United States Fidelity And Guaranty Company v. Shorenstein Realty Services, LP et al

Filing 341

MEMORANDUM Opinion and Order Signed by the Honorable Elaine E. Bucklo on 5/11/2011. Mailed notice by judge's staff. (srb,)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES FIDELITY AND GUARANTY
COMPANY,
Plaintiff,
v.
SHORENSTEIN REALTY SERVICES, L.P.;
SHORENSTEIN MANAGEMENT, INC.;
SHORENSTEIN COMPANY, LLC; SRI MICHIGAN
VENTURE, LLC; SRI MICHIGAN AVENUE
MANAGEMENT, INC.; 175 EAST DELAWARE
PLACE HOMEOWNERS ASSOCIATION; and
NATIONAL UNION FIRE INSURANCE OF
PITTSBURGH, PA,
Defendants.
_______________________________________
NATIONAL UNION FIRE INSURANCE COMPANY
OF PITTSBURGH, PA; SRI MICHIGAN AVENUE
VENTURE, LLC; SHORENSTEIN REALTY
SERVICES, L.P.; SHORENSTEIN MANAGEMENT,
INC.; SRI MICHIGAN AVENUE MANAGEMENT,
INC.; and SHORENSTEIN COMPANY, LLC,
Defendants/Counter-Plaintiffs,
v.
UNITED STATES FIDELITY AND GUARANTY
COMPANY,
Plaintiff/Counter-Defendant.
____________________________________
NATIONAL UNION FIRE INSURANCE COMPANY
OF PITTSBURGH, PA; SRI MICHIGAN AVENUE
VENTURE, LLC; SHORENSTEIN REALTY
SERVICES, L.P.; SHORENSTEIN MANAGEMENT,
INC.; SRI MICHIGAN AVENUE MANAGEMENT,
INC.; and SHORENSTEIN COMPANY, LLC,
Defendant/Third Party Plaintiffs,
v.
AMERICAN MOTORISTS INSURANCE COMPANY,
Third Party Defendant.

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No. 07 C 3179

MEMORANDUM OPINION AND ORDER

This

court

has

already

granted

summary

judgment

to

SRI

Michigan Avenue Venture, LLC, SRI Michigan Avenue Management, Inc.,
Shorenstein Realty Services, L.P., Shorenstein Management, Inc. and
Shorenstein Company, LLC (collectively “Shorenstein”) and National
Union Fire Insurance Company of Pittsburgh, PA (“National Union”)
on the grounds that Shorenstein was insured under the policies
issue by United States Fidelity & Guaranty Company (“USF&G”) and
American Motorists Insurance Company (“AMICO”).

Shorenstein and

National Union have moved for summary judgment on damages, as well
as on the issue of which Shorenstein entities are covered under the
USF&G and AMICO policies.

USF&G filed a cross-motion for summary

judgment, which was joined by AMICO.

For the reasons that follow,

Shorenstein and National Union’s motion is granted in part and
denied in part, and USF&G and AMICO’s cross-motion is denied.
I.
This case centers around a tragic accident which took place on
March 9, 2002 at the John Hancock Center in Chicago, Illinois. SRI
Michigan Avenue Venture, LLC was the owner of the property and
Shorenstein Realty Services, L.P. was the manager of the property.
This accident happened in connection with a project for which
Shorenstein had retained Eckland Consultants, Inc. (“Eckland”),
which held a Business Foundation Policy from USF&G with primary and
umbrella coverage parts. The USF&G policy had primary limits of $1

2

million and excess limits of $5 million.

On the same project,

Shorenstein retained McGinnis Chen & Associates, LLP (“MCA”), which
was insured by AMICO under a Premier Businessowners Policy (the
primary policy) and a Commercial Catastrophe Policy (the excess
policy).

The AMICO primary policy had a limit of $1 million and

the excess policy had a limit of $5 million.

