Ill. Ins. Guaranty Fund v. Nwidor

2018 IL App (1st) 171378

105 N.E.3d 1035

The ILLINOIS INSURANCE GUARANTY FUND, Plaintiff–Appellee,

v.Israel P. NWIDOR, Individually; Phillip Carrington, as Guardian of the Estate of James Carrington, a Disabled Person; and Chicago Carriage Cab Corporation, d/b/a Chicago Taxi Association, Inc., an Illinois Corporation, Defendants

(Chicago Carriage Cab Corporation, Defendant–Appellant).

No. 1–17–1378

Appellate Court of Illinois, First District, Third Division.

May 23, 2018

Jeffrey J. Scolaro and Lisa M. Roccanova, of Daley Mohan Groble, P.C., of Chicago, for appellant.

Bryan G. Schumann, of Lewis Brisbois Bisgaard & Smith LLP, of Chicago, for appellee.

PRESIDING JUSTICE COBBS delivered the judgment of the court, with opinion.

¶ 1 Plaintiff, the Illinois Insurance Guaranty Fund (IIGF), brought a declaratory judgment action in the circuit court of Cook County against defendants, which included the Chicago Carriage Cab Corporation, d/b/a Chicago Taxi Association, Inc. (Chicago Cab). IIGF sought a determination of Chicago Cab's insurance coverage in an underlying lawsuit. Finding that Chicago Cab was not covered, the trial court granted summary judgment in favor of IIGF. On appeal, Chicago Cab contends (1) waiver or estoppel barred IIGF from asserting lack of coverage, (2) the trial court erred in granting summary judgment in favor of IIGF, and (3) the trial court abused its discretion in denying Chicago Cab's motion to reconsider. We affirm.

¶ 2 I. BACKGROUND

¶ 3 A. Underlying Carrington Action

¶ 4 On October 5, 2011, Israel P. Nwidor, a Chicago Cab employee, was driving a 2007 Ford Crown Victoria taxi, owned by Chicago Cab. The taxi collided with a motorcycle being operated by James Carrington. In April 2012, Phillip Carrington, as guardian of the estate of James, brought a personal injury action against Chicago Cab and Nwidor. Chicago Cab owned a commercial automobile liability insurance policy, No. 11UCC2060, issued by the Ullico Casualty Company (Ullico). Chicago Cab tendered its defense to Ullico, which retained defense counsel. An appearance on behalf of Chicago Cab was filed in August 2012. In January 2013, Carrington filed the instant amended complaint against Nwidor, Chicago Cab, and related corporate entities. Carrington alleged that Nwidor and Chicago Cab negligently owned, operated, and maintained the subject taxi, which proximately resulted in James's severe and permanent injuries.

¶ 5 On May 30, 2013, Ullico went into liquidation. In a letter dated June 7, 2013, IIGF notified Chicago Cab of the liquidation. The letter informed Chicago Cab that IIGF would assume responsibility for Ullico's obligations to its Illinois policyholders and claimants, subject to the limitations and conditions of the Illinois Insurance Guaranty Fund, codified as article XXXIV of the Illinois Insurance Code ( 215 ILCS 5/532 et seq. (West 2014) ). The letter advised Chicago Cab that it had to satisfy certain prerequisites before IIGF could "proceed to investigate, adjust, compromise, settle and pay covered claims as provided for, and in accordance with our governing statutory requirements" (emphasis added). The letter also included the following:

"IIGF specifically asserts and maintains a reservation of rights related to any payments it may make in respect to your company. IIGF also asserts and maintains an absolute reservation of rights in respect to any policy related issues which may be discovered or disclosed. IIGF reserves the right to seek reimbursement from you for any and all payments * * * that IIGF may make in respect of your company if, because of * * * any pertinent statutory or policy limitation or condition, it is discovered or decided that the relevant claims were not ‘covered claims.’ "

In a June 24, 2013, letter, IIGF requested information from Chicago Cab and repeated the above-quoted language.

¶ 6 In a third letter, dated September 26, 2013, IIGF informed Chicago Cab that the Ullico liquidator had provided IIGF with "initial computerized data references, and in some but not all instances, file materials as well," but that it was still "missing critical information necessary for us to process claims." The letter also noted as follows:

"In addition to any prior reservation of rights issued by Ullico Insurance Company, IIGF is conducting the handling of the above referenced matter under a full and complete reservation of rights under the terms and conditions of the Ullico insurance policy. * * * Nothing in this letter should be viewed as a waiver of any rights or defenses IIGF may have under the Illinois Insurance Code, under the pertinent insurance policies or otherwise which rights and defenses are hereby reserved."

