Case Title: Home Insurance Co. v. Cincinnati Insurance Co.

Citation: 

Docket Number: 97873

State: illinois

Court: Illinois Supreme Court

Date: 2004-12-02T00:00:00Z

Document:
Docket No. 97873-Agenda 34-September 2004.
THE HOME INSURANCE COMPANY, Appellant, v. THE 							
CINCINNATI INSURANCE COMPANY, Appellee.
Opinion filed December 2, 2004. 
	JUSTICE THOMAS delivered the opinion of the court:
	The Home Insurance Company (Home) brought a two-count
declaratory judgment action against the Cincinnati Insurance Company
(Cincinnati), attempting to recover money paid to settle an underlying
personal injury action. On cross-motions for summary judgment, the
circuit court granted Cincinnati's motion on both counts and denied
Home's motion. The appellate court, with one justice dissenting,
affirmed the circuit court. 345 Ill. App. 3d 40. We allowed Home's
petition for leave to appeal (177 Ill. 2d R. 315). We also allowed
Liberty Mutual Insurance Company to file an amicus brief in support
of Home (155 Ill. 2d R. 345(a)). For the reasons that follow, we
affirm in part and reverse in part.

BACKGROUND
	Allied Asphalt Paving Company (Allied) was the general
contractor for a renovation project on the Kennedy Expressway.
Allied subcontracted work on the project to Aldridge Electric
Company, Inc. (Aldridge), and Western Industries, Inc. (Western).
Matthew Fisher, an employee of Aldridge, was injured while installing
lights in an underpass on the project. The accident occurred at 2 a.m.,
when an intoxicated driver drove through the construction area and
struck Fisher.
	Fisher sued numerous parties, including Allied and Western. In
his third amended complaint, Fisher alleged that Allied and Western
had agreed to assume responsibility for all safety aspects of the
project, and that Allied and Western breached their duty to 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 insurances policies: a commercial liability policy
issued to Western by Cincinnati; and a policy issued to Aldridge by
Home. Each policy contained a $1 million limit of liability for each
occurrence. Additionally, each policy contained the following
endorsement:
		"WHO IS AN INSURED (Section II) is amended to include
as an insured the person or organization shown in the
Schedule, but only with respect to liability arising out of
'your work' for that insured by or for you."
The term "your work" was defined as follows under each policy:
			"a. Work or operations performed by you or on your
behalf, and
			b. Materials, parts or equipment furnished in connection
with such work or operations."
It is undisputed that Home's policy was an excess policy, while
Cincinnati's was a primary policy.
	Allied tendered the defense of the Fisher action to both Cincinnati
and Home. In a June 23, 1997, letter, Cincinnati accepted the defense
of Allied, but reserved its rights to deny coverage with respect to any
work or conduct that was not performed by Western on behalf of
Allied. In a September 14, 1999, letter, Home accepted the defense of
Allied. However, Home's acceptance letter stated that Home "will
agree to share the cost of Allied's defense and indemnity with the
insurance carrier for Western *** on a 50/50 basis subject to a review
of both policies and any reservation of rights."
	In October 1999, Cincinnati settled Fisher's claim against
Western for $40,000. Thereafter, Fisher agreed to settle his suit
against Allied for $600,000. Home paid $500,000 toward this
settlement, but Cincinnati paid only $100,000 of the total settlement
amount.
	On November 8, 2000, Home filed the present declaratory
judgment action, asserting theories of equitable subrogation and
equitable contribution. Count I sought a declaration that Cincinnati
was the sole primary insurer responsible for the defense of Allied and
was thus liable to Home for the entire amount Home paid toward the
settlement. Count II sought a declaration that it was entitled to
recover from Cincinnati the amount it paid in excess of its pro rata
share of the settlement.
	Thereafter, Home took the evidence depositions of Richard
Johnson, Allied's defense counsel, and David Cunningham,
Cincinnati's claim manager. Johnson testified in his deposition that by
the time of trial, Fisher's theory had evolved to rely more heavily on
the fact that the injury was caused by a lack of a flagger at the site.