In its contracts with

Eckland and MCA, Shorenstein required that Eckland and MCA procure
coverage for certain Shorenstein entities as additional insureds.
Shorenstein itself held coverage that included a $1 million primary
policy from The Hartford Fire Insurance Company and a $25 million
excess policy from National Union.
AMICO

originally

reservation

of

agreed

rights

in

to

the

defend

Shorenstein

underlying

state

subsequently refused to indemnify Shorenstein.
defend or indemnify Shorenstein.

under

lawsuit

a

but

USF&G refused to

Ultimately, National Union paid

$7,678,928.10 toward the settlement of the underlying lawsuit.
II.
Summary

judgment

is

appropriate

if

“the

pleadings,

depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.”

Fed. R. Civ. P. 56(c).

Once

the moving party shows that there is no genuine issue of material
fact,

the

burden

of

proof

shifts

3

to

the

nonmoving

party

to

designate specific facts showing that there is a genuine issue for
trial.

Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).

Shorenstein and National Union argue that National Union is
equitably subrogated1 to Shorenstein’s rights against USF&G and
AMICO. Under Illinois law, a party asserting equitable subrogation
must show: (1) the defendant carrier must be primarily liable to an
insured 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.

See

Home

Cincinnati Ins. Co., 821 N.E.2d 269, 280 (Ill. 2004).2

Ins.

Co.

v.

Shorenstein

and National Union assert that all three elements are met here.
A threshold issue presented by both motions for summary
judgment centers on which of the Shorenstein entities listed in the

1

In its response, USF&G argues that National Union can only
be contractually, not equitably, subrogated to the rights of
various Shorenstein entities due to language in the National Union
policy. Shorenstein and National Union respond that only equitable
subrogation is possible because there is no direct contractual
relationship between National Union and USF&G/AMICO. I need not
resolve this issue as the elements which must be proven under
either equitable or contractual subrogation are materially the
same. See Wausau Inc. Co. v. All Chicagoland Moving & Storage Co.,
777 N.E.2d 1062, 1067 (Ill. App. Ct. 2002).
2

As has been the case in the prior motions filed in this
case, none of the parties engages in a choice of law analysis and
assume that Illinois law governs this dispute. Since none of the
parties challenges the application of Illinois law, I shall apply
Illinois law as well. See, e.g., Wood v. Mid-Valley Inc., 942 F.2d
425, 426 (7th Cir. 1991).
4

settlement of the underlying state lawsuit are covered by the USF&G
and/or AMICO insurance policies.3

I start by looking at which

entities were named as defendants in the underlying consolidated
lawsuit.

The Shorenstein defendants were: (1) Shorenstein Realty

Services,

L.P.;

(2)

SRI

Michigan

Avenue

Venture,

LLP;

(3) Shorenstein Management, Inc.; and (4) SRI Michigan Avenue
Management, Inc.
lawsuit,

the

However, when the parties settled the underlying

Settlement

Agreement

listed

the

following

eight

parties: (1) Shorenstein Realty Services, LP; (2) SRI Michigan
Avenue Venture, LLP; (3) Shorenstein Management, Inc.; (4) SRI
Michigan Avenue Management, Inc.; (5) Shorenstein Co., LP; (6)
Shorenstein Company LLC; (7) Shorenstein Properties LLC; and (8)
Shorenstein Michigan Avenue Venture LLC. Therefore, in addition to
the four Shorenstein defendants in the underlying lawsuit, there
were four additional Shorenstein entities listed in the Settlement
Agreement.
Shorenstein and National Union argue that there were really
only two true defendants in the underlying lawsuit -- owner SRI
Michigan Avenue Venture, LLC and property manager Shorenstein

3

USF&G and AMICO argue that the requirements for coverage
under their policies have not been shown because National Union has
failed to put forward evidence that all primary insurance available
to Shorenstein must be exhausted. USF&G/AMICO Opp. (#306) at 4.
Shorenstein and National Union respond that this argument has been
waived as it should have been, but was not, raised in the earlier
motions for summary judgment related to coverage. I agree that
this argument should have been raised earlier as it relates to
coverage and I find it waived.
5

Realty Services, L.P. -- and that only those two parties were truly
released

in

the

Settlement

Agreement.

