.
• Citation: 923 N.E.2d 299,337 Ill. Dec. 740
• Parties: AMERICAN STATES INSURANCE COMPANY, Plaintiff and Counterdefendant-Appellant and Cross-Appellee, v. CFM CONSTRUCTION COMPANY, Defendant and Counterplaintiff-Appellee (Michigan Mutual Insurance Company, Defendant and Counterplaintiff-Appellee and Cross-Appellant; Francisco Flores, Defendant).
• Court: United States Appellate Court of Illinois

923 N.E.2d 299 337 Ill. Dec. 740 AMERICAN STATES INSURANCE COMPANY, Plaintiff and Counterdefendant-Appellant and Cross-Appellee,
v.
CFM CONSTRUCTION COMPANY, Defendant and Counterplaintiff-Appellee (Michigan Mutual Insurance Company, Defendant and Counterplaintiff-Appellee and Cross-Appellant; Francisco Flores, Defendant). No. 2-08-0781. Appellate Court of Illinois, Second District. January 12, 2010. Publication Ordered March 29, 2010.

[923 N.E.2d 302]

Keith G. Carlson, Carlson Law Offices, Chicago, IL, for American States Insurance Company.

R. Howard Jump, Mei Chen, Jump & Associates, P.C., Chicago, IL, for Michigan Mutual Insurance Company.

Justice McLAREN delivered the opinion of the court:

American States Insurance Company (American) appeals from part of a judgment of the trial court denying its motion for summary judgment and granting summary judgment to CFM Construction Company (CFM) and Michigan Mutual Insurance Company (Michigan). The trial court ruled that American was required to pay Michigan half of the amount of a settlement Michigan paid under a policy it issued to a subcontractor, International Decorators, that worked for a general contractor, CFM. Michigan cross-appeals from part of the same judgment denying it and CFM attorney fees, costs, and prejudgment interest.

On appeal American argues that (1) the trial court correctly found that Michigan had no cause of action for equitable contribution or equitable subrogation; and (2) the trial court erred by relying solely upon a comparison of the policies' "other insurance" clauses to find that under those provisions Michigan could recover half of the settlement amount from American.

On cross-appeal, Michigan argues that (1) the trial court erred by failing to award it and CFM attorney fees and costs; and (2) the trial court erred by failing to award it and CFM prejudgment interest. We affirm.

I. Facts

The following facts are not in dispute. This action arose out of an accident at a construction site in Libertyville, Illinois. CFM was the general contractor on the construction project. CFM subcontracted with NF Construction to provide carpentry services for the project. Gerald Kemp, an NF employee, was the construction supervisor at the site. American insured NF under a general liability policy. CFM was added as an additional insured under NF's American policy.

923 N.E.2d 303

CFM also subcontracted with International Decorators on the project. Michigan insured International Decorators under a general liability policy. CFM was added as an additional insured under International Decorators' Michigan policy.

Francisco Flores, an employee of International Decorators, was injured when he fell from a scaffold at the construction site. Flores filed two separate lawsuits, against CFM and NF, alleging in each lawsuit that the named defendant was in charge of the work and had a duty to operate, manage, supervise, and control the construction site and the activities of the workmen thereon and that it allegedly did so negligently, resulting in Flores' injuries. The two lawsuits were consolidated for discovery and trial purposes.

CFM tendered its defense to Michigan. Michigan asked American to contribute to the defense of CFM but American refused. American then filed a declaratory action against CFM, seeking a declaration that it had no duty to contribute to the costs of defending CFM in the Flores action. All parties moved for summary judgment. The trial court ruled in favor of CFM and Michigan and against American. American appealed. This court affirmed the trial court's judgment. American States Insurance Co. v. CFM Construction Co., No. 2-05-0077, 359 Ill.App.3d 1199, 328 Ill.Dec. 732, 904 N.E.2d 1242 (2005) (unpublished order under Supreme Court Rule 23). We held that American owed a duty to defend CFM as an additional insured.

Before that appeal, Flores, Michigan, American, NF, and CFM executed a settlement agreement. Flores agreed to release all claims and causes of action against NF and CFM. Michigan paid $700,000; American agreed to pay only $200,000 on behalf of NF and Gerald Kemp. American refused to pay anything on behalf of CFM.

Michigan acquired an assignment of CFM's rights to sue American for breach of duty to defend and indemnify in the Flores lawsuit.

On remand, and after the settlement, American filed a second amended complaint against CFM and Michigan, seeking, inter alia, a declaration that it had no duty to indemnify CFM under its policy issued to NF. CFM and Michigan filed a second amended countercomplaint for declaratory judgment, seeking reimbursement for half of the $700,000 settlement amount. CFM and Michigan argued, inter alia, that Michigan was entitled to reimbursement from American based on the "other insurance" provisions and equitable contribution. CFM and Michigan also sought attorney fees, costs, and prejudgment interest from American. The parties filed motions for summary judgment. The trial court denied American's motion for summary judgment and granted summary judgment to CFM and Michigan, though denying fees, costs, and interest.

