State Farm Fire & Cas. v. John J. Rickhoff

Decision Date19 August 2009
Docket NumberNo. 1-08-1933.,1-08-1933.
Citation914 N.E.2d 577
PartiesSTATE FARM FIRE & CASUALTY COMPANY, as subrogee of Quality Storage Products, Inc., Plaintiff, v. JOHN J. RICKHOFF SHEET METAL COMPANY, Defendant and Third-Party Plaintiff-Appellant (Meridian Mutual Insurance Company and The Horton Group, Inc., f/k/a The Horton Insurance Agency, Inc., Third-Party Defendants-Appellees).
CourtUnited States Appellate Court of Illinois

Peter C. Morse, Jeffrey A. Siderius, Morse Bolduc & Dinos, Chicago, for Defendants and Third-Party Plaintiffs-Appellants.

Matthew J. Egan, Scott L. Howie, Cynthia H. Alkhouja, Pretzel & Stouffer Chtd., Chicago, for Third-Party Defendant-Appellee, Meridian.

Panos T. Topalis, G. Christopher Slick, Tribler, Orpett & Meyer, PC, Chicago, for Third-Party Defendant-Appellee, Horton.

Justice THEIS delivered the opinion of the court:

Defendant and third-party plaintiff, John J. Rickhoff Sheet Metal Co. (Rickhoff), appeals from the order of the circuit court of Cook County dismissing its third-party complaint against third-party defendants, Meridian Mutual Insurance Co. (Meridian) and the Horton Group, Inc. (Horton), on the motions of Meridian and Horton, which were both filed pursuant to section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2006)) (the Code). On appeal, Rickhoff contends that the circuit court erred in dismissing its third-party complaint for breach of an insurance contract against Meridian because it was not procedurally barred by Meridian's prior declaratory judgment against Rickhoff's additional insured, Quality Storage Products, Inc. Rickhoff also contends that the circuit court erred in dismissing its third-party complaint against Horton because its claims against Horton were not barred by the statute of limitations for insurance producers (735 ILCS 5/13-214.4 (West 2004)). For the following reasons, we affirm.

The following facts and procedural history are relevant to this appeal. Before relating them, we must note that the procedural history of this case is convoluted and involves no less than five layers of litigation. We will accordingly present the facts and procedural history as orderly and chronologically as possible.

In 2000, Quality Storage Products, Inc. (Quality), sold an overhead conveyor to another company, ITW Signode. Quality contracted Rickhoff to install the equipment for ITW Signode. Before the installation had been completed, in March of 2000, an employee of ITW Signode named Rufus Coleman was injured by the equipment. In early 2002, Coleman sued Quality and Rickhoff for his injuries.

Quality and Rickhoff had been working together for more than a decade, and during the course of that relationship, they had a verbal agreement that whenever Rickhoff performed a job for Quality, Rickhoff would name Quality as an additional insured on its general liability policy. At the time in question, Meridian was Rickhoff's general liability insurer, and Horton was Rickhoff's insurance agent. Sometime prior to commencing work on the Quality-ITW Signode project, Rickhoff requested that Horton provide Quality with a certificate of insurance naming Quality as an additional insured under Rickhoff's policy with Meridian. Horton had issued Rickhoff a certificate of insurance on September 30, 1999, naming Quality and Nabisco, Inc., as "additional insureds" with respect to "general liability only."

Quality accordingly requested defense and indemnification from Meridian when Coleman filed his personal injury action in 2002. However, Meridian denied Quality coverage. Sometime later in 2002, Meridian also filed an action against Quality seeking a declaratory judgment that it did not have a duty to defend Quality. In that action, Meridian claimed that because there was no written agreement between Quality and Rickhoff, according to the terms of Rickhoff's insurance policy, Quality could not be named as an additional insured.

In February 2004, Quality filed a counterclaim for contribution and a claim for breach of contract to procure insurance against Rickhoff in the Coleman litigation. Therein, Quality alleged that if it were found liable for Coleman's injuries, its liability was proximately caused by Rickhoff's negligence. Quality also alleged that during its 10-year course of dealing with Rickhoff, the two firms had a "long-standing agreement" that anytime Quality hired Rickhoff as a subcontractor, Rickhoff would name Quality as an additional insured on its liability insurance. However, when Quality tendered defense of the Coleman matter to Meridian, Meridian refused to cover it, maintaining that Rickhoff's policy did not provide for the type of insurance in question. Thus, Quality maintained Rickhoff breached their long-standing agreement by failing to procure appropriate insurance.