Flagging was not Western's responsibility. Rather, Western was
responsible for properly placing barricades at the site. It was
Johnson's guess that Western would probably not be found liable at
all-this was because none of the evidence showed a lack of
compliance with Illinois Department of Transportation specifications
on barricades. He assessed the probability of a finding of liability
against Western at no more than 20%. But Johnson also did not think
much of the lack-of-a-flagman theory as it pertained to Aldridge's
work, stating that it was "off the wall" and "almost bordered on being
ludicrous." Accordingly, Johnson assessed the potential that Allied
would be found liable at all at only 10 to 20%.
	Cunningham testified in his deposition that he agreed with
Johnson's assertion that there was up to a 20% chance that Allied
would be found liable, that the verdict potential was between two to
three million, and that $600,000 was a reasonable settlement amount.
Cunningham also admitted that Cincinnati's payment of $40,000 to
settle on behalf of Western was based at least in part on the possibility
that Western might lose its pending summary judgment motion and be
found liable at trial. He refused to give a percentage of the possibility
of Western being found liable, stating instead that he felt there was a
"slim" chance. By settling on behalf of Western, Cunningham wanted
to insure that no finding would ever be made that Western was liable.
Cunningham admitted that if the jury had made a finding of liability
against Western on the verdict form, Cincinnati's policy, listing Allied
as an additional insured, would be triggered. But Cunningham
believed Cincinnati would owe only for the portion of damages that
arose out of Western's work. He had no idea, however, how that
would be determined at trial, and he had never seen a case where fault
was apportioned between insurance companies as he suggested it
should be. He acknowledged that such "arising out of" language, as
is contained in Cincinnati's policy, is read very broadly by courts in
favor of coverage.
	Cunningham further testified in his deposition that he refused to
pay any more than $100,000 toward the settlement. At the time of his
refusal, he offered to arbitrate the allocation issue.
	Home filed the affidavit of Joan Kenchik, stating that she was the
claim manager for Home that handled the Fisher settlement. She
attempted on several occasions to persuade Cincinnati to contribute
more than $100,000 toward the settlement, but it refused. Home was
thus forced to pay all of the remainder of the settlement amount.
Home made this payment, however, on the condition that Cincinnati
agree to arbitrate Home's claims. According to her affidavit, it was
Home's position that it was entitled to at least equal contribution from
Cincinnati or, depending upon on whether the Cincinnati policy
contained an "other insurance" clause, complete indemnification from
Cincinnati. The affidavit does not indicate whether or not Home ever
communicated to Cincinnati that it was entitled to full reimbursement
for the settlement as an excess insurer. Kenchik's affidavit further
notes that, while Cincinnati agreed to arbitrate at the time of
settlement, it later refused her requests to arbitrate.
	Home filed as an exhibit a letter written by Kenchik to
Cunningham dated October 21, 1999, which was shortly after the
settlement. In the letter, Home agreed to arbitrate the issues of
indemnification. Home also filed a response letter from Cunningham
dated October 27, 1999, stating that Cincinnati had not unqualifiedly
agreed to arbitrate. It also asked Home to specify the legal basis on
which it was seeking reallocation of the settlement award.
	The circuit court granted Cincinnati's motion for summary
judgment and denied Home's cross-motion for summary judgment.
The court found that Home was not entitled to equitable contribution
from Cincinnati because Home's policy was excess and Cincinnati's
policy was primary, and excess and primary insurers do not insure the
same risk. The court also denied the equitable subrogation claim,
finding that Home waived it by not asserting that it had no duty to
defend Allied and by not asserting that it was an excess insurer until
filing the declaratory judgment action.
	With one justice dissenting, the appellate court affirmed the
circuit court's result (345 Ill. App. 3d at 48), but did not address the
circuit court's waiver theory to resolve the subrogation claim of count
I. Instead, the appellate court employed the equitable contribution
analysis of the Appellate Court, First District, in Schal Bovis, Inc. v.
