Philadelphia Indemnity Insurance Co. v. Pace Suburban Bus Service
2016 IL App (1st) 151659
Ill. App. Ct.2017Background
- Pace (a public transit authority division) leased vehicles to Countryside; lease included Pace’s "Risk Financing Program" providing coverage for injuries "arising directly out of" transportation services but expressly excluded claims arising from Countryside employees' willful, wanton, reckless, or intentional conduct.
- Countryside had a commercial auto policy with Philadelphia Indemnity; Philadelphia paid $1.5 million to settle Lisa Gomez’s claim after Gomez sent a presuit demand alleging severe injuries from being left unattended in a Pace van.
- The van driver, Countryside employee Robert Gottardo, left Gomez strapped in a vehicle for ~5 hours on a 90-degree day; he later pleaded guilty to felony reckless conduct based on those facts.
- Pace denied coverage under the lease (citing the reckless-conduct exclusion) and asserted it is self-insured (public funds) so public policy limits claims against it; Philadelphia sued Pace for equitable subrogation, equitable contribution, unjust enrichment, and by assignment from Countryside.
- Pace moved to dismiss under 735 ILCS 5/2-619; the trial court granted dismissal on public-policy/self-insured grounds. On appeal the court affirmed, primarily because the lease’s reckless-conduct exclusion barred coverage for Gomez’s loss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Equitable subrogation — can Philadelphia recover from Pace? | Philadelphia: Pace promised coverage under lease; Philadelphia paid settlement and is entitled to subrogation against Pace. | Pace: Lease excludes reckless conduct; Pace (self-insured public entity) is not a commercial insurer and public policy prevents claims against public funds. | Dismissed — subrogation fails because Gottardo’s reckless conduct is excluded under lease (so Pace not primarily liable). |
| Equitable contribution — may Philadelphia seek pro rata share from Pace? | Philadelphia: alternatively, if both carriers share liability, Pace should contribute. | Pace: Policies do not cover same risks; lease excludes reckless conduct; Pace is self-insured/public funds. | Dismissed — no concurrent coverage or shared risk; exclusion precludes contribution. |
| Unjust enrichment — did Pace retain a benefit requiring restitution? | Philadelphia: paying settlement benefitted Pace; equity requires reimbursement. | Pace: Philadelphia’s payment was not a benefit to Pace; Pace had no duty to pay from public funds. | Dismissed — no duty/obligation by Pace; no unjust retention because claim excluded and public-policy considerations support refusal. |
| Assignment from Countryside — can Philadelphia stand in Countryside’s shoes? | Philadelphia: assignment gives its rights against Pace. | Pace: Countryside had no viable claim (exclusion/public-policy), so assignment conveys nothing. | Dismissed — assignment fails because Countryside had no enforceable claim against Pace. |
Key Cases Cited
- Antiporek v. Village of Hillside, 114 Ill. 2d 246 (1986) (pooled/self-insurance does not equate to commercial insurance; immunity waiver for municipal tort liability does not apply when loss is paid from public coffers)
- Home Insurance Co. v. Cincinnati Insurance Co., 213 Ill. 2d 307 (2004) (distinguishes equitable subrogation from equitable contribution; outlines elements for subrogation)
- Chicago Hospital Risk Pooling Program v. Illinois State Medical Inter-Insurance Exchange, 397 Ill. App. 3d 512 (2010) (elements required to establish equitable subrogation between insurers)
- Dix Mutual Insurance Co. v. LaFramboise, 149 Ill. 2d 314 (1992) (equitable subrogation will be denied where inequitable)
- Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90 (1992) (duty to defend analysis: compare allegations of filed complaint to policy language)
- HPI Health Care Services, Inc. v. Mt. Vernon Hospital, Inc., 131 Ill. 2d 145 (1989) (elements for unjust enrichment claim)