River Val. Cartage Co. v. Hawkeye-Security Ins. Co.

• Decision Date: 24 September 1959
• Docket Number: No. 35103,HAWKEYE-SECURITY,35103
• Citation: 17 Ill.2d 242,161 N.E.2d 101
• Parties: , 76 A.L.R.2d 978 RIVER VALLEY CARTAGE COMPANY, Inc., Appellant, v.INSURANCE COMPANY, Appellee.
• Court: Illinois Supreme Court

Page 101

161 N.E.2d 101

17 Ill.2d 242, 76 A.L.R.2d 978

RIVER VALLEY CARTAGE COMPANY, Inc., Appellant, v. HAWKEYE-SECURITY INSURANCE COMPANY, Appellee.

No. 35103.

Supreme Court of Illinois.

Sept. 24, 1959.

James A. Dooley, Chicago, for appellant.

Paul A. La Rocque, Herbert D. Jones, Jr., and Edward Wolfe, Chicago, for appellee.

SCHAEFER, Justice.

We granted leave to appeal in this case to determine the extent and the duration of an insurance company's liability for interest on a judgment against its insured.

On May s3, 1955, Velma Sawyer obtained a judgment for $175,000 in a personal injury action against the River Valley Cartage Co. Hawkeye-Security Insurance Co. had insured the cartage company against liability to the extent of $50,000. Velma Sawyer died on July 118 1955, and her administrator, Ershel O. Sawyer, was substituted for her. On July 3, 1956, the administrator refused a tender of $50,000, and on November 1, 1956, he commenced supplemental garnishment proceedings against the insurance company as garnishee. On June 26, 1957, judgment for $68,350.57 was entered against the garnishee. This judgment included the amount for which the insurer was liable on the face of its policy, together with interest on the entire judgment of $175,000 from the date of its entry to the date of judgment in the garnishment proceeding. On July 24, 1957, the insurance company paid $50,000 to the administrator under a stipulation that the judgment would thereby be reduced to $18,367.50, but that the payment would not affect the rights or liabilities of the parties.

The insurer appealed to the Appellate Court, and there contended that it was liable for interest only on the sum of $50,000 and that in any case interest stopped accruing on July 3, 1956, when the tender of $50,000 was refused. The Appellate Court rejected the first contention but accepted the second. 18 Ill.App.2d 454, 152 N.E.2d 603. We allowed the administrator's petition for leave to appeal.

The administrator contends that the Appellate Court erred in holding that the tender stopped the running of interest. His position is that the insurer continued to be liable for interest on the sum of $175,000 until July 24, 1957, when $50,000 was paid, and that it continues to be liable for interest on the sum of $125,000. Without cross-appealing the insurer renews the contentions that it made in the Appellate Court. See Ill.Rev.Stat.1957, chap. 110, par. 101.32(4).

The case turns upon the interpretation of the clause in the insurer's policy by which it obligated itself to pay 'all costs taxed against the insured in any such suit and all interest accruing after entry of judgment until the company has paid, tendered or deposited in court such part of the judgment as does not exceed the limit of the company's liability thereon.' The clause appears in section 2 of the policy, which is captioned, 'Defense, Settlement, Supplementary Payments.'

We consider first the question of the extent of the insurer's liability. Courts have divided on the meaning of the phrase 'all interest accruing after entry of judgment.' Some have read it to limit liability for interest to that part of the judgment for which the insurer is responsible. See, e. g., Morgan v. Graham, 10 Cir., 228 F.2d 625, 54 A.L.R.2d 1290; Standard Accident Ins. Co. of Detroit, Mich. v. Winget, 9 Cir., 197 F.2d 97, 34 A.L.R.2d 250; Sampson v. Century Indemnity Co., 8 Cal.2d 476, 66 P.2d 434, 109 A.L.R. 1162. Others have not. See, e. g., United Services Automobile Association v. Russom, 5 Cir., 241 F.2d 296; Underwood v. Buzby, 3 Cir., 236 F.2d 937; Maryland Casualty Co. v. Wilkerson, 4 Cir., 210 F.2d 245. It might be enough to say that the ambiguity evidenced by this division of opinion should be construed against the insurer. First National Bank of Highland Park v. Boston Insurance Co., Ill., 160 N.E.2d 802. But we believe that there are other and stronger reasons for holding that the phrase creates liability for interest on the entire judgment.

In the first place, the insurer's language compels such a conclusion. The phrase referring to interest uses the term 'judgment' without qualification while in the same clause the phrase limiting the duration of the liability for interest refers to 'such part of the judgment as does not exceed the limit of the company's liability thereon.' Obviously the insurer knew how to qualify the term 'judgment' to achieve the result that it urges. It did not do so.

In addition, the realities of the relationship between the insurer and the insured argue against the insurer's interpretation. Under the terms of the policy the insurer has complete control of any litigation from which it might incur liability. The insured can not settle with the plaintiff without releasing the insurer...