Cincinnati Insurance Company v. Blue Cab Company et al
Filing
90
Amended Opinion and Order Signed by the Honorable Joan H. Lefkow on 3/31/2015: Sanders' motion for summary judgment 63 is denied. Because the court is persuaded that a genuine issue of material fact exists as to the reasonableness of the set tlement, Sanders' motion to alter or amend the judgment 83 is granted. The Court's previous opinion and order 76 and entry of judgment in favor of Cincinnati 81 are hereby vacated. The court will schedule a trial on the reasonableness of the settlement. The parties are directed to appear for a scheduling conference on April 21, 2015 at 11:00 a.m.Mailed notice(mad, )
IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CINCINNATI INSURANCE COMPANY,
Plaintiff,
v.
BLUE CAB COMPANY, INC. and
ROSE WASHINGTON SANDERS,
Defendants.
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Case No. 11 C 2055
Judge Joan H. Lefkow
AMENDED OPINION AND ORDER 1
This is an insurance coverage dispute over an insurer’s duty to indemnify defendants in
an underlying personal injury case. Rose Washington Sanders filed a personal injury lawsuit
(“the Underlying Action”) against Thomas McFadden and Blue Cab Company, Inc. (“Blue
Cab”) for injuries she sustained in an accident while she was a passenger in a Blue Cab taxi
driven by McFadden. Plaintiff Cincinnati Insurance Company (“Cincinnati”) insured Blue Cab
under a commercial general liability and garage policy (“the Cincinnati Policy”). Cincinnati
filed the instant suit against Blue Cab and Sanders seeking a declaratory judgment that the
Cincinnati Policy does not require it to defend or indemnify Blue Cab in connection with the
Underlying Action. (See dkt. 1.)
On July 1, 2013, Sanders, McFadden, and Blue Cab settled the Underlying Action.
Cincinnati did not participate in the settlement discussions. As part of the settlement Blue Cab
assigned its rights under the Cincinnati Policy to Sanders. Sanders, individually and as Blue
Cab’s assignee, then filed a counterclaim against Cincinnati in this suit seeking (i) a declaratory
1
This opinion supersedes the earlier opinion of this court entered at docket no. 76.
judgment that she is entitled to indemnity from Cincinnati (counts 1 and 2), and (ii) collection
from Cincinnati as a judgment creditor of Blue Cab (count 3). (Dkt. 60.) On September 27,
2013, Sanders moved for summary judgment on counts 1 and 3 of her counterclaim. (Dkt. 63.)
The court denied summary judgment on May 9, 2014, finding that “Blue Cab could have no
reasonable anticipation of liability because no reasonable factfinder in the Underlying Case could
find that Blue Cab’s failure to investigate McFadden’s medical history was the proximate cause
of Sanders’ injuries.” Cincinnati Ins. Co. v. Blue Cab Co., Inc., No. 11 C 2055, 2014 WL
1876194, at *8 (N.D. Ill. May 9, 2014); (dkt. 76 at 15–16.) Given the court’s disposition of the
motion, the court directed Cincinnati to promptly move for entry of judgment. Cincinnati Ins.
Co., 2014 WL 1876194, at *9. Cincinnati did so on May 13, 2014 (dkt. 78), and the court
entered judgment in its favor on May 20, 2014 (dkt. 81).
Subsequently, Sanders moved to alter or amend the judgment (dkt. 83.), arguing that a
genuine issue of material fact exists as to the reasonableness of the settlement of the Underlying
Action. Because the court is persuaded that an issue of material fact exists on this point,
Sanders’ motion will be granted, and the court’s previous opinion and order (dkt. 76) and entry
of judgment (dkt. 81) will be vacated. For the following reasons, Sanders’ motion for summary
judgment is denied. The court will schedule a trial on the reasonableness of the settlement of the
Underlying Action. 2
LEGAL STANDARD
Summary judgment obviates the need for a trial where there is no genuine issue as to any
material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(a). A genuine issue of material fact exists if “the evidence is such that a reasonable jury
2
The court has jurisdiction pursuant to 28 U.S.C. §§ 1332(a) and 1367 and because the amount in
controversy exceeds $75,000 and there is complete diversity between Cincinnati and the defendants.
Venue is proper under 28 U.S.C. § 1391(b).
2
could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). To determine whether any genuine fact issue
exists, the court must pierce the pleadings and assess the proof as presented in depositions,
answers to interrogatories, admissions, and affidavits that are part of the record. Fed. R. Civ. P.
