author: PRESIDING JUSTICE CERDA

text:
      In re ANCILLARY RECEIVERSHIP OF IDEAL MUTUAL INSURANCE COMPANY (Midwest Steel Erection Company, Inc., Petitioner-Appellant, v. The Illinois Insurance Guaranty Fund, Respondent-Appellee).
    First District (3rd Division)
    No. 1-90-1352
    Opinion filed September 4, 1991.

      O’Halloran, Kosoff & Miller, of Northbrook, for appellant.
    Lord, Bissell & Brook, of Chicago, for appellee.

      Justice White concurred with this opinion prior to his retirement.

   PRESIDING JUSTICE CERDA

delivered the opinion of the court;

This appeal is from the trial court’s order denying Midwest Steel Erection Company’s (Midwest’s) summary judgment motion on all three counts of its first amended petition for declaratory relief, and granting Illinois Insurance Guaranty Fund’s (the Guaranty Fund’s) cross-motion for summary judgment on that petition. On appeal, Midwest asserts that the trial court erred in its summary judgment orders since the Guaranty Fund has a duty, pursuant to the Illinois Insurance Guaranty Fund Act (Ill. Rev. Stat. 1985, ch. 73, par. 1065.82 et seq.) (the Act), to defend and indemnify Midwest with respect to three personal injury cases currently pending against Midwest. The Guaranty Fund asserts that the personal injury cases against Midwest did not constitute covered claims under the Act because Midwest failed to give notice of these claims prior to the last date for timely filed proofs of claim as required by the Act.

Midwest, an Illinois corporation, purchased a comprehensive general liability insurance policy from Ideal Mutual Insurance Company (Ideal), a New York domiciled insurance company which held a certificate of authority to write insurance in Illinois. The Ideal policy was for the period of August 1,1984, to August 1,1985.

On February 7, 1985, the New York Supreme Court entered a liquidation order, with a finding of insolvency against Ideal. On that date, the court, as required by New York Insurance Law, section 7432(b) (N.Y. Ins. Law §7432(b) (McKinney 1985)), ordered that proofs of claim in the Ideal liquidation be filed no later than February 7, 1986. Under New York Insurance Law, section 7432(c) (N.Y. Ins. Law §7432(c) (McKinney 1985)), proofs of claim could be filed after February 7, 1986, but they would share in the distribution of the liquidation assets only after all timely claims were paid.

On April 22, 1985, the New York Superintendent of Insurance, as Ideal’s liquidator, sent Midwest a proof of claim form, which contained three boxes that could be checked by a party making a claim in the Ideal liquidation: “(1) Claim is made for policyholder protection up to the limits of the policy; (2) Claim is made for return of unearned premium; and (3) All other claimants give a concise statement below of the facts constituting the claim and the total amount claimed.” The form also stated that the claim could be amended until the final date of adjudication. Midwest checked the boxes for policyholder protection and for return of unearned premium, and mailed it back to the New York Insurance Department by February 7,1986.

Subsequently, Midwest was served with a complaint in a lawsuit by Daniel Henry, who alleged that he sustained personal injuries as a result of Midwest’s negligence and violation of the Structural Work Act (Ill. Rev. Stat. 1987, ch. 48, par. 60 et seq.) (Henry litigation). On January 12, 1987, Midwest sent the complaint to the Guaranty Fund and requested Guaranty Fund protection for any liability arising out of that litigation. On March 23, 1987, the Guaranty Fund informed Midwest that it was not entitled to the Act’s protection for the Henry litigation because it had not filed a timely written claim with the Guaranty Fund regarding the Henry litigation.

Midwest was then served with a complaint in a lawsuit by Donald Olsen, Jr., who alleged that he sustained personal injuries as a result of Midwest’s negligence and violation of the Structural Work Act (Olsen litigation). Because of the Guaranty Fund’s response to the Henry litigation complaint, Midwest sent a letter to the New York Superintendent of Insurance on June 23, 1987, requesting that his office advise the Guaranty Fund that Midwest’s timely filing of a proof of claim was sufficient to cover both the Henry and Olsen litigations. On July 7, 1987, the Guaranty Fund sent Midwest a letter stating that Midwest was not entitled to the Act’s protection with respect to the Henry and Olsen litigations because Midwest had not given timely notice of those claims prior to February 7, 1986.

On April 18, 1988, a third-party complaint was filed by Daniel International, Inc., naming Midwest and others as third-party defendants in a lawsuit by John Shervino (Shervino litigation). Daniel International, Inc., alleged that it was entitled to contribution from Midwest for any judgment entered against it for the personal injuries Shervino allegedly suffered as a result of Daniel International, Inc.’s negligence. Midwest did not directly tender the third-party complaint to the Guaranty Fund, but instead amended its petition in pending legal proceedings to include the complaint.

On August 15, 1988, Midwest requested permission from the New York Insurance Department to amend its proof of claim to specifically include Midwest’s liability, if any, with respect to the Henry, Olsen, and Shervino litigations. On September 6, 1988, the New York Insurance Department sent Midwest a letter stating that Midwest’s proof of claim had been amended as requested, although the face of the amended form does not specifically include the three claims. The Guaranty Fund still did not provide Midwest with any protection under the Act for the three litigations.

Also on August 15, 1988, Midwest was granted leave of the circuit court of Cook County to file a petition for declaratory relief against the Guaranty Fund, in the ancillary receivership proceeding concerning the Ideal liquidation. Subsequently, on December 21, 1988, Midwest was granted leave of court to file its first amended petition for declaratory relief against the Guaranty Fund. Count I of the first amended petition sought a declaration that Midwest’s liability, if any, in the Henry and Olsen litigations was a covered claim as defined in the Act, and that the Guaranty Fund was under a duty to defend and indemnify Midwest for both of those cases. Count II sought a similar declaration for the Shervino litigation. Count III, in the alternative to counts I and II, sought a declaration that Midwest’s amendment to its proof of claim related back to the date of its original proof of claim with , the New York Insurance Department. In its answer, the Guaranty Fund admitted all the factual allegations, but denied that Midwest’s proof of claim was timely filed and that Midwest’s liability, if any, in the Henry, Olsen, and Shervino litigations constituted covered claims as defined in the Act.

On December 4, 1989, Midwest filed a summary judgment motion against the Guaranty Fund on all counts of its first amended petition. Then, on January 3, 1990, the Guaranty Fund filed a cross-motion for summary judgment on all counts of that petition. Both parties filed memoranda, and on April 30, 1990, there was a trial court hearing. The Guaranty Fund argued that this case was indistinguishable from Union Gesellschaft Fur Metal Industrie Co. v. Illinois Insurance Guaranty Fund (1989), 190 Ill. App. 3d 696, a fifth district case, which held that unspecified contingent claims are not covered claims under the Act. Midwest argued that the holding in Union Gesellschaft was erroneous and distinguishable from this case. After considering arguments, the trial court denied Midwest’s motion and granted the Guaranty Fund’s motion for summary judgment. The trial court found that the Union Gesellschaft case controlled.

On appeal Midwest asserts that (1) the purpose of the Act is to place insureds in the same position they would have been in but for their liability carrier’s insolvency; (2) the liquidation provisions of the Insurance Code (Ill. Rev. Stat. 1987, ch. 73, par. 1065.82 et seq.) are in pari materia with the Act; (3) the Act does not exclude contingent claims from its definition of covered claims; and (4) the liquidation provisions of the Insurance Code expressly authorize insureds of an insolvent liability carrier to file contingent claims. Therefore, Midwest argues, the only reasonable construction of sections 534.3 and 540.5 of the Act (Ill. Rev. Stat. 1985, ch. 73, pars. 1065.84-3(a), 1065.90-5) is that covered claims include contingent claims, such as claims for policyholder protection, filed with the liquidator of the insolvent carrier’s estate prior to the claim bar date.

We first consider the Act’s function and purpose. To ascertain and give effect to the legislature’s intent, the entire statute must be examined and the legislative purposes considered. (In re Liquidation of Security Casualty Co. (1989), 127 Ill. 2d 434, 442.) The purpose of the Act is

“to provide a mechanism for the payment of covered claims under certain insurance policies, to avoid excessive delay in payment, to avoid financial loss to claimants or policyholders because of the entry of an Order of Liquidation against an insolvent company, and to provide a Fund to assess the cost of such protection among member companies.” Ill. Rev. Stat. 1987, ch. 73, par. 1065.82.

Every insurance company authorized to write liability insurance in Illinois must be a member of the Guaranty Fund. (Ill. Rev. Stat. 1985, ch. 73, pars. 1065.84 — 5, 1065.85.) When a member of the Guaranty Fund is declared insolvent, the Guaranty Fund is deemed the insolvent company to the extent of its obligation for covered claims. (Ill. Rev. Stat. 1985, ch. 73, par. 1065.87 — 4.) As the insured’s assignee, the Guaranty Fund has the right to seek reimbursement for its costs and expenses for covered claims from the insolvent member’s liquidation estate. (Ill. Rev. Stat. 1985, ch. 73, par. 1065.95(b).) The Fund, however, has no statutory obligation to satisfy all judgments entered against an insured of an insolvent insurance company. Nianick v. Edgewater Beach Hotel (1975), 28 Ill. App. 3d 33, 34.

