Commonwealth Edison v. National Union Fire Ins.
| Decision Date | 20 June 2001 |
| Docket Number | No. 1-99-3800., No. 1-99-3524 |
| Citation | 752 N.E.2d 555,256 Ill.Dec. 675,323 Ill. App.3d 970 |
| Parties | COMMONWEALTH EDISON COMPANY, Plaintiff-Appellee, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., and Asplundh Tree Expert Company, Defendants-Appellants. |
| Court | United States Appellate Court of Illinois |
Clausen Miller P.C. (James T. Ferrini, Mary F. Standord, Susan Condon, of counsel), Chicago, for Appellant National Union Fire Insurance Company of Pittsburgh, Pa.
Baker & McKenzie (Ronald L. Ohren, of counsel), Chicago, for Appellant Asplundh Tree Expert Company.
Johnson & Bell, Ltd. (William McVisk, Mindy Kallus, of counsel), Chicago, for Appellee.
Defendants National Union Fire Insurance Company of Pittsburgh, Pa. (National) and Asplundh Tree Expert Company (Asplundh) appeal from two orders of the circuit court denying National's and Asplundh's motions for summary judgment and granting summary judgment in favor of plaintiff Commonwealth Edison Company (Edison) in Edison's declaratory judgment action seeking indemnification, as an additional insured in a policy issued to Asplundh by National, for $1.5 million in settlement funds Edison paid in an underlying wrongful death lawsuit. On appeal, National and Asplundh contend that: (1) the trial court erred in granting Edison indemnification for the $1.5 million it paid in settlement based only on Edison's reasonable anticipation of liability arising out of Asplundh's actions; (2) Edison violated the voluntary payment clause in the policy when it settled the underlying lawsuit without National's consent, precluding indemnification under the policy; and (3) Edison's self-insured retention under a separate policy affected National's duty to indemnify Edison. For the reasons set forth below, we affirm.
In 1992, Patrick Fierce (Fierce), special administrator of the Estate of Diana Fierce, deceased, filed a four-count complaint against Edison and Asplundh. Fierce's complaint (Fierce action) alleged that on or about July 2, 1992, Diana Fierce came into contact with a downed power line in the backyard of property she owned at 8116 Carolwood Avenue, Woodridge, Illinois, causing her serious internal and external injuries which subsequently caused her death. Fierce subsequently filed several amended complaints. Count I of the fifth amended complaint was a claim for "wrongful death" against Edison and alleged, in part, that Edison failed to "trim or remove trees" located within its easement to avoid the damaging or breaking of the power lines. Count II was a claim against Edison for violation of the Illinois Public Utilities Act. Count III was also a claim against Edison under the Public Utilities Act which sought punitive damages. Count IV was a claim based on negligence against Asplundh, alleging that Asplundh was in the business of tree trimming, was hired by Edison pursuant to a contract to trim trees surrounding power lines on and along easements owned by Edison, and had a duty to inform Edison of any damage to high voltage electrical power lines. The complaint further alleged that Asplundh, by and through its agents and employees, was negligent in failing to comply with the terms of its contract in the following respects:
Fierce maintained that Asplundh's violation of its duties caused Diana Fierce's injuries. Count V was a claim under the Wrongful Death Act for "infliction of emotional distress" on behalf of Patrick Fierce who alleged that he had witnessed Diana's electrocution and had entered the "zone of danger" created by the downed power lines when he went to her aid.
On February 23, 1994, AIG Risk Management, Inc., on behalf of National as National's claims management analyst, sent a letter to Edison stating that National would defend Edison in the Fierce action, under a reservation of rights, pursuant to the coverage under policy No. RMGL3257964, effective from August 1, 1991 to August 1, 1992. The Fierce action was settled by the parties for $3 million, with Asplundh and Edison agreeing to each pay $1.5 million to Fierce.
On September 18, 1995, Edison filed a complaint against National, seeking a declaration that National breached its obligations to Edison as an additional insured under policy No. RMGL XXX-XX-XX by refusing to fund all or a portion of Edison's contribution to the settlement in the Fierce action and that National must reimburse Edison $1.5 million plus interest under the policy.1
On December 18, 1995, National filed an answer to Edison's complaint for declaratory relief which admitted that Edison was an additional insured, but only with respect to "liability arising out of operations performed for [Edison] by or on behalf of Asplundh." National denied that Edison was an additional insured under the policy with respect to the Fierce action because Edison's liability did not arise out of operations by or on behalf of Asplundh. National further denied all other material allegations against it. National also alleged three affirmative defenses. As its first affirmative defense, National stated that "National Union [had] no obligation under the policy to indemnify Com Ed for any monies Com Ed paid to settle liability that did not arise out of Asplundh's operations." As its second affirmative defense, National stated that it did not have a duty to indemnify Edison based on a policy provision which prohibited the insured from voluntarily making any payment, assuming any obligation, or incurring any expense without National's consent and that Edison failed to obtain National's consent before agreeing to pay $1.5 million to settle the Fierce action. As its third affirmative defense, National stated, in the alternative, that if it was liable to Edison, that liability would be subject to the "other insurance" provisions of the policy. National argued that its liability for the settlement amount would be limited, according to the terms of the policy, by the amount of other applicable primary insurance coverage. Policy No. RM GL XXX-XX-XX, issued by National and naming Asplundh as the "named insured," effective from August 1, 1991 to August 1, 1992, contained a $5 million "general aggregate limit" of coverage. An endorsement to the policy stated that Edison was named as an additional insured, but only with respect to liability arising out of the operations of Asplundh. The policy also contained the following relevant language under the "Commercial General Liability Form":
The policy also stated:
"No insured will, except at their own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent."
The parties filed cross-motions for summary judgment. Asplundh argued that in order to obtain summary judgment, Edison "must first prove as a matter of law that it had liability—not merely exposure—in the underlying lawsuit" and that Edison must secondly prove that "every dollar of its $1.5 million payment was for liability arising out of operations performed for [Edison] by or on behalf of [Asplundh] and, thus, that not one single dollar of that payment was for [Edison's] own liability on account of its own conduct." (Emphasis in original.) Asplundh further argued that Illinois case law precluded Edison from attempting to apportion liability between it and Asplundh for the first time in a declaratory judgment action. National made similar arguments in its motion to those made in Asplundh's motion. Edison argued in its motion for summary judgment that it was entitled to indemnification from National for the settlement amount it paid in the Fierce action because the settlement was made with reasonable anticipation of liability arising out of Asplundh's operations and because Edison had given National notice of its intent to settle and the opportunity to participate in the settlement.
On September 7, 1999, the parties filed a stipulation with respect to their cross-motions for summary judgment. The following statements were included in the stipulation: $1.5 million was paid, under National's policy issued to Asplundh, on behalf of Asplundh, to settle the Fierce action; Edison paid $1.5 million to settle the Fierce action; prior to the settlement of the Fierce action, National was aware that Asplundh and Edison had discussed the possibility of subsequently reallocating the settlement between them; National did not play a part in the negotiations between Edison and Asplundh and was not advised that they had made a decision to fund the settlement on a 50/50 basis until after the agreement had been reached; Edison never subsequently sought to reallocate the settlement with Asplundh; Edison and Asplundh denied liability at the time of the settlement of the Fierce action, and the parties, including National, and their attorneys "believed that both [Edison] and [Asplun...
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