Krutsinger v. Illinois Cas. Co.

• Decision Date: 14 May 1956
• Docket Number: Gen. No. 10038
• Parties: Lolita KRUTSINGER, a minor, Kenneth Krutsinger, a minor, and Karen Krutsinger, a minor, by Dolores Krutsinger, their mother and next friend, Plaintiffs- Appellees, v. ILLINOIS CASUALTY COMPANY, an interinsurance exchange, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 180

135 N.E.2d 180

10 Ill.App.2d 344

Lolita KRUTSINGER, a minor, Kenneth Krutsinger, a minor, and Karen Krutsinger, a minor, by Dolores Krutsinger, their mother and next friend, Plaintiffs- Appellees, v. ILLINOIS CASUALTY COMPANY, an interinsurance exchange,

Defendant-Appellant.

Gen. No. 10038.

Appellate Court of Illinois, Third District.

May 14, 1956.

Rehearing Denied June 28, 1956.

Bozeman, Moran & Klockau, Rock Island, Loren E. Murphy, Monmouth, Bernard J. Moran, Rock Island, of counsel, for appellant.

John L. Franklin, Champaign, for appellees.

HIBBS, Presiding Justice.

Plaintiffs, Lolita Krutsinger, Kenneth Krutsinger and Karen Krutsinger, all minors, by Dolores Krutsinger, their mother and next friend, filed a suit in the Circuit Court of Champaign County on June 2, 1953 against certain tavern owners including Mandel Barnett, Mildred Barnett and Norman Barnett, partners doing business as Piccadilly Liquor Store. The complaint alleged that the defendants were subject to the provisions of the Dram Shop Act (Ill.Rev.Stat.1951, Chap. 43, pars. 94 et seq.); that they violated Section 131 thereof by selling liquor to plaintiffs' father, whom they knew to be a habitual drunkard, and Section 135 thereof, by causing the intoxication of plaintiffs' father with the result that he was unable to furnish plaintiffs support and maintenance, citing Ill.Rev.Stat.1951, Chap. 43, pars. 131 and 135. Both actual and exemplary damages were sought. The Barnetts were duly served with summons, which they turned over to Robert J. Milum, the agent from whom they had purchased their dram shop insurance. He, in turn, mailed the summons to one of the current insurers and on June 25, 1953, notified by letter each of the other insurers who would be involved in the case including Illinois Casualty Company, the defendant in this proceeding, who, though not on the risk at the time of the original lawsuit, had insured the Barnetts for a portion of the time set up in the complaint, to-wit, from September 29, 1951, until July 7, 1952.

On June 29, 1953, an attorney for the Illinois Casualty Company in Moline, Illinois, called plaintiffs' attorney at Urbana and received assurances that no default would be taken against the company until he had an opportunity to decide the company's position in the matter. About a week later a copy of the complaint was obtained from the court files by the company, but it did not file an answer thereto on behalf of its insured. An answer was filed, however, for the insureds by their personal attorney.

On February 22, 1954, an attorney for the Illinois Casualty Company was observed in the court room during a hearing in the Circuit Court on a motion in the case. Shortly thereafter negotiations for settlement were started but the Casualty Company did not participate. Instead on March 9, 1954, it instituted an action in the Circuit Court of Rock Island County for a declaratory judgment to define its rights and liabilities under its contract of insurance involved in the dram shop case in Champaign County.

The dram shop case was finally set for trial in Champaign County on April 5, 1954. On March 26, 1954, plaintiffs served notices that they would ask leave of court on March 29th to file an amended complaint instanter. On the day in question such leave was granted and the plaintiffs filed an amended complaint limiting their action to Section 135 of the Dram Shop Act and omitting any claim for exemplary damages.

All defendants including the Barnetts were ruled to plead by April 1st. An answer was filed on behalf of the Barnetts by their personal attorney.