With

respect

to

the

complaint in the underlying lawsuit, Shorenstein and National Union
argue that although the fifth and sixth amended complaints name
four Shorenstein entities, only SRI Michigan Avenue Venture, LLC
and Shorenstein Realty Services, L.P. were potentially liable to
plaintiffs.

In support, Shorenstein and National Union point out

that only these two entities filed appearances in the case and
Shorenstein filed an answer and other documents with the following
language:

“Shorenstein

Michigan

Avenue

improperly
Michigan

sued

Avenue

Realty

Venture,
herein
Venture,

Services,

LLC

as

(“SRI”)

Shorenstein

LLP,

L.P.

(“SRS”)

(individually
Management,

Shorenstein

Co.,

and
and

Inc.,

L.P.

and

SRI
as
SRI
SRI

Michigan Avenue Management, Inc.)” Shor./Nat’l Union RSODF Ex. E.
Through this phrasing, Shorenstein was alerting the state court to
the fact that the property owner, SRI Michigan Avenue Venture, LLC,
was incorrectly sued as an LLP, and also asserting that the
entities Shorenstein Management, Inc. and Shorenstein Co., L.P.
were improperly named as defendants.

Shorenstein and National

Union also point to the deposition testimony of Shorenstein Rule
30(b)(6) witness, attorney George B. Yankwitt, who, when asked
about which Shorenstein entities were potentially at risk in the
underlying lawsuit, stated, “I suppose that by naming entities in
a complaint someone is making a claim against those entities.

6

On

the other hand, I don’t recall a single communication with Mr.
Clifford or any other attorney representing any plaintiff in any
lawsuit in which anyone ever suggested that any entity other than
the owner of the commercial portion of the Hancock, SRI Michigan
Avenue

Venture

LLC,

or

Shorenstein

liability to any of the plaintiffs.”
Dep. at 83:8-18.

Realty

Services

had

any

USF&G SUF Ex. G, Yankwitt

He then went on state that “the subject of

whether any other entities had potential liability” “was not
discussed”

with

any

of

the

plaintiffs’

lawyers

or

with

any

representatives of any of the insurance carriers. Id. at 83:19-25,
84:1-18.
Turning then to the eight Shorenstein entities listed in the
Settlement Agreement, Shorenstein and National Union argue that
because only SRI Michigan Avenue Venture, LLC and Shorenstein
Realty Services, L.P. had any possible liability in the underlying
lawsuit,

only

settlement.

these

two

parties

were

truly

released

by

the

Shorenstein and National Union explain that the four

additional Shorenstein entities (which were not even defendants in
the underlying action) were included in the Settlement Agreement in
an attempt to be “as overly inclusive as possible.”
Union Mem. (#296) at 12.

Shor./Nat’l

They argue that the “the parties first

agreed on a settlement figure for the Shorenstein defendants, and
then an attorney for the plaintiffs sent a draft release to Mr.
Yankwitt and Mary Chang at Bryan Cave, having filled in the names

7

of Shorenstein entities named as defendants, and asking them to
fill in any other names they wished.”

Id.

In response, USF&G argues that all eight Shorenstein entities
listed in the Settlement Agreement were potentially liable to the
plaintiffs.

See USF&G Mem. (#296) at 9.

AMICO makes a different

argument and maintains that only the four Shorenstein entities
which were defendants in the underlying action could possibly be at
risk in that suit, and could possibly trigger coverage.
For guidance, I turn to Harbor Insurance Co. v. Continental
Bank Corp., 922 F.2d 357 (7th Cir. 1990), which involved two
underlying securities lawsuits.
and

five

of

Continental

its
Bank

directors
and

25

One action named Continental Bank

as

defendants.

directors,

identified only as John Does.

The

officers

other

and

named

employees

Continental settled the two cases

and sought reimbursement of $15 million from insurer Harbor and the
remaining $2.5 million from Allstate. The Seventh Circuit remanded
the case back to the district court for a new trial and, in so
doing, discussed in dicta the issue of damages.