56(c). In doing so, the court must view the facts in the light most favorable to the non-moving
party and draw all reasonable inferences in that party’s favor. Scott v. Harris, 550 U.S. 372, 378,
127 S. Ct. 1769, 167 L. Ed. 2d 686 (2007). The court may not weigh conflicting evidence or
make credibility determinations. Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 704
(7th Cir. 2011).
The party seeking summary judgment bears the initial burden of proving there is no
genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548,
91 L. Ed. 2d 265 (1986). In response, the non-moving party cannot rest on bare pleadings but
must designate specific material facts showing that there is a genuine issue for trial. Id. at 324;
Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). If a claim or defense is factually
unsupported, it should be disposed of on summary judgment. Celotex, 477 U.S. at 323-24.
BACKGROUND 3
I.
McFadden and Blue Cab
McFadden began driving a Blue Cab taxi in 2002. In 2006, McFadden purchased his
own taxi from Blue Cab and entered into an Owner-Operator Agreement with Blue Cab. Under
the Owner-Operator Agreement, McFadden paid weekly fees to Blue Cab in exchange for the
right to use Blue Cab’s trade name on his taxi and to receive radio transmissions from Blue Cab
3
The facts set forth in this section are derived from the statements of fact submitted by the parties
to the extent they comport with Local Rule 56.1. The facts are taken in the light most favorable to
Cincinnati. In accordance with its regular practice, the court has considered the parties’ objections to the
statements of fact and included in this background section only those portions of the statements and
responses that are appropriately presented, supported, and relevant to the resolution of Sanders’ motion.
3
about potential taxi customers. The agreement provided that McFadden was an independent
contractor and stated that it did “not render [McFadden] an agent, legal representative, joint
venture or partner of Blue Cab.” (Dkt. 64, ex. B (“Owner-Operator Agmt.”) § 11.) McFadden
was not supervised or managed by Blue Cab while transporting customers and Blue Cab did not
control McFadden’s hours, the routes he took, or the passengers he picked up.
Prior to starting with Blue Cab, McFadden had experienced unexplained loss of
consciousness on one or more occasions. McFadden testified that he had fainted only once in
1999 or 2000, but McFadden’s doctor testified that McFadden had lost consciousness several
times. (Compare dkt. 70, ex. 4 (“McFadden Dep.”) at 59:18-60:6, with dkt. 70, ex. 6
(“Grodinsky Dep.”) at 8:14-17.) The doctor never determined a reason for the episode(s) despite
doing a “pretty extensive work up.” (Grodinsky Dep. at 8:20-9:5.) He attributed the episode(s)
to McFadden’s “being acutely intoxicated, which by itself can lead to loss of consciousness [and]
can also trigger other events[.]” (Id.) There is no record of McFadden’s losing consciousness
after 2001 when his doctor reported that he stopped drinking. 4 (Id. at 9:8-23.) McFadden also
was diagnosed with diabetes in 2007 and he took medicine for high blood pressure and
hypertension. Despite these conditions, McFadden testified that his driving was never restricted
and no physician ever expressed concern about his driving, even after the fainting episode(s). In
addition, McFadden’s doctor testified that McFadden was able to safely operate a taxi as his
profession in 2007 and that he had no concerns about McFadden’s medical condition. (Id. at
85:6-87:6.)
4
The court notes that there is conflicting testimony about when McFadden actually quit drinking.
(Compare, e.g., McFadden Dep. at 19:12-19 (testifying that his last drink prior to the accident was in June
2007), with Grodinsky Dep. at 9:6-11 (testifying that records indicate McFadden stopped drinking in
October 2001).) Whether or not Blue Cab was negligent for hiring a driver with a history of drinking is
not at issue because there is no evidence that McFadden was intoxicated at the time of the accident. Thus
any history of drinking is not related to the accident. See Jones v. Beker, 632 N.E.2d 273, 277, 260
Ill. App. 3d 481, 198 Ill. Dec. 214 (1994).
4
Blue Cab did not take any steps to inquire about McFadden’s health and medical history
at any time before or after entering into the Owner-Operator Agreement with McFadden.
II.
