Illinois Official Reports

Appellate Court

Lamorak Insurance Co. v. Kone, Inc., 2018 IL App (1st) 163398

Appellate Court 

Caption

LAMORAK INSURANCE COMPANY, f/k/a Commercial Union 

Insurance Company, f/k/a Employers Commercial Union Insurance 

Company, Plaintiff and Counterdefendant-Appellant, v. KONE, INC., 

and LIBERTY MUTUAL INSURANCE COMPANY, Defendants 

and Counterplaintiffs-Appellees.

District & No. First District, Second Division

Docket No. 1-16-3398

Filed

Rehearing denied

May 15, 2018

November 1, 2018

Decision Under 

Review

Appeal from the Circuit Court of Cook County, No. 12-CH-42887; the 

Hon. Rodolfo Garcia, Judge, presiding.

Judgment Affirmed.

Counsel on

Appeal

Clyde & Co US LLP, of Chicago (Eileen King Bower, James J. 

Sanders, and Meghan C. Dalton, of counsel), for appellant.

Molzahn, Reed, Rouse & Berger, LLC, of Chicago (Timothy J. Reed 

and Jennifer R. Beegle, of counsel), and Ansa Assuncao LLP, of East 

Brunswick, New Jersey (Steven F. Gooby and Kenneth Burden, of 

counsel), for appellee Kone, Inc.
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Schiff Hardin LLP, of Chicago (Everett J. Cygal, Catherine M. 

Masters, and David Pi, of counsel), for other appellee.

Panel PRESIDING JUSTICE NEVILLE delivered the judgment of the 

court, with opinion.

Justices Pucinski and Mason concurred in the judgment and opinion.

OPINION

¶ 1 When a former employee sued Kone, Inc. (Kone), for injuries suffered due to long-term 

exposure to asbestos, Kone notified all the insurance companies that sold policies to Kone 

during the employee’s long tenure. One of the insurers, Lamorak Insurance Company 

(Lamorak), argued that the policies it sold to Kone for the years 1977 to 1985 counted as excess 

insurance because Kone had agreed to a self-insured retention (SIR) instead of a deductible for 

those years. Kone filed a counterclaim that included a request for a judgment declaring that 

Lamorak’s policies provided primary coverage. The circuit court granted Kone’s motion for 

summary judgment on that part of its counterclaim. On Lamorak’s appeal from the partial 

summary judgment, we find that Lamorak’s policies bear the characteristics of primary 

insurance. Accordingly, we affirm the circuit court’s judgment.

¶ 2 BACKGROUND

¶ 3 In May 2012, John Nichol filed a complaint charging Kone with negligently exposing 

Nichol to asbestos and causing him to contract malignant pleural mesothelioma. Nichol alleged 

that his exposure to asbestos took place between the early 1960s and the late 1980s, when 

Nichol worked for Kone or Kone’s corporate predecessors. Kone provided notice of Nichol’s 

claim to insurers who sold liability policies to Kone and predecessor corporations covering the 

years from 1961 through 1988. One of the insurers, Lamorak, agreed to defend Kone, subject 

to a full reservation of rights. 

¶ 4 In November 2012, Lamorak filed the complaint that initiated the case now before us. 

Lamorak, in its complaint, asked the court to enter a judgment allocating the liability to Nichol 

amongst all insurers who sold policies to Kone. Lamorak named Liberty Mutual Insurance 

Company (Liberty), Kone, and others as defendants. Lamorak admitted that its corporate 

predecessors sold insurance policies to Kone’s predecessors covering the period from June 30, 

1971, to June 30, 1985. (We will refer to Kone and its predecessors as Kone and to Lamorak 

and its predecessors as Lamorak.) Lamorak admitted that the policies for 1971 to 1977 

provided primary coverage, subject to a deductible. For the years 1977 to 1985, Lamorak sold 

Kone both umbrella policies and other policies, subject to SIRs. The parties agree that 

Lamorak’s umbrella policies provided excess coverage that Kone cannot reach until it exhausts 

underlying coverages. The parties disagree about Lamorak’s duties under the other policies, 

the policies at issue, which the umbrella policies listed as underlying coverage.
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¶ 5 Lamorak alleged, and Kone admitted, that several persons other than Nichol also filed 

complaints against Kone, seeking compensation for injury or damage due to asbestos exposure. 