On April 1st the legal guardian of the plaintiffs, appointed by the County Court of Champaign County, filed a petition in that court setting up the filing of the dram shop case in the Circuit Court of that county and alleged that 'practically all of the sales or gifts of alcoholic liquor upon which the plaintiffs rely as having produced permanent losses to their means of support accrued subsequent to October 1, 1951 and prior to July 1, 1952; that during all of that period of time the Illinois Casualty Company * * * was the carrier upon each of the dram shops in question * * * except one.' The petition further alleged that the other insurance carriers involved were willing to negotiate a settlement based upon the periods of coverage of their respective contracts, but that the Casualty Company had refused to participate in a common settlement; that the other insurance carriers had offered to contribute $4,800 to any judgment which would be rendered against defendants in the Circuit Court, which sum should be distributed as follows: $1,800 to Karen Krutsinger, $1,600 to Kenneth Krutsinger and $1,400 to Lolita Krutsinger; that said offer was based on the condition that the plaintiffs would agree to look only to the Illinois Casualty Company for the balance of any judgments rendered in their favor by the Circuit Court. The petitioning guardian advised the court that he believed that it was for the best interests of his wards that the settlement offered be accepted and prayed that he be authorized to accept it. On the same day, after an ex parte hearing, the County Court entered an order authorizing the guardian to settle with the other insurance carriers.

On March 31, 1954, attorneys for the Casualty Company wrote the personal attorney for the Barnetts claiming breaches of condition in its policy and declined to defend the dram shop case. On April 1st these same attorneys on behalf of the Casualty Company wrote the Barnetts setting forth the alleged breaches in the conditions of the policy and also notifying them that the company would not defend the dram shop case unless they would execute a nonwaiver agreement preserving these defenses for the company. The letter suggested that the Barnetts would be personally liable for the balance of any judgment in excess of the reported settlement with the other insurance companies and urged them to seek advice from different counsel. The Barnetts' personal attorney called the attorneys for the Casualty Company on April 2nd and informed them that the Barnetts could not sign a non-waiver agreement because of the terms of their settlement with the other companies.

The dram shop case was tried by the Circuit Court of Champaign County on April 5, 1954 and verdicts were returned in favor of Lolita Krutsinger for $4,000, Kenneth Krutsinger for $4,800 and Karen Krutsinger for $6,000. Judgments were entered on the verdicts and no appeals were taken therefrom. Credits were allowed pursuant to the stipulation and the judgments have been reduced by those amounts. No further proceedings were ever had in the declaratory judgment action in Rock Island County.

The present suit was filed against the Casualty Company in the Circuit Court of Champaign County on May 5, 1954, for the Krutsinger children by their mother and next friend. The complaint describes briefly the previous suit and settlement agreement with the other companies and the verdicts recovered. It seeks to recover the amounts of those verdicts as reduced from amounts received from the other insurance companies. The Company's answer was filed on July 29, 1954, and in addition to denying the allegations of the complaint set up four separate affirmative defenses. Plaintiffs replied and the cause came to trial on January 17, 1955. At the close of all the evidence plaintiffs moved to withdraw from the consideration of the jury the issues raised by the separate defenses in defendant's answer, which motion was allowed. Plaintiffs then moved for a directed verdict. This motion was also allowed and the jury as instructed by the court returned verdicts for $4,300.58 in favor of Karen Krutsinger, $3,223.11 in favor of Kenneth Krutsinger and $2,900 in favor of Lolita Krutsinger. Defendant has appealed to this court.

Defendant, Illinois Casualty Company, sometimes referred to hereafter as 'the Exchange' points out that any defense it has may be asserted against the plaintiffs here since their rights are no greater than those of the Barnetts, the insureds under the policy in question. With this we agree. Schneider v. Autoist Mut. Ins. Co., 346 Ill. 137, 178 N.E. 466. It insists first that the insureds breeched their contract of insurance by failing to personally notify it of the dram shop suit and by failing to deliver to it the summons served upon them. The policy provides: 'the insured shall give to the Exchange or to its attorney-in-fact, Blackhawk Incorporated, immediate written notice with full particulars of any acts or occurrences covered thereby, and shall also give like notice of claims for damages on account of such acts or occurrences. If any suit is brought against the insured to recover such damages, the insured shall immediately deliver to the Exchange or to its attorney-in-fact, Blackhawk Incorporated every summons or other process served upon him.' This is a common provision in policies of this type and has been repeatedly approved by the courts of this State. Meyer v. Iowa Mut. Liability Ins. Co., 240 Ill.App. 431; Heilig v. Continental...