Casualty Insurance Co., 315 Ill. App. 3d 353 (2000), to resolve the
equitable subrogation count. 345 Ill. App. 3d at 45-46. In discussing
whether Home and Cincinnati were liable for the "same loss," a
necessary element to maintain an equitable contribution claim, the
appellate court adopted the analysis of Schal Bovis, which held that
the policies at issue in that case insured "different risks" for purposes
of equitable contribution because each insurer insured the additional
insured only to the extent that liability arose out the work of the
respective underlying named insureds. 345 Ill. App. 3d at 45-46, citing
Schal Bovis, 315 Ill. App. 3d at 363. The appellate court here found
that because the policies did not insure the "same risk," they therefore
did not cover the "same loss" for purposes of an equitable subrogation
count. 345 Ill. App. 3d at 46. Accordingly, it found that Home was
not entitled to equitable subrogation as a matter of law. 345 Ill. App.
3d at 46.
	The appellate court then turned to the equitable contribution
claim of count II. It noted that it had already found that the policies
did not insure the same risk because of the respective "arising out of
'your work' " endorsements. 345 Ill. App. 3d at 47. It therefore found
that summary judgment was properly granted to Cincinnati on this
count. 345 Ill. App. 3d at 47. In so finding, the appellate court refused
to adopt the reasoning of the Third District of the appellate court in
Cincinnati Insurance Co. v. River City Construction Co., 325 Ill.
App. 3d 267 (2001), a case which declined to follow the Schal Bovis
rule given the circumstances before it. As an alternative basis for its
ruling granting summary judgment on count II, the appellate court
noted that the policies did not insure the same risk because one was
an excess policy and the other was a primary policy. 345 Ill. App. 3d
at 48.

ANALYSIS
	Summary judgment is proper where, when viewed in the light
most favorable to the nonmoving party, the pleadings, depositions,
admissions, and affidavits on file reveal that there is no genuine issue
as to any material fact and that the moving party is entitled to
judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2002);
Hall v. Henn, 208 Ill. 2d 325, 328 (2003); Ragan v. Columbia Mutual
Insurance Co., 183 Ill. 2d 342, 349 (1998). The standard of review
for the entry of summary judgment is de novo. Hall, 208 Ill. 2d  at 328.
We may affirm a grant of summary judgment on any basis appearing
in the record, regardless of whether the lower courts relied upon that
ground. Raintree Homes, Inc. v. Village of Long Grove, 209 Ill. 2d 248, 261 (2004); Harrison v. Hardin County Community Unit School
District No. 1, 197 Ill. 2d 466, 475 (2001) (Harrison, C.J., specially
concurring, joined by Kilbride, J.).

I. Equitable Contribution
	We will first address Home's arguments on the equitable
contribution issue. It essentially argues that the appellate court read
the requirements of an equitable contribution claim too narrowly.
	We begin our analysis with a general discussion of contribution
in the context of multiple insurers. The terms "contribution,"
"indemnification" and "subrogation" are often used interchangeably,
but there are distinct differences between them. 15 Couch on
Insurance 3d §217:5 (rev. 2004). The remedies of contribution and
indemnity are mutually exclusive, and contribution is prohibited where
a party has a right to indemnity. 18 C.J.S. Contribution §26, at 30
(1990). Contribution as it pertains to insurance law is an equitable
principle arising among coinsurers which permits one insurer who has
paid the entire loss, or greater than its share of the loss, to be
reimbursed from other insurers who are also liable for the same loss.
Cincinnati Cos. v. West American Insurance Co., 183 Ill. 2d 317, 322
(1998); Royal Globe Insurance Co. v. Aetna Insurance Co., 82 Ill.
App. 3d 1003, 1005 (1980); 15 Couch on Insurance §217:5 (rev.
2004). Contribution applies to multiple, concurrent insurance
situations and is only available where the concurrent policies insure
the same entities, the same interests, and the same risks. Royal Globe,
82 Ill. App. 3d at 1005; 15 Couch on Insurance 3d §218:3 (rev.
2004). These elements must be met before the insurance can be
considered concurrent or double. 15 Couch on Insurance 3d §218:3
(rev. 2004). Accordingly, when two insurers cover separate and
distinct risks there can be no contribution among them. 15 Couch on
Insurance 3d §218:3 (rev. 2004).
	In contrast to contribution, subrogation and indemnification are
devices for placing the entire burden for a loss on the party ultimately
liable or responsible for it and by whom it should have been
discharged. 15 Couch on Insurance 3d §217:5 (rev. 2004).
