ESL DELIVERY SERVICES COMPANY, Plaintiff and
Counterdefendant-Appellee, v. DELIVERY NETWORK, INC., and FI
WAREHOUSE CORPORATION, Defendants and
Counterplaintiffs-Appellants.


APPELLATE COURT OF ILLINOIS, FIFTH DISTRICT

2008 Ill. App. LEXIS 745


July 25, 2008, Opinion Filed

PRIOR HISTORY:
Appeal from the Circuit Court of Madison County. No. 04-L-389. Honorable A.
A. Matoesian, Judge, presiding.

DISPOSITION: Reversed; cause remanded.

COUNSEL: For Appellants: Karen L. Kendall, Craig L. Unrath, Stephen J. Heine,
Adam J. Lagocki, Heyl, Royster, Voelker & Allen, Peoria, IL.

For Appellee: John L. McMullin, Esq., T. Michael Ward, Brown & James, P.C.,
Louis, MO.

JUDGES: Honorable Bruce D. Stewart, P.J., Honorable Richard P. Goldenhersh,
J.,
and Honorable James M. Wexstten, J., Concur.

OPINION BY: Bruce D. Stewart

OPINION

PRESIDING JUSTICE STEWART delivered the opinion of the court:

The counterplaintiffs, Delivery Network, Inc., and FI Warehouse Corp.
(collectively referred to as Delivery Network), appeal from an order of the
circuit court of Madison County granting a summary judgment in favor of the
counterdefendant, ESL Delivery Services Company (ESL). We reverse.

BACKGROUND

Delivery Network owned and operated a warehouse facility located in Granite
City, Illinois. Beginning April 1, 2003, ESL entered into a lease agreement
with
Delivery Network for the storage of goods and the lease of office space
inside
the warehouse. The lease agreement between Delivery Network and ESL
provided, in
its entirety, as follows:


"Here is what we propose. It will cost about $ 1,000 to get some
repairs done and such in order to make that workable. I will plan on
the first month being that one thousand dollars. If you do not want to
do it that way we could charge an additional $ 100.00 per month for
the first year.


We will furnish:

Electricity

The one of two office spaces which you prefer Hours of
operation will be 8:00 a.m. to 4:30 p.m. ESL will be
responsible for: Maintenance and operations of wall unit
heater/cooler Insurance for all ESL contents within the
office Price is $ 250.00 per month."






A handwritten note on the agreement stated: "Mike, we are proceeding with
this. Beginning 1 April, $ 1250.00. Then $ 250.00/month thereafter. Steve
3/7"

In the evening on October 26, 2003, a fire started at the warehouse. The
building's alarm system notified the fire department, and the building's
sprinkler system activated. The Granite City fire department responded to the
warehouse and, in a short period of time, appeared to have extinguished the
fire. While the fire department was at the scene of the fire, someone
deactivated the warehouse's alarm/sprinkler system. Six or seven hours after
the
fire department left the warehouse, during the early morning hours of October
27, 2003, the fire reignited. However, no one had reactivated the warehouse's
alarm/sprinkler system. Therefore, the fire department did not receive an
immediate alert from the building's fire alarm system, and the sprinklers did
not activate when the fire reignited. At some point, someone noticed the
reignited fire and notified the fire department, but when the firefighters
finally returned the second time, they were unable to immediately control the
fire. The fire burned for more than 10 hours. It destroyed Delivery Network's
warehouse and the warehouse's contents, as well as an adjacent warehouse
facility and its contents.

The owners of the adjacent warehouse, its warehouse tenants, and Delivery
Network's own tenants filed lawsuits against Delivery Network, alleging that
Delivery Network's negligence was the proximate cause of their fire damages.
Specifically, they alleged that Delivery Network's failure to reset the
alarm/sprinkler system after the first fire was the proximate cause of the
damage to their property which occurred when the fire reignited.

Delivery Network filed a counterclaim for contribution against ESL, alleging
that ESL's negligent failure to properly operate and maintain its wall unit
heaters in its leased office space was a proximate cause of the fire.
Delivery
Network sought contribution from ESL in the event any third parties obtained
a
judgment against Delivery Network as a result of the fire damage. The circuit
court consolidated all the claims into one proceeding.

