DISCUSSION

The Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202, gives courts of the
United States discretionary power to issue declaratory judgments. Atlanta Int’l Ins. Co. v.
Atchison, Topeka, and Santa Fe Railway Co., 938 F.2d 81, 83 (7th Cir. 1991). However,
for a court to exercise this power there must be an actual controversy.4 28 U.S.C. § 2201.
Defendants contend that no actual controversy exists yet between them and St. Paul
because there has not been any determination of damages from the underlying litigation
filed in the Circuit Court of Cook County.

When a defendant seeks to dismiss under Rule 12(b)(1), any inference drawn must
be favorable to the plaintiff's complaint. United Milk Products Co. v. Michigan Avenue
National Bank of Chicago, 401 F.2d 14, 17 (7th Cir. 1968). The well-pled allegations
contained in the complaint are accepted as true. National Van Lines, Inc. v. United
States, 326 F.2d 362, 372 (7th Cir. 1964). Tendering matters outside the pleadings does
not turn a Rule 12(b)(1) motion into a summary judgment motion. Crawford v. United
States, 796 F.2d 924, 927-28 (7th Cir. 1986).

In Adlanta Int’l, the Seventh Circuit dealt with a case neatly identical to this case.
In Atlanta Int'l, the Atchison, Topeka, and Santa Railway Company (“Santa Fe”) was
insured by Atlanta International Insurance Company (“Atlanta”) against claims arising
out of Santa Fe’s railroad operations. Atlanta Int 1, 938 F.2d at 82. In 1989, Santa Fe
was found to be in violation of the Sherman Act, 15 U.S.C. § 1, for conspiring with other
railroads in restraint of trade. Jd. Santa Fe was ordered to pay $750,100,000 in damages.
Id. After the verdict, Santa Fe sent letters to its nearly 170 general liability insurers

notifying the insurers of this verdict and noted that there was a possibility for settlement

+A ‘controversy’ in this sense must be one that is appropriate for judicial determination...A justiciable
controversy is thus distinguished from a difference or dispute of a hypothetical or abstract character, from
one that is academic or moot...The controversy must be definite and concrete, touching the legal relations
of parties having adverse legal interest...It must be a real and substantial controversy admitting of specific
telief through a degree of a conclusive character, as distinguished from an opinion advising what the law
would be on a hypothetical state of facts.” Aetna Life Ins, Co. v. Haworth, 300 U.S. 227, 240-1 (1937).

4



difference between the settlement and the $50,000 limit from Country Mutual’s under.
insured-motorist coverage, Country Mutual filed a motion to dismiss arguing that the at-
fault driver was not an “under insured” motorist because the limits of the at-fault driver’s
liability coverage were identical to Cummins’ under insured-motorist coverage. Id, The
Illinois Supreme Court denied Country Mutual’s motion holding that the determination of
whether a motorist is “under insured” must be made after the underlying litigation has
ended. Jd, 485-6. Since St. Paul is arguing that the Carter vehicle is not under insured,
they must wait until the underlying litigation has been completed before that
determination can be made.

Furthermore, it does not matter how St. Paul defines an “under insured motorist”
because statutes in force at the time the insurance policy was issued are controlling.
Cummins, 687 N.E.2d at 1025. Inserting a contrary or restricting provision in an
insurance policy cannot circumvent the purpose of a statute. Id, at 1025-6 (quoting
Severs v. Country Mutual Ins. Co., 89 Il.2d 515, 520, 434 N.E.2d 290 (1982). Any
conflict between statutory and insurance policy provisions will be resolved in favor of the
statutory provisions. Id, at 1026 (quoting DC Electronics, Inc. v. Employers Modern Life
Co., 90 Ill. App.3d 342, 348, 413 N.E.2d 23 (1980).

Thus, even though Defendants sent their statutory notice to St. Paul, which alerted
them to the possibility of the demand for payment or action in the case, there has been no
determination of damages in the Circuit Court case. St. Paul’s argument for declaratory
relief is based upon the premise that the Carter vehicle does not qualify as an under
insured vehicle. (Compl. ff 15, 16.) This is pure speculation.” As was stated in
Cummins, whether a vehicle qualifies as an “under insured vehicle” can only be
determined after the underlying litigation ends and the amount actually received from the

at-fault motorist (allegedly the Carter vehicle) can be compared to the amount of under

7 Yn fact, the main purpose behind acquiring “under insured coverage” is to account for the situation where a
defendant-tortfeasor does not have enough insurance coverage or assets to pay the judgment entered against
him.

7


willingness to offer all of their insurance benefits to the five claimants. The claimants?
injuries [Defendants] clearly exceed the $5 million dollars of insurance benefits available
to Carter’s Excavating.” (PI. Br. Opp’n Ex. C.)

