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Third Division
Filed: December 3, 2003

No. 1-02-2956

PRESIDING JUSTICE HOFFMAN delivered the opinion of the court:

In this declaratory judgment action, the plaintiff, Home Insurance Company (Home), appealsfrom a circuit court order granting summary judgment in favor of the defendant, Cincinnati InsuranceCompany (Cincinnati), and denying its cross-motion for summary judgment. For the reasons whichfollow, we affirm.

The facts giving rise to this litigation are substantially undisputed. Allied Asphalt PavingCompany (Allied) was the general contractor for a renovation project on the Kennedy Expresswayin Chicago commissioned by the State of Illinois. The renovation work was subcontracted toAldridge Electric Company, Inc. (Aldridge) and Western Industries, Inc. (Western). On August 18,1994, Matthew Fisher, an employee of Aldridge, was injured when he was struck by an automobilewhile installing lights in an underpass. At the time of the accident, the driver of the car wasintoxicated, drove through the construction area and struck Fisher. Fisher filed suit against numerousparties, including Allied and Western, the safety subcontractor for the renovation project. In histhird-amended complaint, Fisher alleged that Allied and Western had agreed to assume responsibilityfor all safety aspects of the project and agreed to follow all statutory and Illinois Department ofTransportation directives to protect workers during construction. Fisher further alleged that Alliedand Western breached their duty to, inter alia, provide proper safety signs, traffic cones, barricades,warning lights, flagmen, and other traffic control devices at the location where he was working.

At the time of the accident, Allied was named as an additional insured under two insurancepolicies. Cincinnati had issued a commercial general liability insurance policy to Western, namingAllied as an additional insured, with a $1 million limit of liability for each occurrence. Allied was alsonamed as an additional insured under a policy issued to Aldridge by Home, with a $1 million limit ofliability for each occurrence. Each policy contained the following endorsement:

"WHO IS AN INSURED (Section II) is amended to include as aninsured the person or organization shown in the Schedule, but onlywith respect to liability arising out of 'your work' for that insured byor for you."⁽¹⁾

Further, under each policy, "your work" was defined as:

"a. Work or operations performed by you or on your behalf; and

Allied tendered the defense of the Fisher action to both Cincinnati and Home. In a letter datedJune 23, 1997, Cincinnati informed Richard Johnson, Allied's attorney, that it was accepting thedefense, but would be reserving its rights to deny coverage with respect to any work or conduct thatwas not performed by Western on behalf of Allied.

In a letter dated September 14, 1999, addressed to Johnson, Home agreed to accept thedefense of Allied. The letter also stated: "We [Home] will agree to share the cost of Allied's defenseand indemnity with the insurance carrier for Western Industries on a 50/50 basis subject to a reviewof both policies and any reservation of rights."

About six to eight months before the Fisher trial commenced in October 1999, Cincinnati settled Fisher's claim against Western for $40,000. After the trial in the Fisher action commenced,Fisher agreed to settle his suit against Allied for $600,000. Home paid $500,000, and Cincinnati paid$100,000 of the settlement amount.

On November 8, 2000, Home filed the instant declaratory judgment action against Cincinnati,asserting theories of equitable subrogation and equitable contribution. In Count I of the complaint,Home sought a declaration that Cincinnati was the sole primary insurance carrier responsible for thedefense of Allied in the Fisher action and, thus, was liable to Home for the entire amount Home paidtoward the settlement. In Count II, Home sought a declaration that it was entitled to recover fromCincinnati the amount it paid in excess of its pro-rata share of the Fisher settlement.

In its answer to Home's complaint, Cincinnati raised three affirmative defenses. It allegedthat: (1) Home waived any defenses to coverage by accepting Allied's defense without asserting areservation of its rights; (2) Home was estopped from asserting for the first time in its declaratoryjudgment action that it was only an excess insurer as to Allied and, therefore, lacked any duty todefend or indemnify Allied against the claims in the Fisher action; and (3) Allied's settlement in theamount of $600,000 was "excessive and unreasonable."