Lamorak sought a judgment declaring that the policies at issue imposed on Lamorak no duty 

to defend because Kone had not exhausted all of its primary insurance for the years 1961 

through 1988. Lamorak contended that Liberty, as a primary insurer for part of that period, had 

prior responsibility for providing a defense and indemnity to Kone for Nichol’s claim.

¶ 6 Kone filed an answer to Lamorak’s complaint and a counterclaim. In count I of the 

counterclaim, Kone sought a judgment declaring that Lamorak had a duty to indemnify Kone 

for its liability to Nichol and the other persons who sued Kone. As one part of that relief, Kone 

prayed for a judgment declaring that the policies at issue count as primary insurance.

¶ 7 Liberty filed a motion for summary judgment on Kone’s counterclaim, contending that the 

evidence in the record showed that the policies at issue provided primary coverage. The parties 

filed with the court copies of the policies Lamorak issued to Kone for the years 1971 to 1985. 

Kone and Liberty also filed other documents, with no affidavits or depositions explaining how 

they came to possess the documents. Kone alleged that it received two of the documents from 

Lamorak in response to discovery, and Liberty similarly alleged that it received one of the 

documents from Lamorak in discovery. Lamorak argued that Kone and Liberty failed to 

authenticate all of the documents, but Lamorak did not deny the allegations that it had produced 

the three documents in discovery.

¶ 8 The Lamorak policy for 1976 to 1977 (the last with a deductible and not a SIR) provides:

“4. *** In the event of an occurrence, written notice *** shall be given by or for 

the insured to the company *** as soon as practicable.

* * *

6. Other Insurance: The insurance afforded by this policy is primary insurance ***.

When both this insurance and other insurance apply to the loss on the same basis, 

*** the company shall not be liable under this policy for a greater proportion of the 

loss than that stated in the applicable contribution provision below:

(a) Contribution by Equal Shares ***.

(b) Contribution by Limits. ***

* * *

I. Coverage A—Bodily Injury Liability ***

The company will pay on behalf of the insured all sums which the insured shall 

become legally obligated to pay as damages because of *** bodily injury *** to which 

this insurance applies, caused by an occurrence, and the company shall have the right 

and duty to defend any suit against the insured seeking damages on account of such 

bodily injury *** even if any of the allegations of the suit are groundless, false or 

fraudulent[,] and may make such investigation and settlement of any claim or suit as it 

deems expedient.”

¶ 9 The policy set liability limits of $500,000 per occurrence and $500,000 aggregate, subject 

to a deductible of $25,000 per occurrence and $1 million aggregate. The policy does not specify 

a total premium, but it sets an estimated annual premium of $516,000.

¶ 10 The policy at issue for 1977-78 used the same form as the 1976-77 policy, including the 

same language in paragraphs 4 and 6 and section I, concerning the duty to give notice, the 
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effect of other insurance, and the duty to defend. However, the policy included a “Self-Insured 

Retention Endorsement” that modified several clauses. The endorsement provides:

“In consideration of the reduced premium for which this policy is issued, it is agreed 

that the company’s obligation to pay on behalf of the insured all sums which the insured 

shall become legally obligated to pay as damages and expenses in accordance with the 

insurance provided by this policy *** is in excess of the retained limit ***.

The company’s right and duty to defend any suit against the insured *** shall apply 

solely as follows:

1. When the amount of all claims or suits seeking damages as a result of one 

occurrence does not exceed the retained limit, as estimated by the company, the 

company shall have the right but not the duty to make such investigations thereof as it 

deems necessary but the company shall have no obligation to defend ***.

2. When the amount of all claims or suits seeking damages as a result of one 

occurrence is in excess of the retained limit, as estimated by the company, the company 

shall have the right and duty to defend such claim or suit even if any of the allegations 

of the claim or suit are groundless, false or fraudulent[,] and may make such 

investigation and settlement of the claim or suit as it deems expedient.”

¶ 11 The endorsement does not modify the duty to give notice of paragraph 4, but it expressly 

modified paragraph 6 as follows:

“ ‘Other insurance’ is amended to read:

The insurance afforded by this policy is excess insurance, applicable excess of the 

retained limit, for the limit of liability stated in the declarations of this policy. When 

both this insurance and other insurance apply to loss on the same basis, the company 

shall not be liable under this policy for a greater proportion of the loss than stated in 

the applicable contribution provision below:

(1) Contribution by equal shares ***.

