CENTURY INDEMNITY COMPANY, Plaintiff-Appellant, v. AMERICAN HOME ASSURANCE COMPANY et al., Defendants-Appellees.
No. 1-16-3311
APPELLATE COURT OF ILLINOIS FIRST DISTRICT
November 29, 2017
2017 IL App (1st) 163311-U
PRESIDING JUSTICE COBBS delivered the judgment of the court. Justices Fitzgerald Smith and Howse concurred in the judgment.
Third Division. NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).
¶ 1 Held: Trial court did not err in dismissing counterclaim for declaratory judgment because the well-pled facts did not state a cause of action.
¶ 2 Century Indemnity Company (Century) filed a counterclaim for a declaratory judgment (
I. BACKGROUND
¶ 4 On a motion to dismiss for failure to state a cause of action, a court must take as true all well-pled facts. Urbaitis v. Commonwealth Edison, 143 Ill. 2d 458, 464 (1991). Century brought the instant declaratory judgment action in a counterclaim. Before reciting the specific facts alleged in Century’s counterclaim, we deem it helpful to first briefly summarize the factual background as alleged in the initial pleadings. See, e.g., HPI Health Care Services, Inc. v. Mt. Vernon Hospital, Inc., 131 Ill. 2d 145, 151 (1989).
¶ 5 In November 2013, the original plaintiff in this lawsuit, American Home Assurance Company (American Home), filed a complaint for a declaratory judgment. American Home alleged as follows. Avocet, formerly known as Ventfabrics, Inc., manufactured products containing asbestos, which it distributed, marketed, and sold throughout the United States. Personal injury suits were brought against Avocet nationwide arising out of exposure to those products. Avocet demanded coverage under various primary, umbrella, and/or excess liability insurance policies issued by American Home and several additional insurance companies. In its complaint, American Home sought a declaration of its rights and obligations under its insurance policies with respect to Avocet’s asbestos claims. American Home named as defendants Avocet, and several known and unknown insurance companies that issued liability insurance policies to Avocet. Included among those defendant insurers was Century, as successor to CCI Insurance Company, as successor to Insurance Company of North America.
¶ 7 In April 2015, Century filed its second amended counterclaim, the dismissal of which is before us for review. We take as true the well-pled allegations of fact contained in the instant counterclaim and exhibits attached thereto. Bearinger v. Page, 204 Ill. 2d 363, 365 (2003); Soules v. General Motors Corp., 79 Ill. 2d 282, 284 (1980). Century alleged that it issued four primary insurance policies to Avocet as the named insured or an additional insured, with policy periods running collectively from March 1985 to March 1993. None of those policies covered the personal injury asbestos lawsuits against Avocet. However, when Avocet’s primary insurers announced the exhaustion of their limits, Avocet’s excess insurers “encouraged” Century to pay, “insisted” that Century pay, or “acquiesced in” Century paying Avocet’s asbestos claim settlements. Century mistakenly paid $730,953.42 in claim settlements, under a full reservation of its rights. Century sought a declaration determining which of Avocet’s insurers is obligated to reimburse Century for the settlement money that it paid.
¶ 9 After Century filed the instant complaint, several of the primary insurers and Century stipulated that the aggregate limits of the primary insurers’ respective policies had been exhausted. Based on this stipulation, the trial court dismissed without prejudice all claims against several primary insurers.1 Accordingly, the sole remaining defendant primary insurer was Continental Casualty Company. Century also named as defendants the following excess insurers of Avocet: American Home; Clearwater Insurance Company, as successor by merger to Mt. McKinley Insurance Company and for itself as successor in interest to Gibralter Insurance Company; National Surety Corporation; and TIG Insurance Company with respect to its excess insurance policies.
¶ 10 American Home filed a section 2-615 motion to dismiss Century’s counterclaim, which the other excess insurers joined. On September 29, 2016, at the close of a hearing on the motion, the trial court dismissed counts II and III of the instant counterclaim. On November 29, 2016, the trial court dismissed Century’s claim specifically against Continental Casualty, which was pled in count IV. On December 7, 2016, the trial court entered a final, default judgment in favor of Century and against Avocet on count I of Century’s counterclaim.2 The
II. ANALYSIS
¶ 12 Century assigns error to the trial court’s dismissal of counts II and III of its second amended counterclaim. A motion to dismiss pursuant to section 2-615 of the Code of Civil Procedure (
¶ 13 At the outset, we observe that our analysis implicates the voluntary payment doctrine. Money voluntarily paid under a claim of right to the payment, with full knowledge of the underlying facts by the person making the payment, cannot be recovered solely on the ground that the claim was illegal. King v. First Financial Services Corp., 215 Ill. 2d 1, 27-28 (2005); Illinois Glass Co. v. Chicago Telephone Co., 234 Ill. 535, 541 (1908). Such voluntary payments cannot be recovered absent fraud, coercion, or mistake of fact. Commercial National Bank of Peoria v. Bruno, 75 Ill. 2d 343, 350-51 (1979); Smith v. Prime Cable of Chicago, 276 Ill. App. 3d 843, 847-48 (1995). The payor must show not only that
A. Contractual Subrogation (Count III)
¶ 15 Century contends that the instant counterclaim sufficiently states a cause of action for contractual subrogation. In count III, Century sought contractual subrogation based on a policy provision titled “Transfer of Rights of Recovery Against Others To Us.” That clause provided in relevant part: “If the insured has rights to recover all or part of any payment we have made under this Coverage Part, those rights are transferred to us (emphasis added).” Century alleged that it was entitled to recover from the primary or the excess insurers “where it subsequently learn[ed] that the claim was not within the coverage.” Additionally, we observe Century’s argument that the voluntary payment doctrine does not apply to contractual subrogation.