In interpreting the various sections of the Insurance Code, we have read them together and construed them harmoniously where possible. (Rawles v. Hartman (1988), 172 Ill. App. 3d 931, 935; Doran v. Department of Labor (1983), 116 Ill. App. 3d 471, 475.) A basic rule of statutory construction is “that two statutes on the same subject matter and parts of a comprehensive statutory scheme should be read in pari materia in order to” ascertain the legislature’s intent and to avoid injustice. Rawles, 172 Ill. App. 3d at 935; Doran, 116 Ill. App. 3d at 475.

Midwest asserts that its claim is a covered claim pursuant to the Illinois Guaranty Fund Act (Ill. Rev. Stat. 1985, ch. 73, par. 1065.82 et seq.) because the Act’s definitions of covered claims do not exclude contingent claims. The Act defines a covered claim in two different sections. Section 534.3(a) of the Act defines a covered claim as:

“an unpaid claim for a loss arising out of and within the coverage of an insurance policy to which this Article applies and which is in force at the time of the occurrence giving rise to the unpaid claim *** if:
[t]he claimant or insured is a resident of this State at the time of the insured occurrence ***.” Ill. Rev. Stat. 1985, ch. 73, par. 1065.84-3(a)(ii).

Midwest satisfies this section’s requirements. Any liability arising from the Henry, Olsen, and Shervino litigations is a loss arising out of and within the coverage of the comprehensive general liability policy issued to Midwest by Ideal. Furthermore, the policy was in force at the time of each occurrence alleged in the Henry, Olsen, and Sher-vino pleadings.

Section 540.5 of the Act, however, more specifically defines a covered claim as:

“a claim which appears on the books and records of the insolvent company as of the date of the Order of Liquidation or a claim for which notice is given in writing to the liquidator of the insolvent company’s domiciliary state or to an ancillary receiver in this State, if any, or to the Fund or its agents prior to the earlier of the last date fixed for the timely filing of proofs of claim in the domiciliary liquidation proceedings or 18 months after the entry of the order of liquidation.” (Emphasis added.) Ill. Rev. Stat. 1987, ch. 73, par. 1065.90 — 5(a).

The three litigations do not satisfy this section’s requirements. Although Midwest completed the proof of claim form sent by the New York Superintendent of Insurance and returned it by February 7, 1986, the last date fixed for the filing of proofs of claim in the Ideal liquidation, notice of the Henry, Olsen, and Shervino litigations was not given to the Guaranty Fund or to any domiciliary or ancillary liquidator by February 7, 1986. Therefore, none of these claims are covered claims under the Act.

We reject Midwest’s argument that its original proof of claim satisfied the requirements of section 209 of the Insurance Code for the Henry, Olsen, and Shervino litigations. Section 209 of the Insurance Code sets out the requirements of a proof of claim:

“A proof of claim shall consist of a statement under oath, in writing, signed by the claimant, setting forth the claim, the consideration therefor, and whether any, and if so, what securities are held therefor, and whether any, and if so, what payments have been made thereon, and that the sum claimed is justly owing from the company to the claimant.” Ill. Rev. Stat. 1985, ch. 73, par. 821(1).

Since Midwest’s original proof of claim did not identify any particular claim, it did not satisfy the above requirements.

Midwest then asserts that section 209 of the Insurance Code expressly recognizes an insured’s right to file a contingent claim. In re Munsie (1929), 32 F.2d 304, 305, rev’d on other grounds (1929), 33 F.2d 79, a bankruptcy case, defines a contingent claim as one that

“remains uncertain, at the time of the filing of the petition in bankruptcy, whether or not the bankrupt will ever become liable to pay it. If it is certain that'he is liable to pay it, although it may be uncertain how much he will have to pay, the claim is unliquidated, but it is not contingent.”

In re Empire State Surety Co. (1914), 165 A.D. 135, 138, 150 N.Y.S. 567, 569, discusses the difference between contingent claims and unliquidated claims. Contingent claims are those “having in fact no basis on which to rest at the time when jurisdiction is assumed over the fund,” and unliquidated claims are those “where the determinative circumstance has in fact occurred, and what remains to be done relates merely to its judicial ascertainment, or to the ascertainment of the resultant damages.” In re Empire State, 165 A.D. at 139, 150 N.Y.S. at 569.

The Henry, Olsen, and Shervino claims are contingent claims. None of them has yet gone to judgment and Midwest has no liability regarding these claims. While it is true that an insured has a right to file a contingent claim under the Insurance Code, Midwest misinterprets section 209 as recognizing an insured’s right to amend its proof of claim up to three years after the last date fixed for the filing of claims in the liquidation proceedings. Midwest erroneously contends that section 209 provides that if “an insured identifies specific losses for which it made a timely claim for policyholder protection between the last date fixed for filing claims and the date established for the liquidation of contingent claims, the Guaranty Fund must accept those losses and provide the insured with the protection of the Guaranty Fund Act.”

Section 209, the only section that provides for contingent claims, states:

“Where a Liquidation, Rehabilitation or Conservation Order has been entered in a proceeding against an insurer under this Code, any insured under a liability insurance policy shall have the right to file a contingent claim. The Court at the time of the entry of the Order of Liquidation, Rehabilitation or Conservation shall fix the final date for the liquidation of insured’s contingent claims, hut in no event shall said date be more than three years after the last day fixed for the filing of claims, provided, such date may be extended by the Court on petition of the Director should the Director determine that such extension will not delay distribution of assets under Section 210. No contingent claim shall he allowed unless such claim is liquidated and the insured claimant presents evidence of payment of such claim to the Director on or before the last day fixed by the Court.
The obligation of the insurer, if any, to defend or continue the defense of any claim or suit under a liability insurance policy shall terminate on the entry of the Order of Liquidation, Rehabilitation or Conservation.” (Emphasis added.) Ill. Rev. Stat. 1985, ch. 73, par. 821(3).

In addition, New York Insurance Law section 7433(c) similarly states:

“No contingent claim shall share in a distribution of assets of an insurer adjudicated to be insolvent by an order made pursuant to section seven thousand four hundred thirty-two of this article except that any such claim shall be considered if properly presented and may be allowed to share if:
(1) it becomes absolute against the insurer on or before the last day fixed for filing of proofs of claim, or
(2) there is a surplus and the liquidation is thereafter conducted upon the basis that such insurer is solvent.” N.Y. Ins. Law §7433(c) (McKinney 1985).

Moreover, the Insurance Code specifically provides for late claims, whether contingent or not, but in a different manner than covered claims. Section 208 states:

“Proofs of claim on good cause shown may be filed subsequent to the date specified, but, no such claim shall share in the distribution of assets until all allowed claims proofs of which have been filed before said date, have been paid in full.” Ill. Rev. Stat. 1985, ch. 73, par. 820(2).

Since the court did not set a final date for the liquidation of insured’s contingent claims, any contingent claim not liquidated by February 6, 1989, which is three years from the filing deadline for claims, would not be allowed. Even if the three lawsuits had been contingent claims, none were liquidated by the deadline. Thus, none of the claims would have been allowed.

Midwest confuses the issues. While section 209 allows for the filing of contingent claims, it does not automatically make those claims covered claims. Covered claims are only claims that are timely filed. Section 209 does not negate the requirement for timely filed claims. Moreover, what Midwest calls an amendment is really a new and distinct claim. It is clear that contingent claims are allowed, but Midwest seems to ignore the liquidation requirement for those claims. Contrary to Midwest’s assertion, section 209 distinguishes between contingent and liquidated claims by requiring liquidation before a contingent claim can be allowed.

Midwest next asserts that the liquidator’s acceptance of its claim as a covered claim is binding on the Guaranty Fund. Midwest argues that it is the responsibility of the New York State Superintendent of Insurance, who was appointed by the New York Supreme Court as Ideal’s liquidator, not the responsibility of the Guaranty Fund, to review, evaluate, and accept or reject claims filed in the Ideal liquidation. Thus, Midwest asserts, the Guaranty Fund cannot collaterally attack the judgment of the liquidator since acceptance of a proof of claim signifies recognition that a claimant will participate in the distribution of the insolvent carrier’s assets. Furthermore, Midwest claims, the Guaranty Fund was not prejudiced because it would be reimbursed through its assignment.

Midwest relies on notations made on its amendment to establish that the liquidator considered Midwest’s potential liability in the three litigation cases to be covered claims. The notations are as follows:

“Amendment from: l.RR 4810 Insureds timely filing for same policy covering this claim. Approved by: (signature) 8/24/88.
TIMELY
Insured’s Filing must pay losses through assignment (signature) 8/24/88.”

There is no indication from the face of the amended form, however, that the three lawsuits were claimed since the nonspecified claims in the amendment appear to be identical to those in the original. The only differences are the notations, which are unclear.

Midwest then cites section 545 of the Act to prove that the Fund could not disregard the liquidator’s determination:

“The Fund and any similar organization in another state shall be recognized as claimants in the liquidation of an insolvent company for any amounts paid by them on covered claims obligations as determined under this Article or similar laws in other states and shall receive dividends at the priority set forth in paragraph(c) of subsection (1) of Section 205 of this Code. The liquidator of an insolvent company shall be bound by the amounts of covered claim payments by the Fund or a similar organization in another state on the receipt of certification of such payments." (Emphasis added.) III. Rev. Stat. 1987, ch. 73, par. 1065.95(b).