(2) Contribution by limits.”

¶ 12 The policy sets liability limits of $2 million per occurrence and $2 million aggregate, 

subject to “retained limit[s]” of $100,000 per occurrence and $2 million aggregate. The policy 

sets its estimated premium at $1,085,000.

¶ 13 Also for the 1977-78 year, Kone purchased from Lamorak an umbrella policy, which 

provided:

“7. Notice of Occurrence. When an occurrence takes place which, in the opinion of 

the Insured, involves or may involve liability on the part of the company, prompt 

written notice shall be given by or on behalf of the Insured to the company ***.

* * *

12. Other Insurance. If any other valid and collectible insurance exists protecting 

the Insured against ultimate net loss covered by this policy *** this policy shall be null 

and void with respect to such loss ***; provided, however, if the amounts recoverable 

by the Insured under such other insurance are not sufficient to completely protect the 

Insured against such loss, this policy shall apply but only as excess insurance over such 

other valid and collectible insurance.”
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¶ 14 The policy set liability limits of $5 million per occurrence and $5 million aggregate, subject 

to the underlying Lamorak policy and the SIR. The umbrella policy set its premium at 

$187,500.

¶ 15 The circuit court found no need to consider any documents other than the insurance 

policies. The court entered a judgment declaring that the Lamorak policies at issue for 1977 to 

1985 all served as primary insurance. The court added a finding, pursuant to Illinois Supreme 

Court Rule 304(a) (eff. Mar. 8, 2016), of no just cause to delay enforcement or appeal from 

the declaratory judgment order. Lamorak filed a timely notice of appeal.

¶ 16 ANALYSIS

¶ 17 Jurisdiction

¶ 18 After the parties submitted their briefs on appeal, we questioned our jurisdiction and asked 

Lamorak why we should not dismiss the appeal. The circuit court’s order did not dispose of 

any count of any complaint or counterclaim, and it did not finally determine the rights of any 

party to the case. The declaratory judgment resolved only an issue that formed a partial basis 

for the relief Kone sought, as Kone requested in its counterclaim a declaration that the 1977 to 

1985 policies imposed on Lamorak a duty to defend and indemnify Kone, and the declaration 

that the policies count as primary insurance did not fully resolve that claim.

¶ 19 Lamorak argued that this court has jurisdiction under the reasoning of In re Marriage of 

Best, 228 Ill. 2d 107 (2008). In Best, the husband filed a petition for divorce, and in the divorce 

proceedings, he filed a motion for a judgment declaring that a valid premarital agreement 

limited the wife’s property rights in the divorce proceeding. The circuit court entered a 

judgment finding the premarital agreement valid and added a finding of appealability. Best, 

228 Ill. 2d at 110. Our supreme court held that the declaratory judgment finally resolved a 

separate part of the case. The court found that the husband had requested two distinct forms of 

relief: dissolution of the marriage and a judgment declaring the premarital agreement valid. 

The court said, 

“[The] declaratory judgment could be entered even if the dissolution petition were not 

granted. *** Under the facts and circumstances in this case, the request for dissolution 

of the parties’ marriage and the request for declaratory judgment on the validity and 

interpretation of the premarital agreement are not so closely related that they must be 

deemed part of a single claim for relief.” Best, 228 Ill. 2d at 115.

¶ 20 We find that the order here finally resolves a claim separate from the other claims for relief. 

The circuit court’s declaratory judgment grants Kone and Liberty effective relief even if the 

court decides eventually to grant Lamorak the relief it seeks in its complaint. The declaratory 

judgment concerning the policies at issue could affect the liability of all insurers involved not 

only in this case, but also in all of the other cases involving claims against Kone for injury due 

to asbestos exposure. Accordingly, we find that Illinois Supreme Court Rule 304(a) (eff. Mar. 

8, 2016) gives us jurisdiction to decide the appeal.

