No. 1-06-3339
STATE FARM FIRE AND CASUALTY ) Appeal from the COMPANY, ) Circuit Court of ) Cook County. Plaintiff-Appellee, ) ) v. ) ) UTICA NATIONAL INSURANCE GROUP, ) ) No. 04 CH 6466 Defendant-Appellant ) ) ) (State Farm Mutual Automobile Insurance ) Company, ) Honorable . ) David R. Donnersberger, Plaintiff). ) Judge Presiding.
JUSTICE ROBERT E. GORDON delivered the opinion of the court:
Plaintiff State Farm Fire and Casualty Company (State Farm) filed the case at bar seeking
a declaratory judgment that it owed no coverage in connection with two personal injury lawsuits.
The circuit court of Cook County already found that State Farm owed coverage for the
underlying lawsuits, and this court affirmed that finding in an order dated May 7, 2007 (No. 1-
06-0711, unpublished order under Supreme Court Rule 23).
Defendant Utica National Insurance Group (Utica) filed a counterclaim against State
Farm seeking a declaratory judgment that its umbrella policy was in excess of State Farm’s
umbrella policy. State Farm filed a motion for summary judgment pursuant to section 2-1005 of
the Code of Civil Procedure (735 ILCS 5/2-1005 (West 2004)) claiming that Utica was required
to contribute to the settlement of the underlying lawsuits. In an order dated October 27, 2006, the No. 1-06-3339
trial court granted State Farm’s summary judgment motion. For the reasons stated below, we
affirm.
BACKGROUND
In July 2002, an Audi automobile collided with a minivan, killing both the driver and
passenger of the Audi. Title to the Audi was in the name of Francis Liedtke; and State Farm
Mutual Automobile Insurance Company carried the auto insurance. In addition to the auto
insurance policy, there were two umbrella policies: State Farm Fire and Casualty Company had
issued a personal umbrella insurance policy to Liedtke; and Utica had issued a commercial
umbrella policy to Digital Imaging Solutions, Inc., a company owned and operated by Liedtke.
State Farm sought a declaratory judgment that it was not obligated to pay on the umbrella
policy because Liedtke was not actually the owner of the vehicle at the time of the accident.
After a trial on the issue of ownership, the trial court found that Liedtke was the owner and thus
State Farm owed coverage for the underlying lawsuits under its umbrella policy. State Farm
appealed that finding, and this court affirmed (No. 1-06-0711, unpublished order under Supreme
Court Rule 23).
Utica and State Farm cooperated in the settlement of the underlying lawsuits. In the
agreement, the insurance companies agreed to pay $6 million as follows: $1 million by State
Farm Mutual on the automobile insurance policy; $3 million by State Farm on the personal
umbrella policy; and $2 million by Utica on its commercial umbrella policy.
Paragraph 5 of the settlement agreement expressly reserved Utica’s right to pursue its
claim that its policy was in excess over the State Farm umbrella policy. Paragraph 6(a) provided
2 No. 1-06-3339
that in the event that a court determines that its policy was in excess over the State Farm policy
then State Farm shall reimburse Utica in the amount of $2 million. Alternatively, Paragraph 6(b)
provided that in the event that a court determines that the Utica policy was not excess to the State
Farm policy, then Utica shall reimburse State Farm in the amount of $500,000.
After the settlement, this action continued for the purpose of determining the respective
liability of State Farm and Utica under the settlement agreement. Each insurance company has in
its respective umbrella policy an “other-insurance” clause that provides that the policy is in
“excess” over all other insurance policies.
State Farm’s other-insurance clause provides in full that:
“Other Insurance. This policy is excess over all other valid and
collectible insurance.”
Utica’s other-insurance clause provides in pertinent part:
“5. Other Insurance – Coverage A.
This insurance is excess over any other valid and collectible
insurance whether primary, excess, contingent or any other basis,
except such other insurance as is written specifically to be excess
over this insurance.”