The Seventh

Circuit considered the possibility that some portion of the $17.5
million settlement was attributable to individuals or activities
that were not insured under the D&O policy.

The court stated, “To

the extent that the amount for which Continental settled was larger
than it would have been but for the misfeasance of these other
people-either noninsured persons or persons against whom no claim

8

was made-Continental’s entitlement to reimbursement in this suit
would be cut down.”

Id. at 367.

Admittedly, the language in Harbor Insurance quoted above is
dicta, and the instant case does not involve directors and officers
of a company.

Despite this, Harbor Insurance is analogous to the

instant case in that both cases involve a settlement where some
parties are insured and some are not.4

Shorenstein and National

Union have put forward undisputed evidence that attorneys for the
plaintiffs and Shorenstein reached a “handshake” deal in which the
parties agreed to settle for a certain amount.
Yankwitt Dep. at 73-74.

USF&G SUF Ex. G,

After this agreement was reached, one of

the plaintiffs’ attorney’s sent Shorenstein’s attorneys Mary Chang
and George Yankwitt “a draft of the general release with a request
that we fill in the names of the entities what we want released.”
Id.

Yankwitt also testified that the plaintiffs’ attorney sent

Mary Chang and Yankwitt “a draft of the Release and a request that
we fill in the names of the Shorenstein entities that we wanted to
be beneficiaries of the release.

I do not -- I believe that what

[the plaintiffs’ attorney] sent was a marked up copy of the release
he had used with AMS.
names

of

the

I believe that he had already filled in the

entities

that

were

4

named

as

Defendants

in

the

I recognize that it is undisputed that National Union
represented all the Shorenstein entities listed in the Settlement
Agreement. However, from USF&G and AMICO’s perspective, some of
those Shorenstein entities were covered by policies issued by USF&G
and/or AMICO, and some were not.
9

underlying lawsuits, and he was saying that if you want anyone else
specifically named, add them.”
testified

that

wit[sic]”

which

the

plaintiffs’

entities

Settlement Agreement.

Id. at 87-88.

Chang

Id. at 93.

attorneys
and

Finally, Yankwitt

“did

Yankwitt

not

care

included

in

one
the

USF&G and AMICO have offered no

evidence that the addition of the four non-defendant Shorenstein
entities increased the amount of the settlement.
In light of this undisputed evidence, I conclude that the four
Shorenstein entities which were not listed as defendants in the
underlying

suit

should

not

be

considered

in

the

allocation

analysis.

Their addition to the Settlement Agreement did not

increase the settlement amount. See Harbor Insurance, 922 F.2d at
367.
Turning then to the question of whether all four Shorenstein
entities listed as defendants in the underlying lawsuit should be
considered at risk for liability (or whether only the owner and the
property manager should), I conclude that all four entities listed
as defendants in the underlying lawsuit were potentially liable in
the underlying lawsuit.

The law in Illinois presumes that the

underlying plaintiffs would have prevailed on all of their theories
of liability because the case settled prior to trial.

See Home

Ins. Co. v. Cincinnati Ins. Co., 821 N.E.2d 269, 281 (Ill. 2004).
Thus, I must assume all four Shorenstein defendants were subject to
liability in the underlying lawsuit.

10

I reject Shorenstein and

National Union’s argument that Shorenstein’s assertion in the
pleadings that Shorenstein Co., L.P. and Shorenstein Management,
Inc.

were

improperly

presumption.

Nor

named

do

I

as

conclude

defendants
that

overcomes

Yankwitt’s

this

deposition

testimony establishes that these two parties were not potentially
subject to liability.

Yankwitt admitted that “I suppose that by

naming entities in a complaint someone is making a claim against
those entities.”

USF&G SUF Ex. G, Yankwitt Dep. at 83.

Through

six amended complaints, the plaintiffs in the underlying action
continued to list Shorenstein Co., L.P. and Shorenstein Management,
Inc.

as

defendants.

