Appellate Court of Illinois Provides Guidance Regarding Availability of “Equitable Contribution” Claims Between Insurers
Last month, in Acuity Insurance Co. v. 950 W. Huron Condominium Ass’n, 2019 IL App (1st) 180743, the Appellate Court of Illinois, First District, provided guidance regarding the availability of “equitable contribution” claims between insurers by ruling that insurers that issued consecutive policies have rights of “equitable contribution” against one another. The appellate court rejected the argument that “equitable contribution” is only available between insurers whose policies overlap in time.
“Contribution as it pertains to insurance law is an equitable principle arising among coinsurers which permits one insurer who has paid the entire loss, or greater than its share of the loss, to be reimbursed from other insurers who are also liable for the same loss.” Home Insurance Co. v. Cincinnati Insurance Co., 213 Ill.2d 307, 821 N.E.2d 269, 276, 290 Ill.Dec. 218 (2004). In Home Insurance Co., the Supreme Court of Illinois explained that “[c]ontribution applies to multiple, concurrent insurance situations and is only available where the concurrent policies insure the same entities, the same interests, and the same risks.” [Emphasis added.] Id. See also Philadelphia Indemnity Insurance Co. v. Pace Suburban Bus Service, 2016 IL App (1st) 151659, ¶46, 67 N.E.3d 556, 409 Ill.Dec. 344 (equitable contribution applies to multiple, concurrent insurance situations and is only available when concurrent policies insure same entities, same interests, and same risks).
The word “concurrent” can have several different meanings. The first definition provided by Merriam-Webster’s online dictionary for “concurrent” is “operating or occurring at the same time.” This definition contains a temporal element; two things are “concurrent” if they operate at the same time. The next definitions provided by Merriam-Webster’s online dictionary for “concurrent” are “running parallel,” “convergent,” “acting in conjunction,” and “exercised over the same matter or area by two different authorities.” None of these definitions necessarily requires any temporal element. If the first definition is used, then “concurrent policies” are policies that overlap in time, and only insurers whose policies overlap in time can pursue “equitable contribution” claims against one another. If the later definitions of “concurrent” are used, then there should be no such restriction on “equitable contribution” claims.
In Acuity, supra, 2019 IL App (1st) 180743 at ¶4, a carpentry subcontractor was sued in an underlying construction defect lawsuit. The carpentry subcontractor was insured by Cincinnati from 2000 – 2007 and by Acuity from 2007 – 2013. Id. The alleged property damage allegedly occurred in both Cincinnati’s coverage period and Acuity’s coverage period. Id.
Cincinnati agreed to defend the subcontractor. 2019 IL App (1st) 180743 at ¶5. Acuity filed a declaratory judgment action seeking a ruling that it did not owe a defense for the underlying claim. Cincinnati intervened in the declaratory judgment action seeking “equitable contribution” from Acuity for Acuity’s share of the defense. Id. In the declaratory judgment action, the trial court ruled that Acuity had no duty to defend the subcontractor and no duty to pay equitable contribution to Cincinnati. 2019 IL App (1st) 180743 at ¶16. Cincinnati appealed. 2019 IL App (1st) 180743 at ¶17.
On appeal, the appellate court first ruled that Acuity owed a duty to defend the subcontractor. 2019 IL App (1st) 180743 at ¶¶24 – 44. The appellate court then turned to the issue of “equitable contribution.” Acuity argued that even if it did have a duty to defend the subcontractor, Cincinnati would have no right to contribution because the Cincinnati policies and the Acuity policies applied to different coverage periods. 2019 IL App (1st) 180743 at ¶46. Acuity further argued that “the policies issued by Acuity and Cincinnati are not concurrent,” but rather “are consecutive,” and consecutive policies cannot insure the “same risk” when the coverage period is a defined term in each policy and the two periods do not overlap. 2019 IL App (1st) 180743 at ¶49.
The appellate court held that “[i]nsurance policies in Illinois need not temporally overlap in order to cover the same risk for purposes of equitable contribution.” 2019 IL App (1st) 180743 at ¶51. In other words, the appellate court rejected Acuity’s reading of “concurrent” to require temporal overlap, and instead ruled that the Cincinnati and Acuity policies were “concurrent” even if they were temporally consecutive. The appellate court concluded that Cincinnati was entitled to equitable contribution from Acuity because they both owed a duty to defend the same subcontractor in the same underlying lawsuit. 2019 IL App (1st) 180743 at ¶52. The appellate court reversed the trial court’s ruling and remanded for further proceedings to allow Cincinnati to prove-up the amount of contribution to which it was entitled. 2019 IL App (1st) 180743 at ¶¶52 – 54.
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