Contrary to Midwest’s interpretation, section 545 does not provide that the Guaranty Fund is bound by an out-of-State liquidator’s determination that a claim, such as Midwest’s, was timely filed or that the claimant will participate in the liquidation of the insolvent carrier’s estate. Instead, it states that the liquidator is bound by the Guaranty Fund’s covered claim payments.

Midwest then cites section 221.3 of the Insurance Code to support its position that the Fund is bound by the New York liquidator’s decision. That section, however, entitled “Filing and proving of claims of non-residents against delinquent domiciliary insurers” (Ill. Rev. Stat. 1985, ch. 73, par. 833.3), is inapplicable because the insurance company is not an Illinois company and the claimant is not an out-of-State resident. Section 221.3 states:

“In any delinquency proceeding begun in this state against a domiciliary insurer of this state, claimants residing in a reciprocal ancillary state may file claims either with the ancillary receiver, if any, or with the domiciliary receiver. All such claims must be filed on or before the last date fixed for the filing of claims in the domiciliary delinquency proceeding.
In any such proceeding controverted claims belonging to claimants residing in ancillary states may either (a) be proved in this state as provided by law, or (b) if ancillary proceedings have been commenced in such ancillary state, may be proved in such ancillary proceedings. In the event a claimant elects to prove his claim in ancillary proceedings, and, if notice of the claim and opportunity to appear and be heard is afforded the domiciliary receiver of this state, such claim, when allowed by the court in the ancillary state, shall be accepted in this state as final and conclusive as to its amount, and shall also be accepted as final and conclusive as to its priority, if any, as against special deposits or other security located within the ancillary state.” (Emphasis added.) Ill. Rev. Stat. 1985, ch. 73, par. 833.3.

The applicable section is section 221.4 of the Insurance Code, entitled “Proof of claims of residents in connection with delinquency proceedings in other states.” It states:

“If a delinquency proceeding is commenced in a reciprocal state against an insurer domiciliary in such state, claimants against such insurer who reside within this state may file claims either with the ancillary receiver, if any, appointed in this state or with the domiciliary receiver. All such claims must be filed on or before the last date fixed for the filing of claims in the domiciliary delinquency proceeding.
In any such proceeding controverted claims belonging to claimants residing in this state may either (a) be proved in the domiciliary state as provided by law of such state, or (b) if an-ciliary proceedings have been commenced in this state, be proved in such ancillary proceedings. In the event that any such claimant elects to prove his claim in this state, he shall file his claim with the ancillary receiver in the manner provided by the law of this state for the proving of claims against domiciliary insurers, and he shall give, or cause to be given, notice to the receiver in the domiciliary state, either by mail or otherwise in writing that such claim is being made to such ancillary receiver and the nature and the amount thereof. The domiciliary receiver shall be entitled to appear or to be represented in any proceeding in this state involving the adjudication of the claim. The allowance of the claim by the courts of this state shall be final and conclusive both as to its amount and also as to its priority, if any, against special deposits or other security located within this state.” (Emphasis added.) (Ill. Rev. Stat. 1985, ch. 73, par. 833.4.)

Pursuant to this section, the Illinois court’s decision is binding on the New York liquidator since Midwest chose to prove its claim in Illinois.

The Guaranty Fund relies on Jason v. Superintendent of Insurance (1979), 67 A.D.2d 850, 851, 413 N.Y.S.2d 17, 18, which overturned a trial court decision that deemed an insured’s late proof of claim as timely nunc pro tunc as of the prior filing deadline. As in this case, the insured in Jason did not become aware of a potential claim against him until after the filing deadline passed. Although the appellate court recognized that the insured could not have filed any information regarding the claim by the filing deadline, it ruled that the statute did not recognize ignorance of a claim to forgive a late filing. Jason, 67 A.D.2d at 851, 413 N.Y.S.2d at 18.

The Guaranty Fund argues that, if a court could not declare a late proof of claim as timely nunc pro tunc, then the liquidator surely could not. The Guaranty Fund emphasizes that section 540.5 of the Act (Ill. Rev. Stat. 1985, ch. 743, par. 1065.90 — 5(a)) constitutes the legal requirements for timely filing and cannot be changed by the liquidator’s actions.

Furthermore, section 208 of the Insurance Code (Ill. Rev. Stat. 1985, ch. 73, par. 820) does not provide for an extension of the filing deadline for covered claims. Instead, it provides that proofs of claim for good cause filed late will not share in the distribution of assets until all timely filed proofs of claim have been paid in full. (Ill. Rev. Stat. 1985, ch. 73, par. 820(2).) Section 209 of the Insurance Code, which deals with the filing of contingent claims, provides only for an extension of time within which the contingent claim must be liquidated before being allowed. (Ill. Rev. Stat. 1985, ch. 73, par. 821(3).) The Illinois statute controls the filing deadline and cannot be altered.

The Guaranty Fund also relies on Satellite Bowl, Inc. v. Michigan Property & Casualty Guaranty Association (1988), 165 Mich. App. 768, 419 N.W.2d 460, which did not allow a late claim. In that case, two actions accrued against a Michigan insured prior to the insolvency of an Ohio insurance company, but the insured was not notified of the actions until after the filing deadline had passed. When the insured notified the Michigan association of the claims, the association refused to defend them because they were not timely filed. The insured then successfully petitioned the Ohio court to allow the claims to be filed for good cause. The Ohio court ruled that the claims were entitled to participate in the liquidation’s proceeds after the timely claims were satisfied. (Satellite Bowl, 165 Mich. App. at 770, 419 N.W.2d at 461.) The Michigan court overruled the Ohio court, stating that the Michigan statute, which is the same as the Illinois Act’s section 540.5(a), provided that covered claims include only timely claims with priority among creditors, and not any claim accepted by the domiciliary State. Satellite Bowl, 165 Mich. App. at 772, 419 N.W.2d at 462.

The Satellite Bowl court stated that, while the purpose of the Act was to eliminate the risk for policyholders of doing business with an insolvent insurer, the deadline requirement indicated that the legislature did not intend to make this protection absolute, indemnifying any claim no matter when it arose. (165 Mich. App. at 772, 419 N.W.2d at 462.) The requirement, the court stated, evidenced a legislative intent to provide a cutoff date after which the association was no longer obligated to accept claims. (Satellite Bowl, 165 Mich. App. at 772, 419 N.W.2d at 462.) The Michigan statute, like the Illinois one, did not authorize extension of the filing deadline for covered claims for equitable reasons. Therefore, the court ruled, the courts do not have the power to create an exception to an express statutory scheme providing for claims against an insolvent insurer. (Satellite Bowl, 165 Mich. App. at 772, 419 N.W.2d at 462.) The court ruled that the claim must be timely, and not merely accepted by the domiciliary State, in order to be a covered claim. Satellite Bowl, 165 Mich. App. at 773, 419 N.W.2d at 462.

Midwest then argues that it had an absolute right to amend its proof of claim since the form Midwest submitted to the New York Superintendent of Insurance stated on its face that it could be amended up until the date of final adjudication in the Ideal liquidation, which has not yet occurred. Midwest misses the point. "While the original proof of claim can be amended, Midwest did not amend it. What Midwest asserts as an amendment is actually a new and distinct claim because the original claim did not mention the three litigations.

Midwest then makes the same argument in a different way, claiming that its amendment should relate back to the filing of its original proof of claim because it did not introduce a distinctly new and different claim from the original proof of claim. Midwest cites cases that involved amendments that did not introduce a distinctly new and different claim. The court in In re Ebeling (7th Cir. 1941), 123 F.2d 520, 521, ruled that the amendment was timely because both the original claim and the amendment identified the same court foreclosure case. The original timely claim was based on bonds secured by a trust deed while the amended claim alleged an ownership interest in those same bonds. Ebeling, 123 F.2d at 521.

The court in Continental Motors Corp. v. Morris (10th Cir. 1948), 169 F.2d 315, 317, ruled that the amount claimed for breach of contract could be amended to allege additional damages since the original claim was specific and identifiable. The court stated that “[a]fter the time for the filing of claims has passed only such amendments may be made as do not change or alter the ground for recovery set out in the original claim.” Continental Motors, 169 F.2d at 317.

Midwest’s amendment is different, however, because it introduced distinctly new and different claims. The original claim gave no mention of the three litigations. While Midwest did not know of the three claims before the filing deadline, this court cannot grant relief. That is for the legislature to do. Since courts do not have the power to legislate, they must interpret the law as enacted by the legislature. Doran, 116 Ill. App. 3d at 475.

Midwest then argues that requiring “a claim to be liquidated by an insured prior to submission of that claim to the Guaranty Fund would obviate the Guaranty Fund’s duty to defend an insured of an insolvent carrier, as required by section 537.4 of the Act. (Ill. Rev. Stat. 1985, ch. 73, par. 1065.87 — 4.) That section, however, deals only with the Guaranty Fund’s obligation to covered claims. The liquidation requirement of section 209 of the Insurance Code applies to contingent claims. Nothing in section 209 negates the timely filing requirement for contingent claims. Furthermore, the three claims were not liquidated before February 6,1989.