SRI

Michigan

Avenue

Venture,

LLC

and

Shorenstein Realty Services, L.P. never moved to dismiss the other
Shorenstein defendants and thus all four Shorenstein entities were
defendants

at

the

time

of

settlement.

Thus,

all

four

were

potentially liable to plaintiffs.
I now must determine which of the four Shorenstein defendants
who are also listed in the Settlement Agreement are covered under
USF&G and/or AMICO’s policies.
are:

These four Shorenstein entities

(1) Shorenstein Realty Services, L.P.; (2) SRI Michigan

Avenue Venture, LLP; (3) Shorenstein Management, Inc.; and (4) SRI
Michigan Avenue Management, Inc.
The

USF&G

policy

insured

the

following:

(1)

Owner;

(2) Shorenstein Realty Services, L.P.; (3) Shorenstein Company,
L.P.; and (4) any other party specified by the Owner as an

11

additional insured.

See USF&G Exs. A, B.

The contract between

Eckland and Shorenstein lists the Owner as “SRI Michigan Avenue
Venture, LLP % Shorenstein Realty Services, L.P.”, while a letter
from Shorenstein to Eckland states that the USF&G Policy must list
“SRI

Michigan

insured.

Avenue

Venture,

LLC

(Owner)”

as

an

additional

See id. at Exs. B, C.

The AMICO policy insured the following: (1) Owner; (2) Owner’s
Agent; (3) Shorenstein Company, LP; and (4) any other party
specified by the Owner as an additional insured.
It is undisputed that Shorenstein Realty Services, L.P. is an
insured

under

the

USF&G

policy.

However,

I

conclude

that

Shorenstein Realty Services, L.P. is not an insured under AMICO’s
policy.

That entity is not listed as an additional insured in the

contract between AMICO and MCA.

Further, the contract does not

identify which entity is the “Owner’s Agent” and there is no
indication in the contract itself that Shorenstein Realty Services,
L.P. is the “Owner’s Agent.”5
5

In a single sentence, Shorenstein and National Union argue
that a MCA project manual identifies Shorenstein Realty Services,
L.P. as the “owner’s agent,” and thus the reference to “Owner’s
Agent” in the MCA/Shorenstein contract must also refer to
Shorenstein Realty Services, L.P. This argument is waived. See
United States v. Berkowitz, 927 F.2d 1376, 1384 (7th Cir. 1991)
(perfunctory and undeveloped arguments are waived). Shorenstein
and National Union make no effort to provide any argument or case
law to support this assertion. Ultimately, their argument that it
would be proper to interpret one contract by reference to a totally
separate document is totally unsupported. Likewise, Shorenstein’s
assertion that George Shorenstein’s deposition supports the notion
that Shorenstein Realty Services, L.P. should be deemed to be the
12

The biggest contention between the parties centers around
“LLC” versus “LLP.”

It is undisputed that the owner of the

property at the time of the accident was SRI Michigan Avenue
Venture, LLC. In the underlying lawsuit, the plaintiffs improperly
named the owner as an LLP and this mistake was repeated by the
plaintiffs’ attorneys when they carried over the names from the
case caption to the text of the Settlement Agreement.

USF&G and

AMICO both argue that they insure SRI Michigan Avenue Venture, LLC
and not the LLP.
repeated

in

the

I note that this confusion between LLC and LLP is
USF&G/Eckland

contract

where

the

owner

is

identified as an LLP and later changed to an LLC pursuant to a
letter from Shorenstein making this correction.
I am not persuaded by USF&G and AMICO’s argument.

Their

argument would be much more compelling if, in fact, there was
evidence that SRI Michigan Avenue Venture, LLP actually existed.
The undisputed testimony from attorney George Yankwitt indicates
that the property owner was “sometimes incorrectly” referred to as
an LLP, and testified that he did not know if there ever was an
entity whose correct name was SRI Michigan Avenue Venture, LLP.

