Universal Underwriters Insurance Company v. Judge & James, LTD.

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State: Illinois

Court: 1st District Appellate

Docket No: 1-05-4138 Rel

Case Date: 03/30/2007

Preview:THIRD DIVISION March 30, 2007

No. 1-05-4138

UNIVERSAL UNDERWRITERS INSURANCE COMPANY, Plaintiff-Appellant, v. JUDGE & JAMES, LTD. and JAY S. JUDGE, Defendants-Appellees.

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Appeal from the Circuit Court of Cook County.

No. 02 L 966 Honorable Robert Lopez Cepero, Judge Presiding.

PRESIDING JUSTICE THEIS delivered the opinion of the court: Plaintiff Universal Underwriters Insurance Company (Universal) appeals from the trial court's grant of summary judgment to defendants Judge & James, Ltd., and Jay S. Judge (Judge) (collectively, defendants) in this legal malpractice action. Universal argues that the trial court erred in: (1) determining that defendants committed no legal malpractice when they failed to appeal the circuit court's 1995 order because that order was not final and appealable; (2) finding that defendants did not commit malpractice when they failed to appeal either the 1998 order directing Universal to arbitrate or the 2000 judgment confirming the arbitration award; and (3) failing to enter summary judgment in Universal's favor on defendants' statute of limitations and statute of repose defenses. For the following reasons, we reverse and remand for further proceedings. Universal, a Kansas corporation, issued an insurance policy to Carriage Chevrolet, Inc., a

1-05-4138 car dealership in St. Louis, Missouri, effective from April 1, 1990 to April 1, 1991. The policy included, inter alia, premises liability, property damage, and automobile insurance. Additionally, Universal issued an umbrella policy with a $1 million limit to Carriage Chevrolet. On January 29, 1991, Michele Heflin, a Carriage Chevrolet salesperson, was driving a car owned by Carriage Chevrolet with its permission in Alton, Illinois. While Heflin was rendering assistance to a disabled vehicle, another car struck Heflin, injuring her. Heflin filed suit against that driver and received $25,000, the limit of the driver's policy. Heflin then sought recovery under the Universal umbrella policy issued to Carriage Chevrolet, arguing that it provided underinsured motorist coverage. When Universal denied her claim, Heflin filed a declaratory judgment action in 1993 in Madison County, Illinois. Heflin asked the court to determine and adjudicate the rights and liabilities of the parties with respect to the umbrella policy. She sought a declaratory judgment determining that the umbrella coverage applied to the underinsured motorist coverage of Carriage Chevrolet, for which Heflin was a third-party beneficiary, and that Universal was obligated to negotiate that claim with Heflin, pursuant to its policy provisions. Universal hired defendants Jay Judge and his law firm, Judge & James, to defend it in this action. In May 1995, Universal filed a motion to strike and dismiss Heflin's suit. Heflin then filed a motion for summary judgment, arguing that she was insured under the Universal umbrella policy and that Universal wrongfully refused to arbitrate her claim. She sought a judgment finding that she was insured under this policy. On June 5, 1995, the trial court entered an order finding that Heflin was an insured under the umbrella policy, which provided $1 million in coverage, based on a finding that the contract so provided, that an ambiguity existed therein

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1-05-4138 which was construed in Heflin's favor, and that Heflin had complied with all provisions as required by that policy. The court denied Universal's motion to strike and dismiss. However, Universal's response to Heflin's motion for summary judgment was not due until June 16, 1995. Universal then filed a motion for reconsideration and rehearing, asking the court to reconsider its grant of summary judgment to Heflin in light of Universal's response. Universal also argued that Heflin was not an insured under the umbrella policy, the umbrella policy did not include any underinsured motorist coverage, and that even if Heflin was covered under that policy, the umbrella policy only covered an insured's liability to another party and did not cover any injury to the insured herself. On July 31, 1995, the Madison County circuit court denied Universal's motion to reconsider, but, on its own motion, vacated its June 5, 1995 order granting Heflin's motion for summary judgment so that it could consider Universal's response. Having considered the response, the trial court ordered that it "still agrees with the reasoning of the plaintiff and grants plaintiff's summary judgment motion against Universal." Defendants, as counsel for Universal, did not take an appeal from this order. On October 31, 1996, Universal filed, in the 1993 declaratory judgment action, an emergency motion for a protective order to quash or continue the evidence deposition of one of Helfin's experts. In a January 7, 1997 order, the trial court found that the July 31, 1995 order was final and appealable as it disposed of all issues before the court and, thus, the court no longer had jurisdiction to rule on Universal's motion. Heflin filed a second suit against Universal in 1998 to enforce the arbitration clause. Universal responded, inter alia, that Heflin was not covered under the policy and that the policy