Cincinnati and Home filed cross-motions for summary judgment. In support of and inopposition to their motions, Home and Cincinnati attached, inter alia, the depositions of Johnson,Allied's attorney, and David Cunningham, a claims superintendent for Cincinnati. Both Johnson andCunningham testified as to their opinions about Western's potential liability in the Fisher action.

On August 20, 2002, the circuit court entered a written order granting Cincinnati's motionfor summary judgment and denying Home's cross-motion. The circuit court found, inter alia, that:(1) Cincinnati was Allied's primary insurer while Home was the excess insurer; (2) Home was notentitled to equitable contribution from Cincinnati because excess and primary insurers do not insurethe same risks; and (3) Home waived any defenses to coverage because it did not assert that it hadno duty to defend Allied or that it was an excess insurer until filing its declaratory judgment action. Home now appeals.

Summary judgment is appropriate where the pleadings, depositions, admissions, and affidavitson file, when taken together in the light most favorable to the nonmovant, show that there is nogenuine issue of material fact and the movant is entitled to judgment as a matter of law. 735 ILCS5/2-1005(c) (West 2000). Where the parties have filed cross-motions for summary judgment, theyagree that no genuine issue as to any material fact exists and that only a question of law is involved,and they invite the court to decide the issues based on the record. Tri-State Coach Lines, Inc. v.Metropolitan Pier & Exposition Authority, 315 Ill. App. 3d 179, 189, 732 N.E.2d 1137 (2000). Ourreview of the circuit court's ruling on a motion for summary judgment is de novo. Morris v.Margulis, 197 Ill. 2d 28, 35, 754 N.E.2d 314 (2001). We may affirm the circuit court's grant ofsummary judgment on any basis in the record, irrespective of whether the court relied on that ground. Fabiano v. City of Palos Hills, 336 Ill. App. 3d 635, 641, 784 N.E.2d 258 (2003).

We first address Home's contention that the circuit court erred in denying its motion forsummary judgment and granting Cincinnati's cross-motion for summary judgment on count I of itscomplaint. In count I, Home sought to recover from Cincinnati under a theory of equitablesubrogation. According to Home, Cincinnati provided Allied's primary insurance coverage and itprovided only excess coverage. Home asserts that it had no obligation to pay anything untilCincinnati paid out the limits of its $1 million policy. It argues that, when Cincinnati refused tocontribute more than $100,000 toward the settlement of Fisher's claim, it involuntarily paid theremaining $500,000, which it is now entitled to recover.

In the context of one insurer seeking reimbursement from another insurer, the prerequisitesto recovery under a theory of equitable subrogation are: (1) the defendant carrier must be primarilyliable to the insured for a loss under a policy of insurance; (2) the plaintiff carrier must be secondarilyliable to the insured for the same loss under its policy; and (3) the plaintiff carrier must havedischarged its liability to the insured and at the same time extinguished the liability of the defendantcarrier. State Farm General Insurance Co. v. Stewart, 288 Ill. App. 3d 678, 686-87, 681 N.E.2d 625(1997); North American Insurance Co. v. Kemper National Insurance Co., 325 Ill. App. 3d 477, 481,758 N.E.2d 856 (2001). One of the basic elements of a claim for equitable subrogation by one carrieragainst the other is that both insurers must be liable to the insured for the same loss. See TravelersCasualty & Surety Co. v. American Equity Insurance Co., 113 Cal. Rptr. 2d 613, 624 (2001) (inorder to state a cause of action for equitable subrogation, the insurer must establish that it, in wholeor in part, has compensated the insured for the same loss for which the party to be charged is liable). Consequently, we begin our analysis by addressing the issue of whether Home and Cincinnati wereliable for the same loss.

As stated, Cincinnati insured Western and Home insured Aldridge under their respectivepolicies. Allied was named as an additional insured under both policies. Specifically, the additionalinsured endorsement in the policies contained the following language:

"WHO IS AN INSURED (Section II) is amended to include as aninsured the person or organization shown in the Schedule, but onlywith respect to liability arising out of 'your work' for that insured byor for you."

