Universal Underwriters v. Judge & James

• Decision Date: 30 March 2007
• Docket Number: No. 1-05-4138.,1-05-4138.
• Citation: 865 N.E.2d 531
• Parties: UNIVERSAL UNDERWRITERS INSURANCE COMPANY, Plaintiff-Appellant, v. JUDGE & JAMES, LTD. and Jay S. Judge, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

865 N.E.2d 531

UNIVERSAL UNDERWRITERS INSURANCE COMPANY, Plaintiff-Appellant, v. JUDGE & JAMES, LTD. and Jay S. Judge, Defendants-Appellees.

No. 1-05-4138.

Appellate Court of Illinois, First District, Third Division.

March 30, 2007.

Bonita L. Stone, James W. Hutchinson, Paula S. Kim, Katten Muchin Rosenman LLP, Chicago, for Plaintiff-Appellant.

Stephen P. Carponelli, Raymond M. Rudnick, Chicago, Jay S. Judge, Judge, James & Kujawa, LLC, Park Ridge, for Defendants-Appellees.

Presiding Justice THEIS delivered the opinion of the court:

Plaintiff Universal Underwriters Insurance Company (Universal) appeals from the trial court's grant of summary judgment to defendants Judge & James, Ltd., and Jay S. Judge (Judge) (collectively, defendants) in this legal malpractice action. Universal argues that the trial court erred in: (1) determining that defendants committed no legal malpractice when they failed to appeal the circuit court's 1995 order because that order was not final and appealable; (2) finding that defendants did not commit malpractice when they failed to appeal either the 1998 order directing Universal to arbitrate or the 2000 judgment confirming the arbitration award; and (3) failing to enter summary judgment in Universal's favor on defendants' statute of limitations and statute of repose defenses. For the following reasons, we reverse and remand for further proceedings.

Universal, a Kansas corporation, issued an insurance policy to Carriage Chevrolet, Inc., a car dealership in St. Louis, Missouri, effective from April 1, 1990 to April 1, 1991. The policy included, inter alia, premises liability, property damage, and automobile insurance. Additionally, Universal issued an umbrella policy with a $1 million limit to Carriage Chevrolet.

On January 29, 1991, Michele Heflin, a Carriage Chevrolet salesperson, was driving a car owned by Carriage Chevrolet with its permission in Alton, Illinois. While Heflin was rendering assistance to a disabled vehicle, another car struck Heflin, injuring her. Heflin filed suit against that driver and received $25,000, the limit of the driver's policy. Heflin then sought recovery under the Universal umbrella policy issued to Carriage Chevrolet, arguing that it provided underinsured motorist coverage. When Universal denied her claim, Heflin filed a declaratory judgment action in 1993 in Madison County, Illinois. Heflin asked the court to determine and adjudicate the rights and liabilities of the parties with respect to the umbrella policy. She sought a declaratory judgment determining that the umbrella coverage applied to the underinsured motorist coverage of Carriage Chevrolet, for which Heflin was a third-party beneficiary, and that Universal was obligated to negotiate that claim with Heflin, pursuant to its policy provisions. Universal hired defendants Jay Judge and his law firm, Judge & James, to defend it in this action.

In May 1995, Universal filed a motion to strike and dismiss Heflin's suit. Heflin then filed a motion for summary judgment, arguing that she was insured under the Universal umbrella policy and that Universal wrongfully refused to arbitrate her claim. She sought a judgment finding that she was insured under this policy. On June 5, 1995, the trial court entered an order finding that Heflin was an insured under the umbrella policy, which provided $1 million in coverage, based on a finding that the contract so provided, that an ambiguity existed therein which was construed in Heflin's favor, and that Heflin had complied with all provisions as required by that policy. The court denied Universal's motion to strike and dismiss. However, Universal's response to Heflin's motion for summary judgment was not due until June 16, 1995. Universal then filed a motion for reconsideration and rehearing, asking the court to reconsider its grant of summary judgment to Heflin in light of Universal's response. Universal also argued that Heflin was not an insured under the umbrella policy, the umbrella policy did not include any underinsured motorist coverage, and that even if Heflin was covered under that policy, the umbrella policy only covered an insured's liability to another party and did not cover any injury to the insured herself.

