No. 3-02-0305

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IN THE

APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

A.D., 2003

COUNTRY COMPANIES, as subrogee

of Michael D. Falatko

	Plaintiff-Appellee,

	v.

UNIVERSAL UNDERWRITERS

INSURANCE COMPANY, d/b/a

UNIVERSAL UNDERWRITERS GROUP,

	Defendant-

Counterdefendant-Appellant

	and

MARK R. SECKLER,

	Defendant-

Counterplaintiff-Appellee

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Appeal from the Circuit Court

of the 10th Judicial Circuit

Peoria County, Illinois

No. 97-LM-1901

Honorable

Richard E. Grawey

Judge, Presiding

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	JUSTICE LYTTON delivered the opinion of the court:

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	Country Companies brought a subrogation action against Mark

Seckler and Universal Underwriters Insurance Company ("Universal")

based on an auto accident involving Seckler and one of its

insureds, Michael Falatko.  Seckler filed a counterclaim against

Universal seeking a declaration that Universal had a duty to defend

and indemnify him.  The trial court ruled in favor of Seckler and

against Universal, finding that Universal owed him coverage up to

$500,000.  We affirm.

	In July, 1996, Seckler and Falatko had a traffic accident, and Falatko was injured.  Falatko filed an action against Seckler, Ruff

Electrical Services, Inc. ("Ruff"), and O'Brien Imports of Peoria,

Inc. ("O'Brien"), alleging that Seckler negligently caused the

accident, that Seckler was driving a vehicle in the course of his

employment with Ruff at the time of the accident, and that the

vehicle was owned by O'Brien.

	Falatko was insured by Country Companies.  Seckler was

personally insured by State Farm Mutual Automobile Insurance

Company ("State Farm"), and O'Brien had a garage policy with

Universal at the time of the accident.  Ruff was insured by CGU

Insurance.

	In October, 1997, Country Companies filed suit against Seckler

and Universal, seeking subrogation for amounts paid to Falatko.  In

June, 1998, Falatko and his wife also filed suit against Seckler

individually.  In September of that year, Seckler filed a

"Counterclaim for Declaratory Judgment" in the subrogation action

seeking a declaration that Universal owed a duty to defend and

indemnify him in both suits.  The two cases were subsequently

consolidated.

	Seckler moved for summary judgment in the declaratory judgment

action.  Universal opposed the motion and sought leave to file a

third party complaint adding State Farm to the counterclaim.  The

trial court denied Universal's motion and granted summary judgment

to Seckler.

	After Universal asserted in a motion that Seckler was limited

to $20,000 coverage under the policy, Seckler filed a motion to determine policy limits.  Universal objected, arguing that there

was no basis in the pleadings to grant the motion and that not all

necessary parties were joined.  The trial court granted the motion

and held that Seckler was entitled to $500,000 coverage limits.

	On appeal, Universal argues that the trial court erred when it

made any finding of the limits of liability for two reasons: 1)

Seckler did not join all of the parties that were necessary to the

action; and, in any case, 2) Universal's limit of liability to

Seckler was $100,000.

	ANALYSIS

	A.

	Universal maintains that declaratory judgment on this issue

was improper because parties that were necessary to a full

resolution of the issue were not joined.  The company asserts that

excess insurers are always necessary to a declaration of the limits

of the primary insurer.  Therefore, since Seckler's excess insurer,

State Farm, was not made a party, this court could not reach the

issue.

	In order to determine if a party is necessary to an action,

two factors must be satisfied.  First, the party must have a legal

or equitable interest in the subject matter of the suit.  American Home Assurance Company v. Northwest Industries, Inc., 50 Ill. App. 3d 807, 812 (1977).  Second, that interest must be "a present or

substantial interest as distinguished from a mere expectancy or

future contingent interest."  American Home, 50 Ill. App. 3d at 812.

	The first prong of the test is satisfied when an excess

insurer bears potential liability if a primary insurer's limits are

exceeded.  American Home, 50 Ill. App. 3d at 812.  However, the second prong of the test is not satisfied unless the primary

insurer's liability limits have already been reached, regardless of

the likelihood that those limits may later be exhausted.  American Home, 50 Ill. App. 3d at 812; Zurich Insurance Company v. Raymark Industries, 144 Ill. App. 3d 943, 946-48 (1986).

	Here, State Farm meets the first prong of the "necessary

party" test, since it provided excess insurance coverage to

Seckler.  However, at the time of the trial court's judgment, there

was nothing in the record to indicate that Universal's primary

liability limits were exhausted.  State Farm's interest was still

merely contingent, and the company did not satisfy the second

requirement to be a necessary party.  See American Home, 50 Ill. App. 3d at 812.  Therefore, State Farm was not a necessary party to

the action.