¶ 16 Pursuant to the doctrine of subrogation, one who has involuntarily paid a debt or claim of another succeeds to the rights of the other with respect to the debt or claim so paid. A.J. Maggio Co. v. Willis, 316 Ill. App. 3d 1043, 1049 (2000); Bernot v. Pirmus Corp., 278 Ill. App. 3d 751, 753 (1996); Bost v. Paulson’s Enterprises, Inc., 36 Ill. App. 3d 135, 139 (1976). The doctrine of subrogation is sufficiently broad to include every instance in which
¶ 17 These principles make clear that recovery by way of subrogation is available only where the plaintiff is under a legal obligation to pay the debt of another. A.J. Maggio Co., 316 Ill. App. 3d at 1049; Bernot, 278 Ill. App. 3d at 753. “Clearly, an insurance carrier may not exercise its right to subrogation until it has paid the insured’s damages under the policy giving rise to the subrogation rights.” (Emphasis added.) Benge, 297 Ill. App. 3d at 1072. “Accordingly, an insurer which pays a loss for which it was not reasonably liable thereby becomes a mere volunteer, and is not entitled to subrogation.” 16 Couch on Insurance §223:25, at 223-43 (3d ed. 2000); see Mayfair Construction Co., Inc. v. Security Insurance Co. of Hartford, 51 Ill. App. 3d 588, 596 (1977) (“A volunteer *** cannot be viewed as a subrogee“).
¶ 18 This court has noted that “the courts are sympathetic to excess insurers in determining whether payments made were under sufficient obligation to allow the insurer to seek subrogation, as excess insurers are often potentially liable on a claim, while unable to determine their actual liability until later in a dispute.” Progressive Insurance Co. v. Universal Casualty Co., 347 Ill. App. 3d 10, 25 (2004). However, in the case at bar, we are
19 B. Unjust Enrichment (Count II)
B. Unjust Enrichment (Count II)
¶ 20 Century next contends that the instant counterclaim sufficiently states a cause of action for unjust enrichment. In count II, Century alleged: “Despite having the legal obligation to fund settlements, the Excess Insurers acquiesced in Century’s funding settlements under a full reservation of rights ***.” Century alleged that Avocet’s excess insurers were unjustly enriched as the result of Century’s mistaken payment of Avocet’s asbestos claim settlements.
¶ 21 The doctrine of unjust enrichment, standing alone, does not justify an action for recovery. Rather, unjust enrichment is a condition that may be caused by unlawful or improper conduct as defined by law, such as fraud, duress, or undue influence. Thus, when an underlying claim of unlawful or improper conduct is deficient, then a claim for unjust enrichment should also be dismissed. Martis v. Grinnell Mutual Reinsurance Co., 388 Ill. App. 3d 1017, 1024-25 (2009); Mulligan v. QVC, Inc., 382 Ill. App. 3d 620, 631 (2008). For a cause of action for
¶ 22 In count II, Century alleged only that it mistook the scope of its coverage, which was the gist of its contractual subrogation claim in count III. Century did not allege any independent improper or unlawful conduct directed at it by the excess insurers. Since we held that count III was deficient, then Century’s claim for unjust enrichment was merely derivative and properly dismissed.
¶ 23 In any event, even if Century could bring an unjust enrichment claim on an independent basis, Century’s payment of Avocet’s asbestos settlement claims remains voluntary for two reasons. In count II, although Century expressly alleged: “Century’s payment of the settlements was not a voluntary payment.” It additionally alleged that “Instead, the payments were made due to a mistake in fact” regarding the scope of its coverage. However, the erroneous construction of a contract is a mistake of law, and money paid thereunder is not recoverable. Groves v. Farmers State Bank of Woodlawn, 368 Ill. 35, 47 (1938); Jursich v. Arlington Heights Federal Savings & Loan Ass’n, 110 Ill. App. 3d 847, 853 (1982).
¶ 24 Additionally, in count II, Century alleged that the excess insurers “acquiesced in” Century’s allegedly mistaken payments, and elsewhere in the instant pleading, Century alleged that the excess insurers “encouraged” or “insisted” that Century pay. These facts do not come close to demonstrating that Century was compelled to pay Avocet’s settlement claims. See King, 215 Ill. 2d at 33; Smith, 276 Ill. App. 3d at 848-49 (and authorities cited therein). Further, Century’s “reservation of rights” did not preclude application of the voluntary payment doctrine. See Smith, 276 Ill. App. 3d at 848 (quoting 66 Am. Jur. 2d
¶ 25 Century pled itself out of court. We uphold the trial court’s dismissal of counts II and III of Century’s second amended counterclaim.
26 III. CONCLUSION
III. CONCLUSION
¶ 27 For the foregoing reasons, the judgment of the circuit court of Cook County is affirmed.
¶ 28 Affirmed.