Find Legal Information

Country Companies brought a subrogation action against MarkSeckler and Universal Underwriters Insurance Company ("Universal")based on an auto accident involving Seckler and one of itsinsureds, Michael Falatko. Seckler filed a counterclaim againstUniversal seeking a declaration that Universal had a duty to defendand indemnify him. The trial court ruled in favor of Seckler andagainst Universal, finding that Universal owed him coverage up to$500,000. We affirm.

In July, 1996, Seckler and Falatko had a traffic accident, andFalatko was injured. Falatko filed an action against Seckler, RuffElectrical Services, Inc. ("Ruff"), and O'Brien Imports of Peoria,Inc. ("O'Brien"), alleging that Seckler negligently caused theaccident, that Seckler was driving a vehicle in the course of hisemployment with Ruff at the time of the accident, and that thevehicle was owned by O'Brien.

Falatko was insured by Country Companies. Seckler waspersonally insured by State Farm Mutual Automobile InsuranceCompany ("State Farm"), and O'Brien had a garage policy withUniversal at the time of the accident. Ruff was insured by CGUInsurance.

In October, 1997, Country Companies filed suit against Secklerand Universal, seeking subrogation for amounts paid to Falatko. InJune, 1998, Falatko and his wife also filed suit against Secklerindividually. In September of that year, Seckler filed a"Counterclaim for Declaratory Judgment" in the subrogation actionseeking a declaration that Universal owed a duty to defend andindemnify him in both suits. The two cases were subsequentlyconsolidated.

Seckler moved for summary judgment in the declaratory judgmentaction. Universal opposed the motion and sought leave to file athird party complaint adding State Farm to the counterclaim. Thetrial court denied Universal's motion and granted summary judgmentto Seckler.

After Universal asserted in a motion that Seckler was limitedto $20,000 coverage under the policy, Seckler filed a motion todetermine policy limits. Universal objected, arguing that therewas no basis in the pleadings to grant the motion and that not allnecessary parties were joined. The trial court granted the motionand held that Seckler was entitled to $500,000 coverage limits.

On appeal, Universal argues that the trial court erred when itmade any finding of the limits of liability for two reasons: 1)Seckler did not join all of the parties that were necessary to theaction; and, in any case, 2) Universal's limit of liability toSeckler was $100,000.

Universal maintains that declaratory judgment on this issuewas improper because parties that were necessary to a fullresolution of the issue were not joined. The company asserts thatexcess insurers are always necessary to a declaration of the limitsof the primary insurer. Therefore, since Seckler's excess insurer,State Farm, was not made a party, this court could not reach theissue.

In order to determine if a party is necessary to an action,two factors must be satisfied. First, the party must have a legalor equitable interest in the subject matter of the suit. AmericanHome Assurance Company v. Northwest Industries, Inc., 50 Ill. App.3d 807, 812 (1977). Second, that interest must be "a present orsubstantial interest as distinguished from a mere expectancy orfuture contingent interest." American Home, 50 Ill. App. 3d at812.

The first prong of the test is satisfied when an excessinsurer bears potential liability if a primary insurer's limits areexceeded. American Home, 50 Ill. App. 3d at 812. However, thesecond prong of the test is not satisfied unless the primaryinsurer's liability limits have already been reached, regardless ofthe likelihood that those limits may later be exhausted. AmericanHome, 50 Ill. App. 3d at 812; Zurich Insurance Company v. RaymarkIndustries, 144 Ill. App. 3d 943, 946-48 (1986).

Here, State Farm meets the first prong of the "necessaryparty" test, since it provided excess insurance coverage toSeckler. However, at the time of the trial court's judgment, therewas nothing in the record to indicate that Universal's primaryliability limits were exhausted. State Farm's interest was stillmerely contingent, and the company did not satisfy the secondrequirement to be a necessary party. See American Home, 50 Ill.App. 3d at 812. Therefore, State Farm was not a necessary party tothe action.

Universal also argues that the trial court erred in itsdetermination that Seckler was entitled to more than the minimumcoverage required by law. The company claims that its liabilitylimits for this accident should be significantly lower.

