Zurich Ins. Co. v. Raymark Industries, Inc.

• Decision Date: 06 May 1991
• Docket Number: No. 1-90-1917,1-90-1917
• Citation: 572 N.E.2d 1119,157 Ill.Dec. 655,213 Ill.App.3d 591
• Parties: , 157 Ill.Dec. 655 ZURICH INSURANCE COMPANY, Plaintiff, v. RAYMARK INDUSTRIES, INC., et al., Defendants (Northbrook Excess & Surplus Insurance Company, Intervening Plaintiff-Appellee; International Insurance Company, Third-Party Defendant-Appellant; Aetna Casualty & Surety Company, et al., Third-Party Defendants). First District, First Division
• Court: United States Appellate Court of Illinois

Page 1119

572 N.E.2d 1119

213 Ill.App.3d 591, 157 Ill.Dec. 655

ZURICH INSURANCE COMPANY, Plaintiff, v. RAYMARK INDUSTRIES, INC., et al., Defendants (Northbrook Excess & Surplus Insurance Company, Intervening Plaintiff-Appellee; International Insurance Company Third-Party Defendant-Appellant; Aetna Casualty & Surety Company, et al., Third-Party Defendants).

No. 1-90-1917.

Appellate Court of Illinois,

First District, First Division.

May 6, 1991.

Purcell & Wardrope, Chtd., Chicago (Sandra Young, Robert L. Bartolone, of counsel), for third-party defendant-appellant.

Dowd & Dowd, Ltd., Chicago (Michael E. Dowd, Nancy J. Gleason, Philip J. McGurie, of counsel), for intervening plaintiff-appellee.

Justice BUCKLEY delivered the opinion of the court:

This appeal arises from Allstate Insurance Company's (Allstate) March 22, 1989, motion to recover the sum of $2,605,727.25 it expended to pay a judgment against Raymark Industries, Inc. (Raymark). Allstate sought reimbursement from International Insurance Company (International) and Aetna Casualty & Surety Company (Aetna). An involuntary bankruptcy petition was filed on February 10, 1989, against Raymark. International moved to stay Allstate's reimbursement proceedings until the closure or dismissal of the bankruptcy pending against Raymark. International now appeals from an order of the circuit court of Cook County, granting International's motion to stay with respect to Raymark, but denying it with respect to International.

This case began in 1978 as a declaratory judgment action by Zurich Insurance Company, one of Raymark's primary insurers, against Raymark and its other primary insurers to determine how insurers' policies applied to the numerous asbestos-related bodily injury claims then pending against Raymark. Allstate's predecessor in interest, Northbrook Excess and Surplus Insurance Company (Northbrook), was an excess insurer and therefore, allowed to intervene as a plaintiff. Thereafter, Raymark interpleaded other excess insurers, including International, into the case as third-party defendants. Most insurers admitted to owing Raymark coverage for the claims, but disagreed on the allocation of coverage. Prior to the Illinois Supreme Court's decision determining the manner in which insurance coverage would be provided on the numerous claims (Zurich Insurance Co. v. Raymark Industries (1987), 118 Ill.2d 23, 112 Ill.Dec. 684, 514 N.E.2d 150), the circuit court, beginning in 1984, entered a series of interim funding orders. Generally, these orders allocated defense and indemnity obligations among the insurers. After the Illinois Supreme Court's decision, the interim funding orders reflected the coverage formula which the court's decision mandated.

Allstate's predecessor in interest, Northbrook, issued seven policies to Raymark with applicable limits totaling $123 million covering the period of 1976 through 1982. Northbrook made payments pursuant to the interim funding orders which exhausted these limits. In 1985, however, before these limits were exhausted, Allstate facilitated Raymark's appeal of a $2 million plus judgment against it by obtaining a supersedeas bond which California law requires in order to appeal a lower court's decision and guaranteeing payment if the bond were to become payable. This judgment against Raymark became final in January 1989. The plaintiff demanded payment of the judgment, and the surety on the bond threatened to sue Allstate if it did not honor its guarantee of payment. Consequently, Allstate paid $2,605,727.25 in satisfaction of the judgment including interest accrued. This payment extended beyond Allstate's financial obligations under its policies.