	B.

	Universal also argues that the trial court erred in its

determination that Seckler was entitled to more than the minimum

coverage required by law.  The company claims that its liability

limits for this accident should be significantly lower.

	Unambiguous terms in an insurance policy must be enforced as

written, so long as they do not contravene public policy.  John Deere Insurance Company v. Allstate Insurance Company, 298 Ill. App. 3d 371, 376 (1998).  However, an insurance company can waive

provisions of its policy by words or conduct that are inconsistent

with an intention to rely on its requirements.  National Tea Company v. Commerce & Industry Insurance Company, 119 Ill. App. 3d 195, 205 (1983).

	In this case, the policy provides coverage to the limits

stated in the declarations page for most drivers, including

O'Brien's owners, partners, employees, and contract drivers. 

However, the policy contains an exception to the declared limits

for certain classes of drivers that do not fall into one of the

classes specifically named.  The policy decreases coverage for

drivers who do not fit into one of the named categories but are

"required by law to be an INSURED while using an AUTO covered by

this Coverage Part within the scope of [the vehicle owner's]

permission."  This decrease in coverage for permissive drivers is

known as a "step-down" provision.

	Universal asserts that this step-down provision in the policy

lowers its liability limits to Seckler.  The company argues that

Seckler, as a permissive driver, falls within the exception to the

general liability limits, and is entitled to no more than the

minimum coverage required by law, i.e. $100,000.

	Seckler responds that Universal filed a certificate of

insurance with the Illinois Secretary of State stating that it was

providing O'Brien with coverage limits of $300,000 per person for

bodily injury, $300,000 per occurrence for bodily injury, and $300,000 per occurrence for property damage; those limits are

higher than the limits the company claims should apply to this

accident.  Seckler asserts that this filing should constitute a

waiver of the step-down provision of the policy.  We agree.

	When Universal certified to the Illinois Secretary of State

that the same coverage applies to all occurrences, without

exception, it waived any step-down provision in the policy. 

Universal never indicated that coverage limits might be different

for different types of drivers.  Filing the certificate with the

Secretary of State, without reference to any differential limits,

is an act inconsistent with an intention to rely on those

provisions that changed the company's liability limits depending on

the 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.  See Browning v. Plumlee, 316 Ill. App. 3d 738 (2000); John Deere Insurance Company v. Allstate Insurance Company, 298 Ill. App. 3d 371 (1998).

	However, Universal claims that this result conflicts with our

previous decision in Country Mutual Insurance Company v. Universal Underwriters Insurance Company, 316 Ill. App. 3d 161 (2000).  The company asserts that we faced this same issue in that case, but

declined to hold that the injured party was entitled to coverage

limits greater than the minimum required by law.  The company is

incorrect.

	In Country Mutual, we had no need to reach this issue.  We needed merely to determine 1) whether Universal was the primary

insurer for the injured party in that case, and 2) the proper

minimum coverage requirements for a permissive user of a vehicle owned by a auto dealer.  In other words, we only determined the

properly applicable minimum coverage , limits that were required; we were not asked or required

to decidedid not determine whether the injured party wasin that case might be entitled to coverage

greater than the minimums.  See Country Mutual, 316 Ill. App. 3d at 164-66.  Thus, our decision in this case is not inconsistent with

the holding of Country Mutual.

	Nevertheless, Universal asserts that Seckler cannot rely on

the certificate as a waiver because it was not presented as

evidence before the trial court.  However, we may take judicial

notice of public records regardless of whether such records were

before the trial court.  Muller v. Zollar, 267 Ill. App. 3d 339, 341 (1994).  Moreover, we can sustain the trial court's judgment on

any ground properly before us, no matter whether the trial court

relied on it or whether the its reasoning was correct.  See Shramuk v. Snyder, 278 Ill. App. 3d 745, 748 (1996).

	In this case, we take judicial notice of the filing of the

certificate, and it is properly before us.  As stated above, the

certificate establishes that Universal waived its right to claim

that its policy provided differing coverage based on the status of

the vehicle's driver, at least to the extent that it attempts to

decrease that coverage below the $300,000 limits it has represented

to the State as coverage for drivers of any status.

	Because the parties have informed this court that the action underlying this case has been settled for less than $300,000, we

need not determine whether the result of Universal's waiver is

coverage in the amount of the $300,000 noted in the certificate

filed with the Secretary of State or the $500,000 contained in the

declarations page of the policy.

	The judgment of the circuit court of Peoria County is affirmed

as modified.

	Affirmed as modified.

	HOLDRIDGE and SLATER, JJ., concur.