Underlying Action
On September 23, 2007, McFadden, responding to a dispatch from Blue Cab, picked up
Sanders at Midway Airport in Chicago. While transporting Sanders from the airport to her home
in Oak Park, Illinois, McFadden lost consciousness and his taxi struck a light pole. Sanders
suffered extensive injuries as a result of the accident and incurred medical expenses exceeding
$450,000.
In December 2007, Sanders filed suit against McFadden and Blue Cab in the Circuit
Court of Cook County, Illinois. Sanders v. McFadden, No. 07 L 13584. The suit included
claims against Blue Cab for negligently approving McFadden as an operator of a Blue Cab taxi
under the Owner-Operator Agreement and negligently failing to obtain McFadden’s medical
history before entering into the Owner-Operator Agreement. In particular, Sanders asserted that
Blue Cab should not have allowed McFadden to operate a taxi under its name because
McFadden had lost consciousness in the past and had a history of other health issues. After
Sanders filed the Underlying Action, Cincinnati instituted this suit seeking a declaratory
judgment that it was not required to defend or indemnify Blue Cab for liability related to
Sanders’ injuries.
In July 2013, Sanders, McFadden, and Blue Cab settled the Underlying Action, and
judgments in the amount of $1,250,000 were entered against McFadden and Blue Cab. 5 Blue
Cab assigned its rights under the Cincinnati Policy to Sanders in consideration for a covenant not
5
The agreed judgment orders entered by the state court recite that “the Court finds the judgment
. . . is in good faith pursuant to 740 ILCS 100/2(c) and (d).” (Dkt. 64, ex. F at 1; id., ex. G at 1.) Neither
party discusses the implications of a good faith finding by the state court on this case.
5
to execute on the judgment against it. McFadden’s insurer, First Chicago Insurance Company,
agreed to tender its policy limit of $250,000 to Sanders. Although Cincinnati was involved in
some prior settlement discussions, it did not participate in the settlement discussions that led to
settlement and was not party to the settlement agreement.
III.
Cincinnati Policy
Under the Cincinnati Policy, Cincinnati provided Blue Cab with both commercial general
liability coverage (“the CGL Policy”) and garage liability coverage. The policy had a limit of
$1,000,000 per occurrence. Although Sanders asserts counterclaims under both parts of the
Cincinnati Policy, she only moves for summary judgment with respect to liability under the CGL
Policy.
The CGL Policy covers amounts “that the insured becomes legally obligated to pay as
damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” (Dkt.
64, ex. I (“Policy”) at CIN000010.) “Insureds” under the CGL Policy include Blue Cab’s
“employees” acting “within the scope of their employment . . . or while performing duties related
to the conduct of [Blue Cab’s] business.” (Id. at CIN000020.) The policy excludes coverage for
bodily injury “arising out of the ownership, maintenance, use or entrustment to others of any . . .
auto . . . owned or operated by or rented or loaned to any insured” (“the Auto Exclusion”). (Id.
at CIN000013.) The Auto Exclusion applies “even if the claims against any insured allege
negligence or any wrongdoing in the supervision, hiring, employment, training or monitoring of
others by that insured, if the ‘occurrence’ . . . involved the ownership, maintenance, use or
entrustment to others of any . . . auto . . . that is owned or operated by or rented or loaned to any
insured.” (Id.)
6
ANALYSIS
Sanders asserts that, as an assignee of Blue Cab’s rights under the CGL Policy, she is
entitled to indemnification from Cincinnati with respect to the judgment against Blue Cab in the
Underlying Action. To succeed on her motion for summary judgment, Sanders must establish
that there is no genuine issue of material fact that (1) the liability underlying the judgment
entered against Blue Cab is covered by the CGL Policy; and (2) Blue Cab entered into the
settlement in reasonable anticipation of such liability. 6 See Santa’s Best Craft, LLC v. St. Paul
Fire & Marine Ins. Co., 483 Fed. App’x 285, 286 (7th Cir. 2012) (“When an insured settles the
underlying lawsuit prior to trial, the insurer need only indemnify the settlement payments made
in reasonable anticipation of liability for damages covered under the policy.” (citing U.S.
Gypsum Co. v. Admiral Ins. Co., 643 N.E.2d 1226, 1244, 268 Ill. App. 3d 598, 205 Ill. Dec. 619
(1994))).
I.