Indemnification differs from subrogation in that the entity seeking
indemnification does so in its own right, while in the latter the
subrogee succeeds to another's right to payment. 15 Couch on
Insurance 3d §217:5 (rev. 2004).
	It is well settled that the doctrine of equitable contribution is not
applicable to primary/excess insurer issues. River City, 325 Ill. App.
3d at 274 (it is well established that excess insurers cannot seek
equitable contribution from primary insurers); Schal Bovis, 315 Ill.
App. 3d at 363 (same); Home Indemnity Co. v. General Accident
Insurance Co. of America, 213 Ill. App. 3d 319, 321 (1991); United
States Fidelity & Guaranty Co. v. Continental Casualty Co., 198 Ill.
App. 3d 950, 955 (1990); Reliance National Indemnity Co. v.
General Star Indemnity Co., 72 Cal. App. 4th 1063, 1078, 85 Cal. Rptr. 2d 627, 635 (1999); 15 Couch on Insurance 3d §218:7 (rev.
2004). This is because by definition the policies do not cover the same
risks-the protections under the excess policy do not begin until those
of the primary policy cease. Home Indemnity, 213 Ill. App. 3d at 321;
United States Fidelity & Guaranty, 198 Ill. App. 3d at 955.
	Here, it is undisputed that Home's policy was excess and
Cincinnati's was primary. Applying the well-settled rule, we find that
Home could not recover on its equitable contribution claim because
the two policies insured different risks. The very case that Home
places its greatest reliance on in this appeal-River City-found that an
excess insurer cannot recover from a primary insurer under an
equitable contribution theory because they insure different risks. See
River City, 325 Ill. App. 3d at 274. Undaunted, Home claims that
"many courts have held [that] the rule is narrower-that is, primary
insurers may not obtain equitable contribution from excess insurers."
For this proposition, Home cites Schal Bovis, 315 Ill. App. 3d at 369-70, Home Indemnity, 213 Ill. App. 3d 319, and United States Fidelity
& Guaranty Co., 198 Ill. App. 3d 950. But none of these cases stand
for the proposition for which Home cites them. Instead, each of these
cases noted that equitable contribution is not applicable to
excess/primary insurer issues, and in Schal Bovis, the court
specifically stated that "an excess insurer cannot seek equitable
contribution from a primary insurer." Schal Bovis, 315 Ill. App. 3d at
363. Home fails to cite any Illinois case (or any other reported case
for that matter) that has held that the rule is narrower.
	The fact that Home was an excess carrier and Cincinnati was a
primary carrier is enough to end the analysis on the equitable
contribution claim. But Home engages in a lengthy argument as to
whether the two insurers insured the same risk in view of the "arising
out of 'your work' " endorsement language in the respective policies.
It contends that the appellate court should not have relied upon Schal
Bovis to find a lack of identity in the risks insured, but instead should
have relied upon River City and found that the two policies insured
the same risk. It maintains that by not doing so, the appellate court
created an irreconcilable conflict between the First and Third Districts.
Because the instant appellate court considered the "arising out of
'your work' " endorsement as an independent and indeed the main
basis for denying the claim and because it applied the same analysis to
the equitable subrogation claim, we will address Home's argument on
this point.
	Relying on Schal Bovis, the appellate court concluded that the
risk that plaintiff might be injured in connection with Aldridge's work
is a different risk from that associated with someone being injured in
connection with Western's work. In Schal Bovis, a construction
worker sued Buck (the owner of the site, who was insured by
Northbrook), Schal (the general contractor, who was also insured by
Northbrook), Ozark (insured by Wausau), Ranken (insured by Great
American), Alcan (insured by Casualty), and Chicago Forming
(insured by American Estates). Plaintiff obtained a judgment against
Schal, Buck and Ozark for $2.8 million. Plaintiff had voluntarily
dismissed Alcan and Chicago Forming from its suit, but they remained
in the action as third-party defendants. The jury was not asked to
apportion fault, but it did return directed verdicts for the third-party
defendants on the basis that they were not in charge of the work.