Delivery Network's liability insurance carrier settled all the claims against
Delivery Network. The only remaining claim was Delivery Network's
counterclaim
for contribution against ESL. Delivery Network's liability insurance carrier
asserted a subrogation right to seek contribution from ESL. ESL filed a
motion
for a summary judgment on the contribution counterclaim, arguing Delivery
Network could not maintain a contribution action against ESL for fire damage
even if the fire had started as a result of ESL's negligence. Therefore, ESL
concluded that the insurance company did not have a right of subrogation to
assert. On January 5, 2007, the circuit court granted ESL's motion for a
summary
judgment, and Delivery Network appeals the circuit court's judgment.

DISCUSSION

A party is entitled to a summary judgment "if the pleadings, depositions,
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." 735 ILCS 5/2-1005(c) (West 2006). Our review
of a
circuit court's summary judgment is de novo. Sun Life Assurance Co. of
Canada v.
Manna, 227 Ill. 2d 128, 136, 879 N.E.2d 320, 325 (2007). In the present case,
there are material issues of fact, and ESL is not entitled to a judgment as a
matter of law. Therefore, we reverse the circuit court's summary judgment and
remand this cause for further proceedings.

This case presents the issue of whether a landlord's liability insurance
carrier has a subrogation right to seek contribution against a tenant where
the
tenant's negligence causes damage to the real and personal property of third
parties. Section 2(a) of the Joint Tortfeasor Contribution Act (740 ILCS
100/2(a) (West 2006)) establishes a right of contribution between two or more
persons who are subject to liability in tort arising out of the same injury
to
property. Under this statutory provision, Delivery Network had a right to
seek
contribution from ESL to the extent of ESL's prorated share of common
liability.
Delivery Network's liability insurance carrier paid the liability on behalf
of
Delivery Network and, therefore, has a subrogation right to seek contribution
from ESL for ESL's prorated share of the liability.

The circuit court's ruling that Delivery Network's liability insurer could
not seek contribution from ESL was based entirely on the holding in Dix
Mutual
Insurance Co. v. LaFramboise, 149 Ill. 2d 314, 597 N.E.2d 622 (1992). We find
Dix distinguishable from the facts of the present case.

In Dix, a landlord and a tenant entered into a lease of residential property,
and the landlord maintained fire insurance on the property during the term of
the lease. Dix, 149 Ill. 2d at 317-18, 597 N.E.2d at 624. The tenant
attempted
to remove exterior paint from the leased premises with a power stripper,
which
caused fire damage to the property. Dix, 149 Ill. 2d at 318, 597 N.E.2d at
624.
The landlord's fire insurance company paid the landlord's claim for the fire
damage, and the insurance company brought a subrogation action against the
tenant for negligently causing the fire damage. Dix, 149 Ill. 2d at 318, 597
N.E.2d at 624. On appeal, the Illinois Supreme Court addressed the issue of
whether the insurance company had a right of subrogation against the tenant.
Dix, 149 Ill. 2d at 318, 597 N.E.2d at 624.

The Illinois Supreme Court began its analysis by noting that the basis of the
insurance company's claim was a subrogation right, i.e., an "equitable right
and
remedy which rests on the principle that substantial justice should be
attained
by placing ultimate responsibility for the loss upon the one against whom in
good conscience it ought to fall." Dix, 149 Ill. 2d at 319, 597 N.E.2d at
624.
The court stated that in order to assert a subrogation right, the insurance
company must "step into the shoes of" its insured and may assert a
subrogation
right only if "(1) the landlord could maintain a cause of action against the
tenant and (2) it would be equitable to allow the insurance company to
enforce a
right of subrogation against the tenant." Dix, 149 Ill. 2d at 319, 597
N.E.2d at
624-25.

In looking at whether the landlord could maintain a cause of action against
the tenant, the court noted that "a tenant is generally liable for fire
damage
caused to the leased premises by his negligence" but that the parties may
agree
to exonerate the tenant from liability under the terms of the lease. Dix,
149
Ill. 2d at 319, 597 N.E.2d at 625. The court in Dix looked to the terms of
the
lease "as a whole" to determine whether the parties intended the lease "to
exculpate the tenant from negligently caused fire damage." Dix, 149 Ill. 2d
at
319-20, 597 N.E.2d at 625. Looking at the terms of the lease, the court
concluded that the parties did not intend for the tenant to be responsible
for
any fire damage to the leased premises. Dix, 149 Ill. 2d at 321, 597 N.E.2d
at
625.