¶ 21 Horizontal Exhaustion

¶ 22 The parties and the circuit court agree that Kajima Construction Services, Inc. v. St. Paul 

Fire & Marine Insurance Co., 227 Ill. 2d 102 (2007), requires horizontal exhaustion under the 

circumstances of this case. The injury to Nichol occurred as a result of repeated exposure to 
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asbestos over a number of years. The insurance policies for all of those years provide some 

potentially relevant coverage. In Kajima, the parties agreed that “horizontal exhaustion 

requires an insured to exhaust all available primary limits before invoking excess coverage.” 

Kajima, 227 Ill. 2d at 113. The Kajima court explained that 

“horizontal exhaustion is based on a recognition of the difference between primary and 

excess insurance. *** [W]hen excess insurance exists as part of an overall insurance 

package, it provides a secondary level of coverage to protect the insured where a 

judgment or settlement exceeds the primary policy’s limits of liability. [Citation.] 

Excess insurance coverage attaches only after a predetermined amount of primary 

insurance or self-insured retention has been exhausted. [Citation.] Consequently, until 

the limits of primary insurance coverage are exhausted, secondary coverage does not 

provide any collectible insurance. [Citation.] Once an excess policy is triggered in a 

case, the limits of the primary insurance must be exhausted before the excess carrier 

will be required to contribute to a settlement or judgment.” (Internal quotation marks 

omitted.) Kajima, 227 Ill. 2d at 114-15. 

¶ 23 The parties here agree that the umbrella policies Lamorak issued to Kone for 1977 to 1985 

count as excess insurance, and Lamorak owes nothing on those policies until Kone exhausts 

the limits of all applicable primary insurance. We must decide whether the Lamorak policies 

at issue count as excess policies or as primary policies. If the policies count as excess insurance, 

Lamorak will have no liability for 1977 to 1985 until Kone exhausts the policy limits for all of 

its primary policies covering the years each injured employee worked. If the Lamorak policies 

provide primary insurance, Lamorak’s liability on those policies for 1977 to 1985 will fall on 

the same level as all other primary insurance. Because the circuit court decided the issue on a 

motion for summary judgment, we review the circuit court’s ruling de novo. Outboard Marine 

Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102 (1992).

¶ 24 Primary or Excess

¶ 25 Lamorak contends that the circuit court’s judgment, that the policies at issue provide 

primary coverage, conflicts with the holding of Missouri Pacific R.R. Co. v. International 

Insurance Co., 288 Ill. App. 3d 69 (1997). In Missouri Pacific, hundreds of Missouri Pacific 

employees sought damages for injuries resulting from asbestos exposure occurring over the 

course of many years. Missouri Pacific acknowledged that it purchased only excess insurance 

for the years at issue, and the policies referred to Missouri Pacific’s SIR. Missouri Pacific, 288 

Ill. App. 3d at 72. Missouri Pacific argued that SIRs did not count as “ ‘other insurance’ ” 

within the meaning of the excess policies. Missouri Pacific, 288 Ill. App. 3d at 74. The 

Missouri Pacific court rejected the argument and held that “Missouri Pacific must exhaust the 

SIRs before looking to the insurers for coverage. *** [T]he SIRs in the present case constitute 

primary coverage.” Missouri Pacific, 288 Ill. App. 3d at 82.

¶ 26 Lamorak argues that Missouri Pacific stands for the proposition that SIRs always count as 

primary insurance and that any policy that refers to an underlying SIR counts as an excess 

policy for purposes of horizontal exhaustion. We do not read Missouri Pacific so broadly. The 

Missouri Pacific court specified that Missouri Pacific’s SIRs counted as primary insurance, 

subject to horizontal exhaustion. The Missouri Pacific court did not restrict the freedom of 

others to enter into contracts that may provide for SIRs and insurance coverage with other 

effects.
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¶ 27 Lamorak’s argument that any policy that refers to a SIR must constitute an excess policy 

conflicts with insurance practice in Illinois. In Roman Catholic Diocese of Joliet, Inc. v. Lee, 

292 Ill. App. 3d 447, 449 (1997), the plaintiff purchased primary insurance for 1985 to 1986, 

with a liability limit of $100,000 over a SIR of $100,000. The plaintiff also purchased an excess 

policy for the same period. Similarly, in Rosalind Franklin University of Medicine & Science 

v. Lexington Insurance Co., 2014 IL App (1st) 113755, ¶ 20, the court noted, “[t]he primary 

policy issued by Lexington is a ‘Healthcare Professional Services Liability Policy’ 

(hereinafter, the Lexington Primary Policy), which contains a limit of $1 million per ‘medical 

incident,’ subject to a $100,000 self-insured retention.” In Travelers Indemnity Co. v. American 

Casualty Co., 337 Ill. App. 3d 435, 439 (2003), the court said that a “primary policy typically 

covers claims starting at the first dollar of loss or the first dollar in excess of a deductible or 

self-retention.”

