Knoll Pharmaceutical v. Automobile Ins. Co.
| Decision Date | 16 July 2002 |
| Docket Number | No. 00 C 6733.,00 C 6733. |
| Parties | KNOLL PHARMACEUTICAL CO., Plaintiff, v. AUTOMOBILE INSURANCE CO. OF HARTFORD and National Union Fire Insurance Co. of Pittsburgh, PA, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Tyrone C. Fahner, Alan J. Martin, Jordan Rudnick, Carrie Marie Raver, Mayer, Brown, Rowe & Maw, Chicago, IL, Kenneth J. Merlino, Power, Rogers & Smith, P.C., Chicago, IL, for plaintiff.
Matthew S. Ponzi, Thomas Berthold Orlando, George M. Ferreti, Foran, Glennon, Palandech & Ponzi, P.C., Chicago, IL, for Automobile Ins. Co. of Hartford, defendant.
Thomas B. Underwood, Sandra Young, Michael Duane Sanders, Heidi A. Smith, Purcell & Wardrope, Chtd., Chicago, IL, Heidi A. Smith, Donald S. Nathan, P.C., Chicago, IL, for National Union fire Ins. of Pittsburgh, PA, defendant.
Michael John Fusz, Dion Joseph Sartorio, Shaun McParland Baldwin, Jeffrey Mark Alperin, David C. Butman, Daniel Ira Graham, Jr., Tressler, Soderstrom, Maloney & Priess, Chicago, IL, for Royal Ins. Co. of America, defendant.
This insurance coverage case involves just over $50 million in disputed insurance policy liability limits, defense costs and prejudgment interest. We are now at the damages stage of this case, after writing two prior opinions on Automobile Insurance Company of Hartford ("Automobile"), National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union") and Royal Insurance Company of America's ("Royal") (collectively "Defendant Insurers") duty to defend Knoll Pharmaceutical Company ("Knoll") and the transfer of the insurance policies as a matter of law to Defendant Insurers. The instant opinion holds that the total award to Knoll from Automobile is $29,933,394.00 plus prejudgment interest from February 1, 2002 to July 16, 2002 — the date of this Court's order — and the total award to Knoll from National Union is $19,955,596.00 plus prejudgment interest from the February 1, 2002 to July 16, 2002 period.1 See supra Analysis, Section I(E). The instant opinion rules on the parties' four outstanding motions and concludes this lawsuit.
Knoll filed this diversity lawsuit, seeking a declaration that Defendant Insurers owed a duty to defend Knoll in the underlying case, In re Synthroid Marketing Litigation, 110 F.Supp.2d 676 (N.D.Ill.2000). On July 13, 2001, we partially granted Knoll's motion for judgment on the pleadings and denied Defendant Insurers' motions for judgment on the pleadings. Knoll Pharm. Co. v. Auto. Ins. Co. of Hartford, et al., 152 F.Supp.2d 1026 (N.D.Ill.2001) ("Knoll I"). On October 1, 2001, we granted Knoll's motion for summary judgment, finding that Defendant Insurers' policies transferred as a matter of law to Knoll. Knoll Pharm. Co. v. Auto. Ins. Co. of Hartford, et al., 167 F.Supp.2d 1004 (N.D.Ill.2001) ("Knoll II"). Currently before the Court are Knoll's motion for summary judgment on Count II of the complaint (Breach of Contract) seeking money damages from Automobile and National Union, and Knoll's motions for summary judgment and Automobile and National Union's motion for summary judgment on Count III of the complaint (Violations of Section 155 of the Illinois Insurance Code). For the reasons set forth herein, Knoll's motion for summary judgment on Count II is granted, (R. 121-1), Automobile and National Union's motion for summary judgment on Count III is granted, (R. 122-1), and Knoll's motions for summary judgment on Count III are denied, (R. 119-1, against National Union; R. 120-1, against Automobile).
Automobile issued three insurance policies to Knoll effective from April 1, 1989 through April 1, 1992. National Union issued two insurance policies to Knoll effective from September 30, 1993 through December 1, 1995. Each policy requires that Automobile and National Union pay Knoll all sums — up to policy limits — that Knoll is legally obligated to pay as a result of personal or advertising injury claims filed against Knoll in the underlying Synthroid Marketing litigation, so long as the offense occurred during the pertinent policy period. Additionally, each policy requires that Automobile and National Union pay all costs, including attorney fees, incurred by Knoll in defending claims for which Automobile and National Union might incur a duty to indemnify, and that payment of these defense costs is not subject to policy limits. Knoll reached a preliminary settlement agreement resolving the underlying Synthroid Marketing litigation. After receiving that court's preliminary approval of the settlement, Knoll deposited $101,319,780.00 into a settlement fund account. Automobile and National Union did not contribute to the settlement fund, nor did they defend Knoll in the underlying Synthroid Marketing litigation.