"Your work" was defined under each policy as "[w]ork or operations performed by you or on yourbehalf".

In Schal Bovis Inc. v. Casualty Insurance Co., 315 Ill. App. 3d 353, 732 N.E.2d 1179 (2000),this court considered the effect that the language set forth above had on one insurer's right to recoverequitable contribution from another insurer as a consequence of an amount paid in settlement of aclaim against an entity that was an additional insured under policies issued by both carriers. In thatcase, a worker injured on a construction project sued MKDG/Buck 123 Partnership (Buck), theowner of the site, and Schal Bovis, Inc. (Schal), the general contractor, both of whom were insuredby Northbrook Property & Casualty Company (Northbrook). The injured worker also sued variousother subcontractors, including Ozark Steel (Ozark), who was insured by Wausau InsuranceCompany (Wausau); Ranken Steel (Ranken), who was insured by Great American InsuranceCompany (Great American); Alcan United Concrete, Inc. (Alcan), who was insured by CasualtyInsurance Company (Casualty); and Chicago Forming, Inc., who was insured by American StatesInsurance Company (American States). Schal Bovis, Inc., 315 Ill. App. 3d at 358. Buck and Schalwere named as additional insureds on each of the subcontractors' policies. The jury returned averdict in favor of the worker and against Schal, Buck, and Ozark in the amount of $2.8 million. Great American, Wausau, and Northbrook, the excess insurer, satisfied the $2.8 million judgment andsought equitable contribution from Casualty and American States, both of whom failed to pay anypart of the judgment. The circuit court, inter alia, entered judgment in favor of Casualty andAmerican States on the claim. In affirming the judgment entered in favor of Casualty and AmericanStates, this court noted that, although Great American's policy covered Schal and Buck as additionalinsureds, it did so only to the extent that the liability of Schal and Buck arose out of Ranken's work. Schal Bovis, Inc., 315 Ill. App. 3d at 363. Likewise, the Wausau policy covered Schal and Buck, butonly with respect to liability which arose out of Ozark's work. Schal Bovis, Inc., 315 Ill. App. 3dat 363. We stated:

"Clearly, the risk that a plaintiff might be injured in connection with Ranken'swork is a different risk than the risk that a plaintiff might be injured in connection withOzark's work. These risks are, in turn, different than the risks associated with aplaintiff being injured in connection with Alcan's work or in connection with ChicagoForming's work (as is required by the Casualty and American States policies). Thus,because each insurer insured substantively different risks, each is precluded fromseeking equitable contribution from the others." Schal Bovis, Inc., 315 Ill. App. 3dat 363.

Although, in Schal Bovis, Inc., we discussed the endorsement limiting the additional insured'sliability in the context of a claim for equitable contribution, the analysis is equally relevant to Home'sequitable subrogation claim in this case. Home was obligated to indemnify Allied only with respectto liability arising out of Aldridge's work, while Cincinnati was obligated to indemnify Allied only withrespect to liability arising out of Western's work. The risk that a plaintiff might be injured inconnection with Aldridge's work is a different risk than that associated with someone being injuredin connection with Western's work. Consequently, since Home and Cincinnati were not liable toindemnify Allied for the same loss, Home is not entitled to equitable subrogation as a matter of law. For this reason, we affirm the circuit court's grant of summary judgment in favor of Cincinnati oncount I of Home's complaint and the denial of summary judgment in favor of Home on the samecount

We now turn to the circuit court's order granting summary judgment in favor of Cincinnation Count II, Home's claim for equitable contribution. A co-insurer who has paid a loss is permittedto obtain partial reimbursement from other insurers who are also liable for the same loss (CincinnatiCos. v. West American Insurance Co., 183 Ill. 2d 317, 322, 701 N.E.2d 499 (1998)). In order forHome to succeed on its claim for equitable contribution, it would have to establish that it was a co-primary insurer with Cincinnati (see Schal Bovis, Inc., 315 Ill. App. 3d at 361), as the right tocontribution only arises among co-insurers.