CGL Policy Coverage
Cincinnati argues that the Auto Exclusion in the CGL Policy precludes its liability in the
Underlying Action. 7 “Because an insurance policy is a contract, the rules applicable to contract
interpretation govern the interpretation of an insurance policy.” Founders Ins. Co. v. Munoz,
930 N.E.2d 999, 1003, 237 Ill. 2d 424, 341 Ill. Dec. 485 (2010). “Insurance policies are to be
liberally construed in favor of coverage, and where an ambiguity exists in the terms of the
6
The court will apply Illinois law as suggested by the parties. See Auto-Owners Ins. Co. v.
Websolv Computing, Inc., 580 F.3d 543, 547 (7th Cir. 2009) (“Courts do not worry about conflict of laws
unless the parties disagree on which state’s law applies.” (internal citation and quotation marks omitted)).
7
Cincinnati does not argue more generally that Sanders’ “negligent approval” claim against Blue
Cab is not covered by the policy. Cf. Am. Family Mut. Ins. Co. v. Enright, 781 N.E.2d 394, 400, 334 Ill.
App. 3d 1026, 269 Ill. Dec. 597 (2002) (“[T]he type of risk involved here, negligent hiring, is the type of
risk that the parties to the insurance contract reasonably contemplated would be covered by a general
liability business policy.”).
7
contract, the ambiguity will be resolved in favor of the insured and against the insurer.” Mount
Vernon Fire Ins. Co. v. Heaven’s Little Hands Day Care, 795 N.E.2d 1034, 1039, 343 Ill. App.
3d 309, 277 Ill. Dec. 366 (2003) (citing State Sec. Ins. Co. v. Burgos, 583 N.E.2d 547, 554, 145
Ill. 2d 423, 164 Ill. Dec. 631 (1991)).
In simplified terms, the Auto Exclusion provides that Cincinnati’s insurance does not
extend to bodily injury arising out of the use 8 of a car that is “owned or operated by or rented or
loaned to” an insured. (Policy at CIN000013.) Cincinnati argues that this exclusion applies
either because McFadden was an employee of Blue Cab and thus an “insured” who owned and
was operating the taxi at the time of the accident or because Blue Cab (which is clearly an
insured) was “operating” McFadden’s taxi at the time of the accident. 9
First, the terms of the Owner-Operator Agreement are clear that McFadden was an
independent contractor rather than an employee of Blue Cab. (See Owner-Operator Agmt. § 11.)
Although the terms of the agreement are not dispositive of the relationship between the parties,
see Davila v. Yellow Cab Co., 776 N.E.2d 720, 723, 333 Ill. App. 3d 592, 267 Ill. Dec. 348
(2002), Illinois law supports the conclusion that McFadden was an independent contractor.
Illinois courts have held that “the right to control the manner of doing the work is probably the
most important single consideration in determining whether the relationship is that of an
employee or an independent contractor.” Statewide Ins. Co. v. Brendan Constr. Co., 578 N.E.2d
1264, 1266, 218 Ill. App. 3d 1055, 161 Ill. Dec. 618 (1991) (quoting State Farm Mut. Ins. Co. v.
Staff, 325 N.E.2d 1, 4, 26 Ill. App. 3d 217 (1975)). McFadden had the right to control his hours,
8
Specifically, the ownership, maintenance, use or entrustment to others of a car that is owned or
operated by an insured or rented or leased to an insured (including any negligence or other wrongdoing in
the supervision, hiring, employment, training or monitoring by the insured of others using such a car).
9
It is undisputed that Blue Cab did not own, rent or lease McFadden’s taxi.
8
routes, and passengers. He owned his own taxi and retained all his fares, paying only a fixed
weekly fee to Blue Cab. As Cincinnati admits in its brief, “McFadden was not an employee of
Blue Cab, Blue Cab did not own or lease the taxi, and had no control McFadden’s [sic] driving
or his day-to-day work.” (Dkt. 71 at 6.) Because McFadden was not an employee, he was not an
“insured” under the terms of the CGL Policy and thus his ownership and operation of the taxi
does not result in application of the Auto Exclusion.
Second, Blue Cab was not “operating” McFadden’s taxi at the time of the accident as
would be necessary for the event to fall within the Auto Exclusion. 10 Although Blue Cab, as a
corporation, could not itself operate a car, it could operate the car through its employees or
agents. But as noted above, McFadden was not an employee or an agent of Blue Cab. He was
not on Blue Cab’s payroll and he could choose when and where to drive the taxi. See Grace v.
