Myoda Computer Center, Inc. v. American Family Mut. Ins. Co., ___ N.E.2d ___, 2009 WL 884902 (Ill. App. Ct. (1st Dist.) March 31, 2009)
The underlying suit asserted the copyright infringement claims which fell within potential coverage and triggered the right to independent counsel.
On cross-motion for summary judgment on stipulated facts the court ruled for American Family, the insurer. It had agreed to defend through independent counsel, but was permitted to challenge the obligation to defend where a settlement proposal from Microsoft was accepted for $50,000 after notice was provided to the insurer. American Family indicated an interest in contribution but did not take a definitive
position on whether it would or would not agree to that amount prior to consummation of the settlement.
In reversing the trial court, the court of appeals found that Myoda’s ability to recover the $50,000 from American Family could not be adjudicated as a matter of law because differing inferences could arise on the undisputed facts.
The court found that the “voluntary payments” clause was not implicated because the settlement took place after Myoda tendered the matter to American Family. Westchester Fire Ins. Co. v. G. Heileman Brewing Co., 321 Ill. App. 3d 622, 637 (2001), citing Faust v. The Travelers, 55 F.3d 471 (9th Cir. 1995) (construing California law).
Alliance Syndicate, Inc. v. Parsec, Inc., 318 Ill. App. 3d 590 (2000) was factually distinguishable because it addressed a settlement following tender on behalf of a third party that was not an additional named insured. This had no application, however, to the scenario where the settlement was post-tender and the insurer agreed to defend.
The court therefore found Commonwealth Edison Co. v. National Union Fire Ins. Co., 323 Ill. App. 3d 970, 972-73 (2001) more analogous and the insured need not obtain its insurer’s consent but could contest indemnification at a later date because of its reservation of rights.