¶ 7 In a fourth letter, dated May 6, 2014, IIGF informed Chicago Cab that IIGF had obtained the Ullico policy, which included "endorsement number 11," in effect at the time of the accident. Generally, the policy provided coverage only for covered automobiles, and endorsement No. 11 deleted coverage for the subject taxi, vehicle identification number (VIN) 2FAFP71W67X124521. The letter explained: "since it appears that the policy affords no coverage for the deleted auto due to endorsement number 11 and the general policy provisions," IIGF "fully reserves all rights under the policy and Illinois law * * * to deny any obligation to pay for any defense or indemnity" on behalf of Chicago Cab or Nwidor. The letter further explained that the IIGF provisions of the Insurance Code obligate IIGF to pay only a "covered claim," which refers to a loss within the coverage of a liability insurance policy, and any loss outside of such coverage is not a covered claim. For these reasons, and for any additional reasons as the investigation continued, IIGF would continue to pay for the defense of Chicago Cab and Nwidor but under a reservation of rights, including the right to file a declaratory judgment action. The underlying Carrington action was and remains stayed.

¶ 8 B. Instant Declaratory Judgment Action

¶ 9 On May 23, 2014, IIGF filed the instant complaint for declaratory relief, with the Ullico policy attached. The Ullico policy shows coverage for the subject taxi bearing City of Chicago Taxicab Medallion No. 2975. Endorsement No. 11 shows that on September 22, 2011, that vehicle was removed from coverage and replaced with a different vehicle (VIN 1FMCU4K3XCKA59559) bearing the same medallion. Endorsement No. 11 had an effective date of September 30, 2011. IIGF alleged that the subject taxi was deleted from coverage under the Ullico policy prior to the October 5, 2011, accident. IIGF further alleged that since the Ullico policy provides no liability coverage for the subject taxi, there consequently could be no "covered claim" as defined by the IIGF provisions in the Insurance Code. 215 ILCS 5/534.3(a) (West 2014). Accordingly, IIGF sought a declaration that it did not have a duty to defend or indemnify Chicago Cab or Nwidor in the underlying action, and that IIGF was entitled to reimbursement from Chicago Cab for defense costs.

¶ 10 Chicago Cab filed an answer and three affirmative defenses. The answer denied the complaint's salient allegations. In its first affirmative defense, Chicago Cab asserted that the subject taxi was still covered under the Ullico policy on the day of the underlying accident. Chicago Cab alleged as follows. Ullico insured Chicago Cab's fleet of taxis, including the subject taxi affixed with medallion No. 2975. Without mentioning endorsement No. 11, Chicago Cab alleged that, based on City of Chicago regulatory custom and practice, the City of Chicago taxicab medallion license card (Hard Card) was not issued to the replacement vehicle until October 7, 2011, two days after the underlying accident. Therefore, according to Chicago Cab, the subject taxi was still covered at the time of the accident. Consequently, Chicago Cab presented a covered claim.

¶ 11 In its second affirmative defense, Chicago Cab posited that 25 months elapsed from the April 2012 filing of the original complaint in the underlying action to May 6, 2014, when IIGF issued a reservation of rights letter. Chicago Cab alleged that Ullico and IIGF waived a lack of coverage by waiting 25 months before IIGF issued a reservation of rights letter or filed a declaratory judgment action of any kind. In its third affirmative defense, Chicago Cab alleged that it detrimentally relied on the actions of Ullico and IIGF and, consequently, IIGF and Ullico should be estopped from asserting a lack of coverage.

¶ 12 In August 2016, IIGF filed a motion for summary judgment, in which it argued that, as a matter of law, insurance coverage for the subject taxi was removed on September 30, 2011, the effective date of endorsement No. 11 of the Ullico policy. Therefore, according to IIGF, the subject taxi was not covered at the time of the October 5, 2011, underlying accident. IIGF also argued that it did not waive denial of coverage or is estopped from asserting lack of coverage.

¶ 13 In its response, Chicago Cab asserted that "[t]he policy and endorsement language only tells a part of the story, and clearly does not reflect the true rights, duties, and obligations contemplated by the Contracting Parties." Chicago Cab contended that IIGF ignored the regulatory procedures, past negotiations, business practices, and mutual contractual intent of the contracting parties and of the taxi insurance industry in general. Chicago Cab argued that there were "myriad issues of fact as to how and when" insurance coverage was transferred from the subject taxi to the replacement vehicle. According to Chicago Cab, these material issues of fact precluded summary judgment. Chicago Cab also argued that its affirmative defenses of waiver and estoppel raise questions of material fact that preclude summary judgment.

¶ 14 On January 5, 2017, at the close of a hearing, the trial court granted IIGF's motion for summary judgment. Chicago Cab filed a motion to reconsider, which the trial court ...