Three of the five insurers satisfied the judgment, but two paid nothing:
Casualty and American States, who were the insurers of the third-party defendants. All of the policies listed Buck as an additional
insured, but the Casualty and American States policies contained
"arising out of 'your work' " endorsements similar to the ones in the
present case. Northbrook was an excess insurer relative to the other
insurers in the case, and the other insurers were primary with respect
to each other.
		Schal Bovis found that Northbrook could not seek equitable
contribution, applying the well-settled rule that an excess insurer may
not seek recovery from a primary insurer. Schal Bovis, 315 Ill. App.
3d at 363. The court then concluded that Great American and Wausau
were also precluded from seeking equitable contribution from
Casualty and American States. Schal Bovis, 315 Ill. App. 3d at 363.
The court's rationale was as follows:
		"Although the Great American policy covered Schal and
Buck as additional insureds, it did so only to the extent that
Schal's and Buck's liability arose out of Ranken's work. The
Wausau policy covered Schal and Buck from liability, but
only when that liability arose out of Ozark's work. Clearly,
the risk that a plaintiff might be injured in connection with
Ranken's work is a different risk than the risk that a plaintiff
might be injured in connection with Ozark's work. These
risks are, in turn, different than the risks associated with a
plaintiff being injured in connection with Alcan's work or in
connection with Chicago Forming's work (as is required by
the Casualty and American States policies). Thus, because
each insurer insured substantively different risks, each is
precluded from seeking equitable contribution from the
others." Schal Bovis, 315 Ill. App. 3d at 363.
	The appellate court in the case before us noted that River City
declined to follow Schal Bovis. 345 Ill. App. 3d at 47. After
discussing River City, the appellate court here chose to follow Schal
Bovis. 345 Ill. App. 3d at 48.
	In River City, Modugno, an injured worker, sued Caterpillar and
River City in connection with an injury he sustained while working for
his employer, Illinois Piping, on the premises of Caterpillar. River City
installed tanks and grating around the tanks for Caterpillar, but had
failed to install a temporary or permanent hand railing as required by
contract. Modugno was required to use the grating to access his job
site. He lost his balance and was injured while on the grating. Auto
Owners insured River City, and Cincinnati insured Illinois Piping.
Both insurers insured Caterpillar as an additional insured, and both
policies had "arising out of your work" language. Cincinnati settled
the suit, releasing all claims against Caterpillar, Illinois Piping and
River City.
	The River City appellate court held that the trial court erred in
dismissing Cincinnati's equitable contribution claim against Auto
Owners. River City, 325 Ill. App. 3d at 274. It noted that Modugno
was injured while performing work for Illinois Piping on grating
erected by River City. Thus, there was sufficient identity of insurable
interests to support an equitable contribution claim. River City, 325
Ill. App. 3d at 274. The court refused to follow the Schal Bovis rule,
noting it would unfairly protect Auto Owners from paying for the
benefit it received-release from liability. River City, 325 Ill. App. 3d
at 275.
	Although River City found that there was sufficient identity of
interests, it did not discuss whether the policies insured the same risk.
Instead, it avoided consideration of the requirement, finding instead
that coverage need not be identical in all respects. River City, 325 Ill.
App. 3d at 274. River City is also factually distinguishable from both
the present case and Schal Bovis because in River City it could not be
disputed that the work of River City, who was insured by the
nonsettling insurer (Auto Owners), was directly responsible for the
liability of the additional insured (Caterpillar). The River City court
apparently believed that because of the clear responsibility of River
City for the accident, the equities of the case obviated any need for a
close examination of the respective risks insured by the two insurers.
See River City, 325 Ill. App. 3d at 275 (the rule in Schal Bovis would
unfairly protect Auto Owners from paying for the benefit it
received-release from liability).
	Home and amici essentially argue that this court should follow
River City. They contend that the instant appellate court incorrectly
proceeded from the premise that the two policies each covered Allied
for its liability arising out of a different subcontractor's work, to the
conclusion that they therefore covered different risks. According to
Home, the appellate court falsely assumed that Allied's liability could
have only arisen out of one of the subcontractor's work, but not the
others. A court should assume that the injured worker would have
prevailed against either party sued in the complaint. See The Home
Insurance Co. v. Certain Underwriters at Lloyd's London, 729 F.2d 1132, 1134 (7th Cir. 1984).