On December 7, 2000, Defendant Estate of Krystal Powe sent its statutory notice
to St. Paul. (/d. at 4.) In this letter, Estate of Krystal Powe stated that it was “hereby
making a claim for the injuries and losses which the Estate has sustained, pursuant to the
under insurance provisions of the applicable insurance policies which your company
issued to the City of Chicago.” (Id, Ex. D.) On January 5, 2001, St. Paul filed its
Complaint for Declaratory Judgment. (Jd. at 4.) On February 12 and 13, 2001,
Defendants sent letters to St. Paul withdrawing the statutory notice made earlier. (d.)

St. Paul seeks a declaration from this court holding that it is not liable to
Defendants under either of the policies issued to the City of Chicago because the Carter
vehicle is not considered an under insured motorist.” (Id. 41 28, 29.) Defendants have
moved to dismiss the declaratory judgment action for lack of subject matter jurisdiction
or, alternatively, because St. Paul has not stated a claim upon which relief can be granted.
For the foregoing reasons, Defendant’s motion to dismiss for lack of subject matter

jurisdiction is granted.?

? According to the terms of St. Paul’s primary policy, it will compensate those persons
protected under its policy [it is not contested by St. Paul that Defendants are covered
under the policies held by the City of Chicago] for injuries resulting from the fault of an
uninsured or under insured vehicle. (Compl. { 18.) The policy defines an under insured
vehicle as one that has enough liability insurance as required by law, but has less than the
limit of coverage provided under the policy agreement. (Id. | 19.) St. Paul contends that
since the Carter vehicle has $5 million in liability insurance coverage, which is more than
the $1 million limit in uninsured motorist coverage for the Gardner vehicle, St. Paul is not
liable for the under insured motorist coverage under the Primary Policy. (Jd, { 20.)
Furthermore, since the Primary Policy does not provide coverage, the Excess Policy does
not provide coverage. (Id. J 29.)

3 Since Defendant’s motion to dismiss is granted for lack of subject matter jurisdiction,
their motion to dismiss for failure to state a claim is moot. Similarly, Plaintiff's motion
to strike has no bearing upon this opinion, and is rendered moot.

3


discussions in the near future. Jd. Santa Fe also requested that the insurers give their
views as to the terms of the policies held by them. Jd. When Atlanta received their letter
it brought suit under the Federal Declaratory Judgment Act to relieve itself from any
potential coverage provided in the insurance policy issued to Santa Fe. Id.

The Seventh Circuit affirmed the District Court’s dismissal of Atlanta’s request
for a declaratory relief because no actual controversy existed to warrant a declaratory
judgment. Id, at 84. The District Court held that the mere rendering of a judgment
against the insured (Santa Fe) by itself does not create an actual controversy with the
insurer (Atlanta). Id, at 83. The District Court relied upon an Illinois Supreme Court
decision in Gibraltar Ins. Co. v. Varkalis, 46 Ul.2d 481, 263 N.E.2d 823, 826 ( 1970) for
the proposition that “no actual controversy arises among the parties until such time as the
issuing company is called upon to either pay or defend a claim on behalf of its insured
under the terms of the policy in question.” Jd. The Seventh Circuit supported the use of
the Illinois Supreme Court case by the District Court. Id, The Seventh Circuit further
stated that “a party bringing a declaratory action must show an actual controversy and a
direct injury or threat of injury that is ‘real and immediate, not conjectural or
hypothetical. Jd, (quoting Koch Refining v. Farmers Union Cent, Exch. Ine., 831 F.2d
1339, 1353 (7th Cir. 1987), cert. denied, 485 U.S. 906). Since the requisite injury-a claim
for payment by Santa Fe-neither occurred nor was immediately threatened by Santa Fe.
Id.

In this case, Defendants sent out letters to St. Paul to comply with the statutory
requirements of 215 ILCS 5/143a-2. However, they withdrew their requests for St. Paul
to step in and either pay or take part in the case. (Mot. Dismiss 4[ 13.) Itis not clear from
the statute whether Defendants can withdraw their statutory notice or whether St. Paul
became bound to act after the thirty day time period elapsed. If Defendants can withdraw
the statutory notice then Atlanta Int’lis controlling because the insurer, St. Paul, has not

been asked by Defendants to do anything as of yet. Ifand when Defendants make a


, insured motorist coverage held by the City of Chicago.