¶ 28 Thus, the reference to a SIR does not, in itself, resolve the question of whether the policy 

counts as an excess policy or a primary policy. An insured may bear the burden of a SIR and 

purchase a primary policy that refers to the underlying SIR. Illinois courts have discussed 

several characteristic distinctions between primary and excess policies. Excess policies

“generally do not require immediate notice of an occurrence as do provisions in primary 

policies. [Citation.] Excess insurers are not interested in every accident, but only in 

those that may be serious enough to involve [them]. [Citation.] Since excess coverage 

is contingent on exhaustion of primary or underlying policies, excess insurers generally 

do not require notification of occurrences until the excess policy is reasonably likely to 

be implicated. [Citation.] Consequently, insurance policies for excess coverage 

generally grant the insured some discretion in evaluating the case.” (Internal quotation 

marks omitted.) American States Insurance Co. v. National Cycle, Inc., 260 Ill. App. 

3d 299, 311 (1994). 

“Primary insurance is coverage whereby liability attaches immediately upon the happening of 

the occurrence that gives rise to liability. [Citation.] Primary policies generally impose on the 

insurer a duty of defense separate from the duty to indemnify the insured against the claim. 

*** Rather than providing a duty to defend, most excess policies require the excess insurer to 

indemnify the insured for the costs of the defense as part of the ‘ultimate net loss’ against 

which the policy insures.” Krusinski Construction Co. v. Northbrook Property & Casualty 

Insurance Co., 326 Ill. App. 3d 210, 219 (2001). Excess insurers usually charge much smaller 

premiums than primary insurers. “[T]his disparity in premiums is indicative of the reduced risk 

assumed by the [excess] policy.” Illinois Emcasco Insurance Co. v. Continental Casualty Co., 

139 Ill. App. 3d 130, 133 (1985). For primary policies that have deductibles or SIRs, as with 

excess policies, “liability attaches only after a predetermined amount of *** coverage has been 

exhausted. *** This reduced risk is reflected in the cost of the policy.” Whitehead v. Fleet 

Towing Co., 110 Ill. App. 3d 759, 764 (1982).

¶ 29 Here, the policies at issue establish that Kone had a duty to notify Lamorak of any 

occurrence, regardless of the amount of potential liability. The policies at issue impose on 

Lamorak a duty to defend if the liability appears likely to exceed the SIR. Notably, the policies 

do not give Kone discretion to decide whether liability will likely exceed the SIR. Lamorak 

reserved for itself that discretion. See American States, 260 Ill. App. 3d at 311. Finally, the 

premiums for the policies at issue greatly exceed the premiums for the contemporaneous 

umbrella policies, which covered much greater dollar amounts of liability for a wider group of 
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risks. The three most notable characteristics of primary insurance all indicate that the policies 

at issue constitute primary insurance.

¶ 30 Lamorak relies heavily on the policy language that expressly makes the policies “excess 

insurance, applicable excess of the retained limit.” The policies also state that “[i]n 

consideration of the reduced premium for which this policy is issued, it is agreed that the 

company’s obligation to pay *** is in excess of the retained limit.” Insofar as that language 

introduces some ambiguity into interpretation of the policies, we may look to the documents 

the parties presented to resolve the ambiguity. See Benedict v. Federal Kemper Life Assurance 

Co., 325 Ill. App. 3d 820, 824 (2001).

¶ 31 Kone appended to its motion for summary judgment several documents bearing legends 

that indicate creation in 1977. Kone presented no affidavits, depositions, or other evidence to 

explain how it obtained the documents. In its brief, Kone asserted that the documents were 

“produced by the parties in discovery,” but Kone did not say which parties produced which 

documents, except that Kone identified two charts as coming from Lamorak. Liberty also 

asserted in its brief that one document appended to the motion came from Lamorak in 

discovery. Lamorak objected that the documents appended to the motions lacked proper 

authentication, but it did not deny the assertion that it had produced the three documents in 

discovery. 