The trial court reasoned that Michigan could not recover under the theory of equitable contribution because the policies of Michigan and American "did not cover the same risk[s]." However, the trial court determined that both policies provided primary commercial general liability coverage and contained identical "other insurance" provisions (providing excess coverage). The trial court concluded, "The policy provisions therefore are canceled out and the cost of the CFM settlement must be shared." The trial court ordered American to pay Michigan $350,000. The trial court denied American's motion for reconsideration. American timely appealed, and Michigan filed a timely cross-appeal.

II. Analysis

On appeal, American argues that the trial court erred by granting CFM and

923 N.E.2d 304

Michigan's motion for summary judgment, awarding Michigan $350,000 in reimbursement.

Summary judgment is appropriate only when "the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." 735 ILCS 5/2-1005(c) (West 2008). Summary judgment is a drastic measure of disposing of litigation and should be granted only if the movant's right to judgment is clear and free from doubt. Chatham Foot Specialists, P.C. v. Health Care Service Corp., 216 Ill.2d 366, 376, 297 Ill.Dec. 268, 837 N.E.2d 48 (2005). When ruling on a motion for summary judgment, the court has a duty to construe the evidence in the light most favorable to the nonmoving party and strictly against the movant. Chatham Foot, 216 Ill.2d at 376, 297 Ill.Dec. 268, 837 N.E.2d 48. The appellate court applies a de novo standard of review to the trial court's grant or denial of a summary judgment motion. Chatham Foot, 216 Ill.2d at 376, 297 Ill.Dec. 268, 837 N.E.2d 48.

A. American's Appeal 1. Equitable Contribution

On appeal American argues that the trial court correctly decided that Michigan and CFM had no cause of action for equitable contribution. We will address this issue, because on review we may affirm on any basis supported by the record. Northern Moraine Wastewater Reclamation District v. Illinois Commerce Comm'n, 392 Ill.App.3d 542, 563, 332 Ill. Dec. 18, 912 N.E.2d 204 (2009).

When an insurer has paid the entire loss, the doctrine of equitable contribution allows it to be reimbursed by other insurers that are also liable for the loss. Cincinnati Insurance Co. v. American Hardware Manufacturers Ass'n, 387 Ill. App.3d 85, 114, 325 Ill.Dec. 483, 898 N.E.2d 216 (2008). The doctrine of equitable contribution "arises from a right, which is independent from the rights of the insured, to recover from a co-obligor who shares the same liability as the party seeking contribution." Argonaut Insurance Co. v. Safway Steel Products, Inc., 355 Ill.App.3d 1, 10-11, 290 Ill.Dec. 797, 822 N.E.2d 79 (2004). The purpose of the doctrine is to provide a remedy when one insurer has paid a debt that is equally owed by another insurer. Chicago Hospital Risk Pooling Program v. Illinois State Medical Inter-Insurance Exchange, 325 Ill.App.3d 970, 981, 259 Ill.Dec. 230, 758 N.E.2d 353 (2001). "The fact that one insurer undertakes the burden of a full settlement payment does not mean the insurer is a volunteer." Chicago Hospital Risk, 325 Ill.App.3d at 981, 259 Ill.Dec. 230, 758 N.E.2d 353. Equitable "[c]ontribution applies to multiple, concurrent insurance situations and is only available where the concurrent policies insure the same entities, the same interests, and the same risks." Home Insurance Co. v. Cincinnati Insurance Co., 213 Ill.2d 307, 316, 290 Ill.Dec. 218, 821 N.E.2d 269 (2004).

American argues that equitable contribution does not apply, because the parties' policies insured completely different risks. American argues that American's policy insured CFM for CFM's liability arising out of NF's work, which had no connection to Flores or International Decorators; whereas Michigan's policy insured CFM for liability arising out of work by International Decorators, which was Flores' employer. We disagree with American.

It is well settled that when two insurers cover "separate and distinct risks," equitable contribution does not apply. Home Insurance, 213 Ill.2d at 316,

923 N.E.2d 305

290 Ill.Dec. 218, 821 N.E.2d 269. The term "risk" is not defined by the policies here, so the commonly understood dictionary definition is applicable. Home Insurance, 213 Ill.2d at 321, 290 Ill.Dec. 218, 821 N.E.2d 269. "Risk," as it is used in the policies, is defined by Merriam-Webster's as "the possibility of loss or injury." Merriam-Webster's Collegiate Dictionary 1011 (10th ed. 1998). It is also defined as "the chance of loss" or the "degree of probability of such loss" (Webster's Third New International...