St. Paul also argues that their under insured policy only requires them to pay if the |

amount of coverage of the at-fault driver (Carter) is less than the amount of under insured

” coverage held by Defendants (Compl. ff 19, 20.) Since Ranger deposited the entire five :

" .. million dollars, St. Paul argues that each Defendant will receive “$1,000,000 in the

aggregate.” (PI. Br. Opp’n at 13.) Thus, St. Paul’s policies would not require them to
pay. St. Paul assumes too much. It is unclear what each Defendant will receive. It is ,
entirely possible that each Defendant will receive $1 million each in the underlying
lawsuit, but it is also possible that one Defendant will receive $4,999,999 in the lawsuit,
while the other four Defendants must share $1. Thus, any opinion offered as to whether
St. Paul might be liable to Defendants based upon St. Paul’s under insured insurance
policies with the City of Chicago would be nothing more than an advisory opinion.
CONCLUSION :
For the foregoing reasons, the Court grants Defendants’ Motion to Dismiss for lack of

subject matter jurisdiction (#6-1). St Paul’s motion to strike is moot (#15-1).

soorpereD ?//3 Jol ENTERED:

Judge Ronald A. Guzma



Migute Order Form (06/97)

© 594

United States District Court, Northern District of Iinois

Name of Assigned Judge Ronald A. Guzman Sitting Judge if Other
or Magistrate Judge . than Assigned Judge
CASE NUMBER 01C 112 DATE 9/13/2001
CASE ST. PAUL FIRE vs. ESTATE OF GENESIS BRYANT, et al
TITLE
{in the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
qd) im Filed motion of { use listing in “Motion” box above.]
(2) Oo Brief in support of motion due
(3) o Answer brief to motion due . Reply to answer briefdue___
(4) im Ruling/Hearing on set for at
(5) Oo Status hearing[held/continued to] [set for/re-set for] on set for at
(6) im} Pretrial conference[held/continued to] [set for/re-set for] on set for at :
(1) o Trial[set for/re-set for] on at
(8) Oo (Bench/Jury trial] [Hearing] held/continued to at
(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) OGeneralRule 21 CIFRCP41(a\(1) EO FRCP41(a)(2).
ao [Other docket entry] ENTER MEMORANDUM OPINION AND ORDER: The Court grants
Defendants’ Motion to Dismiss for lack of subject matter jurisdiction [6-1]. St. Paul’s motion to strike
is moot. [15-1]. -
(1) [For further detail see order attached to the original minute order.]
No notices required, advised in open court.
No notices required. umber of novices
Notices mailed by judge’s staff. Sep 17 m0t
Notified counsel by telephone. dave docketed
a | Docketing to mail notices.
vY | Mail AO 450 form. docking @hAFials
Copy to judge/magistrate judge. '

courtroom
deputy’s
initials

TBK

Date/time received in
central Clerk's Office

mailing deputy initials



ee - onan

demand for payment or otherwise takes steps that make it sufficiently certain that St. Paul
will be called upon to pay under the policy, then there will exist an appropriate setting for
determining whether St. Paul is liable under the Primary Policy with the City of Chicago.
See Atlanta Int’l, 938 F.2d at 84.

Since it not clear whether an insured can withdraw statutory notice and since all
inferences must be drawn favorable to St. Paul, this Court will assume that such statutory
notice cannot be withdrawn and that a demand has been made upon St. Paul.> In this
case, however, whether a demand was made upon St. Paul to act does not effect the
dismissal of St. Paul’s complaint for lack of subject matter jurisdiction.

Even if St. Paul is bound to act, as they contend, under Illinois law there is still no
controversy yet until the underlying litigation is completed.® The Illinois Supreme Court
in Cummins v. Country Mutual Ins. Co., held that whether an at-fault motorist is defined
as “under insured” is determined by comparing the amount of under insured-motorist
coverage held by the injured party to the amount of coverage actually recovered from the
at-fault driver. 178 Ill.2d 474, 485-6, 687 N.E.2d 1021, 1027 (1997). In Cummins,
Country Mutual Insurance Company (“County Mutual”) issued an under insured-motorist
policy to Mr. Cummins in the amount of $50,000 per person and $100,000 per accident.
Cummins, 687 N.E.2d at 1023. Mr. Cummins was involved in an accident witha
motorist with identical insurance limits of $50,000 per person and $100,000 per accident.
id. Cummins received $35,000 from the at-fault driver with the rest going to injured

passengers in the at-fault driver’s vehicle. Jd. When Cummins filed suit to recover the

* St. Paul has not offered any reason why the statutory notice cannot be withdrawn. Since the right of
subrogation is “founded on principles of justice and equity, and its operation is governed by principles of
equity, Ness v. Ford Motor Co., 835 F.Supp. 453, 457 (N.D. Ill. 1993) {quoting Remsen v, Midway Liquors,
Inc., 30 Ill. App.2d 132, 174 N.E.2d 7, 12 (1961)), it seems more equitable to allow an insured to withdraw
the statutory notice. In this case, if Defendants could not withdraw this notice, St. Paul could pay them $5
million for the rights to the underlying case, even though the amount of damages awarded in the underlying
lawsuit could be greater than $5 million. This would result in a windfall for St. Paul as they would have
bought low and then could sell high.