	Cincinnati, on the other hand, argues that the two policies
covered substantially different risks because of the additional insured
endorsements. Fisher was an employee of Aldridge, so no matter how
the injury transpired, Allied's liability arose out of Aldridge's work. In
contrast, the same cannot be said about Western's role in the case.
Thus, the policies insured different risks.
	We believe that the two policies at issue covered substantially
different risks and therefore equitable contribution was not available.
The term "risk" is not defined by the policies, so the commonly
understood dictionary definition is applicable. People ex rel. Daley v.
Datacom Systems Corp., 146 Ill. 2d 1, 15 (1991). "Risk," as it is used
in the policies at issue, is defined by Webster's as "the possibility of
loss or injury." Merriam Webster's Collegiate Dictionary 1011 (10th
ed. 1996). It is also defined as "the chance of loss" or the "degree of
probability of such loss." Webster's Third New Dictionary 1961
(1993); see also Black's Law Dictionary 1328 (6th ed. 1990) (the
degree of hazard; a specified contingency or peril. In general, the
element of uncertainty in an undertaking). The policies clearly covered
different possibilities or degrees of probability for suffering harm or
loss. The Cincinnati policy covered Allied only for liability arising out
of Western's work, while the Home policy covered Allied only for
liability arising out of Aldridge's work. Although it was possible that
both policies would one day be triggered because Allied's liability for
an accident arose out of both Western's and Aldridge's work, this is
a different question than whether the policies set out to cover the
same risk. Clearly, under the terms of either policy Allied would be
covered 100% if liability arose at all out of the work of the named
insured, no matter how slight. Furthermore, any determination that
either Western or Aldridge were not liable in tort for Fisher's injury
is quite a different question than whether or not the policies were
triggered because Allied's liability arose out of the work of Western
or Aldridge within the meaning of the respective policies. See Schal
Bovis, 315 Ill. App. 3d at 368 (a finding that a party is not in charge
of the work is different from a finding that injuries did not arise out of
that party's work). But again, just because both policies may have
been triggered so as to provide coverage does not mean that the
policies set out to cover the same risk. Accordingly, we believe that
Schal Bovis is the better reasoned case, and to the extent that River
City is inconsistent, it is overruled.

II. Equitable Subrogation
	Having determined that the lower courts properly denied Home's
claim for equitable contribution because the Home policy was excess
to Cincinnati's primary policy and because the policies did not insure
the same risks, we now consider Home's claim for equitable
subrogation. Home argues that the appellate court incorrectly applied
the "identity of risk" requirement, applicable to claims of equitable
contribution, to deny Home's claim for equitable subrogation.
	The appellate court correctly noted the elements of an equitable
subrogation claim as follows: (1) the defendant carrier must be
primarily liable to the insured for a loss under a policy of insurance;
(2) the plaintiff carrier must be secondarily liable to the insured for the
same loss under its policy; and (3) the plaintiff carrier must have
discharged its liability to the insured and at the same time extinguished
the liability of the defendant carrier. 345 Ill. App. 3d at 44, citing
North American Insurance Co. v. Kemper National Insurance Co.,
325 Ill. App. 3d 477, 481 (2001); State Farm General Insurance Co.
v. Stewart, 288 Ill. App. 3d 678, 686-87 (1997). However, in
discussing whether Home and Cincinnati were liable for the "same
loss," the appellate court relied upon the equitable contribution
analysis of Schal Bovis. 345 Ill. App. 3d at 45-46. As we have already
explained, Schal Bovis found that the two policies at issue insured
different risks for equitable contribution purposes because each
insurer insured the additional insured only to the extent that liability
arose out the work of the respective underlying named insureds. Here,
however, the appellate court found that because the Home and
Cincinnati policies did not insure the "same risk," they therefore did
not cover the "same loss" for purposes of an equitable subrogation
claim. 345 Ill. App. 3d at 46.
	We find that the appellate court erred in equating the "identity of
risk" element of a contribution claim with the "same loss" requirement
of a subrogation claim. As Home correctly points out, the appellate
court either overlooked or ignored that Schal Bovis found that the
excess insurer in that case, who was in the same position as Home
here, would be entitled to equitable subrogation. Schal Bovis, 315 Ill.
