Progressive Ins. Co. v. Universal Cas. Co.

• Citation: 807 N.E.2d 577,282 Ill.Dec. 953,347 Ill. App.3d 10
• Decision Date: 15 March 2004
• Docket Number: No. 1-03-1445.,1-03-1445.
• Parties: PROGRESSIVE INSURANCE COMPANY, Plaintiff-Appellee, v. UNIVERSAL CASUALTY COMPANY, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

807 N.E.2d 577

347 Ill. App.3d 10

282 Ill.Dec. 953

PROGRESSIVE INSURANCE COMPANY, Plaintiff-Appellee, v. UNIVERSAL CASUALTY COMPANY, Defendant-Appellant.

No. 1-03-1445.

Appellate Court of Illinois, First District, First Division.

March 15, 2004.

Matthew E. Luecke, Thomas L. Burdelik & Associates, Chicago, for Appellant.

Jeffrey S. Deutschman, Deutschman & Associates, P.C., Chicago, for Appellee.

Justice GORDON delivered the opinion of the court:

This case arises from an auto accident in which Francisco Araujo hit a pedestrian, Luz Mendez, while delivering pizzas for a pizza vendor, Pizza Nova, Inc. Araujo's vehicle was insured by defendant, Universal Casualty Company, while plaintiff, Progressive Insurance Company, provided insurance to Pizza Nova for its business automobiles. Plaintiff Progressive settled a lawsuit filed by Mendez as a result of the accident for $57,500 and brought suit against defendant Universal for reimbursement. Following cross-motions for summary judgment, the trial court granted summary judgment in favor of Progressive and denied Universal's motion. The court awarded Progressive $20,000, Universal's policy limit for a single claimant. Universal now appeals. For the following reasons, we reverse and remand to the trial court for further proceedings.

BACKGROUND

On January 22, 1999, Luz Mendez was hit by a vehicle driven by Francisco Araujo. The vehicle was owned by Francisco's father, Jose Araujo, and at the time he hit Mendez, Francisco was driving the vehicle in the course of his employment delivering pizza for Pizza Nova. Jose carried insurance on his vehicle with defendant Universal, which provided $20,000 in liability coverage for a single claimant.¹ Universal's policy also contained a provision providing for coverage of any person or organization legally responsible for the use of the insured automobile, which later became the basis for Progressive's contention that Pizza Nova was not only an insured of plaintiff Progressive, but an additional insured of defendant Universal. Universal's policy further provided the following policy defenses under the section entitled "Conditions":

"5. * * * The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for such immediate medical and surgical relief to others as shall be imperative at the time of accident.

* * *

6. * * * No action shall lie against the company unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy, nor until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company."

Pizza Nova was the named insured on a policy provided by plaintiff Progressive, which insured any automobiles used in the course Pizza Nova's business, but were not owned by Pizza Nova. Progressive's policy provided a liability limit of $350,000 and contained the following "other insurance" provision: "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."

It appears from the record that both insurance companies were notified of the Araujo-Mendez accident and entered into negotiations with the underlying tort claimant Mendez to settle the case prior to her filing suit. Those negotiations proved unsuccessful, and on January 17, 2001, Mendez filed a complaint naming Araujo and Pizza Nova as defendants. While Pizza Nova was served with process regarding the lawsuit, Mendez was unable to serve the Araujos. On May 1, 2001, Progressive, Pizza Nova's insurance carrier, settled the case with Mendez for $57,500.

Thereafter, Progressive filed a complaint for declaratory judgment in the circuit court, requesting a finding that Universal was the primary insurer of the Araujo vehicle and that Progressive was an excess insurance carrier. Because of its alleged status as an excess carrier, Progressive requested an order directing Universal to reimburse Progressive for its settlement with Mendez. Universal responded that its bodily injury liability limit on the Araujo policy was $20,000, but flatly denied any obligation to reimburse Progressive for its settlement. Universal asserted that its obligation to cover any loss by Araujo was never triggered because two conditions precedent to its policy were not satisfied, namely: (1) the insured's obligation was not "finally determined" by written agreement between the insured, the claimant and the insurer or in a court of law and (2) Progressive's settlement was an unauthorized voluntary payment.

