Cont'l W. Ins. Co. v. Country Mut. Ins. Co.

• Decision Date: 24 June 2021
• Docket Number: No. 20-2962,20-2962
• Citation: 3 F.4th 308
• Parties: CONTINENTAL WESTERN INSURANCE COMPANY, Plaintiff-Appellee, v. COUNTRY MUTUAL INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

3 F.4th 308

CONTINENTAL WESTERN INSURANCE COMPANY, Plaintiff-Appellee,

v.COUNTRY MUTUAL INSURANCE COMPANY, Defendant-Appellant.

No. 20-2962

United States Court of Appeals, Seventh Circuit.

Argued April 21, 2021

Decided June 24, 2021

Adam P. Joffe, Attorney, Traub Lieberman Straus & Shrewsberry, Chicago, IL, for Plaintiff-Appellee.

Keith G. Carlson, Attorney, Carlson Law Offices, Chicago, IL, for Defendant-Appellant.

Before Flaum, Scudder, and Kirsch, Circuit Judges.

Flaum, Circuit Judge.

In the aftermath of a serious collision between an ambulance and semi-truck, a question lingered: Who owned the ambulance? This inquiry turned contentious as two insurance companies looked to sidestep primary coverage obligations arising from three post-accident lawsuits. The ambulance service's formation through a joint enterprise and status as a separately insured party complicated the resultant ownership determination. The district court determined that defendant-appellant Country Mutual Insurance Company's named insured owned the ambulance, holding Country Mutual responsible for primary coverage for the defense costs in question. Accordingly, the district court found that plaintiff-appellee Continental Western Insurance Company's named insured did not own the ambulance such that Continental only owed coverage in excess of Country Mutual's primary coverage. After granting summary judgment to Continental on these grounds, the court awarded Continental attorney's fees and defense costs equal to the amounts that Country Mutual should have covered but that Continental, in fact, incurred to defend its insured in the three underlying lawsuits. Considering the record evidence strongly reflects the parties’ intent that Country Mutual's insured owned the ambulance and considering the reasonableness of the resulting award of attorney's fees under Illinois law, we affirm the district court.

I. Background

A. Factual Background

Alhambra and Hamel are two villages located in southern Illinois. In 1989, the Hamel Fire Protection District ("Hamel Fire") and Alhambra Fire Protection District ("Alhambra Fire") formed a joint venture called the Alhambra-Hamel Ambulance Service (the "Service") to provide ambulance service to residents of both fire districts.

On September 17, 2012, a Service-operated ambulance driven by Theodore Berg, Jr., collided with a semi-truck owned by Specialized Transportation, Inc. (hereinafter, the "accident"). The semi-truck driver Daniel Eddinger and his codriver Rayburn Conway were seriously injured in the accident. Ambulance passengers, including Michelle Logue, were also severely injured.

The accident produced three lawsuits (hereinafter, the "underlying lawsuits").¹ Continental defended Hamel Fire in each of the underlying lawsuits but only after first tendering them to Country Mutual. Country Mutual ignored each tender. All three cases eventually settled, and Continental paid all attorney's fees assessed for Hamel Fire's defenses.

The question before us now is which insurance company—Continental or Country Mutual—is responsible for paying the defense fees that Continental incurred to defend Hamel Fire in the underlying lawsuits. The parties agree this question turns exclusively on who owned the ambulance involved in the accident, a 2010 Freightliner Ambulance with a vehicle identification number 1FVACWDU2ADAN8141 (hereinafter, the "ambulance").

Several documents shed light on which entity owned the ambulance. On the one hand, the 2009 "Certificate of Title of a Vehicle" for the ambulance listed "Alhambra Hamel Ambulance Service" as its "owner." Likewise, the 2009 "Bill of Sale" issued by Truck Centers, Inc. listed the ambulance as "Sold To: Alhambra-Hamel Ambulance Service." Finally, the "Illinois Traffic Crash Report" that recorded the accident listed the ambulance "owner" as "Alhambra Hamel, Ambulance Service." On the other hand, when they formed the Service in 1989, Hamel Fire and Alhambra Fire reached an "Agreement to Provide Ambulance Service Jointly." That 1989 agreement contained an "Ownership of Property" provision: "All property; both real and personal, acquired by Alhambra and Hamel hereunder shall be owned equally by them." Country Mutual also provided an affidavit from Hamel Fire's treasurer who attested to the contents of the agreement.