App. 3d at 364. There, the court noted the following:
			"In addition to seeking equitable contribution, Northbrook
and its insureds (Schal and Buck) sought reimbursement from
Casualty and American States. An action by an excess insurer
seeking reimbursement from primary insurers is a distinct
remedy, different than equitable contribution. See, e.g., New
Amsterdam Casualty Co. v. Certain Underwriters at Lloyds,
London, 34 Ill. 2d 424, 216 N.E.2d 665 (1966); Home
Indemnity Co. v. General Accident Insurance Co., 213 Ill.
App. 3d 319, 572 N.E.2d 962 (1991). Recovery under a
reimbursement theory requires only a finding that Casualty
and/or American States owed coverage to Schal and Buck
with respect to the judgment; to wit, that Schal's and Buck's
liability to Keegan at least in part arose out of the work by
Casualty's and American States' respective insureds (Alcan
and Chicago Forming). In such a circumstance, Northbrook,
as an excess insurer, should not have had to pay any claim on
behalf of Schal and Buck until the Casualty and American
States limits were exhausted." Schal Bovis, 315 Ill. App. 3d
at 363-64.
	We believe that Schal Bovis expresses the correct view. A
subrogation action brought by an excess insurer against a primary
insurer is completely distinct from a contribution action. The elements
necessary to maintain a contribution action focus prospectively on the
"risk" that the parties set out to cover. For a coinsurer to recover, it
must have insured the identical risk. In contrast, a subrogation claim
only requires that the secondary insurer insure the "same loss" as the
primary insurer. This requirement looks retrospectively at the loss
suffered. Here, Allied suffered only one loss, and if Allied's liability
arose at all out of Western's work then Cincinnati was wholly liable
for that loss as the primary insurer, and Home was only secondarily
liable for that loss as the excess insurer. By definition, primary and
excess insurers insure different risks. Under the appellate court's
approach, an excess insurer would never be able to recover from a
primary insurer under a subrogation or reimbursement theory because
the parties insure different risks. Cincinnati does not cite any case, nor
are we aware of any, that has taken the same approach as the appellate
court here. Accordingly, we reverse the appellate court's finding.
	We further find that Home was entitled to summary judgment on
its equitable subrogation claim as a matter of law. While Home would
only be entitled to recovery if it could be shown that Cincinnati owed
coverage to Allied because Allied's liability arose at least in part out
of Western's work, there is a presumption that the injured worker in
the underlying suit would have prevailed on all of his theories of
liability where the case is settled prior to trial. Certain Underwriters
at Lloyd's London, 729 F.2d  at 1134 (court was entitled to assume
that worker would have prevailed on his design negligence claim if the
case had not settled, and in subsequent contribution action, defendant
insurance company was asking the "impossible" when it maintained
that plaintiff insurance company must show what portion of the
settlement was paid to settle the allegation of design negligence).
	Here, none of the deposition testimony and affidavits on file were
sufficient to create a genuine issue of fact and to overcome the
presumption that Allied's liability arose at least in part out of the work
of Western. Cunningham admitted in his deposition that Cincinnati
paid $40,000 to settle the suit against Western at least in part because
of the possibility that Cincinnati might lose its pending summary
judgment motion and be found liable to Fisher at trial. Cunningham
further acknowledged that there was a chance that Western could
have been found liable in the Fisher suit. He also correctly
acknowledged that the "arising out of" language is read broadly in
favor of coverage. See, e.g., Casualty Insurance Co. v. Northbrook
Property & Casualty Insurance Co., 150 Ill. App. 3d 472, 475 (1986).
Moreover, Cincinnati agreed to pay $100,000 toward Allied's
settlement with Fisher, presumably because Cincinnati believed that
Allied's liability arose at least in part out of the work of Western.
Under the circumstances, we find that Home was entitled to summary
judgment as a matter of law on its subrogation claim. As we will
explain more fully below, we also find that Home waived a portion of
this claim.