In August 2004, Meridian filed a motion for summary judgment in the declaratory judgment action. In that motion, Meridian reiterated that Quality could not be an additional insured under Rickhoff's policy because that policy required a written contract between the insured and any additional insured, and there was no written contract between Quality and Rickhoff. Further, although Horton had issued a certificate of insurance on September 30, 1999, stating that Quality was an additional insured, Horton was Rickhoff's agent, not Meridian's; therefore, Meridian asserted that Horton could not bind Meridian. Meridian also pointed out that Charles Naso, the Horton employee who issued the certificate of insurance, testified in his deposition in the matter that the certificate was not sufficient to bind Meridian and that the certificate could not be interpreted as an alteration of Rickhoff's insurance policy. In response, Quality asserted that a genuine issue of material fact existed regarding whether it was an additional insured. The circuit court granted that motion in October 2004. Quality did not appeal from that determination.

In 2005, Quality and Rickhoff reached a settlement with Coleman in the injury litigation. Pursuant to that agreement, Quality voluntarily dismissed its counterclaim for contribution and its breach of contract to procure insurance claim against Rickhoff. The circuit court entered a good faith finding as to the settlement.

Thereafter, State Farm, which is Quality's general liability insurer, as subrogee, commenced the present action against Rickhoff for breach of contract to procure insurance. State Farm alleged that when Meridian refused to defend Quality and, later, prevailed in the declaratory judgment action, it amounted to a breach of Rickhoff's contractual obligation to procure insurance for Quality. This resulted in State Farm having to defend Quality in the Coleman litigation. In so doing, State Farm paid out a $110,000 settlement and roughly $82,000 in attorney fees and other defense costs.

Rickhoff responded to State Farm's complaint by denying all material allegations. Rickhoff also filed a third-party complaint against Meridian and Horton. Therein, Rickhoff alleged that the certificate of insurance issued by Horton on September 30, 1999, which stated that Quality was an additional insured, was never rescinded or revoked. Thus, Rickhoff contended that Meridian breached its contract of insurance when it denied coverage to Quality. Rickhoff also contended that the certificate of insurance was sufficient to satisfy the writing requirement of its liability policy. Regarding Horton, Rickhoff contended that Horton breached its contract to provide insurance for Quality as Rickhoff had requested. Rickhoff also contended that Horton negligently failed to procure insurance for Quality and failed to adequately advise it of the prerequisites for having Quality named as an additional insured.

Rickhoff attached to its complaint its Meridian general liability insurance policy and the September 30, 1999, certificate of insurance. The insurance policy provided, inter alia, that an "insured" under the policy included "any person or organization whom you [Rickhoff] are required to name as an additional insured on this policy under a written contract or agreement." Coverage for an additional insured was limited to the work performed for the additional insured by the insured or for the insured. Relevant amendments to the policy similarly required a "written contract" between the insured and the additional insured.

In response, Meridian filed a motion to dismiss Rickhoff's third-party complaint pursuant to both sections 2-615 and 2-619 of the Code. Pursuant to section 2-615, Meridian contended that Rickhoff failed to state a claim for breach of contract where Rickhoff failed to fulfill the writing requirement of the policy to name an additional insured and failed to point to anything else that would give rise to a contractual duty. Pursuant to section 2-619, Meridian contended that Rickhoff's third-party complaint against it was barred by the prior declaratory judgment because the issue of whether Meridian had a duty to defend Quality had already been adjudicated in that action. Further, in the declaratory judgment action, Quality's legal position, that it was entitled to coverage, was the same as the position that Rickhoff would have taken. Meridian attached its summary judgment motion from the declaratory judgment action, along with Quality's response, Meridian's reply, and the court order granting the motion.

Horton also filed a motion to dismiss Rickhoff's third-party complaint pursuant to section 2-619 of the Code. Therein, Horton contended that Rickhoff was aware of the Meridian policy's writing requirement for naming additional insureds. Horton also argued that the September 30, 1999, certificate of insurance was specific to another job and could not be used to assert coverage for the Quality job in question. Finally, Horton argued that the two-year statute of limitations for claims against an insurance agent (735 ILCS 5/13-214.4 (West 2006)) had run....

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