Royal Ins. Co. v. INSIGNIA FINANCIAL GROUP

• Decision Date: 05 June 2001
• Docket Number: No. 1-00-2063.,1-00-2063.
• Citation: 323 Ill. App.3d 58,256 Ill.Dec. 111,751 N.E.2d 164
• Parties: ROYAL INSURANCE COMPANY OF AMERICA, Plaintiff-Appellee, v. INSIGNIA FINANCIAL GROUP, INC., and Stacie Kelley, Indiv. and as Mother and Next Friend of Robert Kelley, a a Minor, Defendants-Appellees and Appellants (Reliance Insurance Company, Plaintiff-Appellant).
• Court: United States Appellate Court of Illinois

751 N.E.2d 164

323 Ill. App.3d 58

256 Ill.Dec. 111

ROYAL INSURANCE COMPANY OF AMERICA, Plaintiff-Appellee, v. INSIGNIA FINANCIAL GROUP, INC., and Stacie Kelley, Indiv. and as Mother and Next Friend of Robert Kelley, a a Minor, Defendants-Appellees and Appellants (Reliance Insurance Company, Plaintiff-Appellant).

No. 1-00-2063.

Appellate Court of Illinois, First District, Second Division.

June 5, 2001.

Robert L. Kiesler, Patti M. Deuel, Kiesler & Berman, Chicago, for Plaintiff-Appellee.

Karen K. Coffin, Nemecek and Cole, Sherman Oaks, CA, Robert J. Zaideman, Zaideman & Esrig, P.C., Chicago, for Defendant-Appellees and Appellants.

Goldberg, Kohn, Bell, Black, Rosenbloom & Mortiz, Ltd., of Chicago (Kenneth S. Ulrich and Lincoln Schroth, of counsel), for Plaintiff-Appellant.

Justice COUSINS delivered the opinion of the court:

This is a dispute over which of two insurance companies has to provide a defense and possible indemnification to Insignia Financial Group, Inc. (Insignia), in connection with an underlying tort case filed in the circuit court of Cook County. The underlying complaint was filed against Insignia and seeks damages for in utero injuries sustained by Robert Kelley when his mother, Stacie Kelley, received an electric shock while she was employed by Insignia. Reliance Insurance Company (Reliance) brought a declaratory judgment action, alleging that it did not have a duty to defend or indemnify Insignia under its employers liability policy. Royal Insurance Company of America (Royal) also sought a declaration that it did not have a duty to defend or indemnify under its general liability policy. Reliance's theory was that Robert suffered a direct injury and that only consequential bodily injuries to a child of an injured employee are permitted under its employers liability insurance. Royal's theory was that Robert suffered a consequential injury, an injury excluded by the general liability policy issued by Royal to Insignia. Royal's motion to consolidate both declaratory actions was granted.

The trial court denied Reliance's motion for judgment on the pleadings, ruling that Reliance had a duty to defend Insignia in the underlying case. The trial court granted Royal's cross-motion for summary judgment. Reliance and Insignia filed notices of appeal.

On appeal, Reliance argues that the trial court erred in determining that an injury to a fetus caused by an electrical shock to the mother which occurred during the course of employment constituted a "consequential" rather than "direct" injury, thereby triggering Reliance's duty to defend a lawsuit against the employer.

On appeal, Insignia contends that the trial court erred in granting Royal's cross-motion for summary judgment because the question of whether Robert's injury was a "direct consequence" of the shock to Stacie is an unresolved question that cannot be determined on the basis of the complaint alone and requires a full evidentiary hearing on the merits.

BACKGROUND

On May 14, 1998, Stacie Kelley, individually and on behalf of her minor son, Robert Kelly, filed a complaint (Kelley complaint) against her employer, Insignia, seeking damages for in utero injuries allegedly suffered by Robert. On November 19, 1999, Robert Kelley filed a first amended complaint against Insignia that essentially contained the same allegations as the original complaint. According to the complaint, Stacie was employed by Insignia as a swimming pool attendant for the Emerald Courts apartments when the injury occurred. Insignia manages the Emerald Court apartments. The complaint further provides:

"8. On August 30, 1995, Stacie was pregnant with Robert. Robert was born on December 1, 1995.

9. On August 30, 1995, Stacie went into the pool house to turn on the lights for the pool. At that time, Stacie grabbed a metal switch to turn on the pool lights.

10. As Stacie flipped the lever for the pool lights, she received an electric shock that traveled from her hand down through her feet.

11. The electric shock traveled through Stacie's uterus and shocked Robert as well. Robert suffered brain damage as a result of the electric shock. Today he suffers from right spastic hemiparesis, developmental delay and seizures."

