Opinion ID: 629181
Heading Depth: 1
Heading Rank: 1

Heading: Who controlled the litigation?

Text: 17 The majority's analysis of who controlled the litigation is accurate as far as it goes but fails to take into consideration what took place during the course of the product liability litigation. Although the primary insurance contract between Dresser and Fidelity imposed on Fidelity a duty to defend, that obligation may have been modified by a claims service contract entered into between Dresser and Underwriters Adjusting Company (UAC). The claims service contract authorized UAC to investigate all claims against Dresser and make settlements in those cases below Dresser's $10,000 deductible in its primary policy but the claims service contract gave Dresser complete authority to control litigation or settlement of products liability claims. The district court found that the claims service contract modified the primary insurance contract and authorized Dresser to control litigation in product liability claims. The majority's brief discussion explaining why the contract was not modified fails to take into consideration the subsequent actions of the parties. A contract modification alters a contract through introduction of new elements into the details of a contract and canceling others, while leaving the general purpose and effect of the contract intact. Chicago College of Osteopathic Medicine v. George A. Fuller Co., 776 F.2d 198, 208 (7th Cir.1985). See also 6 Corbin on Contracts Sec. 1293 (1962). 1 Thus the conduct of the parties is relevant to determining whether a modification occurred. 18 A glaring omission in Lloyd's argument is the failure to present us with any authority stating that Fidelity was prohibited from modifying its insurance contract with Dresser, or that Fidelity was prohibited from permitting Dresser to litigate the underlying products liability action through hiring independent counsel. Certainly Lloyd's could very easily have written into its contract with Dresser that it was relying on Fidelity to control the litigation strategy or that any modification of the primary insurance contract (between Dresser and Fidelity) must meet the approval of Lloyd's. It is equally disconcerting that the majority's decision to remand the case will provide Lloyd's with a second bite at the apple in a case where it failed to properly defend against the motion for summary judgment as evidenced by its refusal to file any affidavits or take any depositions. Above all, parties who have demonstrated a lack of diligence in prosecuting a claim certainly should not be granted a second opportunity before the district court in what may conceivably amount to prejudice to the successful litigant. 19 I also find unpersuasive Lloyds' argument that there was a secret agreement between Dresser and Fidelity to conceal from Lloyd's the claims service contract. What possible incentive would Fidelity have to form a secret agreement with Dresser that removed from Fidelity the ability to control litigation or settlement of a lawsuit in which Fidelity stood to be liable for $1 million in damages? Certainly Fidelity would not idly stand by and suffer a $1 million judgment if it thought Dresser should accept a settlement offer within the primary insurance coverage. Accordingly, I am of the opinion that the district court's decision can and should be affirmed on the basis of contract modification, making a remand unnecessary because Fidelity had no contractual control over the litigation.