“Owner’s Agent” is likewise waived. See id. Shorenstein provides
no pin cites and instead refers generally to the entire deposition.
It is not the job of this court to scour evidence and find support
for a party’s assertion. In addition, Shorenstein fails to provide
any legal authority for the notion that I may use deposition
testimony to define “Owner’s Agent” in the MCA/Shorenstein
contract.
It is Shorenstein and National Union’s job to fully
develop any argument they attempt to present to this court.
13

USF&G SUF Ex. G., Yankwitt Dep. at 43.

As discussed above,

attorneys for Shorenstein in the underlying action corrected the
owner’s name from an LLP to an LLC in all the pleadings they filed.
Further, the state court, in finding that the settlement was
reached in good faith, entered an order in which it acknowledged
that the owner was incorrectly sued as an LLP.

Neither USF&G or

AMICO argue that they were somehow confused or did not understand
that the owner of the property was being sued in the underlying
lawsuit.6

Given the pleadings and orders in the state court case,

the testimony concerning the confusion between the entity’s status
as an LLP or an LLC, and the fact that there only ever was one
entity which owned the property, I conclude that the party which
was sued in the underlying complaint and was a part of the
Settlement Agreement was an insured under both the USF&G and AMICO
policy, despite being incorrectly identified as an LLP.
With this in mind, I turn to the issue of targeted or
selective tender.

Under the targeted tender rule, when several

insurance policies are available to the insured, the insured has
the paramount right to choose or knowingly forego an insurer’s
participation in a claim.

See John Burns Constr. Co. v. Indiana

6

I note that AMICO was involved in providing a defense to
Shorenstein in the underlying lawsuit and must have been aware that
Shorenstein asserted that the owner was in fact an LLC, not an LLP.
I also note that USF&G’s policy actually repeated the mistake made
by the plaintiffs in the underlying lawsuit in that it, too,
originally identified the “Owner” as an LLP. See USF&G SUF Ex. B.
14

Ins. Co., 727 N.E.2d 211, 215 (Ill. 2000). An insured’s ability to
forego an insurer’s assistance should be protected. See Cincinnati
Cos. v. West American Ins. Co., 701 N.E.2d 499, 503 (Ill. 1998).
When an insured has knowingly chosen to forego an insurer’s
assistance, the insurer is relieved of its obligation to the
insured with regard to that claim.

Id. at 503-04.

The targeted

insurer, then, has the sole responsibility to defend and indemnify
the insured. Chicago Hosp. Risk Pooling Program v. Ill. State Med.
Inter-Insurance Exch., 758 N.E.2d 353, 357 (Ill. 2001).

That

insurer may not seek equitable contribution from the other insurers
that were not designated by the insured.

See Cincinnati Cos., 701

N.E.2d at 503.
Shorenstein and National Union have presented evidence that
Shorenstein informed both USF&G and AMICO that it selected USF&G
and AMICO (among others) to participate in Shorenstein’s defense
and indemnification and relieved National Union of its obligations.
See USF&G SUF Exs. N, O.

USF&G and AMICO do not dispute the target

tender letters, but rather argue that they were somehow suspect or
invalid because the tenders were “orchestrated by” National Union.
Further, USF&G and AMICO argue that Shorenstein never “deactivated
its coverage with” National Union.
First, the issue of Shorenstein’s motivation is a non-starter.
Illinois courts have recognized that an insured may base its
decision to target one insurer over another for any number of

15

reasons, including a desire to avoid increased premiums or to avoid
being dropped as an insured in the future.
701

N.E.2d

at

1311.

USF&G

and

AMICO

See Cincinnati Cos.,
provide

no

authority

supporting the position that an insured must make its decision to
target tender independent of any influence by the insurer not
targeted.
Second, I reject USF&G’s argument that Shorenstein never
“deactivated its coverage” with National Union.

Shorenstein and

National Union have presented evidence that Shorenstein informed
USF&G and AMICO that Shorenstein was choosing them to defend it and
Shorenstein informed USF&G and AMICO that it was foregoing coverage
from National Union.