State Farm moved for summary judgment claiming that Utica was required to contribute
to the settlement, because their two other-insurance clauses were incompatible, and thus
cancelled each other out. Utica filed a cross motion for summary judgment claiming that the two
3 No. 1-06-3339
clauses were not incompatible and that Utica’s clause made its policy in excess to State Farm’s
policy.
In an order dated October 27, 2006, the trial court granted State Farm’s summary
judgment motion and denied Utica’s motion, and this appeal followed. For the reasons stated
below, we affirm.
ANALYSIS
The standard of review in the case at bar is de novo. “Since the construction of an
insurance policy is a question of law, our review is de novo.” Ohio Casualty Insurance Company
v. Oak Builders, Inc., No. 1-05-2279, slip op. at 5 (June 1, 2007). In addition, we review de novo
an order granting summary judgment. North River Insurance Co. v. Grinnell Mutual
Reinsurance Co., 369 Ill. App. 3d 563, 568 (2006).
There are generally three types of other-insurance clauses: the pro-rata clause; the excess
clause; and the escape clause. Ohio Casualty, slip op. at 6. The Illinois Supreme Court defined
the three types of clauses as follows:
“The typical pro-rata clause provides that when an insured has
other insurance available, the company will be liable only for the
proportion of the loss represented by the ratio between its policy
limit and the total limits of all available insurance. The excess
clause allows coverage only ‘over and above’ other insurance. The
escape clause holds the policy null and void with respect to any
hazard as to which other insurance exists.” Putnam v. New
4 No. 1-06-3339
Amsterdam Casualty Co., 48 Ill. 2d 71, 76 (1970), quoted in Ohio
Casualty, slip op. at 6.
Both parties concede that the other-insurance clauses in their respective policies are both excess
clauses.
The Illinois Supreme Court has stated that “when two policies contain the same sort of
‘other-insurance’ clause, the clauses will be deemed incompatible.” Padilla v. Norwegian-
American Hospital, Inc., 266 Ill. App. 3d 829, 836 (1994), quoted in Ohio Casualty, slip op. at 7.
When two clauses are "he same sort" and hence incompatible, they "cancel each other out"and
the insurance companies must “share the costs associated with defending and indemnifying the
suit.” Ohio Casualty, slip op. at 8-9.
Although Utica concedes in its appellate brief that the two clauses are both excess clauses
and thus both the same type, it claims that the two clauses are still not of the “same sort” because
the two clauses do not contain identical language. Utica notes that its clause is more specific
than State Farm’s clause. State Farm’s clause states only that its policy is excess “over all other
valid and collectible insurance.” By contrast, Utica’s clause states that its policy is excess over
all other insurance “whether primary, excess, contingent or any other basis, except such other
insurance as is written specifically to be excess over this insurance.”
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No. 1-06-3339
STATE FARM FIRE AND CASUALTY ) Appeal from the COMPANY, ) Circuit Court of ) Cook County. Plaintiff-Appellee, ) ) v. ) ) UTICA NATIONAL INSURANCE GROUP, ) ) No. 04 CH 6466 Defendant-Appellant ) ) ) (State Farm Mutual Automobile Insurance ) Company, ) Honorable . ) David R. Donnersberger, Plaintiff). ) Judge Presiding.
JUSTICE ROBERT E. GORDON delivered the opinion of the court:
Plaintiff State Farm Fire and Casualty Company (State Farm) filed the case at bar seeking
a declaratory judgment that it owed no coverage in connection with two personal injury lawsuits.
The circuit court of Cook County already found that State Farm owed coverage for the
underlying lawsuits, and this court affirmed that finding in an order dated May 7, 2007 (No. 1-
06-0711, unpublished order under Supreme Court Rule 23).
Defendant Utica National Insurance Group (Utica) filed a counterclaim against State
Farm seeking a declaratory judgment that its umbrella policy was in excess of State Farm’s
umbrella policy. State Farm filed a motion for summary judgment pursuant to section 2-1005 of
the Code of Civil Procedure (735 ILCS 5/2-1005 (West 2004)) claiming that Utica was required
to contribute to the settlement of the underlying lawsuits. In an order dated October 27, 2006, the No. 1-06-3339
trial court granted State Farm’s summary judgment motion. For the reasons stated below, we
affirm.