Finally, Union Gesellschaft (190 Ill. App. 3d 696), a fifth district decision, is very similar to this case. Midwest contends that the Union Gesellschaft decision was erroneous, constituted judicial legislation, and was distinguishable from this case. The court in Union Gesell- schaft affirmed a summary judgment in favor of the Guaranty Fund. Although we are not bound by the Union Gesellschaft decision, we agree with its holding.

In Union Gesellschaft, a manufacturer of bicycle pedals (the insured), which was insured under a product liability insurance policy with Ideal, filed a proof of claim with the New York Superintendent of Insurance prior to the February 7, 1986, deadline. Included in its proof of claim, the insured filed a contingent claim for every “known claim/suit made against [the insured] of which [it] has knowledge as of the [filing] date” and “each and every claim or suit after the [filing] date hereof, contingent or real, wherein a person was allegedly injured due to a defective product manufactured by [the insured].” Union Gesellschaft, 190 Ill. App. 3d at 698.

After the February 7, 1986, filing deadline, the insured received notice of two lawsuits which arose during the period that Ideal’s insurance policy was in effect. After receiving notice of the two litiga-tions, the Guaranty Fund denied any fund coverage because specific notice of the claims was not given to the liquidator prior to February 7, 1986. The insured filed a complaint for declaratory judgment, seeking a court order declaring coverage for the two claims as well as any other claims that might arise in the future as a result of injuries that occurred while insured by Ideal.

The Guaranty Fund filed a motion for summary judgment, asserting that a claim not timely filed is not a covered claim, and that even though a general proof of claim was timely filed by Union, it did not contain specific information concerning any claims. Summary judgment was granted in favor of the Guaranty Fund. The Fifth District Appellate Court stated that even though the Act’s purpose is to eliminate the risk for policyholders doing business with an insolvent insurer, the “timely filing requirement of section 540.5 (Ill. Rev. Stat. 1987, ch. 73, par. 1065.90 — 5) indicates that the legislature did not intend to make this protection absolute, indemnifying all claims, including contingent claims.” Union Gesellschaft, 190 Ill. App. 3d at 699.

The court further stated that the filing deadline would have no meaning if it ruled that the filing of a contingent claim was sufficient for purposes of being deemed a covered claim. (Union Gesellschaft, 190 Ill. App. 3d at 700.) The court then reasoned that such a ruling would mean that liquidation and distribution of the insolvent carrier’s assets could not be effected until all potential statutes of limitation had run. (Union Gesellschaft, 190 Ill. App. 3d at 700.) The court found that the filing deadline evidenced a legislative intent to provide a cutoff date after which the Fund was no longer obligated to indemnify claims. (Union Gesellschaft, 190 Ill. App. 3d at 700.) The court noted that the insured’s ignorance of the two specific claims was not recognized by the statute to forgive a late filing of notice of the claims. While the court recognized the insured’s plight, it stated, it could not remedy the situation since the court must determine and give effect to the legislature’s intention. (Union Gesellschaft, 190 Ill. App. 3d at 700.) Therefore, the court concluded, the unspecified, contingent claim filed after the deadline did not constitute a valid proof of claim. Union Gesellschaft, 190 Ill. App. 3d at 700.

Not only was the Union Gesellschaft case correctly decided, but any dissimilarities between that case and this case are minimal. The same result occurs in this case. There are three claims which arose after the proof of claims filing deadline even though the actions which were the basis of the three claims occurred while the insurance policy was in effect. No notice of the claims was given prior to the filing deadline. Furthermore, there is only a potential liability, making these claims contingent as well as unliquidated. They are not covered claims under the Act. Therefore, the summary judgment orders were proper.

Based on the foregoing, the judgment of the circuit court is affirmed.

Affirmed.

RIZZI and WHITE, JJ., concur.


source: Caselaw Access Project

author: JUSTICE JOHNSON

license: Public Domain

text:
    STATEWIDE INSURANCE COMPANY, Plaintiff-Appellant, v. BRENDAN CONSTRUCTION COMPANY et al., Defendants-Appellees.
    First District (4th Division)
    No. 1-90-1356
    Opinion filed September 5, 1991.

      Fuqua, Winter, Stiles & Anderson, Ltd., of Waukegan (William P. Anderson, of counsel), for appellant.
    Sweeney & Riman, Ltd., of Chicago (Georgene M. Wilson, of counsel), for appellee St. Paul Fire and Marine Insurance Company.
   JUSTICE JOHNSON

delivered the opinion of the court:

Plaintiff, Statewide Insurance Company (hereinafter Statewide), brought an action for a declaratory judgment which asked the trial court to determine whether it, or defendant St. Paul Fire and Marine Insurance Company (hereinafter St. Paul) had the duty to defend defendant Brendan Construction Company (hereinafter Brendan), in a wrongful death action brought against it by the personal representative of John Verdin, the deceased. St. Paul moved to dismiss the complaint pursuant to section 2 — 615 of the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 615). The court granted St. Paul’s motion to dismiss. Plaintiff thereafter filed an amended complaint against St. Paul. In response to the amended complaint, St. Paul filed a motion to dismiss pursuant to section 2 — 615 of the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 615). The trial court granted this motion and dismissed the amended complaint.

The following issues are before this court for review: (1) whether John Verdin was an employee of Brendan; (2) whether plaintiff has a duty to defend and indemnify Brendan in a wrongful death action; and (3) whether St. Paul has a duty to defend and indemnify Brendan in a wrongful death action.

We affirm.

Statewide issued a general liability insurance policy to Brendan which covered accidental bodily injuries. The policy contained an amendatory endorsement which made the following exclusionary provisions:

“This insurance does not apply:
(i) to bodily injury to any employee of the insured arising out of or in the course of his employment by the insured for which the insured may be held liable as an employer or in any other capacity;
(ii) to any obligation of the insured to indemnify or contribute with another because of damages arising out of the bodily injury; or
(iii) to bodily injury sustained by the spouse, child, parent, brother, or sister of an employee of the insured as a consequence of bodily injury to such employee arising out of and in the course of his employment by the insured.
This exclusion applies to all claims and suits by any person or organization for damages because of such bodily injury including damages for care and loss of services.
This exclusion does not apply to liability assumed by the insured under an incidental contract.”

The insurance policy also contained the following exclusions from coverage:

“(i) [T]o any obligation for which the insured or any carrier as his insurer may be held liable under any workmen’s compensation, unemployment compensation or disability benefits law, or under any similar law;
(j) to bodily injury to any employee of the insured arising out of and in the course of his employment by the insured or to any obligation of the insured to indemnify another because of damages arising out of such injury; but this exclusion does not apply to liability assumed by the insured under an incidental contract.”

In 1987, Brendan was the general contractor for the renovation and repair of a residence located at 1427 North Astor Street in Chicago, Illinois. In order to complete the job, Brendan subcontracted the electrical work to Young’s Electric Company (hereinafter Young’s). John Verdin was employed by Young’s. On August 21, 1987, John Ver-din fell to his death at the Astor Street site while he was Young’s agent. Young’s did not carry any workers’ compensation insurance.

Brendan became the “statutory employer” of John Verdin, since Young’s was uninsured, and Brendan was obligated to pay the workers’ compensation benefits to Verdin’s widow pursuant to section 1(a)(3) of the Workers’ Compensation Act (hereinafter the Act) (Ill. Rev. Stat. 1987, ch. 48, par. 138.1(a)(3)). Defendant St. Paul was the carrier for Brendan’s workers’ compensation insurance. St. Paul paid the workers’ compensation benefits.

John Verdin’s estate later filed a wrongful death complaint against Brendan in the circuit court of Cook County. The complaint alleged that Brendan was negligent. The defense of this action on behalf of Brendan was tendered to Statewide, Brendan’s general liability insurer. Statewide is defending Brendan pursuant to a reservation of rights.

Statewide then filed an action for a declaratory judgment against Brendan and St. Paul, contending that St. Paul, and not Statewide, owed Brendan coverage and a defense to the wrongful death action. St. Paul filed a motion to dismiss pursuant to section 2 — 615 of the Code of Civil Procedure. (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 615.) The trial court dismissed the complaint. Statewide then sought and was granted leave to amend its complaint. St. Paul then moved to dismiss the amended complaint pursuant to section 2 — 615 of the Code of Civil Procedure. (Ill. Rev. Stat. 1987, ch. 110, par. 2-615.) On April 17, 1990, the trial court entered an order granting St. Paul’s motion. This appeal followed.

First, plaintiff alleges that the trial court erred when it dismissed its amended complaint because the complaint properly alleged that Brendan was John Verdin’s employer at the time of his death.

Defendant maintains that plaintiff’s complaint was properly dismissed because the payment of workers’ compensation benefits pursuant to section 1(a)(3) of the Act (Ill. Rev. Stat. 1987, ch. 48, par. 138.1(a)(3)) did not make Brendan John Verdin’s employer.