Further, there is evidence that Shorenstein

informed National Union of the same.
Chuck

Fendrich

(on

behalf

of

A July 17, 2002 letter from

Shorenstein

Management,

Inc.,

Shorenstein Realty Services, L.P. and SRI Michigan Avenue Venture,
LLC) to Eckland and MCA, stated:
Please be advised that I have caused notice to be given
to Shorenstein’s insurance agent, Marsh USA, Inc., as
well as its primary general liability insurance carrier,
The Hartford Fire Insurance Company (“Hartford”), and
each of its excess general liability carriers, that
Shorenstein does not wish to have Hartford or its excess
liability
carriers
provide
for
the
defense
or
indemnification of these claims at this time.
Any
attempt by you to assert concurrent coverage with
Hartford or any of Shorenstein’s insurance carriers based
on a comparison of the applicable policy language is
contrary to the specific intention of Shorenstein in
looking to you and/or your insurance carrier(s) for the
cost of defense and full indemnity of this matter at this
time.
See Institute of London Underwriters v. The
Hartford Insurance Co., 599 N.E.2d 1311 (1st Dist. 1992).
16

USF&G SUF Exs. N, O (emphasis added).

In response to these

letters, USF&G and AMICO argue that there is no evidence that
Shorenstein ever notified National Union of its “deactivation.”

I

reject this argument as both July 17, 2002 letters indicate that
copies of both letters were sent to National Union.

Id. (showing

that National Union was carbon copied on both letters).7
The fact that Shorenstein kept National Union on “stand by,”
ready to step in should USF&G and AMICO refuse to defend or
indemnify Shorenstein, does not negate the original targeted tender
of USF&G and AMICO.8

Many Illinois cases, including John Burns,

cited by USF&G and AMICO, support the notion that an insured does

7

While not explicit, USF&G appears to argues that any
targeted tender was negated because the Settlement Agreement did
not specifically state that National Union was participating in the
settlement because of USF&G and AMICO’s failure to participate.
First, Statewide Ins. Co. v. Houston Gen. Ins. Co., 920 N.E.2d 611
(Ill. App. Ct. 2009) did not hold that such a statement is
required. Further, as Shorenstein and National Union rightly point
out, the Settlement Agreement contained a reservation of rights in
which Shorenstein and National Union reserved their rights to seek
reimbursement from “any insurer or potential insurer” of
Shorenstein, which would include USF&G and AMICO. In addition,
USF&G speculates that Shorenstein would never have given up
National Union’s $25 million coverage and rely exclusively on
USF&G’s $6 million coverage.
This argument is directly
contradicted by the July 17, 2002 letters cited above in which
Shorenstein makes clear that it wished to target USF&G and AMICO
and relinquish coverage by National Union.
8

USF&G argues that Shorenstein was obligated to re-assert
their targeted tender intentions in a Settlement and Defense
Agreement it entered into with various carriers. This argument is
waived as unsupported. See Berkowitz, 927 F.2d at 1384. USF&G
provides no legal authority for its proposition that Shorenstein
was obligated to reiterate its position on targeted tender.
17

not negate an earlier tender by asking a different insurer (which
the insured previously released from its obligations) to step in
should the targeted insurers fail to act.

John Burns, 727 N.E.2d

at 217(insured’s own insurance company defended insured only after
targeted insurance company refused to represent insured); Alcan
United, Inc. v. West Bend Mut. Ins. Co., 707 N.E.2d 687, 694 (Ill.
App. Ct. 1999) (after insured sought exclusive coverage from
insurer West Bend and deactivated its tender to another insurer,
Reliance, Reliance’s duty was “to provide standby coverage in the
event West Bend refused tender”); Legion Ins. Co. v. Empire Fire
and Marine Ins. Co., 822 N.E.2d 1 (Ill. App. Ct. 2004) (after
insured deactivated tender to insurer Empire, Empire’s “duty to
[the insured] was then only to provide standby coverage in the
event [the targeted insurer] refused to defend”); Chicago Hosp.
Risk, 925 N.E.2d at 1235 (stating that targeted tender “is not
negated merely by an expressed desire to keep the deactivated
insurer on notice as standby coverage in the event that the
selected insurer refuses the tender”).
I now turn to the actual calculation of damages. As explained
above, USF&G insured two entities in the settlement and AMICO
insured one. Dividing the total settlement amount paid by National
Union ($7,678,928.10) by the four Shorenstein defendants equals
$1,919,732.03 per entity.