BACKGROUND
In July 2002, an Audi automobile collided with a minivan, killing both the driver and
passenger of the Audi. Title to the Audi was in the name of Francis Liedtke; and State Farm
Mutual Automobile Insurance Company carried the auto insurance. In addition to the auto
insurance policy, there were two umbrella policies: State Farm Fire and Casualty Company had
issued a personal umbrella insurance policy to Liedtke; and Utica had issued a commercial
umbrella policy to Digital Imaging Solutions, Inc., a company owned and operated by Liedtke.
State Farm sought a declaratory judgment that it was not obligated to pay on the umbrella
policy because Liedtke was not actually the owner of the vehicle at the time of the accident.
After a trial on the issue of ownership, the trial court found that Liedtke was the owner and thus
State Farm owed coverage for the underlying lawsuits under its umbrella policy. State Farm
appealed that finding, and this court affirmed (No. 1-06-0711, unpublished order under Supreme
Court Rule 23).
Utica and State Farm cooperated in the settlement of the underlying lawsuits. In the
agreement, the insurance companies agreed to pay $6 million as follows: $1 million by State
Farm Mutual on the automobile insurance policy; $3 million by State Farm on the personal
umbrella policy; and $2 million by Utica on its commercial umbrella policy.
Paragraph 5 of the settlement agreement expressly reserved Utica’s right to pursue its
claim that its policy was in excess over the State Farm umbrella policy. Paragraph 6(a) provided
2 No. 1-06-3339
that in the event that a court determines that its policy was in excess over the State Farm policy
then State Farm shall reimburse Utica in the amount of $2 million. Alternatively, Paragraph 6(b)
provided that in the event that a court determines that the Utica policy was not excess to the State
Farm policy, then Utica shall reimburse State Farm in the amount of $500,000.
After the settlement, this action continued for the purpose of determining the respective
liability of State Farm and Utica under the settlement agreement. Each insurance company has in
its respective umbrella policy an “other-insurance” clause that provides that the policy is in
“excess” over all other insurance policies.
State Farm’s other-insurance clause provides in full that:
“Other Insurance. This policy is excess over all other valid and
collectible insurance.”
Utica’s other-insurance clause provides in pertinent part:
“5. Other Insurance – Coverage A.
This insurance is excess over any other valid and collectible
insurance whether primary, excess, contingent or any other basis,
except such other insurance as is written specifically to be excess
over this insurance.”
State Farm moved for summary judgment claiming that Utica was required to contribute
to the settlement, because their two other-insurance clauses were incompatible, and thus
cancelled each other out. Utica filed a cross motion for summary judgment claiming that the two
3 No. 1-06-3339
clauses were not incompatible and that Utica’s clause made its policy in excess to State Farm’s
policy.
In an order dated October 27, 2006, the trial court granted State Farm’s summary
judgment motion and denied Utica’s motion, and this appeal followed. For the reasons stated
below, we affirm.
ANALYSIS
The standard of review in the case at bar is de novo. “Since the construction of an
insurance policy is a question of law, our review is de novo.” Ohio Casualty Insurance Company
v. Oak Builders, Inc., No. 1-05-2279, slip op. at 5 (June 1, 2007). In addition, we review de novo
an order granting summary judgment. North River Insurance Co. v. Grinnell Mutual
Reinsurance Co., 369 Ill. App. 3d 563, 568 (2006).
There are generally three types of other-insurance clauses: the pro-rata clause; the excess
clause; and the escape clause. Ohio Casualty, slip op. at 6. The Illinois Supreme Court defined
the three types of clauses as follows:
“The typical pro-rata clause provides that when an insured has
other insurance available, the company will be liable only for the
proportion of the loss represented by the ratio between its policy
limit and the total limits of all available insurance. The excess
clause allows coverage only ‘over and above’ other insurance. The
escape clause holds the policy null and void with respect to any
hazard as to which other insurance exists.” Putnam v. New
4 No. 1-06-3339
Amsterdam Casualty Co., 48 Ill. 2d 71, 76 (1970), quoted in Ohio
Casualty, slip op. at 6.