6 By arguing that the statutory notice made by Defendants pursuant to 215 ILCS 5/143a-2
binds them, St. Paul concedes that Illinois law is applicable.

6


rsa snnemeimniniiininiatiniiinciaetieet ee

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS en
EASTERN DIVISION .
2001
ST. PAUL FIRE AND MARINE ) sep 18
INSURANCE COMPANY, > )
Plaintiff, )
) 01 C 112
vs. )
) Judge Ronald
) Guzman
ESTATE OF GENESIS BRYANT, ESTATE )
OF KRYSTAL POWE, MALCOLM BRYANT, )
WAYNE OSBORNE, and ALBERT GARDNER, )
Defendants. )

MEMORANDUM OPINION AND ORDER

Plaintiff, St. Paul Fire and Marine Insurance Company (“St. Paul”) is a Minnesota
corporation with its principal place of business in Minneapolis, Minnesota. Defendants,
Malcolm Bryant, Wayne Osborne, and Albert Gardner are individuals residing in
Chicago, Illinois. Defendants Genesis Bryant and Krystal Powe are deceased, The
administrators of their estates, Richard Bryant and Julie Powe, respectively, both reside in
Chicago, Illinois. St. Paul brought a declaratory judgment action under 28 U.S.C. §§2201
and 2202 against all Defendants seeking to establish that St. Paul is not liable to
Defendants for an accident that occurred on July 29, 2000. Defendants have moved to
dismiss the Complaint pursuant to Federal Rule of Civil Procedure Rule”) 12(b)(1) and
(6). For the reasons provided in this Memorandum Opinion and Order, the Court grants
the motion to dismiss pursuant to Rule 12(b)(1) because no actual controversy exists
between the parties.

FACTS
On July 29, 2000, a tragic accident occurred on I-90/94 in Chicago, Illinois.

(Compl. { 10.) On that day, Defendants were working for the City of Chicago’s Mayor’s
Office for Special Events delivering “jumping jacks” to neighborhood festivals, (Mot.
Dismiss J 1.) Defendant Albert Gardner was driving with Defendants Ms. Bryant, Ms.

|


Hr rereema createed St

Powe, Mr. Bryant, and Mr. Osborne on I-90/94 (“Gardner vehicle”). (Compl. J 10.) A
Mack truck towing a dump trailer driven by Robert Walton was just in front of them. dd.
4/11.) Carter’s Excavating & Grading (“Carter”) owned the truck. (d.) As the truck
went under the Van Buren Street overpass, the bed of the dump trailer struck the overpass
and detached from the truck. (Jd. 12.) The bed landed on the Gardner vehicle, killing
Genesis Bryant and Krystal Powe, and seriously injuring Albert Gardner, Malcolm
Bryant, Wayne Osborne. (Id.) Subsequently, Defendants filed suit in the Circuit Court of
Cook County against Robert Walton and Carter’s Excavating & Grading seeking
damages (“underlying action”).

Ranger Insurance Company (“Ranger”) insured the Carter truck for five million
dollars in liability coverage. (id. 414.) In Ranger Ins. Co. v. Carter’s Excavating &
Grading, Case No. 01 CH 410, Ranger filed an interpleader action and deposited the
entire five million dollars of insurance benefits with the Clerk of the Circuit Court of
Cook County. Ud. J 15.) To date, there has been no adjudication of liability in the
underlying lawsuit filed by Defendants. (Mot. Dismiss [ 6.)

The City of Chicago’s Mayor’s Office of Special Events had leased the ill-fated
Gardner vehicle from Budget Rent-A-Car. (Compl. ¥ 17.) St. Paul insures the City of
Chicago with both a Primary Policy and an “Umbrella Excess Liability Protection”
policy. (Id. J] 17, 21.) On November 27, 2000, Defendants Malcolm Bryant, the Estate
of Genesis Bryant, Albert Gardner, and Wayne Osborne sent a letter to St. Paul pursuant
to the statutory notice requirement of 215 ILCS 5/ 143a-2(6).' (PI. Br. Opp’n at 4.) In this
letter Defendants stated that “{y]our policy and the Statute controlling under insured
motorist coverage [215 ILCS 5/143a-2] are silent regarding whether an interpleader filing

is an offer of settlement. It is our position that [Ranger] has clearly indicated a

' 215 ILCS 5/143a-2(6) reads: Subrogation against under insured motorists. No insurer shall exercise any
right of subrogation under a policy providing additional uninsured motorist coverage against an under
insured motorist where the insurer has been provided with written notice in advance of a settlement between
its insured and the under insured motorist and the insurer fails to advance a payment to the insured, in an

amount equal to the tentative settlement, within 30 days following receipt of such notice.

2