Section 1(a)(3) of the Act makes the following relevant provision:

“Any one engaging in any business or enterprise referred to in subsections 1 and 2 of Section 3 of this Act who undertakes to do any work enumerated therein, is liable to pay compensation to his own immediate employees in accordance with the provisions of this Act, and in addition thereto if he directly or indirectly engages any contractor whether principal or sub-contractor to do any such work, he is liable to pay compensation to the employees of any such contractor or sub-contractor unless such contractor or sub-contractor has insured, in any company or association authorized under the laws of this State to insure the liability to pay compensation under this Act, or guaranteed his liability to pay such compensation.” Ill. Rev. Stat. 1987, ch. 48, par. 138.1(a)(3).

The Illinois Supreme Court has ruled that “the purpose of the Workmen’s Compensation Act is to afford employees financial protection when their earning power is temporarily diminished or terminated due to employment injuries. It was the obvious intent of the legislature in enacting section 1(a)(3) to ensure this purpose was carried out when the employer-subcontractor cannot fulfill this obligation.” Laffoon v. Bell & Zoller Coal Co. (1976), 65 Ill. 2d 437, 446.

This court enunciated the following criteria for determining when someone is an employee in State Farm Mutual Automobile Insurance Co. v. Staff (1975), 26 Ill. App. 3d 217, 221:

“ ‘[T]he right to control the manner of doing the work is probably the most important single consideration in determining whether the relationship is that of an employee or an independent contractor. [Citations.] Other factors, such as whether compensation is on a time basis or by the job, the right to discharge, and the furnishing of materials, equipment or tools, are all to be taken into consideration.’ ” State Farm Mutual Auto mobile Insurance Co., 26 Ill. App. 3d at 221, quoting O’Brien v. Industrial Comm’n (1971), 48 Ill. 2d 304, 307.

We find that Brendan and the decedent did not have an employer-employee relationship. The record shows that Brendan had no right to control the manner and method of Verdin’s work, Brendan had no right to discharge Verdin, Brendan did not pay Verdin, and Brendan did not provide Verdin with his materials or equipment. See State Farm Mutual Automobile Insurance Co., 26 Ill. App. 3d at 221, citing O’Brien, 48 Ill. 2d at 307.

In addition, we find that the Act differentiates between employees of the general contractor and employees of the subcontractor. Section 1(a)(3) of the Act provides that an employer covered by the Act “is liable to pay compensation to his own immediate employees ***, and in addition thereto if he directly or indirectly engages any contractor whether principal or sub-contractor to do any such work, he is liable to pay compensation to the employees of any such contractor or sub-contractor unless such contractor or sub-contractor has insured *** or guaranteed his liability to pay such compensation.” (Emphasis added.) (Ill. Rev. Stat. 1987, ch. 48, par. 138.1(a)(3).) The Act does not convert an uninsured subcontractor’s employees into employees of the general contractor.

Moreover, the supreme court has recognized that the subcontractor, and not the general contractor, is the injured worker’s employer. The argument that a general contractor may become the employer of an injured worker employed by a subcontractor was rejected by our supreme court in Laffoon v. Bell & Zollar Coal Co. (1976), 65 Ill. 2d 437, a case with facts similar to the facts in the case at bar. In Laffoon an employee of an uninsured subcontractor was injured. The general contractor paid workers’ compensation benefits pursuant to section 1(a)(3) of the Act. The injured workman then sued the general contractor, alleging that the general contractor was negligent. The general contractor moved to dismiss the plaintiff’s complaint asserting the exclusive remedy defense in section 5(a) of the Act (Ill. Rev. Stat. 1975, ch. 48, par. 138.5(a)). (Laffoon, 65 Ill. 2d at 441.) The trial court dismissed the complaint, and the injured worker appealed. Our supreme court reversed the trial court and held that the general contractor was not entitled to assert the exclusive remedy defense. (Laffoon, 65 Ill. 2d at 445-46.) In effect, the supreme court mandated that the general contractor does not become the injured worker’s employer by virtue of the payment of compensation benefits pursuant to section 1(a)(3) of the Act. Accordingly, we rule that the trial court properly dismissed the complaint in this case.

Plaintiff next alleges that it does not have a duty to defend and indemnify Brendan, because Brendan’s insurance policy with it expressly excluded coverage for claims made by employees and those who could make workers’ compensation claims against Brendan, and because the decedent was a person for whom coverage is properly excluded pursuant to exclusion (i) of the policy and the amendatory endorsement. Plaintiff further contends that St. Paul has a duty to defend and indemnify Brendan from the negligence claim because Brendan is covered by St. Paul’s workers’ compensation and employer’s liability insurance policy. In light of our finding above, we do not reach these issues. The trial court properly dismissed the complaint.

For the aforementioned reasons, we affirm the judgment of the trial court.

Affirmed.

JIGANTI, P.J., and McMORROW, J., concur.


author: PRESIDING JUSTICE JIGANTI

text:
    J G INDUSTRIES, INC., f/k/a Goldblatt Brothers, Inc., Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH et al., Defendants (National Union Fire Insurance Company of Pittsburgh, Counterplaintiff-Appellant; J G Industries, Inc., f/k/a Goldblatt Brothers, Inc., et al., Counterdefendants-Appellees).
    First District (4th Division)
    No. 1-90-3349
    Opinion filed September 5, 1991.

      Pretzel & Stouffer, Chartered, of Chicago (Robert Marc Chemers and Robert J. Franco, of counsel), for appellant.
    Clifford A. Harstad, Ltd., of Chicago (Clifford A. Harstad and Sofia E. Goebel, of counsel), for appellee J G Industries, Inc.
    Hayes & Power, of Chicago (Larry R. Rogers, of counsel), for appellee Jose G. Garcia.
   PRESIDING JUSTICE JIGANTI

delivered the opinion of the court:

This is an appeal from a declaratory judgment in favor of the plaintiff, J G Industries, Inc., holding that the defendant, National Union Fire Insurance Company (National Union), had a duty to defend J G against a lawsuit brought by its former employee, the defendant Jose G. Garcia. The lawsuit contained separate counts seeking to recover damages for retaliatory discharge, libel and slander and punitive damages in connection with the retaliatory discharge theory. National Union counterclaimed for declaratory judgment and filed a motion for summary judgment in which it conceded that it had a duty to defend the libel and slander count, which had previously been dismissed, but alleged that the policy did not provide coverage for retaliatory discharge or punitive damages. The trial court granted summary judgment in favor of National Union and against J G with respect to the punitive damages count, but denied National Union’s motion for summary judgment on the retaliatory discharge count finding that National Union was required to defend J G in the retaliatory discharge litigation. The court further awarded J G $3,200 in already incurred defense costs. National Union has appealed, contending that the trial court erred in finding that it had a duty to defend the retaliatory discharge action and in awarding defense costs attributable to that action.

This litigation arose when Jose G. Garcia filed a two-count complaint against Goldblatt Bros., Inc. (Goldblatt), J G’s predecessor in interest. Count I alleged that Garcia suffered an injury during the course of his employment with Goldblatt and filed a worker’s compensation action. The complaint alleged that Goldblatt discharged him in retaliation for his filing of the worker’s compensation action. Count II alleged that Goldblatt, through its employee James Gentile, libeled and slandered Garcia by falsely accusing him of theft. The complaint was subsequently amended to add a third count, which sought punitive damages in connection with the retaliatory discharge theory.

During the relevant time period, Goldblatt was covered under a comprehensive general liability insurance policy issued by National Union. The policy included a personal injury liability clause, which stated as follows:

“1. COVERAGE P-PERSONAL INJURY LIABILITY
The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury (herein called ‘personal injury’) sustained by any person or organization and arising out of one or more of the following offenses committed in the conduct of the named insured’s business:
Group A — false arrest, detention or imprisonment, or malicious prosecution;
Group B — the publication or utterance of a libel or slander or of other defamatory or disparaging material, or a publication or utterance in violation of an individual’s right of privacy; except publications or utterances in the course of or related to advertising, broadcasting or telecasting activities conducted by or on behalf of the named insured;
Group C — wrongful entry or eviction, or other invasion of the right of private occupancy;
if such offense is committed during the policy period within the United States of America, its territories or possessions, or Canada, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such personal injury even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company’s liability has been exhausted by payment of judgments or settlements.”

Under the heading “Exclusions,” the policy stated in part that “[t]his insurance does not apply *** (c) to personal injury sustained by any person as a result of an offense directly or indirectly related to the employment of such person by the named insured.”

National Union was notified of the Garcia action and refused to defend. J G, Goldblatt’s successor in interest, retained counsel to defend the suit and initiated the instant declaratory judgment action against National Union. At the time the instant action was filed, Garcia’s libel and slander count had already been dismissed.

As stated earlier, National Union counterclaimed for declaratory judgment and filed a motion for summary judgment. In its prayer for relief, National Union requested a declaration that it had no duty to defend or indemnify J G against the retaliatory discharge action and that defense costs should be limited to the libel and slander count on the grounds that “National Union had a duty to defend J.G. Industries, as to Count II only,” until the time that count II was dismissed. The trial court ruled that the policy did not provide coverage for punitive damages but that National Union had a duty to defend the pending retaliatory discharge action. The court awarded J G $3,200 in already incurred defense costs.