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1-05-4138 did not contain an arbitration clause for underinsured motorist coverage. In an order dated October 9, 1998, the trial court found that this was a separate and distinct lawsuit from the declaratory judgment action. It held that the previous case had determined that Heflin was covered under Universal's umbrella policy and that Universal did not appeal that decision. Although Universal sought to relitigate coverage issues, the court held that those issues had already been decided, denied Universal's motion for summary judgment, and granted Heflin's motion to strike Universal's affirmative defenses. The court found that the policy contained an arbitration clause and ordered the parties to arbitrate Heflin's claim. Defendants, as Universal's counsel, did not appeal this order. On January 13, 2000, Universal and Heflin proceeded to arbitration and the arbitrators awarded her $2,975,000 in damages. On March 2, 2000, Heflin filed an action in the circuit court of Madison County to confirm the arbitration award under section 11 of the Uniform Arbitration Act (710 ILCS 5/11 (West 2000)). Universal then filed a motion to reject the award. On October 26, 2000, the trial court denied Universal's request to reject the arbitration award and confirmed the award. Defendants, as counsel for Universal, did not appeal this judgment. On January 5, 2001, Heflin issued a citation to discover assets against Universal to enforce the judgment. On March 30, 2001, Heflin filed a motion to order payment of the judgment in the trial court. On April 4, 2001, Universal, through defendants, filed an emergency motion for leave to file a complaint seeking a writ of mandamus or a supervisory order in the Illinois Supreme Court. The motion stated that Heflin had filed three lawsuits against Universal concerning underinsured motorist coverage, none of which contained a final and appealable

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1-05-4138 order. It argued that the July 31, 1995 order was not final and, thus, the subsequent two lawsuits must be dismissed because another action remained pending. Alternatively, Universal argued that if that order was final, the other two suits were barred by res judicata. Universal asked the supreme court to vacate the October 26, 2000 order, dismiss the newest lawsuit, reduce the arbitration award to the umbrella policy's $1 million limit, determine whether the proceedings in the latest two lawsuits were void, and stay payment of the judgment. The supreme court denied the writ on May 3, 2001. On May 7, 2001, the trial court entered an order requiring Universal to pay the judgment of $2,975,000 plus interest to date of $141,577.08. On May 17, 2001, Universal, through new counsel, settled Heflin's claim for $3 million, representing the judgment amount plus a portion of the interest due. On January 23, 2002, Universal filed this legal malpractice case against defendants. In its amended complaint, Universal contended that defendants owed Universal a duty of care, which included the obligation to take timely appeals and to timely seek other remedies in the event of adverse and erroneous judgments. Defendants breached their duties by neglecting or otherwise failing to timely appeal the July 31, 1995 order and the October 26, 2000 order.1 Universal also alleged that defendants breached their duties by failing to raise the $1 million umbrella policy limit as a defense or limitation on damages in the arbitration proceeding, failing to file a timely

Additionally, as Universal clarified in its response to defendants' summary judgment motion, Universal alleged that if, and only if, the July 31, 1995 order was not final and appealable, Universal would argue that defendants committed malpractice by failing to take an interlocutory appeal from the October 9, 1998 order compelling arbitration and attacking the underlying issue of coverage. 5

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1-05-4138 motion to reconsider the arbitration award or file a timely petition to vacate or modify the award, and failing to address the merits of the arbitration award or argue that the arbitrators exceeded their powers by entering an award in excess of the policy limits. Universal alleged that but for these breaches, it would have prevailed in challenging the declaratory judgment finding Heflin to be an insured under the umbrella policy and in the alternative, Universal would have successfully had the $2,975,000 arbitration award vacated as exceeding the policy limits. Universal sought $3 million in damages. On May 31, 2005, defendants filed their third affirmative defense of the statute of limitations and the statute of repose. In response, Universal argued that these defenses did not apply to this case and that, if they did, defendants should be estopped from raising them. On July 7, 2005, defendants filed a motion for summary judgment on Universal's legal malpractice complaint, arguing that they committed no malpractice because Universal voluntarily paid a void judgment by settling Heflin's case, foregoing any collateral attack to set aside such void judgment. They contended that the trial court's October 26, 2000 order was void because the umbrella policy contained no agreement to arbitrate and that the trial court exceeded "its specific subject matter jurisdiction" to order arbitration and enter judgment on the arbitration award where there was no arbitration agreement. Defendants also contended that the earlier orders entered in the Heflin cases, including the July 31, 1995 order, were not final and appealable. In its response, Universal argued that the July 31, 1995 order was final and appealable and that the October 26, 2000 order was not void. Both parties attached the umbrella policy, various pleadings from the Heflin cases, e-mail and letter correspondence, and the

