Reliance Nat. Ins. Co. v. Great Lakes Aviation, 04-4120.

• Decision Date: 23 November 2005
• Docket Number: No. 04-4120.,No. 04-4148.,04-4120.,04-4148.
• Parties: RELIANCE NATIONAL INSURANCE CO., Plaintiff, v. GREAT LAKES AVIATION, LTD., et al., Defendants-Appellees, v. Arny Berger, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

430 F.3d 412

RELIANCE NATIONAL INSURANCE CO., Plaintiff, v. GREAT LAKES AVIATION, LTD., et al., Defendants-Appellees, v. Arny Berger, et al., Defendants-Appellants.

No. 04-4120.

No. 04-4148.

United States Court of Appeals, Seventh Circuit.

Argued September 13, 2005.

Decided November 23, 2005.

C. Kevin McCabe, Lord Bissell & Brook, Chicago, IL, for Plaintiff.

Richard E. Boyle, Gundlach, Lee, Eggmann, Boyle & Roessler, Belleville, IL, for Defendant-Appellee Raytheon Aircraft Co. in 04-4120 and 04-4148.

James G. Goggin (argued), Verrill & Dana, Portland, ME, for Defendants-Appellants Arny Berger, Patricia A. Beville and Deborah A. DeSalle in 04-4120 and Ketura Brueck, Vicki L. Carlson, Darl Heffelbower, Kathleen Reed in 04-4148.

John W. Adler (argued), Chicago, IL, for Defendant-Appellee Great Lakes Aviation, Limited in 04-4120 and 04-4128.

Before POSNER, RIPPLE, and WOOD, Circuit Judges.

POSNER, Circuit Judge.

This case presents questions concerning the law of contribution among joint tortfeasors. The questions arise in a complex procedural setting; but we can simplify. In 1996, two airplanes, one carrying ten passengers, collided on a runway in a small municipal airport in Illinois. All fourteen persons aboard the two airplanes were killed. The two owners of the smaller plane had a $1 million liability insurance policy that had been issued by Reliance National Insurance Company. Reliance filed an interpleader suit in federal district court, 28 U.S.C. § 1335, naming as defendants everyone who might have a claim to the insurance proceeds, including the owners of the smaller plane (all references to "owners" in this opinion are to them), the pilots (actually of course their estates, but we'll suppress that detail for the sake of simplicity), the passengers (that is, their estates), the manufacturer of both planes — Raytheon Aircraft Company — and the airline that operated the passenger plane, Great Lakes Aviation. Reliance deposited $1 million in the court and was dismissed. The eventual judgment in the interpleader suit, awarding the $1 million to Great Lakes and Raytheon, is challenged in this appeal, which is by the passengers.

The passengers had filed tort suits in an Illinois state court against Great Lakes, Raytheon, the owners, and the pilots. The two pilots of the smaller plane had filed similar suits against Great Lakes and the owners. The passengers settled with Great Lakes and Raytheon, receiving $44 million from the former and $8 million from the latter, for a total of $52 million. In exchange, the passengers released their claims against all the defendants, except that both they and the defendants "reserve[d] their respective rights, title and interest in their respective claims to the funds interpleaded by Reliance."

The pilots' state court suits went to trial in 2003, and on the eve of trial Great Lakes agreed with the owners that it would not seek any contribution from them personally; it would limit any claim of contribution to the $1 million that Reliance, the owners' liability insurer, had deposited in the federal district court in the interpleader suit. These parties further agreed that the amount of contribution from the owners to which Great Lakes would be entitled would be determined by multiplying all amounts that Great Lakes had paid in settlement of the passengers' claims (that is, $44 million) by the percentage of responsibility for the collision that the jury in the pilots' suit allocated to the lead pilot of the smaller plane. That turned out to be 65 percent, implying a contribution claim for Great Lakes of $28.6 million ($44 million × .65). A similar agreement with Raytheon (though, oddly, it had not been named as a defendant) assessed its contribution claim as $5.2 million ($8 million [the amount of its settlement with the passengers] × .65). Great Lakes and Raytheon have agreed to divide the $1 million of insurance proceeds — if they are awarded those proceeds — in the same proportion as their claims. Their entitlements to contribution, calculated in accordance with their agreements with the owners, are much greater, but the sum they can actually receive is capped at the $1 million in the district court's registry.

Although the agreements were embodied in agreed judgment orders entered by the state court, the passengers claim to be entitled to the $1 million. The district judge rejected their claim. He thought that because Great Lakes and Raytheon apparently had been the only defendants in the passengers' suits to have paid anything — they had in fact paid the healthy sum of $52 million — the principles of equity entitled them to the modest contribution, $1 million, that they would receive if they were awarded the money that the owners' insurer had deposited in the district court. Alternatively he ruled that the agreed judgment orders in the state court gave Great Lakes and Raytheon a claim to the money that was prior to the passengers' claim. The passengers contend that those judgments are entitled to no weight because the passengers were not parties to the litigation in which the judgments were entered and because an Illinois law bars contribution in the circumstances of this case. They further argue that as the only blameless parties (although actually Raytheon's liability has never been determined), they should get the $1 million.

The passengers are correct that contribution is barred by Illinois law. In words that could not be much clearer, the Illinois Joint Tortfeasor Contribution Act provides that "a tortfeasor who settles with a claimant ... is not entitled to recover contribution from another tortfeasor whose liability is not extinguished by the settlement." 740 ILCS 100/2(e). The purpose appears to be to discourage piecemeal settlement of multiparty cases, but in any event the rule is clear, and so, it seems to us, is its application to this case. The settling tortfeasors are Great Lakes and Raytheon, which together paid the "claimant" (the passengers) $52 million. The "tortfeasor[s] whose liability is not extinguished by the settlement" are the owners, provided the $1 million in the court's registry is attributed to them — but it should be, even though the deposit into the registry was made by their insurer. Suppose they hadn't been insured, and had deposited $1 million of their own money in the court. Their settlement with the passengers would not have extinguished their liability, but merely have limited it to the $1 million that they had deposited. It cannot make a difference that the money was actually deposited by their liability insurer, any more than it would have made a difference had it been deposited by a wire from their bank. The liability insurer is a surrogate for the tortfeasor whom it has insured. Flatt v. Country Mutual Ins. Co., 289 Ill.App.3d 1097, 225 Ill.Dec. 151, 682 N.E.2d 1228, 1232 (1997); Shelton v. Country Mutual Ins. Co., 161 Ill.App.3d 652, 113 Ill.Dec. 426, 515 N.E.2d 235, 240 (1987); Reagor v. Travelers Ins. Co., 92 Ill.App.3d 99, 47 Ill.Dec. 507, 415 N.E.2d 512, 514 (1980).

This would be painfully obvious if the suit against the owners had gone to judgment and damages had been assessed at $1 million and the owners had no personal assets, but just the insurance. Could Reliance have refused to pay the judgment on the ground that it was not the tortfeasor? Obviously not; and what difference can it make that instead of waiting for a judgment or...