On appeal, National Union contends that the trial court erred in finding that it had a duty to defend J G against the retaliatory discharge claim. National Union makes two specific arguments in support of this contention. First, it maintains that the insurance policy did not provide coverage for retaliatory discharge. Second, citing Ru- benstein Lumber Co. v. Aetna Life & Casualty Co. (1984), 122 Ill. App. 3d 717, 462 N.E.2d 660, National Union argues that insurance for retaliatory discharge claims is void as against public policy.

In addressing the first argument, we note that the terms of the comprehensive general liability policy provide coverage for bodily injury and property damage. In his brief on appeal, defendant Garcia does not contend that the claim for retaliatory discharge falls within the definition of bodily injury or property damage. Rather, he contends that coverage is extended by the personal injury liability endorsement. This endorsement, quoted in full earlier in this opinion, provides that National Union would pay damages for injuries arising out of “one or more of the following offenses committed in the conduct of the named insured’s business.” The policy then specifically lists the covered offenses as false arrest, detention or imprisonment, or malicious prosecution; the publication or utterance of a libel or slander or of other defamatory or disparaging material, or a publication or utterance violative of the right to privacy (with certain stated exceptions); and wrongful entry or eviction, or other invasion of the right of private occupancy. Retaliatory discharge is not listed as an offense covered by the personal injury liability endorsement.

Garcia concedes that retaliatory discharge does not appear among the offenses explicitly covered by the policy. He argues, however, that the retaliatory discharge claim “could” have fallen within the exclusion relating to personal injuries “sustained by any person as a result of an offense directly or indirectly related to the employment of such person by the named insured.” Garcia argues that because this exclusion was deleted from the policy, the parties “probably” intended to provide coverage for employment-related offenses such as the retaliatory discharge claim. Garcia contends that even if this intent is not clear, at the very least the deletion of the exclusion created an ambiguity in the insurance contract which should be construed against the insurer.

The mere fact that an ambiguity exists somewhere within the confines of an insurance policy does not automatically mandate a judgment against the insurer. Where a policy contains allegedly ambiguous language, it is the duty of the court to construe the policy as a whole with the goal of best effectuating the intentions of the parties. (National Surety Corp. v. Swissler Plumbing, Inc. (1988), 167 Ill. App. 3d 608, 613-14, 521 N.E.2d 257.) We are mindful of the proposition of law stating that ambiguities in an insurance contract should be construed against the insurer and in favor of the insured. (Simioni v. Continental Insurance Cos. (1985), 135 Ill. App. 3d 916, 918, 482 N.E.2d 434.) However, we do not believe this proposition requires strained or unreasonable interpretations which would have the effect of invalidating the contract between the parties. As stated in Bohnen International, Inc. v. Liberty Mutual Insurance Co. (1983), 120 Ill. App. 3d 657, 666, 458 N.E.2d 644, 649, “[liberal construction of an insurance policy in favor of the insured must yield to rules of reasonable construction.”

In the case at bar, we do not believe the policy can be reasonably construed to provide coverage for retaliatory discharge. The policy contains a list of the offenses covered. Retaliatory discharge is not on the list. This is fairly strong evidence that the parties did not intend it to be covered. We cannot accept the strained argument that the parties intended to cover retaliatory discharge because it could have fallen within an exclusion which was subsequently deleted. Generally, an exception to an exclusion should not be interpreted as providing coverage or providing an additional basis for coverage. (See Qualls v. Country Mutual Insurance Co. (1984), 123 Ill. App. 3d 831, 834, 462 N.E.2d 1288.) We believe the same is true where, as here, an exclusion has been deleted from the policy. Furthermore, it appears unlikely that, given the explicit list of covered offenses, the parties also intended coverage for a vague category consisting of all offenses which could have conceivably fit within the boundaries of a deleted exclusion. In our view,- the policy does not provide coverage for the retaliatory discharge claim.

The defendant J G, in its brief on appeal, argues that National Union should be estopped from raising a policy coverage defense in the instant declaratory judgment action because it failed to defend the lawsuit under a reservation of rights or immediately seek a declaratory judgment as to its obligation to defend. J G relies upon the proposition that where the allegations of the complaint bring the claim potentially within the coverage of the policy, an insurer who fails to defend the action under a reservation of rights or to seek a declaratory judgment concerning its obligation to defend will be estopped from relying upon any policy defenses to coverage. (Consolidated Rail Corp. v. Liberty Mutual Insurance Co. (1981), 92 Ill. App. 3d 1066, 416 N.E.2d 758.) Here, however, retaliatory discharge was not covered by the policy and Garcia’s complaint alleging retaliatory discharge therefore did not come potentially within policy coverage. As we stated in M/A Com, Inc. v. Perricone (1989), 187 Ill. App. 3d 358, 362, 543 N.E.2d 228, 231, “[t]he duty to defend, although broad, is not boundless. The doctrine of estoppel arises only where a duty to defend exists and has been breached by the insurer. It does not prevent the insurer from raising the issue of whether it did in fact breach a duty to defend its insured.” We therefore reject J G’s estop-pel argument.

Our determination that retaliatory discharge was not covered by the policy makes it unnecessary for us to consider National Union’s argument that insurance coverage for retaliatory discharge would violate public policy.

National Union next contends that, because no coverage was provided for the retaliatory discharge claim, the trial court erred in awarding defense costs covering that claim as well as the libel and slander claim. National Union conceded in its motion for summary judgment that it had a duty to defend the libel and slander claim. National Union argues that the cause should be remanded to allow apportionment of the costs so that it will bear only the costs related to the covered claim.

The Illinois Supreme Court in Maryland Casualty Co. v. Peppers (1976), 64 Ill. 2d 187, 355 N.E.2d 24, considered the insurer’s duty to defend in a situation where the complaint charges both conduct for which the policy affords coverage and conduct for which it does not. It held that the “duty to defend extends to cases where the complaint alleges several causes of action or theories of recovery against an insured, one of which is within the coverage of a policy while the others may not be.” (Peppers, 64 Ill. 2d at 194, 355 N.E.2d at 28.) Since Peppers was decided, several cases have cited it for the proposition that an insurer has the duty to defend a multicount litigation even if only one or some of the counts are covered. See Altaf v. Hanover Square Condominium Association No. 1 (1989), 188 Ill. App. 3d 533, 540-41, 544 N.E.2d 1032; Western Casualty & Surety Co. v. Adams County (1989), 179 Ill. App. 3d 752, 756, 534 N.E.2d 1066; State Farm Fire & Casualty Co. v. Shelton (1988), 176 Ill. App. 3d 858, 861, 531 N.E.2d 913; Fidelity & Casualty Co. v. Nalco Chemical Co. (1987), 155 Ill. App. 3d 730, 740, 509 N.E.2d 446; Tuell v. State Farm Fire & Casualty Co. (1985), 132 Ill. App. 3d 449, 453-54, 477 N.E.2d 70.

National Union maintains that the above-cited cases have misinterpreted Peppers and that the proper interpretation of its pronouncement on the duty to defend is that the defense obligation which attached to the covered cause of action is not eliminated or diminished by the fact that the complaint also contains additional noncovered causes of action. According to National Union, the Peppers court did not intend to hold that the insurer is obligated to provide a defense against causes of action or theories of recovery not insured under the policy.

National Union has not cited, and we have not found, any Illinois cases which have considered this issue as framed by National Union. However, it appears that the decisions from other jurisdictions which have squarely addressed the issue express little sympathy for National Union’s position. For example, in Timberline Equipment Co. v. St. Paul Fire & Marine Insurance Co. (1978), 281 Or. 639, 644, 576 P.2d 1244, 1247, the insurer who failed to defend a complaint alleging both covered and noncovered claims argued that it was obligated to reimburse the insured for only those defense costs attributable to the covered portion of the complaint. The Oregon Supreme Court rejected this argument and held the insurer liable for the total defense costs. A similar argument for apportioning defense costs between covered and noncovered claims was rejected by the supreme court of Minnesota in Jostens, Inc. v. CNA Insurance/Continental Casualty Co. (Minn. 1987), 403 N.W.2d 625, where the court relied upon the “strong policy in favor of requiring defense where there is even arguable coverage.” (Jostens, 403 N.W.2d at 631.) Finally, in a case which provides some, albeit weak, support for National Union’s position, the California Supreme Court in Hogan v. Midland National Insurance Co. (1970), 3 Cal. 3d 553, 476 P.2d 825, 91 Cal. Rptr. 153, used language suggesting that the insurer may be entitled to an apportionment of attorney fees under certain circumstances. In discussing the issue, the court stated that “[i]n its pragmatic aspect, any precise allocation of expenses in this context [of covered and noncovered claims] would be extremely difficult and, if ever feasible, could be made only if the insurer produces undeniable evidence of the allocability of specific expenses.” Hogan, 3 Cal. 3d at 564, 476 P.2d at 831, 91 Cal. Rptr. at 159; see also Annot., 41 A.L.R. 2d 434 (1955); 7C J. Appleman, Insurance Law & Practice §4691, at 249 (1979).

