Bartkowiak v. Underwriters at Lloyd's London
39 N.E.3d 176
Ill. App. Ct.2015Background
- On Oct. 31, 2009 a truck hit and killed a road-construction flagger; the decedent’s wife sued the driver, the trucking company (DWT), and the broker (Jack Gray). The wrongful-death complaint did not reference insurers.
- The driver had a $1 million primary automobile liability policy through Northland; Jack Gray was an additional insured under that policy.
- Jack Gray also held a “Contingent Automobile Liability” policy from Underwriters at Lloyd’s, London (Lloyd’s) with a $1 million limit and a clause (Condition IV) stating Lloyd’s coverage “shall not apply if there is valid and collectible Automobile Liability insurance of any nature.”
- Northland paid its $1 million limits; plaintiff settled the wrongful-death litigation for $7.8 million, received the Northland limits, and obtained assignment of Jack Gray’s rights under the Lloyd’s policy for the remaining shortfall.
- Plaintiff sued Lloyd’s for declaratory relief, claiming Lloyd’s owed a duty to defend/indemnify for the $4.2 million excess; Lloyd’s moved to dismiss arguing Condition IV is an escape clause (no coverage if any valid collectible primary insurance exists).
- The trial court granted dismissal; the appellate court affirmed, holding Condition IV disclaims coverage where any valid, collectible primary automobile liability insurance exists and does not create excess coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend/indemnify under contingent policy | Lloyd’s must cover losses in excess of primary limits (policy is excess to the extent primary is insufficient) | Condition IV excludes coverage whenever there is any valid and collectible automobile liability insurance | Held for defendant: Condition IV is an escape clause; Lloyd’s had no duty because Northland provided valid collectible coverage |
| Use of extrinsic evidence in duty-to-defend analysis (eight-corners rule) | Court should be limited to underlying complaint and policy; extrinsic insurer facts improperly considered | Court may consider undisputed, objective extrinsic facts so long as they do not decide issues central to the underlying litigation | Held for defendant: court properly considered undisputed facts (existence and payment by Northland) without resolving underlying merits |
| Meaning of “collectible” in Condition IV | “Collectible” should be read to allow partial collectibility only to the extent of available limits (i.e., policy is excess for amounts beyond primary limits) | “Collectible” means a valid, collectible policy (not void or insolvent); existence of any collectible primary insurance defeats contingent coverage | Held for defendant: “collectible” refers to validity/ability to collect at all; presence of valid collectible primary insurance defeats coverage; policy construed as written |
| Estoppel for denying coverage without reservation/declaratory action | Lloyd’s denial without reservation or declaratory action should estop it from later asserting policy defenses | Estoppel does not apply where insurer ultimately had no duty to defend | Held for defendant: estoppel inapplicable because Lloyd’s ultimately had no duty to defend under the policy |
Key Cases Cited
- Pekin Ins. Co. v. Wilson, 237 Ill. 2d 446 (duty to defend is ordinarily assessed by comparing underlying complaint to policy)
- Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384 (duty to indemnify depends on facts actually fitting coverage; duty to defend is broader)
- Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90 (insurer has duty to defend if underlying allegations fall within potential coverage)
- Hobbs v. Hartford Ins. Co. of the Midwest, 214 Ill. 2d 11 (policy interpretation governed by ordinary contract rules; ambiguities resolved for insured)
- Ehlco Liquidating Trust v. Employers Ins. of Wausau, 186 Ill. 2d 127 (estoppel requires insurer to defend under reservation or seek declaratory judgment; estoppel unavailable if insurer had no duty)
- Waste Mgmt., Inc. v. Int’l Surplus Lines Ins. Co., 144 Ill. 2d 178 (principles on insurer defenses and estoppel)
- Home Ins. Co. v. Liberty Mut. Ins. Co., 266 Ill. App. 3d 1049 (similar clause construed as escape clause, not excess coverage)
- Northbrook Prop. & Cas. Ins. Co. v. U.S. Fid. & Guar. Co., 150 Ill. App. 3d 479 ("valid and collectible" directed to legal validity and solvency of insurer)