Insignia tendered Robert's claim to both Royal and Reliance for a defense and possible indemnification. Insignia had purchased a general liability policy from Royal. Royal's general liability policy excludes coverage for bodily injury to a child of an employee as a consequence of bodily injury to the employee arising out of and during the course of employment. Exclusion "e" of the Royal policy states in pertinent part:

"This insurance does not apply to:

* * *

e. Employer's Liability

`Bodily injury' to:

(1) An `employee' of the insured arising out of and in the course of:

(a) Employment by the insured; or

(b) Performing duties related to the conduct of the insured's business; or

(2) The * * * child * * * of that `employee' as a consequence of paragraph (1) above.

This exclusion applies:

(1) Whether the insured may be liable as an employer or in any other capacity; and

(2) To any obligation to share damages with or repay someone else who must pay damages because of the injury." (Emphasis added.)

In addition to the Royal policy, Insignia had purchased a workers compensation and employers liability policy from Reliance. Reliance's policy covers damages for bodily injury to employees and for consequential bodily injury to a child of the injured employee, provided these damages are a direct consequence of bodily injury arising out of and in the course of employment by the employee. The Reliance policy provides in pertinent part:

"We will pay all sums you legally must pay as damages because of bodily injury to your employees, provided the bodily injury is covered by this Employers Liability Insurance.

The damages we will pay, where recovery is permitted by law, includes damages:

1. for which you are liable to a third party by reason of a claim or suit against you by that third party to recover damages claimed against such third party as a result of injury to your employees.

* * *

3. for consequential bodily injury to a spouse, child, parent, brother or sister of the injured employee;

provided that these damages are the direct consequence of bodily injury that arises out of and in the course of the injured employee's employment by you * * *." (Emphasis added.)

On March 12, 1999, Reliance filed a complaint for declaratory relief, seeking a declaration that the Reliance policy did not cover the claims made against Insignia because the Kelley complaint alleged "direct" injuries to Robert. On September 1, 1999, Royal filed a complaint for declaratory relief, alleging that its policy excluded coverage because the Kelley complaint alleged "consequential" injuries to Robert. On November 22, 1999, the court granted Royal's motion to consolidate the two actions for declaratory relief.

Subsequently, Reliance filed its motion for judgment on the pleadings while Royal filed a cross-motion for summary judgment. During arguments on the motions, Reliance argued that its policy with Insignia was inapplicable because it only covered "consequential" injuries and that Robert's injuries were "directly" caused by the electrical shock. Royal conversely contended that its policy only covered "direct" injuries and that Robert's injuries were a "consequence" of the electric shock which injured his mother. Insignia asserted that the determination of whether Reliance or Royal owed coverage could only be decided after an evidentiary hearing on the merits.

Based on the allegations of the Kelley complaint and the language of the insurance policies, the trial court concluded that Robert suffered injuries as a direct consequence of his mother's injury and that the Reliance policy therefore applied. On May 16, 2000, the trial court granted Royal's cross-motion for summary judgment and denied Reliance's motion for judgment on pleadings.

Reliance and Insignia appeal. Royal also filed a motion challenging the jurisdiction of this court to consider the appeals filed by Reliance and Insignia and requesting dismissal of this appeal. Royal's motion raises two issues: (1) Reliance lacks standing to appeal; and (2) Insignia's appeal is untimely. For the following reasons, we deny the motion to dismiss, affirm in part, and reverse in part.

ANALYSIS

I

We initially consider Royal's motion to dismiss. First, Royal asserts that Reliance lacks standing to appeal the trial court's order granting summary judgment in favor of Royal. Although both insurers opposed each other's motions at the trial court level, Royal claims that the interests of Royal and Reliance are not adverse and Reliance was not prejudiced by the summary judgment order. Generally, a defendant does not have standing to appeal a judgment in favor of a codefendant because judgment for or against one of them does nothing but establish their respective rights and liabilities toward the plaintiff. An exception exists, however, in cases where the issues between the codefendants were actively litigated in the action below. Tisoncik v. Szczepankiewicz, 113 Ill. App.3d 240, 244, 68 Ill.Dec. 874, 446 N.E.2d 1271 (1983). Here, in its cross-motion for summary judgment, not only did Royal argue that its policy excluded coverage, but it further contended that the Kelley complaint alleged a "consequential injury" that was covered by the Reliance policy. Since the co-insurers actively litigated the common issue of whether Robert suffered a consequential injury in the trial court below, Reliance has standing to appeal the judgment in favor of Royal. Tisoncik, 113 Ill.App.3d at 244,68 Ill.Dec. 874,446 N.E.2d 1271.

Second, Royal contends that Insignia's appeal was untimely. Jurisdiction is conferred upon the appellate court only through the timely filing of a notice of appeal. Berg v. Allied Security, Inc., 193 Ill.2d 186, 189, 249 Ill.Dec. 770, 737...