Regardless of our views on the merits of National Union’s apportionment argument, we believe the supreme court opinion in Maryland Casualty Co. v. Peppers (1976), 64 Ill. 2d 187, 355 N.E.2d 24, requires us to reject it. This cause appears to be factually indistinguishable from Peppers and the language employed in Peppers stating that an insurer has a duty to defend “cases where the complaint alleges several causes of action or theories of recovery against an insured, one of which is within the coverage of a policy while the others may not be.” (Peppers, 64 Ill. 2d at 194, 355 N.E.2d at 28.) Given the apparent clarity of this language, we believe that adoption of an interpretation which would limit an insurer’s defense costs to covered portions of the complaint must be left to the supreme court. Thus, we will not disturb the trial court’s award of defense costs.

Accordingly, the judgment of the circuit court is reversed in part and affirmed in part.

Reversed in part; affirmed in part.

LINN and JOHNSON, JJ., concur.


text:
    GERHARD R. MACHE et al., as Successor Co-Trustees, et al., Plaintiffs-Appellants, v. ANNA BOGUCKA MACHE, Defendant-Appellee.
    First District (4th Division)
    No. 1-91-0427
    Opinion filed September 5, 1991.

      Sharon Swarsensky Bilow and Joanne A. Sarasin, both of Much, Shelist, Freed, Denenberg, Ament & Eiger, P.C., of Chicago, for appellants.
    Thomas C. Baratía, Jr., & Associates, of Melrose Park (Thomas C. Baratta, Jr., and Samuel A. Garnello, of counsel), for appellee.
   PRESIDING JUSTICE JIGANTI

delivered the opinion of the court:

This is an interlocutory appeal from the denial of a preliminary injunction. The plaintiffs, Gerhard R. Mache and Anita Slansky, filed an action to enjoin the defendant, Anna Bogucka Mache, from transferring or converting to her own use funds allegedly obtained as a result of the defendant’s undue influence over her husband, decedent Gerhard M. Mache. The plaintiffs are the decedent’s children. At the close of the plaintiffs’ evidence at the preliminary injunction hearing, the trial court directed a finding in favor of the defendant and against the plaintiffs and denied injunctive relief. The plaintiffs have appealed, contending that the trial court abused its discretion in denying their motion for a preliminary injunction and that the court improperly excluded expert testimony on the issue of undue influence.

At the time he met the defendant in 1982, Gerhard Mache was a 72-year-old widower. The defendant Anna Bogucka was a well-educated 58-year-old woman who had emigrated from Poland in 1964. They married in 1982. Prior to the marriage, Gerhard and Anna entered into a prenuptial agreement which provided that each would renounce all rights to the other’s properly upon death or divorce. They were legally separated in 1988. Under the terms of the separation agreement, Gerhard set up a trust which would provide Anna with an annual income of $7,400 for the rest of her life. Upon termination of the trust, the principal was to be paid to Gerhard’s children. Although Anna and Gerhard socialized frequently and traveled together after the separation, they lived apart until June of 1990, when Gerhard was diagnosed as suffering from terminal cancer. At Gerhard’s request, Anna moved in with him and took care of him. Between June of 1990 and October 5, 1990, the date Gerhard died, Gerhard made transfers of funds totaling $360,000 to Anna. These are the transfers which the plaintiffs contend were the result of Anna’s undue influence over Gerhard.

At the hearing on their motion for a preliminary injunction, the plaintiffs attempted to call a psychiatrist, Dr. Bennett G. Braun, as their first witness. Following Dr. Braun’s testimony concerning his qualifications, the trial court expressed doubt that his testimony would advance the relevant inquiry before the court. Further questioning established that Dr. Braun had been retained by the plaintiffs as a testifying expert 10 days before the hearing, that he reviewed the records of Gerhard’s doctors and conducted telephone interviews with Gerhard’s three children and three of his neighbors. At that point, the trial court granted the defendant’s motion to disqualify Dr. Braun as an expert witness and allowed the plaintiffs’ attorney to make an offer of proof as to his expected testimony. According to the offer of proof, Dr. Braun would have testified that he conducted a “psychiatric autopsy” of Gerhard and determined that at the time he transferred the funds in question to Anna he was in a dependent relationship with her. Dr. Braun would have testified that in his opinion Anna had overpowered Gerhard’s will and induced him to make transfers of money to her that he would not have otherwise made. This opinion was based upon Gerhard’s total dependence on Anna and the effect of the pain medication Gerhard was taking. Following this offer of proof, Vhokaraju S. Deva, a radiation oncologist, testified that she administered several courses of radiation treatment to Gerhard in an effort to decrease his pain. She also prescribed long-acting morphine tablets to be taken by Gerhard when he was an outpatient. Dr. Deva testified that although Gerhard was in a lot of pain, he was alert, coherent, able to understand the doctor and “knew what he wanted.”

The plaintiffs then called the defendant Anna Bogucka Mache as an adverse witness. Anna testified that she was born in Poland and was fluent in English, Polish and German. She stated that she met Gerhard Mache in 1982 and that they were married four or five months later. According to Anna, Gerhard had been born in Germany and was pleased by the fact that Anna spoke German. Prior to the marriage Anna’s only asset was a $10,000 savings account. Gerhard had assets worth approximately $2 million. Although she signed a prenuptial agreement before the marriage, she did not read it until approximately six years later. At that time she initiated divorce proceedings, which resulted in a separation agreement. As stated earlier, the separation agreement provided that Gerhard would set up a trust which would pay Anna $7,400 per year for the rest of her life. It further provided that Anna would have no other claims on Gerhard’s assets. Anna admitted that when she discovered the prenuptial agreement, she felt she had been tricked and was angry with Gerhard. However, she testified that after the separation Gerhard seemed more relaxed and sought her company. They saw each other daily from Christmas of 1989 forward. Anna characterized their relationship as a “secret marriage.” She explained that Gerhard wished to avoid conflict with his children and did not want them to know that he and Anna were together. In 1989, they took a trip to Germany but traveled separately so the children would not know that they were together. In February of 1990, Gerhard and Anna took a two-week trip to Florida and in March of 1990 he bought her a car. In April of 1990 he gave her $20,000 in exchange for her signature on a gift tax return.

Anna testified that she was with Gerhard in his car on June 24, 1990, when he turned the wheel and suffered pain in his right arm. They went to the emergency room where it was learned that Gerhard had a broken arm. Shortly after this incident, Gerhard’s doctors discovered that he had incurable cancer. Gerhard asked Anna to move in with him and take care of him. Anna testified that she agreed, and that she cared for Gerhard 24 hours a day. She slept on a couch in his room, washed him, cooked for him and fed him. Anna took him to his doctor appointments, filled his prescriptions and administered his pain medication. When she became too exhausted to care for Gerhard alone, she hired a nurse. The nurse spoke Polish and had a very limited English vocabulary. Gerhard did not speak Polish. Gerhard aisked Anna to stay with him despite expected difficulties from his children. She did so.

On July 17, 1990, Gerhard transferred $100,000 from his trust fund account at Merrill Lynch to the trust that had previously been set up for Anna. Also in July of 1990 Gerhard purchased a $60,000 condominium for Anna. The purchase price was paid for by two checks from Gerhard. The first check, dated August 1, 1990, was in the amount of $50,000. The check was made out to “Gerhard M. Mache” and endorsed by “Gerhard M. Mache Trustee.” Anna then endorsed the check and deposited the funds into her savings account. The second check, dated August 11, 1990, was in the amount of $10,000 and was made payable to Anna Mache. Title to the condominium was held jointly by Anna Mache and a married couple who were friends of Anna’s.

On August 22, 1990, Gerhard wrote a letter to his stockbroker at Merrill Lynch directing him to immediately transfer all of the assets in the Anna Mache trust to a new account in Anna’s name alone. The Anna trust at that time contained assets worth $200,000. Two days later, Anna drove Gerhard to a currency exchange where Gerhard’s signature on the transfer letter was notarized. Anna then delivered the letter to Merrill Lynch on that same day. Although Gerhard was with her, he waited in the car while she delivered the letter to Gerhard’s stockbroker.

In early September, Anna became ill from exhaustion and required hospitalization. Gerhard was admitted to the hospital the following day because his pain could not be adequately controlled at home. On September 11, 1990, Gerhard authorized a transfer of $100,000 from his trust account to Anna’s account. The document was notarized by Marilynn Amoux, an employee of the hospital. Sometime in September, Gerhard brought his children together and told them, in Anna’s presence, that he had made a transfer of funds to Anna in the amount of $100,000. Although Anna knew the actual amount was $360,000, she said nothing because she was “not allowed to.” According to Anna, Gerhard was afraid of his children and told her that they were “vicious and greedy” and would “play dirty tricks” on her.

Marilynn Amoux, the hospital secretary who notarized the September 11, 1990, transfer letter, testified that she had been called to notarize Gerhard’s signature on September 10. However, Anna later called and told her to come the following day because Gerhard was expecting guests. When Gerhard notarized the transfer letter, he was alert, stated that he knew what he was signing and signed clearly and firmly.