Thus, the $1,919,732.03 allocated to

Shorenstein Realty Services, L.P. must be paid by USF&G.

18

The

$1,919,732.03 allocated to SRI Michigan Avenue Venture, LLC is
shared by USF&G and AMICO, with each party responsible for $959,
866.02. Therefore, AMICO owes National Union $959,866.02 and USF&G
owes National Union $2,879,598.05.9
Finally, Shorenstein and National Union ask me to award
prejudgment interest at a rate of 5% under the Illinois Interest
Act, 815 ILCS 205/2.

Section 2 provides: “Creditors shall be

allowed to receive at the rate of five (5) per centum per annum for
all moneys after they become due on any bond, bill, promissory
note, or other instrument of writing.”

Prejudgment interest is

available for sums due on insurance policies.
Farm Ins. Co., 666 N.E.2d 24, 27 (1996).

See Couch v. State

The decision to award

prejudgment interest is within the trial court’s sound discretion.
See Statewide Ins. Co. v. Houston Gen. Ins. Co., 920 N.E.2d 611,
624 (Ill. 2009).

Interest may accrue when the amount due becomes

liquidated, i.e. “due and capable of exact computation.”

Santa’s

Best Craft, LLC v. St. Paul Fire and Marine Ins. Co., 611 F.3d 339,
355 (7th Cir. 2010) (quoting Conway v. Country Caves. Ins. Co., 442
N.E.2d 245, 250 (Ill. 1982)).

“A sum is liquidated if calculation

9

None of the parties dispute that Shorenstein’s primary
insurer, Hartford, paid its $1 million policy to fund the
settlement of the underlying lawsuit. In addition, none of the
parties discuss that policy, any targeted tender issues related to
Hartford or how that payment may or may not impact my ruling with
respect to USF&G and AMICO. In light of this, I conclude that the
parties have waived any argument with respect to Hartford and have
proceeded with my analysis with the understanding that the Hartford
policy is irrelevant to these motions.
19

does not require ‘judgment, discretion or opinion.”

Id. (quoting

Dallis v. Don Cunningham & Assoc., 11 F.3d 713, 719 (7th Cir.
1993)).

However, “a good faith defense to liability does not bar

prejudgment interest if the amount is ascertainable.”

Id.

After considering all the relevant facts, I decline to award
prejudgment interest.

Clearly, the amount of money paid by

National Union to settle the underlying lawsuit was “liquidated.”
However, given the complexities of this case, including the fact
that

not

all

of

the

parties

listed

in

the

settlement

were

defendants and not all of the entities were insureds of USF&G and
AMICO, I cannot conclude that the amount USF&G and AMICO owed was
“subject to an easy determination by calculation or computation.”
Couch, 666 N.E.2d at 27.
Hanover,

696

N.E.2d

22,

This is not a case like New Hampshire v.
28

(Ill.

App.

Ct.

1998),

where

the

plaintiff insurer was seeking reimbursement from another insurer
for the amount plaintiff paid to settle a lawsuit, and “there was
no dispute that the amount due was $450,000.”
III.
Shorenstein and National Union have demonstrated that National
Union is subrogated to Shorenstein’s rights against USF&G and AMICO
as described herein.

For all the foregoing reasons, Shorenstein

and National Union’s motion for summary judgment is granted in part
and denied in part.

USF&G and AMICO’s cross-motion for summary

judgment is denied.
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ENTER ORDER:

____________________________
Elaine E. Bucklo
United States District Judge
Dated: May 11, 2011

21