Faire, No. 1-13-0575, 2013 IL App (1st) 130575-U, 2013 WL 6237661, at ¶¶ 13-15 (Dec. 2,
2013) (candle vendor not an agent of marketplace supervisor where vendor managed the day-today operation of her business without interference from supervisor and retained all earnings from
sales). A finding that Blue Cab somehow “operated” the taxi owned and physically operated by
McFadden would defy the ordinary meaning of the word. 11
10
Generally, Illinois courts have narrowly interpreted the term “operating” in auto insurance
policies. An individual need not be driving a vehicle to be the “operator,” but his acts must be “closely
related to control and actual driving of the car. . . .” Heritage Ins. Co. of Am. v. Phelan, 321 N.E.2d 257,
262, 59 Ill. 2d 389 (1974) (driver who stopped to repair car remained its operator even though he was not
driving). The “better definition of the term ‘operating’ is that it involves personal physical management
of the automobile by the person in question.” Collins v. Econ. Fire & Cas. Co., 422 N.E.2d 74, 75, 96 Ill.
App. 3d 796, 52 Ill. Dec. 393 (1981) (citation omitted).
11
Cincinnati contends that Sanders should be foreclosed from arguing in this suit that Blue Cab
was not operating the taxi because she represented otherwise in the Underlying Action. Although
Sanders’ second amended complaint in the Underlying Action does contain a few allegations that Blue
Cab somehow owned or operated McFadden’s taxi, the gist of count two of that complaint asserts that
Blue Cab was negligent in authorizing McFadden to drive his taxi under the Blue Cab trade name because
of McFadden’s medical history. (See dkt. 70, ex. 1 at 9, ¶ 25.) The court refuses to bind Sanders’ hands
because of imprecise language in her complaint in the Underlying Action. Furthermore, Sanders’
9
Both cases cited by Cincinnati in support of the application of the Auto Exclusion can be
distinguished. In Northbrook Property and Casualty Company v. Transportation Joint
Agreement, 741 N.E.2d 253, 194 Ill. 2d 96, 251 Ill. Dec. 659 (2000), the court found that a
school bus accident was covered by an auto exclusion in the school districts’ insurance policy
because the bus was “operated jointly by the school districts.” Id. at 254. In Oakley Transport,
Inc. v. Zurich Insurance Company, 648 N.E.2d 1099, 271 Ill. App. 3d 716, 208 Ill. Dec. 177
(1995), the court held that an accident fell within the auto exclusion when it was the result of an
“employee . . . operating a semi-tractor during the course of his employment.” Id. at 1101. In
both cases, the operator of the vehicle was determined to be an insured under the policy. In
contrast, McFadden’s taxi was not operated by an insured under the CGL Policy at the time of
the accident and thus the Auto Exclusion does not preclude liability.
Finally, Cincinnati argues that Sanders should be foreclosed from using the CGL Policy
as a basis for coverage because she failed to cite the CGL Policy in contention interrogatories
submitted prior the filing of her counterclaim. Cincinnati’s argument is unavailing because it
was on notice of a potential liability claim against the CGL Policy. Indeed, in the complaint that
initiated this lawsuit, Cincinnati requested a declaration that it was not liable under the CGL
Policy. See U.S. Gypsum Co. v. LaFarge N. Am., Inc., 508 F. Supp. 2d 601, 619 (N.D. Ill. 2007)
(preventing party from pursuing theory not relied on in response to contention interrogatories
“would only be appropriate if defendants were prejudiced by the theory not being expressly
purported admission “is not even competent evidence in this case because it states a legal conclusion and
is not the admission of a fact that could be dispositive.” Kohler v. Leslie Hindman, Inc., 80 F.3d 1181,
1185 (7th Cir. 1996).
10
included in the interrogatory responses” (citations omitted)). Any failure by Sanders to mention
the CGL Policy in her interrogatory responses was harmless. 12
For these reasons, Cincinnati’s argument that the Auto Exclusion precluded its liability in
the Underlying Action fails.
II.