Gerhard R. Mache, the decedent’s son, testified that he was the executor of Gerhard’s estate. While Gerhard was alive, he gave the witness his power of attorney, made him co-trustee of Gerhard’s trust and trastee of Anna’s trust. The witness testified that a few days after September 11, 1990, Gerhard signed approximately $400,000 in gift checks to members of his family in an effort to minimize estate taxes. Although the checks were dated September 11, 1990, the witness stated that he did not give them to Gerhard to sign on that day because Gerhard was sleepy and groggy and might not have fully understood what he was signing. When he asked Gerhard’s stockbroker, Robert Curry, to liquidate certain bonds in Gerhard’s account in order to cover the checks, he was told that there had been some “activity” in Gerhard’s account and that the remaining bonds were insufficient to cover the checks. Curry would not discuss the account further, so the witness went to Gerhard’s house and asked if Gerhard had intended to transfer any funds to Anna. Gerhard said that he did not and became very upset. According to the witness, Gerhard apologized for having previously accused his children of stealing funds from his account and suggested that he be declared incompetent so that no further damage could be done. When the witness suggested initiating proceedings to attach Anna’s condominium, Gerhard refused and stated that he had given her only a $10,000 down payment for the condominium. The witness then immediately prepared a document removing Gerhard as co-trustee of his trust account and Gerhard signed it.

Sid Levine, Gerhard’s attorney, testified that Gerhard frequently consulted him concerning estate planning and that, at one point, he suggested that Gerhard give Anna $50,000 in exchange for her signature on a gift tax return which would have resulted in $150,000 in tax savings. Gerhard said that he did not have to give her that much money and ultimately paid her $20,000 to sign the return. Levine testified that Gerhard did not consult with him prior to transferring funds to Anna.

Robert Curry, the stockbroker with Merrill Lynch, testified that he managed Gerhard’s trust accounts at the time the transfers to Anna took place. In his opinion, Gerhard was a sophisticated investor. Curry testified that the trust set up for Anna was originally to pay her income only, but that in the spring of 1990, Gerhard told Curry that he wanted to take the money out of the trust and give it to Anna. According to Curry, Gerhard was very concerned that his children not know about the transfers of funds to Anna. Curry testified that “the general theme was [Gerhard] felt it was not their business. And I certainly felt it was at least implicit if not explicit in what he said that he was concerned that they might try to prevent it.” Gerhard told Curry that he wanted Anna to be taken care of upon his death. Anna was not with Gerhard when he had these conversations with Curry.

At the conclusion of the plaintiffs’ case, the defendant moved for a directed finding. The trial court granted the motion, finding that the plaintiffs’ evidence failed to raise even an inference that Anna obtained any funds through undue influence over Gerhard. The court found that Gerhard had given gifts to Anna prior to his illness and that he turned to her for care and comfort when he learned that he was terminally ill.

On appeal, the plaintiffs contend that the trial court erred in denying their motion for a preliminary injunction.

To be entitled to injunctive relief, a plaintiff must show that it had a protectible interest in the subject matter of the litigation; a likelihood of prevailing on the merits of the claim; that it would suffer irreparable injury in the absence of an injunction; that it had no adequate remedy at law; and that the benefits of granting the injunction would outweigh any possible injury to the defendant. (Agrimerica, Inc. v. Mathes (1988), 170 Ill. App. 3d 1025, 1030-31, 524 N.E.2d 947.) On the issue of likelihood of success on the merits, a plaintiff need only raise a fair question of the existence of the right claimed. (Alanis v. Fairway Ford (1980), 89 Ill. App. 3d 458, 460, 411 N.E.2d 1045.) It is well established that the grant or denial of injunctive relief is a matter that rests within the sound discretion of the trial court and will not be reversed absent an abuse of that discretion. (Blakemore v. Lake Holiday Property Owners’ Association (1986), 144 Ill. App. 3d 199, 207, 494 N.E.2d 186.) It is within the province of the trial court in its role as the trier of fact to determine the credibility of the witnesses and the weight to be given their testimony. (In re Marriage of Ligas (1982), 110 Ill. App. 3d 1, 6, 441 N.E.2d 1277.) Where two or more equally plausible interpretations can be made from the facts, the judgment of the trial court will be sustained. Nemeth v. Banhalmi (1984), 125 Ill. App. 3d 938, 963, 466 N.E.2d 977.

In the case at bar, the plaintiffs’ complaint alleges that the transfers of funds to Anna resulted from her exercise of undue influence over Gerhard. Undue influence has been defined as any improper urgency of persuasion whereby the will of a person is overpowered and he is induced to do an act which he would not do if left to act freely. (Franciscan Sisters Health Care Corp. v. Dean (1983), 95 Ill. 2d 452, 460, 448 N.E.2d 872.) Ordinarily, a presumption of undue influence arises where a fiduciary relationship is shown to exist. (In re Estate of Mooney (1983), 117 Ill. App. 3d 993, 997, 453 N.E.2d 1158.) However, the presumption does not arise as to conveyances between a husband and wife, where, instead, a presumption of gift arises. (Miethe v. Miethe (1951), 410 Ill. 226, 231, 101 N.E.2d 571; Wold v. Wold (1976), 43 Ill. App. 3d 773, 357 N.E.2d 627.) The presumption of gift may be rebutted under certain circumstances which tend to negate donative intent, as for example where the property conveyed consisted of the husband’s entire estate. Scanlon v. Scanlon (1955), 6 Ill. 2d 224, 231, 127 N.E.2d 435.

Essentially, the plaintiffs’ argument in this appeal is that the trial court drew the wrong inferences from the evidence presented. The plaintiffs contend that Anna’s actions in moving in with Gerhard and caring for him during his terminal illness should have been interpreted as an attempt by her to overcome his will and influence him to give her money. They further contend that because the transfers took place in what they considered a clandestine and somewhat unusual manner, the court should have inferred that Gerhard did not understand what was taking place.

A thorough review of the facts, as stated above, leads to the equally supportable inference that Gerhard cared for Anna and wanted to provide for her after his death. Although Anna and Gerhard were legally separated, the record shows that they took vacations together and saw each other on an almost daily basis. As stated earlier, conveyances between a husband and wife are presumed to be gifts. Although the plaintiffs cite Miethe v. Miethe (1951), 410 Ill. 226, 101 N.E.2d 571, and Wold v. Wold (1976), 43 Ill. App. 3d 773, 357 N.E.2d 627, in support of their argument that the presumption of gift has been rebutted, we find these cases factually remote from the case at bar. For example, in Miethe, the challenged conveyance consisted of the husband’s entire estate. In Wold, the wife to whom the property was conveyed was a successful businesswoman with substantial assets, while the husband was a chronic alcoholic who was isolated from his family. Here, Gerhard was described as a shrewd investor who accumulated an estate in excess of $2 million and who was described by many of the witnesses as alert and purposeful in his actions. Testimony by Anna and by Robert Curry, Gerhard’s stockbroker, supports the inference that Gerhard took steps to hide the transfers from his children not because his will was overborne but rather because he knew they would disapprove and even might try to prevent Anna from receiving the funds. There is no testimony in the record to show that Anna attempted to restrict Gerhard’s access to the plaintiffs, his attorney or his financial advisers. The testimony was consistent that Gerhard understood what he was doing when he effectuated the transfers to Anna and that he did so of his free will. The only evidence to the contrary was the testimony of plaintiff Gerhard R. Mache, who stated that Gerhard said that he did not intend to give money to Anna and suggested that he be declared incompetent. The trial court apparently rejected this testimony.

In our view, the trial court acted well within its authority in determining that no evidence of undue influence was presented and that the plaintiffs accordingly failed to establish even a fair question as to their right to the challenged funds.

The plaintiffs then argue that the court erred in refusing to allow testimony by an expert witness, Dr. Bennett Braun, on the issue of undue influence. The plaintiffs maintain that it was unfair for the court to preclude this testimony, then to subsequently find that the plaintiffs failed to meet their burden of showing that undue influence existed.

The modem standard of admissibility of expert testimony is whether the testimony will aid the trier of fact in its understanding of the facts presented at trial. (Johnson v. Commonwealth Edison Co. (1985), 133 Ill. App. 3d 472, 482, 478 N.E.2d 1057.) While an expert may express an opinion on an ultimate issue, expert opinions are generally not admissible on matters of which the trier of fact is knowledgeable unless the subject is difficult of comprehension and the testimony will aid the trier of fact in understanding it. (McCormick v. McCormick (1988), 180 Ill. App. 3d 184, 205, 536 N.E.2d 419.) The decision as to whether to admit evidence rests within the discretion of the trial court and will not be reversed absent a clear abuse of discretion. McCormick, 180 Ill. App. 3d 184, 536 N.E.2d 419.

A review of the offer of proof contained in the record reveals that Dr. Braun merely applied the facts of the case to the relevant law and opined that Gerhard was in a dependent relationship with Anna and that she exerted undue influence over him with regard to the transfers of funds. In essence, the proposed testimony constituted nothing more than a legal opinion and did not touch upon matters beyond the understanding or comprehension of the court. The trial court is allowed wide discretion in determining the admissibility of such testimony, and we find no abuse of that discretion in the instant cause.

Accordingly, the judgment of the trial court is affirmed.

Affirmed.

LINN and McMORROW, JJ., concur.