Both parties concede that the other-insurance clauses in their respective policies are both excess
clauses.
The Illinois Supreme Court has stated that “when two policies contain the same sort of
‘other-insurance’ clause, the clauses will be deemed incompatible.” Padilla v. Norwegian-
American Hospital, Inc., 266 Ill. App. 3d 829, 836 (1994), quoted in Ohio Casualty, slip op. at 7.
When two clauses are "he same sort" and hence incompatible, they "cancel each other out"and
the insurance companies must “share the costs associated with defending and indemnifying the
suit.” Ohio Casualty, slip op. at 8-9.
Although Utica concedes in its appellate brief that the two clauses are both excess clauses
and thus both the same type, it claims that the two clauses are still not of the “same sort” because
the two clauses do not contain identical language. Utica notes that its clause is more specific
than State Farm’s clause. State Farm’s clause states only that its policy is excess “over all other
valid and collectible insurance.” By contrast, Utica’s clause states that its policy is excess over
all other insurance “whether primary, excess, contingent or any other basis, except such other
insurance as is written specifically to be excess over this insurance.”
In Ohio Casualty, we were recently presented with almost the exact same argument and
rejected it. Ohio Casualty, slip op. at 9-10. Like the clause in State Farm’s policy, the clause in
the American Family policy in Ohio Casualty was short. It stated only that it was excess over
5 No. 1-06-3339
“ ‘[a]ny other primary insurance.’ ” Ohio Casualty, slip op. at 7. By contrast the clause in the
Ohio Casualty policy was longer, more specific and with language very similar to the clause in
Utica’s policy. The Ohio Casualty clause stated that the policy was excess over all other
insurance “ ‘whether primary, excess, contingent or on any other basis unless a contract
specifically requires that this insurance be primary.’ ” Ohio Casualty, slip op. at 8. Like Utica in
our case, Ohio Casualty asserted that it should not have to share the indemnification costs
because the two excess clauses were “not identical.” Ohio Casualty, slip op. at 10.
In Ohio Casualty, we rejected the “not identical” argument. Ohio Casualty, slip op. at 10.
Although Ohio Casualty was decided approximately a month after Utica submitted its brief in
this appeal, the Ohio Casualty opinion was merely an application of long-standing precedent,
such as Putnam, decided over 40 years ago, and Padilla, decided over 10 years ago. Putnam, 48
Ill. 2d at 76; Padilla, 266 Ill. App. 3d at 836. In Ohio Casualty, we stated:
“[T]he Putnam court described the three different types of ‘other
insurance’ clauses and concluded that where ‘other insurance’
clauses of the same type are in conflict, it is ‘impossible to give
effect to the intent of all parties.’ [Citation.] Indeed, in Padilla,
relying on our decision in Putnam, we confirmed that ‘when two
policies contain the same sort of ‘other insurance’ clause, the
clauses will be deemed incompatible.’ [Citation.]” (Emphasis
omitted.) Ohio Casualty, slip op. at 10.
6 No. 1-06-3339
Based on our above analysis of Putnam and Padilla, we held in Ohio Casualty that since the
policies at issue contained the “same type” of insurance clause, namely an excess clause, the
clauses were incompatible and canceled each other out and thus the two insurance companies had
to share in the loss on a pro-rated basis. Ohio Casualty, slip op. at 11. Like we did a few months
later in Ohio Casualty, the trial court in the case at bar relied on Putnam and Padilla in its opinion
to reach the same conclusion.
CONCLUSION
For the reasons stated above, we affirm the decision of the trial court that the two other-
insurance clauses canceled each other out and thus Utica was required to contribute to the
settlement.
Affirmed.
McBRIDE, P.J. and GARCIA, J., concur.