As stated, in Schal Bovis, Inc., this court held that, where each insurer insures substantivelydifferent risks, each is precluded from seeking equitable contribution from the other. Schal Bovis,Inc., 315 Ill. App. 3d at 363. We have already concluded that, here, the risk that a plaintiff might beinjured in connection with Aldridge's work is a different risk than that associated with someone beinginjured in connection with Western's work. For this reason, Home is precluded from seekingequitable contribution from Cincinnati. See Schal Bovis, Inc., 315 Ill. App. 3d at 363.

We are mindful that the Third District of the Appellate Court in Cincinnati Insurance Co. v.River City Construction Co., 325 Ill. App. 3d 267, 757 N.E.2d 676 (2001), declined to follow SchalBovis, Inc. In that case, a worker employed by Illinois Piping Corporation (Illinois Piping) workingat the Caterpillar Corporation (Caterpillar) building was injured. River City Construction Company(River City) had contracted with Caterpillar to install tanks at the building. At the time of theaccident, Auto-Owners Insurance Company (Auto-Owners) insured River City, and CincinnatiInsurance Company (Cincinnati) insured Illinois Piping. Cincinnati Insurance Co., 325 Ill. App. 3dat 269. Caterpillar was named as an additional insured under both the Cincinnati and Auto-Ownerspolicies. Cincinnati paid Caterpillar's $541,422.12 settlement with the injured worker. In count IIof Cincinnati's complaint, it sought equitable contribution from Auto-Owners for its proportionateshare of liability. Auto-Owners filed a motion to dismiss count II, arguing, inter alia, that Cincinnaticould not maintain an action for equitable contribution because the Cincinnati and Auto-Ownerspolicies did not insure the same risk. The circuit court agreed and dismissed count II of Cincinnati'scomplaint. In reversing, the court held that, although the Cincinnati policy insured Caterpillar forliability arising out of Illinois Piping's operations, and the Auto-Owners policy insured Caterpillar forliability arising out of River City's work, following the rule stated in Schal Bovis Inc. would beinequitable because Cincinnati's payment of the settlement on behalf of Caterpillar benefitted both Cincinnati and Auto-Owners. Cincinnati Insurance Co., 325 Ill. App. 3d at 275. The court inCincinnati Insurance Co. appears to have held that, merely because Caterpillar was insured forworkers' injuries under both policies, Cincinnati's settlement of Caterpillar's claim necessarilybenefitted Auto-Owners without regard to whether both carriers were actually liable for the sameunderlying risk. We decline to adopt the court's reasoning in Cincinnati Insurance Co., and reaffirmour holding in Schal Bovis, Inc., that, in order to be entitled to equitable contribution, the plaintiffcarrier and the defendant carrier must be co-insurers for the same underlying risk.

Even assuming arguendo that Home and Cincinnati insured the same underlying risk, Homestill could not succeed on its claim for equitable contribution in this case. As noted earlier, both theHome and Cincinnati policies contained virtually identical standard "other insurance" provisions. Home's policy, however, contained an endorsement which modified the clause to provide excesscoverage only. See American States Insurance Co. v. Liberty Mutual Insurance Co., 291 Ill. App.3d 336, 683 N.E.2d 510 (1997); United States Fire Insurance Co. v. Aetna Life & Casualty, 291 Ill.App. 3d 991, 684 N.E.2d 956 (1997). In Illinois, an excess insurer cannot seek equitable contributionfrom a primary insurer because excess and primary carriers insure different risks. See Schal Bovis,Inc., 315 Ill. App. 3d at 363; Home Indemnity Co. v. General Accident Insurance Co. of America,213 Ill. App. 3d 319, 321, 572 N.E.2d 962 (1991); United States Fidelity & Guaranty Co. v.Continental Casualty Co., 198 Ill. App. 3d 950, 955, 556 N.E.2d 671 (1990). The rationale for sucha holding is that the protections under an excess policy do not begin until those under a primarypolicy have been exhausted. Home Indemnity Co., 213 Ill. App. 3d at 321. Therefore, even if bothHome and Cincinnati could be said to insure Allied for the same loss, Home's status as an excessinsurer precludes it from seeking equitable contribution from Cincinnati, a primary insurer. See SchalBovis, Inc., 315 Ill. App. 3d at 363.