III. Waiver
	The circuit court found that Home completely waived its
subrogation claim by not reserving its rights in the letter to Allied
when it accepted the defense of the Fisher suit and by not raising the
effect of its being an excess insurer sooner than when it filed the
declaratory judgment action.
	Waiver arises from an affirmative act, is consensual, and consists
of an intentional relinquishment of a known right. Crum & Forster
Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384, 396
(1993). A waiver may be either expressed or implied, arising from
acts, words, conduct, or knowledge of the insurer. Crum & Forster
Managers Corp., 156 Ill. 2d  at 396; Western Casualty & Surety Co.
v. Brochu, 105 Ill. 2d 486, 499 (1985). An implied waiver arises when
conduct of the person against whom waiver is asserted is inconsistent
with any intention other than to waive it. Liberty Mutual Insurance
Co. v. Westfield Insurance Co., 301 Ill. App. 3d 49, 53 (1998). Where
there is no dispute as to the material facts and only one reasonable
inference can be drawn, it is a question of law as to whether waiver
has been established. Liberty Mutual, 301 Ill. App. 3d at 53. The
failure of a paying insurer to reserve its rights against a nonpaying
insurer may constitute a waiver of the right to equitable remedies. 15
Couch on Insurance 3d §218:32 (rev. 2004). An insurer desiring to
reserve its rights against a second insurer must make this position
clear in its correspondence with the second insurer; it is also
considered good practice to include such reservation language in any
settlement agreement or order, then provide a copy of it to the
nonsettling insurer. 15 Couch on Insurance 3d §218:32 (rev. 2004).
	Home argues that the circuit court misapprehended the nature of
a reservation of rights. Home notes that the circuit court correctly
found that the estoppel doctrine only applies where an insurer
breached its duty to defend its insured, and that because Home did not
breach any duty to defend, estoppel does not apply. Working from this
premise, Home claims that because it did not know the contents of
Cincinnati's policy, the circuit court erred in finding waiver with
respect to its conduct toward Cincinnati.
	We disagree. As stated above, an insurer by its conduct may
waive rights against another insurer. Here, Home was presumed to
know the contents of its own policy and that it was an excess insurer.
Home claims that it did not know the contents of Cincinnati's policy
and whether it also contained an excess clause. However, this should
not have stopped Home from informing Cincinnati during the Fisher
litigation that it would seek full reimbursement from Cincinnati if its
policy did not contain an excess clause. The totality of Home's
conduct was inconsistent with any claim that it would seek full
reimbursement for the Fisher settlement from Cincinnati. Home
accepted Allied's defense without a specific reservation of rights and
without asserting that it was an excess insurer. Instead, it only
asserted that it would share in the cost of Allied's defense and
indemnity with Western on a 50-50 basis. Moreover, Home only
sought $300,000 from Cincinnati at the time of the settlement, not the
full amount. It also never asserted that it was an excess insurer at the
time of settlement.
	In Liberty Mutual, the nonsettling insurer waived the right to
contest the reasonableness of the settlement where it did not indicate
that it was concerned about the reasonableness of the settlement at the
time it was made. Liberty Mutual, 301 Ill. App. 3d at 53. Similarly,
we find that Home waived a portion of its reimbursement claim by not
asserting it was entitled to anything more than $300,000 at the time
of settlement or at any other time in the underlying dispute, including
when it agreed to pay Allied on a 50-50 basis with Western. On appeal
before this court, Home admits that it agreed to share in the defense
and indemnity of Allied on a 50-50 basis with Cincinnati. Home asks
for an award of $200,000 if we find that the circuit court was correct
in its waiver analysis. Recognizing that we are guided by equitable
principles as they apply to the particular facts of this case, we find that
Home is entitled to recover $200,000 from Cincinnati-having waived
the remainder of its claim.

CONCLUSION
	For the foregoing reasons, we affirm summary judgment for
Cincinnati on the equitable contribution claim, but reverse the
appellate court on the equitable subrogation claim and find that Home
was entitled to summary judgment on its cross-motion. However,
Home waived a portion of that claim and therefore can only recover
$200,000. Accordingly, we affirm the judgment of the appellate court
in part and reverse in part.
Appellate court judgment affirmed in part
and reversed in part;
circuit court judgment affirmed in part
and reversed in part.