The parties subsequently filed cross-motions for summary judgment, responses, supplemental briefs and a second set of cross-motions for summary judgment.²

In its motion for summary judgment, Progressive realleged that, as the primary insurer of the automobile, Universal was obligated to reimburse Progressive, the excess insurer, for its settlement with Mendez. Progressive further asserted that Universal should be estopped from raising any policy defenses to coverage as it wrongfully declined to defend its insured in the underlying lawsuit when it was filed. Attached to Progressive's motion was a copy of the coverage provisions under its policy, including the "other insurance" clause restated above. Also attached to Progressive's motion was the following: (1) a copy of an unnotarized letter from the underlying tort claimant's attorney, Paul Kesselman, addressed to Universal and Francisco Araujo, dated March 8, 1999, and titled "Notice of Attorney's Lien," stating that Kesselman was retained to represent Mendez for damages resulting from the January 22, 1999, accident; (2) a copy of a letter from Suzanne Weisman, a claims representative for Universal, acknowledging receipt of Kesselman's lien letter and responding that the matter was under investigation; (3) an unsigned letter from Denise Gracon, apparently an employee of Progressive,³ to Universal, referencing a settlement demand from Mendez and requesting a complete copy of Universal's policy for review; (4) an unsigned letter from Lisa Anderson, apparently a second employee of Progressive,⁴ addressed to Universal, stating that no response was received from the previous letter and requesting a determination regarding the Mendez matter.

Universal's motion reasserted the two policy defenses recounted above and claimed that, although Progressive's attachments amounted to notice of an insurance claim, Universal never received notice of a lawsuit; therefore, its duty to defend the lawsuit never arose and Progressive's estoppel argument regarding Universal's policy defenses did not apply. Universal further argued that Progressive was not an excess insurance carrier, but a co-insurer, and therefore it brought an improper action for reimbursement when it should have brought its action under the doctrine of equitable contribution.

Regarding the issue of whether Universal received notice of the filing of the underlying lawsuit, Universal submitted an affidavit signed by Paul Kesselman, averring that he never notified Universal of the lawsuit and that he was unable to serve the Araujos with summons. The parties further submitted the conflicting affidavits of Brian Germain, an officer of defendant Universal, and Pamela Mausser, an officer of plaintiff Progressive.

Germain's affidavit provided that he was "familiar with the complete claims file for the claim by Luz Maria Mendez and Francisco and Jose Araujo and with the claims file for the claim by Progressive Insurance Company against Universal," and that he reviewed each of these files. Germain admitted in his affidavit that Universal was aware of an insurance claim made by Mendez and that a claims adjuster "had preliminary settlement discussions with Paul Kesselman," Mendez' attorney. However, Germain averred that after those preliminary discussions, Universal had no further contact with Kesselman and neither Kesselman nor the Araujos notified the company of a lawsuit. Furthermore, even though there were several discussions between Universal and Progressive about the insurance claim, "at no time did Progressive ever inform Universal about a pending lawsuit" until the pleadings were filed by Progressive in its suit against Universal.⁵ To the contrary, Mausser's affidavit stated the following, in pertinent part, "As reflected in the computer-generated notes attached hereto as Exhibit A, on February 14, 2001, we communicated to Suzanne Weisman, an adjuster for Universal Casualty, that a lawsuit was filed in this matter on January 31, 2001. Ms. Weisman stated that Universal was not covering the loss because of an exclusion in their policy."

Ultimately, the court granted summary judgment in favor of Progressive, and denied Universal's motion. The court determined that Universal had received sufficient notice of the underlying cause of action and that Progressive did not settle the underlying lawsuit prematurely.

On appeal, Universal contends that the trial court erred in granting Progressive's motion for summary judgment and in improperly denying Universal's motion for summary judgment. We reverse the trial court's grant of summary judgment in favor of Progressive, but affirm the denial of Universal's motion. Accordingly, we remand the cause of action for further consideration in the trial court.

ANALYSIS

Summary judgment is properly granted where the pleadings, depositions, admissions and affidavits show there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2002). Presumably, when parties file cross-motions for summary judgment, they agree that no genuine issues of material fact exist and that the dispute involves...