Unambiguous terms in an insurance policy must be enforced aswritten, so long as they do not contravene public policy. JohnDeere Insurance Company v. Allstate Insurance Company, 298 Ill.App. 3d 371, 376 (1998). However, an insurance company can waiveprovisions of its policy by words or conduct that are inconsistentwith an intention to rely on its requirements. National TeaCompany v. Commerce & Industry Insurance Company, 119 Ill. App. 3d195, 205 (1983).

In this case, the policy provides coverage to the limitsstated in the declarations page for most drivers, includingO'Brien's owners, partners, employees, and contract drivers. However, the policy contains an exception to the declared limitsfor certain classes of drivers that do not fall into one of theclasses specifically named. The policy decreases coverage fordrivers who do not fit into one of the named categories but are"required by law to be an INSURED while using an AUTO covered bythis Coverage Part within the scope of [the vehicle owner's]permission." This decrease in coverage for permissive drivers isknown as a "step-down" provision.

Universal asserts that this step-down provision in the policylowers its liability limits to Seckler. The company argues thatSeckler, as a permissive driver, falls within the exception to thegeneral liability limits, and is entitled to no more than theminimum coverage required by law, i.e. $100,000.

Seckler responds that Universal filed a certificate ofinsurance with the Illinois Secretary of State stating that it wasproviding O'Brien with coverage limits of $300,000 per person forbodily injury, $300,000 per occurrence for bodily injury, and$300,000 per occurrence for property damage; those limits arehigher than the limits the company claims should apply to thisaccident. Seckler asserts that this filing should constitute awaiver of the step-down provision of the policy. We agree.

When Universal certified to the Illinois Secretary of Statethat the same coverage applies to all occurrences, withoutexception, it waived any step-down provision in the policy. Universal never indicated that coverage limits might be differentfor different types of drivers. Filing the certificate with theSecretary of State, without reference to any differential limits,is an act inconsistent with an intention to rely on thoseprovisions that changed the company's liability limits depending onthe status of the driver. See National Tea Company, 119 Ill. App.3d at 205. Universal has waived its claim that the "step-down"provision controls, and the policy limits cannot be enforced. SeeBrowning v. Plumlee, 316 Ill. App. 3d 738 (2000); John DeereInsurance Company v. Allstate Insurance Company, 298 Ill. App. 3d371 (1998).

However, Universal claims that this result conflicts with ourprevious decision in Country Mutual Insurance Company v. UniversalUnderwriters Insurance Company, 316 Ill. App. 3d 161 (2000). Thecompany asserts that we faced this same issue in that case, butdeclined to hold that the injured party was entitled to coveragelimits greater than the minimum required by law. The company isincorrect.

In Country Mutual, we had no need to reach this issue. Weneeded merely to determine 1) whether Universal was the primaryinsurer for the injured party in that case, and 2) the properminimum coverage requirements for a permissive user of a vehicleowned by a auto dealer. In other words, we only determined theproperly applicable minimum coverage, we were not asked or requiredto decide whether the injured party was entitled to coveragegreater than the minimum. See Country Mutual, 316 Ill. App. 3d at164-66. Thus, our decision in this case is not inconsistent withthe holding of Country Mutual.

Nevertheless, Universal asserts that Seckler cannot rely onthe certificate as a waiver because it was not presented asevidence before the trial court. However, we may take judicialnotice of public records regardless of whether such records werebefore the trial court. Muller v. Zollar, 267 Ill. App. 3d 339,341 (1994). Moreover, we can sustain the trial court's judgment onany ground properly before us, no matter whether the trial courtrelied on it or whether the its reasoning was correct. See Shramukv. Snyder, 278 Ill. App. 3d 745, 748 (1996).

In this case, we take judicial notice of the filing of thecertificate, and it is properly before us. As stated above, thecertificate establishes that Universal waived its right to claimthat its policy provided differing coverage based on the status ofthe vehicle's driver, at least to the extent that it attempts todecrease that coverage below the $300,000 limits it has representedto the State as coverage for drivers of any status.

Because the parties have informed this court that the actionunderlying this case has been settled for less than $300,000, weneed not determine whether the result of Universal's waiver iscoverage in the amount of the $300,000 noted in the certificatefiled with the Secretary of State or the $500,000 contained in thedeclarations page of the policy.

The judgment of the circuit court of Peoria County is affirmedas modified.

Affirmed as modified.

HOLDRIDGE and SLATER, JJ., concur.