Reasonableness of Settlement of Underlying Action 13
A settlement that effectively lets the insured off the hook while placing an insurer who
did not consent to the settlement on the hook gives rise to concerns about collusion between the
insured and the injured party. In such a case, the settlement binds the insurer only if the insured
proves that the settlement was reasonable. Guillen ex rel. Guillen v. Potamac Ins. Co. of Ill.,
785 N.E.2d 1, 14, 203 Ill. 2d 141, 271 Ill. Dec. 350 (2003). The insured need not establish actual
liability, SwedishAmerican Hosp. Ass’n of Rockford v. Ill. State Med. Inter-Ins. Exch.,
916 N.E.2d 80, 101, 395 Ill. App. 3d 80, 334 Ill. Dec. 47 (2009), but the court must consider
whether the settlement was made in reasonable anticipation of liability and “whether,
considering the totality of circumstances, the insured’s decision conformed to the standard of a
prudent uninsured.” Guillen, 785 N.E.2d at 14 (internal quotation marks and citation omitted,
emphasis in original). “The burden of proving reasonableness falls on the insured both out of
fairness, since the insured was the one who agreed to the settlement, and out of practicality, since
the insured will have better access to the facts bearing upon the reasonableness of the
12
In support of its argument, Cincinnati cites to cases that are unhelpful to its cause. See Ryerson
Inc. v. Fed. Ins. Co., 676 F.3d 610, 614 (7th Cir. 2012) (“When there is no prejudice to the opposing
party, invoking the doctrine of mend the hold [which forbids a defendant to alter its defenses] to bar a
valid defense is overkill.”); Pierce v. Chicago Rail Link, L.L.C., No. 03 C 7524, 2005 WL 599980, at *3
(N.D. Ill. Mar. 15, 2005) (allowing argument to go forward despite its omission in interrogatory
response).
13
Because Blue Cab’s counsel in the Underlying Action did not move to dismiss or move for
summary judgment on the relevant claim, the court does not have any guidance from the state court on the
merits of the claim.
11
settlement.” Fed. Ins. Co. v. Binney & Smith, Inc., 913 N.E.2d 43, 49, 393 Ill. App. 3d 277, 332
Ill. Dec. 448 (2009) (citing Guillen, 785 N.E.2d at 14)). The insurer has the right to rebut any
showing of reasonableness. Id.
Cincinnati argues that Blue Cab’s settlement of Sanders’ claim was not reasonable
because she did not have a colorable claim against Blue Cab. 14 Illinois courts have recognized
that a principal or employer has a duty to exercise reasonable care in the selection of an
independent contractor. See Huber v. Seaton, 542 N.E.2d 464, 505, 186 Ill. App. 3d 503, 134 Ill.
Dec. 285 (1989) (“[A]n employer is generally insulated from liability for the negligent acts of an
independent contractor . . . [but] a recognized exception to the general rule exists if the employer
fails to exercise reasonable care in the selection of the independent contractor.” (citations
omitted)); see also Gomien v. Wear-Ever Aluminum, Inc., 276 N.E.2d 336, 338, 50 Ill. 2d 19
(1971) (principal or employer may be liable for acts of independent contractor where it “failed to
exercise reasonable care in selecting a careful and competent contractor”); Strickland v.
Commc’ns. & Cable of Chicago, Inc., 710 N.E.2d 55, 57, 304 Ill. App. 3d 679, 237 Ill. Dec. 632
(1999) (“A defendant may be liable for negligent hiring whether the person was retained as an
employee or an independent contractor.”). To show that an employer failed to exercise
reasonable care in the selection of an independent contractor, a plaintiff must show that the
employer hired an independent contractor that it “knew or should have known was unfit for the
job so as to create a danger of harm to the plaintiff.” Jones v. Beker, 632 N.E.2d 273, 277, 260
Ill. App. 3d 481, 198 Ill. Dec. 214 (1994). “In addition, there must be a connection between the
particular unfitness and the independent contractor’s negligent act.” Id.; see also Strickland,
14
Both parties refer to the underlying claim against Blue Cab as a “negligent approval” claim, but
neither party cites (and the court could not locate) any cases that recognize a tort of “negligent approval”
under Illinois law. The court thus analyzes the claim as one for negligent selection of an independent
contractor.
12
710 N.E.2d at 58 (elements of negligent hiring are (1) “employer knew or should have known
that the person hired had a ‘particular’ unfitness for the job that would create a foreseeable
danger” and (2) “this particular unfitness was the proximate cause of the plaintiff’s injury”).
Thus, for a factfinder to determine that Blue Cab would be liable to Sanders for her
injuries, it must find two elements: (1) that Blue Cab breached its duty in failing to investigate
McFadden’s health, and (2) that this breach proximately caused Sanders’ injuries.
A.