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1-05-4138 depositions of Judge and several experts. Universal also included an e-mail from Judge to Universal, dated May 10, 2001, wherein Judge stated that he believed he should have reacted to the trial court's October 26, 2000 order. He stated that he should not have filed a notice of appeal, but should have filed a motion to vacate that judgment, stating that "[t]he reason we did not was because the Order of 10/26/00 never came to my attention." Judge stated that although the order was received in his office in November, he did not learn of it until he fired the attorney involved in his office who never informed Judge of the order. On September 21, 2005, Universal filed a motion for a summary determination on defendants' statute of limitations and statute of repose defenses, arguing that these defenses did not apply to this case and that, if they did, defendants should be estopped from raising them. On December 14, 2005, the trial court granted defendants' motion for summary judgment and, thus, found Universal's motion for summary determination on defendants' statute of limitations and repose defenses moot. Universal then filed this timely appeal. In an action for legal malpractice, a plaintiff must plead and prove that: the defendant attorney owed the plaintiff a duty of due care arising from the attorney-client relationship; that the defendant breached that duty; and that as a proximate result, the plaintiff suffered actual damages. Governmental Interinsurance Exchange v. Judge, 221 Ill. 2d 195, 199, 850 N.E.2d 183, 186-87 (2006). The burden of pleading and proving actual damages requires establishing that "but for" the attorney's negligence, the plaintiff would have been successful in the underlying suit, and thus, a legal malpractice plaintiff must litigate "a case within a case."

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1-05-4138 Governmental Interinsurance Exchange, 221 Ill. 2d at 200, 850 N.E.2d at 187. In an action alleging that an attorney failed to perfect an appeal, the plaintiff must prove that he or she would have been successful on appeal if the appeal had properly been perfected. Governmental Interinsurance Exchange, 221 Ill. 2d at 200, 850 N.E.2d at 187. Summary judgment should be granted "without delay if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." 735 ILCS 5/2-1005(c) (West 2004). Although summary judgment can aid in the expeditious disposition of a lawsuit, it remains a drastic means of disposing of litigation and, therefore, should be allowed only where the right of the moving party is clear and free from doubt. Bagent v. Blessing Care Corp., No. 102430 (Ill. Jan. 19, 2007). The movant bears the initial burden of production in a motion for summary judgment. Bourgonje v. Machev, 362 Ill. App. 3d 984, 994, 841 N.E.2d 96, 106 (2005). A defendant moving for summary judgment may meet its burden of production either by presenting evidence that, left unrebutted, would entitle it to judgment as a matter of law or by demonstrating that the plaintiff will be unable to prove an element of his cause of action. Bourgonje, 362 Ill. App. 3d at 994, 841 N.E.2d at 106. If a defendant presents facts that would demonstrate its entitlement to judgment as a matter of law, the burden then shifts to the plaintiff to present some evidence allowing the imposition of liability on the defendant and supporting each element of his cause of action, thereby defining a material issue of fact to be determined at trial. Bourgonje, 362 Ill. App. 3d at 994-95, 841 N.E.2d at 106. Our standard of review is de novo. State Automobile Mutual Insurance Co. v. Kingsport Development, LLC, 364

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1-05-4138 Ill. App. 3d 946, 951, 846 N.E.2d 974, 979 (2006). Universal argues that the trial court erred in granting summary judgment to defendants on its legal malpractice complaint. First, Universal contends that the July 31, 1995 order in the Heflin declaratory judgment action, which found that Heflin was an insured under Universal's umbrella policy and entitled to underinsured motorist coverage, was final and appealable. Because this order was final and appealable, Universal contends, defendants breached their duties to Universal by failing to perfect an appeal from this order. Defendants respond that the July 31, 1995 order was not final because it did not adjudicate all underinsured motorist coverage issues. Specifically, defendants contend that the July 31, 1995 order was not final because it did not award Heflin money damages, did not state that the umbrella policy provided underinsured motorist coverage with an arbitration clause requiring either a three-person arbitration or arbitration under the American Arbitration Association, and did not order the parties to proceed to arbitration. Although defendants never specify which of the four elements of a legal malpractice claim Universal failed to prove, we assume that this argument challenges the element of breach. Defendants misunderstand the nature of declaratory judgments. Under section 2-701 of the Code of Civil Procedure (the Code) (735 ILCS 5/2-701 (West 2004)), "[t]he court may, in cases of actual controversy, make binding declarations of rights, having the force of final judgments, whether or not any consequential relief is or could be claimed, including the determination * * * of the construction of * * * any deed, will, contract or other written instrument, and a declaration of the rights of the parties interested." 735 ILCS 5/2-701(a) (West

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1-05-4138 2004). Further, the statute provides that "if a declaration of rights is the only relief asked, the case may be set for early hearing as in the case of a motion." 735 ILCS 5/2-701(b) (West 2004). The central purpose of declaratory relief is to allow the court to address a controversy one step sooner than normal after a dispute has arisen, but before the parties take steps that would give rise to a claim for damages or other relief. Beahringer v. Page, 204 Ill. 2d 363, 372-73, 789 N.E.2d 1216, 1223 (2003). "The remedy of declaratory judgment is to be liberally applied to provide a method by which a binding declaration of rights may be rendered before the parties make an irrevocable change in position that might jeopardize those rights." Illinois State Toll Highway Authority v. Amoco Oil Co., 336 Ill. App. 3d 300, 305, 783 N.E.2d 658, 662 (2003). Further, in deciding issues of insurance coverage, the court should limit its rulings to the issues set out in the pleadings, should not decide issues which go beyond coverage, and must not determine disputed factual issues that are crucial to an insured's liability in the underlying lawsuit. 16 Ill. L. & Prac. Declaratory Judgments

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