The insurance policies issued by Continental and Country Mutual, both in effect during the accident, also speak to ambulance ownership and coverage priority. At a high level, there were four insurance policies implicated by the accident. Of those, only the ones issued by Country Mutual (to its insured, the Service) and Continental (to its insured, Hamel Fire) are relevant.²

Turning to the specifics of each policy, we begin with Country Mutual's policy. Country Mutual issued a multi-peril commercial lines insurance policy to the Service, its named insured, for a period of December 24, 2011, to December 24, 2012 (the "Country Mutual Policy"). The Country Mutual Policy included business auto coverage subject to a $1,500,000 limit of liability for any one accident or loss, but it only insured certain "covered autos." Under "Item 3. – Schedule of Covered Autos You Own," the Country Mutual Policy listed the "2010, Freightliner Ambulance, 1FVACWDU2ADAN8141," specifying the ambulance was a covered auto.

The Country Mutual Policy stated the company "will pay all sums an ‘insured’ legally must pay" in applicable damages. In addition to covering the Service, the Country Mutual Policy also circuitously covered Hamel Fire. In clarifying who was insured under the Country Mutual Policy, the "Liability Coverage" section stated that "insureds" span three categories: "[y]ou for any covered ‘auto,’ " "[a]nyone else while using with your permission a covered ‘auto’ you own, hire or borrow," and "[a]nyone liable for the conduct of any ‘insured’ described above but only to the extent of that liability."

Under this framework, the Country Mutual Policy insured the Service (as the primary policy holder), Berg (as the driver of a covered auto with the Service's permission), and Hamel Fire (as one allegedly liable for the conduct of its "agent and driver" or "employee"—Berg—who qualifies as an "insured"). The district court accepted and Country Mutual did not challenge in its briefing or at oral argument that Hamel Fire consequently enjoyed coverage under the Country Mutual Policy. On appeal, we thus accept that as given.

We turn next to Continental's policy, which Continental issued to Hamel Fire, its named insured, for a period of September 4, 2012, to September 4, 2013 (the "Continental Policy"). The Continental Policy included business auto coverage subject to a $5,000,000 limit of liability for any one accident or loss. Unlike the Country Mutual Policy, the Continental Policy did not list the ambulance under its own "Item Three - Schedule of Covered Autos You Own," although it listed six unrelated vehicles. Nevertheless, the ambulance was still an "auto" covered by virtue of the Continental Policy's declarations, which stated that any "auto" enjoyed coverage. All told, both parties do not dispute that the ambulance was a covered auto under both the Continental Policy and Country Mutual Policy.

Both policies also spelled out coverage priority in comparably worded "Other Insurance" provisions. In the Country Mutual Policy, the "Other Insurance" provision stated: "For any covered ‘auto’ you own, this Coverage Form provides primary insurance. For any covered ‘auto’ you don't own, the insurance provided by this Coverage Form is excess over any other collectible insurance." Similarly, the Continental Policy's "Other Insurance" provision (as modified by another form) stated: "For any covered ‘auto’ you own and any ‘commandeered auto’, this endorsement provides primary insurance. For any covered ‘auto’ you don't own, the insurance provided by this endorsement is excess over any other collectible insurance." Thus, both policies provided primary coverage for owned autos and excess coverage for non-owned autos.

B. Procedural Background

Asserting that it was entitled to reimbursement of the attorney's fees it paid to defend Hamel Fire in the underlying lawsuits, Continental sued Country Mutual in federal district court, invoking the court's diversity jurisdiction.

The district court granted Continental's motion for summary judgment because, in the court's view, the Service, and not Hamel Fire, owned the ambulance. Based on that finding, and both policies’ "Other Insurance" clauses, the court determined that Country Mutual owed primary coverage for the costs to defend Hamel Fire in the underlying lawsuits, while Continental only owed excess coverage. Therefore, the court entered a judgment in a civil action instructing that "Country Mutual had a duty to defend Hamel Fire in the underlying lawsuits, including the duty to reimburse Continental for the cost of defending Hamel Fire."

Country Mutual next filed a notice of appeal to this Court. We sent the case back to the district court, however, with instruction to calculate damages. Back in the district court, the parties litigated the issue of attorney's fees and defense costs with full briefing and oral argument. In an attempt to challenge Continental's desired damages, Country Mutual sought an evidentiary hearing and attempted to introduce an affidavit by Stephen Mudge, the Service's lead attorney in the underlying lawsuits. The district court ultimately denied both requests: the former as unnecessary and the latter as untimely. The district court then awarded attorney's fees and defense costs in the amount of $240,146.18, in addition to prejudgment interest of $10,394.72, for a total of $250,540.90. The court denied Continental's request for post-judgment interest but also stated that "upon the entry of an amended judgment in this case, post-judgment interest will begin accruing at the rate established by 28 U.S.C. § 1961." Country Mutual now appeals, challenging ...