Knoll employed a team of four national firms (Sonnenschein, Nath & Rosenthal; Pillsbury, Madison & Sutro; Baker & Botts; and Mayer, Brown & Platt) to defend itself in the two class action lawsuits formed from a consolidation of over seventy separate suits. Knoll's in-house legal staff, headed by Thomas Allman and Moira Brophy, collected defense invoices and forwarded them to their accounting department for payment from a Knoll account. It is undisputed that Knoll contemporaneously paid each of the invoices for which it seeks indemnification and that no other entity besides Knoll paid these defense costs. (R. 121-1, Pl.'s Mot. for Summ.J. on Count II, Ex. C.)
During the underlying Synthroid Marketing litigation, Knoll sent copies of the complaints that it received to Defendant Insurers, requesting a defense under the policies. Defendant Insurers, however, refused to defend Knoll and never sought a declaratory judgment to determine whether such a duty existed. Rather, they maintained their positions that the claims submitted were not covered under the policies. The amount of time and investigation spent assessing their coverage obligations is disputed. As we determined in Knoll I, a duty to defend Knoll in the underlying suits did in fact exist. Knoll I, 152 F.Supp.2d at 1029. We also determined, however, that Defendant Insurers' positions denying this duty were reasonable and that the issues presented in this defense were novel in Illinois. See id. at 1035-37. Presently before the Court are Knoll's motion for summary judgment seeking money damages from Automobile and National Union for breach of contract, and the parties' cross-motions for summary judgment regarding Knoll's request for Illinois Insurance Code Section 155 sanctions.
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, 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." Fed.R.Civ.P. 56(c). A genuine issue for trial exists only when "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Accordingly, the nonmovant must "come forward with specific facts showing that there is a genuine issue for trial." Miller v. Am. Family Mut. Ins. Co., 203 F.3d 997, 1003 (7th Cir.2000) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). It is not, however, the task of this Court to "scour the record" in search of a genuine issue, for we rely on the nonmoving party to identify "with reasonable particularity" the evidence that militates against summary judgment. Richard v. Combined Ins. Co. of Am., 55 F.3d 247, 251 (7th Cir.1995).
We have already determined that Automobile and National Union had a duty to defend Knoll in the underlying litigation and that they breached this duty. Knoll I, 152 F.Supp.2d at 1029. Under Illinois law, when an insurance company breaches its duty to defend, the measure of the damages is the amount of the judgment against the insured up to the policy limits, the expenses incurred by the insured in defending the suit and additional damages traceable to the refusal to defend. Chandler v. Doherty, 299 Ill.App.3d 797, 234 Ill.Dec. 294, 702 N.E.2d 634, 640 (1998).
When interpreting insurance contracts, the purpose is to give effect to the parties' intent. E. Trading Co. ex. rel. Amin v. Refco, Inc., No. 97 C 6815, 2001 WL 869626, at *3 (N.D.Ill. Aug.1, 2001); Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill.2d 90, 180 Ill.Dec. 691, 607 N.E.2d 1204, 1212 (1992). When possible, the contract should be construed so that all provisions are given effect and are in harmony, making them consistent and workable. Refco, 2001 WL 869626, at *3; Welborn v. Ill. Nat'l Cas. Co., 347 Ill.App. 65, 106 N.E.2d 142, 143 (1952). In construing insurance contracts, courts should interpret them as complete documents, not isolated parts. Weiss v. Bituminous Cas. Corp., 59 Ill.2d 165, 319 N.E.2d 491, 495 (1994). If, however, a term in a policy is subject to more than one reasonable interpretation within the context in which it appears, it is ambiguous. Outboard Marine, 180 Ill.Dec. 691, 607 N.E.2d at 1217. Any ambiguities in an insurance contract are interpreted in favor of the insured. Hurst-Rosche Eng'rs, Inc. v. Commercial Union Ins. Co., 51 F.3d 1336, 1342 (7th Cir.1995). The insurer is the drafter of the policy and has the power to make the language clear. Id. Furthermore, the parties' intent is to provide coverage to the insured, and any ambiguity jeopardizing this coverage should therefore be consistent with the insured's intent. Id. A court may not, however, create an ambiguity when the language is clear and...
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