Continental Cas. Co. v. Great American Ins. Co.

• Citation: 732 F. Supp. 929
• Decision Date: 15 March 1990
• Docket Number: No. 86 C 3938.,86 C 3938.
• Parties: CONTINENTAL CASUALTY COMPANY, an Illinois Corporation, in its own right and as Subrogee of Edward C. Levy Company, a Michigan Corporation, Plaintiff, v. GREAT AMERICAN INSURANCE COMPANY, an Ohio Corporation, Defendant.
• Court: U.S. District Court — Northern District of Illinois

732 F. Supp. 929

CONTINENTAL CASUALTY COMPANY, an Illinois Corporation, in its own right and as Subrogee of Edward C. Levy Company, a Michigan Corporation, Plaintiff, v. GREAT AMERICAN INSURANCE COMPANY, an Ohio Corporation, Defendant.

No. 86 C 3938.

United States District Court, N.D. Illinois, E.D.

March 15, 1990.

John Kuhn, Brinton & Bollinger, Chicago, Ill., for plaintiff.

William V. Johnson, Johnson, Cusack & Bell, Ltd., Chicago, Ill., for defendant.

MEMORANDUM OPINION

BRIAN BARNETT DUFF, District Judge.

The bell has sounded, and Round Four of this ineptly fought bout between Continental Casualty Company ("CCC") and Great American Insurance Company begins. CCC is the excess liability insurer and contractual subrogee of Edward C. Levy Company; Great American is Levy's primary insurer. In Round One, the parties filed cross-motions for summary judgment, motions which the court described in gentle terms as peculiar. See Continental Cas. Co. v. Great American Ins. Co., 711 F.Supp. 1475, 1477 (N.D.Ill.1989). The reason — if one could call it that — for the perplexing posture of the parties in Round One is apparent only in hindsight. CCC had suspected Great American of not paying its entire liability under a policy with Levy, leaving CCC to pay purportedly more than its share. Yet CCC must not have been sure of this, so rather than accusing Great American directly of breaching its contract with Levy, CCC sued Great American for breaching its duty of good faith toward CCC. As evidence of Great American's bad faith, CCC claimed among other things that Great American never had tendered the full amount of its liability under its policy with Levy.

This court agreed that Great American had not tendered its policy limits. See id. at 1482-84. The court's ruling on this issue didn't end the parties' fight. The court held that there were material issues of fact about Great American's good or bad faith in failing to tender its full amount of coverage. Id. at 1486. The court's opinion must have awakened CCC from its slumber. CCC began Round Two swinging, moving for summary judgment on a claimed theory of breach of contract. CCC quickly stumbled, however, as it took no time for the court to observe that CCC had not pleaded breach of contract apart from its claims of breach of good faith.

Having wasted more than the usual amount of their client's resources already, CCC's lawyers approached Round Three carefully. In that round, CCC moved to amend its complaint, and put forth three new theories of relief. CCC won on points in this round, as the court allowed two of CCC's proposed theories. Count 3 of CCC's newest complaint is a claim for breach of contract, by virtue of Great American's failure to tender its entire liability under its primary insurance policy with Levy. CCC claims that it can bring this claim as contractual subrogee of Levy and as a third-party beneficiary of Great American's policy with Levy. Count 4 of the complaint states a claim of equitable subrogation, by virtue of CCC's having to make up the portion of Levy's liability that Great American has refused to pay.

Now we reach Round Four. CCC has moved for summary judgment on Counts 3-4. The facts it has put forth in favor of its motion are simple, undisputed, and for the most part recounted in this court's earlier opinion: Great American insured Levy under a comprehensive general liability policy. That policy had two separate limits, $1 million each per person, for bodily injury liability and contractual bodily injury liability. Levy paid separate premiums for each. As a result of a workplace accident for which Levy was ultimately held responsible, Levy owed in excess of $2.3 million plus costs and interest to a worker's estate. The final bill for this accident approached $3.9 million. Great American paid $1 million plus $644,638.05 in interest on behalf of Levy to satisfy this judgment. Levy's excess insurance carrier, CCC, paid the balance. CCC's contract with Levy provided in part: "In the event of any payment under this policy, CCC shall be subrogated to all Levy's rights of recovery therefor against any person or organization. ..."

CCC claims that entry of summary judgment is a simple matter, in light of this court's order in Continental Cas., 711 F.Supp. 1475. CCC first submits that Great American may not contest its liability to CCC under its primary insurance contract, as this court's previous order was final. As it has shown so many times before, CCC does not understand the Federal Rules of Civil Procedure. This court's previous order, one granting summary judgment on certain issues of fact and law, was pursuant to Rule 54(b), Fed.R.Civ.Pro., as it did not resolve all of the issues in this case. By the language of Rule 54(b), a party may seek reconsideration of any such order "at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties." (Emphasis added) See also Anderson v. Montgomery Ward & Co., Inc., 704 F.Supp. 162, 163 (N.D.Ill.1989) (party may seek reconsideration of issues of fact and law resolved in a Rule 54(b) order for good cause).

This issue is moot, as Great American has not challenged this court's prior ruling about its twin coverages of Levy in opposing CCC's current motion for summary judgment. CCC nevertheless is still not entitled to judgment merely on what this court said in its previous order. That order stated only that Great American owed Levy under two coverages. The court did not hold that CCC could claim the benefit of Great American's promise to Levy, as CCC itself argued in Round One that Great American owed it the additional coverage only if CCC could prove Great American's bad faith. CCC did not prove bad faith in Round One, so Great American owed CCC nothing at the close of that Round, under CCC's own view of the case.

CCC's amendment changes everything. It is undisputed that CCC is Levy's contractual subrogee, by virtue of CCC's excess insurance contract with Levy. CCC also is Levy's equitable subrogee. Under Michigan law,¹ "equitable subrogation is a legal fiction through which a person who pays a debt for which another is primarily responsible is substituted or subrogated to all the rights and remedies of the other," unless the payor is a "`mere volunteer.'" Commercial Union Ins. v. Medical Protective, 426 Mich. 109, 117, 393 N.W.2d 479, 482 (1986), quoting Smith v. Sprague, 244 Mich. 577, 579-80, 222 N.W. 207, 208 (1928). This court previously determined that Great American should have paid two coverages, equalling $2 million, instead of one coverage, equalling $1 million, on Levy's...