¶ 32 Rule 803(16) of the Illinois Rules of Evidence (Ill. R. Evid. 803(16) (eff. Apr. 26, 2012)) 

provides that the hearsay rule does not require exclusion of “[s]tatements in a document in 

existence 20 years or more the authenticity of which is established.” Rule 901(a) of the Illinois 

Rules of Evidence (Ill. R. Evid. 901(a) (eff. Jan. 1, 2011)) provides, “The requirement of 

authentication or identification as a condition precedent to admissibility is satisfied by 

evidence sufficient to support a finding that the matter in question is what its proponent 

claims.” For an allegedly ancient document, the rule requires evidence that the document “(A) 

is in such condition as to create no suspicion concerning its authenticity, (B) was in a place 

where it, if authentic, would likely be, and (C) has been in existence 20 years or more at the 

time it is offered.” Ill. R. Evid. 901(b)(8) (eff. Jan. 1, 2011). Kone and Liberty presented no 

affidavits or testimony to support findings about when or how they found most of the 

documents they appended to their motion for summary judgment. The presence of “1977” on 

a sheet of paper does not suffice to make a document self-authenticating. See Ill. R. Evid. 902 

(eff. Jan. 1, 2011). We ignore the documents that lack authentication. 

¶ 33 But Kone and Liberty asserted that Lamorak produced three of the documents in discovery, 

and Lamorak has not disputed that assertion. When Illinois courts interpret the rules of 

evidence, the courts may look to federal cases for guidance. People v. Thompson, 2016 IL 

118667, ¶ 40. In Architectural Iron Workers Local No. 63 Welfare Fund v. United Contractors, 

Inc., 46 F. Supp. 2d 769, 771 (N.D. Ill. 1999), the plaintiff filed many exhibits and the 

defendant objected that several specific exhibits were “inadmissible because they [were] 

unsupported by affidavit or deposition testimony.” The plaintiff asserted that some of the 

specified exhibits “were all produced during the course of the litigation in response to 

Plaintiffs’ requests for documents.” Architectural Iron Workers, 46 F. Supp. 2d at 772. The 

Architectural Iron Workers court held that “documents produced in response to discovery are 

self-authenticating. *** [T]here is no error to admit as evidence documents that Defendants 

themselves possess and produced in response to Plaintiff’s requests for production of 

documents.” Architectural Iron Workers, 46 F. Supp. 2d at 772.
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¶ 34 Because Lamorak had an opportunity to determine whether it produced the contested 

documents in discovery, and it did not deny that it produced those documents, we find 

sufficient authentication for the three documents Liberty and Kone asserted that they received 

from Lamorak in discovery.

¶ 35 The first document so authenticated is a private wire, dated June 29, 1977, from an 

insurance agent to the Kone employee responsible for risk coverage. The agent stated that 

Lamorak was “binding the primary general liability program using the *** SIR.” The 

document supports the inference that the agent and Kone believed Lamorak had agreed to issue 

primary insurance subject to a SIR. The two charts from Lamorak show Kone’s coverage for 

1973 through 1985. Both charts identify the Lamorak policies by number and specify that the 

policies at issue count as “Primary.” 

¶ 36 All the relevant indicators show that the policies at issue provide primary coverage. Insofar 

as the language of the policies might introduce some ambiguity, contemporaneous documents 

show that the parties understood that the policies at issue provided primary insurance. We hold 

that the policies at issue provided primary insurance coverage.

¶ 37 CONCLUSION

¶ 38 Insurance policies Lamorak issued to Kone for 1977 to 1985 imposed on Kone a duty to 

notify Lamorak of every occurrence, regardless of whether potential liability exceeded Kone’s 

SIR, and the policies established Lamorak’s duty to defend claims that appeared likely to 

exceed the SIR. The policies also had premiums far greater than the premiums for the umbrella 

policies Lamorak issued to Kone for the same years. Contemporary documents show that 

Lamorak and Kone understood that the policies at issue provided primary insurance subject to 

a SIR. Accordingly, we affirm the circuit court’s judgment declaring that the policies at issue 

provided primary insurance coverage to Kone.

¶ 39 Affirmed.