On July 31, 1995, the Madison County circuit court denied Universal's motion to reconsider, but, on its own motion, vacated its June 5, 1995 order granting Heflin's motion for summary judgment so that it could consider Universal's response. Having considered the response, the trial court ordered that it "still agrees with the reasoning of the plaintiff and grants plaintiff's summary judgment motion against Universal." Defendants, as counsel for Universal, did not take an appeal from this order. On October 31, 1996, Universal filed, in the 1993 declaratory judgment action, an emergency motion for a protective order to quash or continue the evidence deposition of one of Heflin's experts. In a January 7, 1997 order, the trial court found that the July 31, 1995 order was final and appealable as it disposed of all issues before the court and, thus, the court no longer had jurisdiction to rule on Universal's motion.

Heflin filed a second suit against Universal in 1998 to enforce the arbitration clause. Universal responded, inter alia, that Heflin was not covered under the policy and that the policy did not contain an arbitration clause for underinsured motorist coverage. In an order dated October 9, 1998, the trial court found that this was a separate and distinct lawsuit from the declaratory judgment action. It held that the previous case had determined that Heflin was covered under Universal's umbrella policy and that Universal did not appeal that decision. Although Universal sought to relitigate coverage issues, the court held that those issues had already been decided, denied Universal's motion for summary judgment, and granted Heflin's motion to strike Universal's affirmative defenses. The court found that the policy contained an arbitration clause and ordered the parties to arbitrate Heflin's claim. Defendants, as Universal's counsel, did not appeal this order.

On January 13, 2000, Universal and Heflin proceeded to arbitration and the arbitrators awarded her $2,975,000 in damages. On March 2, 2000, Heflin filed an action in the circuit court of Madison County to confirm the arbitration award under section 11 of the Uniform Arbitration Act (710 ILCS 5/11 (West 2000)). Universal then filed a motion to reject the award. On October 26, 2000, the trial court denied Universal's request to reject the arbitration award and confirmed the award. Defendants, as counsel for Universal, did not appeal this judgment.

On January 5, 2001, Heflin issued a citation to discover assets against Universal to enforce the judgment. On March 30, 2001, Heflin filed a motion to order payment of the judgment in the trial court. On April 4, 2001, Universal, through defendants, filed an emergency motion for leave to file a complaint seeking a writ of mandamus or a supervisory order in the Illinois Supreme Court. The motion stated that Heflin had filed three lawsuits against Universal concerning underinsured motorist coverage, none of which contained a final and appealable order. It argued that the July 31, 1995 order was not final and, thus the subsequent two lawsuits must be dismissed because another action remained pending. Alternatively, Universal argued that if that order was final, the other two suits were barred by res judicata. Universal asked the supreme court to vacate the October 26, 2000 order, dismiss the newest lawsuit, reduce the arbitration award to the umbrella policy's $1 million limit, determine whether the proceedings in the latest two lawsuits were void, and stay payment of the judgment. The supreme court denied the writ on May 3, 2001.

On May 7, 2001, the trial court entered an order requiring Universal to pay the judgment of $2,975,000 plus interest to date of $141,577.08. On May 17, 2001, Universal, through new counsel, settled Heflin's claim for $3 million, representing the judgment amount plus a portion of the interest due.

On January 23, 2002, Universal filed this legal malpractice case against defendants. In its amended complaint, Universal contended that defendants owed Universal a duty of care, which included the obligation to take timely appeals and to timely seek other remedies in the event of adverse and erroneous judgments. Defendants breached their duties by neglecting or otherwise failing to timely appeal the July 31, 1995 order and the October 26, 2000 order.¹ Universal also alleged that defendants breached their duties by failing to raise the $1 million umbrella policy limit as a defense or limitation on damages in the arbitration proceeding, failing to file a timely motion to reconsider the arbitration award or file a timely petition to vacate or modify the award, and failing to address the merits of the arbitration award or argue that the arbitrators exceeded their powers by entering an award in excess of the policy limits. Universal alleged that but for these breaches, it would have prevailed in challenging the declaratory judgment finding Heflin to be an insured under the umbrella policy and in the alternative, Universal would have successfully had the $2,975,000 arbitration award vacated as exceeding the policy limits. Universal sought $3 million in damages.

On May 31, 2005, defendants filed their third affirmative defense of the statute of limitations and the statute of repose. In response, Universal argued that these defenses did not apply to this case and that, if they did, defendants should be estopped from raising them.

On July 7, 2005, defendants filed a motion for summary judgment on Universal's legal malpractice complaint, arguing that they committed no malpractice because Universal voluntarily paid a void judgment by settling Heflin's case, foregoing any collateral attack to set aside such void judgment....