Breach of Duty
Blue Cab is a common carrier. See Demetrion v. Edwards, 416 F.2d 958, 960 (7th Cir.
1969) (finding cab company was a common carrier because it dispatched cabs to calls, “held
itself out as able and willing to carry all passengers within a reasonable radius,” and made a
“public profession out of the carriage of people”). As such, it owes its passengers the “duty to
use the highest degree of care consistent with the mode of conveyance and practical operation
thereof . . . .” Przybylski v. Yellow Cab Co., 285 N.E.2d 506, 508, 6 Ill. App. 3d 243 (1972).
Illinois courts have indicated that a common carrier owes a duty of the highest degree of care in
hiring. See Chi. Transit Auth. v. Amalgamated Transit Union, Local 241, 926 N.E.2d 919, 928,
399 Ill. App. 3d 689, 339 Ill. Dec. 444 (2010) (noting status as common carrier would require
CTA to use highest duty of care in selecting bus driver). It was reasonable for Blue Cab to
anticipate that a court would find that its failure to investigate into McFadden’s medical history
at all would constitute a breach of its heightened duty to its passengers.
B.
Proximate Cause
Under Illinois law, proximate cause encompasses both cause in fact and legal cause.
Young v. Bryco Arms, 821 N.E.2d 1078, 1085, 213 Ill. 2d 433, 290 Ill. Dec. 504 (2004) (citation
omitted). Cause in fact is present “when there is a reasonable certainty that a defendant’s acts
13
caused the injury or damage.” Id. (quoting Lee v. Chi. Transit Auth., 605 N.E.2d 493, 502, 152
Ill. 2d 432, 178 Ill. Dec. 699 (1992)). The operative question is whether the injury would have
occurred absent the defendant’s conduct. See id. Legal cause is established when “the
defendant’s conduct is ‘so closely tied to the plaintiff’s injury that he should be held legally
responsible for it.’” Id. at 1086 (quoting Simmons v. Garces, 763 N.E.2d 720, 732, 198 Ill. 2d
541, 261 Ill. Dec. 471 (2002)). The question is whether a reasonable person would foresee that a
breach of its duty would likely result in injury. Id. (citation omitted). With respect to a negligent
selection or negligent hiring claim, there must be a connection between the specific unfitness for
the job and the negligent act. See Jones, 632 N.E.2d at 277.
Although the factual support for a proximate cause finding against Blue Cab is weak,
proximate cause “is ordinarily a question for the jury.” Gill v. Foster, 626 N.E.2d 190, 197, 157
Ill. 2d 304, 193 Ill. Dec. 157 (1993) (citation omitted). “It can be decided as a matter of law on a
motion for summary judgment only when the facts are undisputed and are such that there can be
no difference in the judgment of reasonable persons as to the inferences to be drawn from them.”
Id. (citation omitted). At the time of settlement, Blue Cab faced trial in front of a jury against a
sympathetic plaintiff with significant damages. 15 Although the facts are weak, they are enough
to create a genuine issue of fact as to whether Blue Cab reasonably anticipated liability at the
time of the settlement. For example, there is evidence that McFadden had been a heavy drinker
with at least one seizure and that this information was part of his medical record. Blue Cab
could have reasonably anticipated that a jury might conclude that this satisfied proximate cause.
15
The court acknowledges that perhaps First Chicago should have provided Blue Cab with its
own counsel, who could have moved to dismiss the complaint against Blue Cab. But instead Blue Cab
was put in the difficult situation of choosing whether to defend or settle a lawsuit that had various
unknowns and a sympathetic plaintiff who had been seriously injured through no fault of her own.
14
The court, however, is unconvinced that Blue Cab faced a high probability of a negative verdict,
and settlement for the full amount of the Cincinnati Policy is thus suspect.
CONCLUSION AND ORDER
Sanders’ motion for summary judgment (dkt. 63) is denied. Because the court is
persuaded that a genuine issue of material fact exists as to the reasonableness of the settlement,
Sanders’ motion to alter or amend the judgment (dkt. 83) is granted. The court’s previous
opinion and order (dkt. 76) and entry of judgment in favor of Cincinnati (dkt. 81) are hereby
vacated. The court will schedule a trial on the reasonableness of the settlement. The parties are
directed to appear for a scheduling conference on April 21, 2015 at 11:00 a.m.
Date: March 31, 2015
_______________________________________
U.S. District Judge Joan H. Lefkow
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