For the foregoing reasons, we find that the circuit court properly granted summary judgmentin favor of Cincinnati on count II of Home's complaint, and denied summary judgment in favor ofHome.

In summary, we affirm the circuit court's grant of summary judgment in favor of Cincinnatiand against Home on both counts of Home's complaint and the denial of Home's motion for summaryjudgment on the same counts.

Affirmed.

KARNEZIS, J., concurs.

HALL, J., dissents.

I respectfully dissent. I believe that the elements of equitable subrogation have been met. Where an insurer seeks reimbursement from another insurer under a theory of equitable subrogation,the insurer must establish that: (1) the defendant insurer is primarily liable to the insured under apolicy of insurance; (2) the insurer is secondarily liable to the insured under an insurance policy; and(3) the insurer paid the insured under that policy, thereby extinguishing the debt of the defendantinsurer. State Farm General Insurance Co. v. Stewart, 288 Ill. App. 3d 678, 686-87, 681 N.E.2d 625(1997).

Here, the first and second elements are satisfied since it is undisputed that the Home policyis excess and the coverage of the Cincinnati policy is primary as to Allied. The third and final elementis satisfied since Home paid $500,000 of the $600,000 settlement, thereby extinguishing the debtowed by Cincinnati, even though Cincinnati's policy was primary.

The majority, however, maintains that pursuant to the analysis set forth in Schal Bovis Inc.v. Casualty Insurance Co., 315 Ill. App. 3d 353, 732 N.E.2d 1179 (2000), since Home and Cincinnatiwere not liable to indemnify Allied for the same loss, Home is not entitled to equitable subrogationas a matter of law. I disagree. In Schal Bovis, the reviewing court discussed the endorsementlimiting the additional insured's liability in the context of a claim for equitable contribution, notequitable subrogation.

The equitable subrogation and equitable contribution doctrines both pertain to the allocationof costs when there is more than one potentially responsible insurance company, but the two doctrinesare based upon "entirely different" concepts. Maryland Casualty Co. v. Nationwide Mutual InsuranceCo., 81 Cal. App. 4th 1082, 1088, 97 Cal. Rptr. 2d 374 (2000), citing Fireman's Fund Ins. Co. v.Maryland Casualty Co., 65 Cal. App. 4th 1279, 1293, 77 Cal. Rptr. 2d 296 (1998). Equitablecontribution applies to apportion a loss among insurers who cover the same risk, so that each paysits fair share and one does not profit at the expense of the others. Fireman's Fund, 65 Cal. App. 4that 1296. Conversely, "[e]quitable subrogation allows an insurer that paid coverage or defense coststo be placed in the insured's position to pursue a full recovery from another insurer who was primarilyresponsible for the loss." Maryland Casualty Co., 81 Cal. App. 4th at 1088. Where different insurerscover different risks and liabilities with respect to the same insured, they may proceed against eachother for reimbursement by equitable subrogation rather than equitable contribution. Atlantic MutualInsurance Co. v. J. Lamb, Inc., 100 Cal. App. 4th 1017, 1043-44, 123 Cal. Rptr. 2d 256 (2002);Travelers Casualty & Surety Co. v. American Equity Insurance Co., 93 Cal. App. 4th 1142, 1151,113 Cal. Rptr. 2d 613 (2001). Based upon these principles, I would reverse the summary judgmententered in favor of Cincinnati on count I (equitable subrogation claim) of Home's complaint.

1. Although the schedules contained in the copies of the insurance policies included in therecord on appeal do not reflect Allied's name, both parties represent that Allied was listed in eachpolicy's schedule as an additional insured.