On February 10, 1989, an involuntary bankruptcy petition was filed against Raymark in the United States Bankruptcy Court for the Eastern District of Pennsylvania. Raymark's motion to dismiss the involuntary petition was denied. On March 22, 1989, one day after Allstate paid the $2 million plus judgment, it filed a motion for reimbursement against International, Aetna and Raymark contending that because the payment was in excess of its policy limits, it was entitled to reimbursement pursuant to the interim funding orders from one, two or all three.

On February 27, 1990, International filed a motion to stay Allstate's reimbursement action pending resolution of Raymark's involuntary bankruptcy case. International asserted that the matter fell within the automatic stay provisions of section 362(a)(1) or (a)(3) of the Bankruptcy Code because the motion was brought against a debtor in bankruptcy, namely, Raymark. International appeals from an order of the circuit court of Cook County granting its motion to stay Allstate's reimbursement proceedings as to Raymark but denying the motion as to International. International contends that the circuit court erred in finding that the International policy issued to Raymark was not property of Raymark's bankruptcy estate subject to the automatic stay provision of section 362(a)(1) of the Bankruptcy Code (11 U.S.C. § 362(a)(1) (1987)).

The case law in Illinois clearly establishes that a denial of a motion to stay is appealable as of right under Supreme Court Rule 307(a)(1) (134 Ill.2d R. 307(a)(1)). (Metropolitan Sanitary District v. United States Steel Corp. (1975), 30 Ill.App.3d 360, 361, 332 N.E.2d 426, 427; Kellerman v. MCI Telecommunications Corp. (1985), 134 Ill.App.3d 71, 73, 89 Ill.Dec. 51, 53, 479 N.E.2d 1057, 1059.) The scope of review in an interlocutory appeal is normally limited to determining whether the circuit court abused its discretion in granting or refusing the requested interlocutory relief. (Kellerman, 134 Ill.App.3d at 73, 89 Ill.Dec. at 53, 479 N.E.2d at 1059.) There have been exceptions to this limited scope of review (see People v. Kerr-McGee Chemical Corp. (1986), 142 Ill.App.3d 1104, 1106, 97 Ill.Dec. 344, 346, 492 N.E.2d 1003, 1005), however, this case does not fall within one of those and consequently, the standard of review on appeal is whether the circuit court abused its discretion in determining the interlocutory appeal. International's position that this court should determine whether the circuit court's ruling on a question of law was correct independent of the circuit court's judgment is misguided. The case at bar deals with an interlocutory appeal, unlike those cited by International. See South Suburban Safeway Lines, Inc. v. Regional Transportation Authority (1988), 166 Ill.App.3d 361, 116 Ill.Dec. 790, 519 N.E.2d 1005.

Allstate incorrectly asserts that since International failed to state the standard of review in its brief, International has waived review on the grounds that International failed to raise this as an issue on appeal. Allstate misconstrues the court's holding in Miller v. Police Board of the City of Chicago (1976), 38 Ill.App.3d 894, 904, 349 N.E.2d 544, 552, which held that an appellant waived the right to argue the question of constitutionality as an issue in its motion for rehearing because it failed to raise the issue before the police board, the circuit court or the appellate court. There is not any case in Illinois which has held that a party waived the standard of review by failing to recite the standard in its brief. We find that International did not waive the standard of review.

In determining whether the circuit court abused its discretion, this court should not decide whether it agrees with the circuit court's decision; but rather, should determine whether the circuit court "acted arbitrarily without the employment of conscientious judgment or, in view of all the circumstances, exceeded the bounds of reason and ignored recognized principles of law so that substantial prejudice resulted." (In re Marriage of Aud (1986), 142 Ill.App.3d 320, 326, 96 Ill.Dec. 615, 619, 491 N.E.2d 894, 898.) International contends that the circuit court should be reversed for refusing to grant the automatic stay as to International.

Section 362(a) of Chapter 11 of the Bankruptcy Code provides in pertinent part:

"(a) Except as provided in subsection (b) of the section, a petition filed under p 301, 302 or 303 of this title operates as a stay, applicable to all entities, of (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other proceeding against the...