The Dix court found it significant that under the terms of the lease, the
tenant assumed the risk for his own personal property and the landlord was
exempted from liability for damage to the tenant's personal property in the
event of a fire, but the lease contained no provision for damage to the
leased
premises in the case of a fire. Dix, 149 Ill. 2d at 321-22, 597 N.E.2d at
626.
Specifically, the only paragraph in the lease that addressed the issue of a
loss
in the event of a fire provided as follows:


"'(E) The Tenant will assume their [sic] own risk for their [sic]
personal property and Landlord, J.S. Ludwig, will not be responsible
for fire, wind[,] or water damage.'" Dix, 149 Ill. 2d at 321, 597
N.E.2d at 625-26.


The Dix court, therefore, concluded that the parties intended for each party
to
be responsible for any fire damage to his own property. Dix, 149 Ill. 2d at
321-22, 597 N.E.2d at 626.

The court also stated that the fact that the landlord obtained a fire
insurance policy on the premises was further evidence that the parties did
not
intend for the tenant to be responsible for fire damage to the landlord's
property. Dix, 149 Ill. 2d at 322, 597 N.E.2d at 626. The court noted that
the
cost of insurance on the leased premises is factored into the rent and that
"'"[i]n practical effect the tenant paid the cost of the fire insurance."'"
Dix,
149 Ill. 2d at 323, 597 N.E.2d at 626 (quoting Cerny-Pickas & Co. v. C.R.
Jahn
Co., 7 Ill. 2d 393, 398, 131 N.E.2d 100, 104 (1955) (quoting General Mills,
Inc.
v. Goldman, 184 F.2d 359, 366 (8th Cir. 1950))). The court cited the
well-settled principle that an insurer may not subrogate against a coinsured,
and the court held, "Under the particular facts of this case, the tenant, by
payment of rent, has contributed to the payment of the insurance premium,
thereby gaining the status of co[]insured under the insurance policy." Dix,
149
Ill. 2d at 323, 597 N.E.2d at 626. The court's decision to deny the insurance
company the right to subrogation was based on "the provisions of the lease
as a
whole, the reasonable expectations of the parties, and the principles of
equity
and good conscience." Dix, 149 Ill. 2d at 323, 597 N.E.2d at 626.

The Dix decision was based on the particular facts of that case, and we find
the facts of the present case distinguishable from the facts in Dix. In the
present case, Delivery Network's insurance company did not seek a
contribution
claim for the fire damage to Delivery Network's own property. Instead,
Delivery
Network's contribution claims were only for damages to the property of third
parties. The only claims Delivery Network filed against ESL were contribution
claims for damage caused by ESL's negligence to the real and personal
property
at the neighboring warehouse and to goods warehoused at Delivery Network's
warehouse. Delivery Network did not seek damages for the leased premises as
was
the case in Dix.

The language of the Dix decision limits its application. The Dix court held
that the tenant was a coinsured under the landlord's fire insurance policy
because "[b]oth the landlord and tenant intended that the policy would cover
any
fire damage to the premises." (Emphasis added.) Dix, 149 Ill. 2d at 323, 597
N.E.2d at 626. The Dix court did not address situations such as the present
case
where the tenant's negligence causes damage to the property and premises of
third parties.

Nothing in the lease agreement indicates that the parties intended to
exculpate ESL from fire damage to third parties caused by ESL's own
negligence.
There is no express exculpatory provision in the lease, and viewing the
lease as
a whole, we conclude there is no evidence that the parties intended the
landlord
to bear the burden of losses suffered by third parties as a result of the
tenant's negligence. There is a provision in the lease with respect to ESL's
responsibility to procure insurance covering the contents of its office
space,
but that provision makes no reference to third-party claims. Under the facts
of
the present case, we cannot find that ESL is a coinsured under Delivery
Network's liability insurance coverage. There is no evidence in this record
to
support the holding that the parties intended Delivery Network's liability
insurance to cover ESL's negligently caused damages to the property of
others.
We find that, under the terms of the lease, both parties remained responsible
for any damages they caused to third parties through their own negligence.

As noted in Dix, an insurance company may assert a subrogation right if "(1)
the landlord could maintain a cause of action against the tenant and (2) it
would be equitable to allow the insurance company to enforce a right of
subrogation against the tenant." Dix, 149 Ill. 2d at 319, 597 N.E.2d at 625.
We
hold that Delivery Network could maintain a contribution action against ESL
for
its prorated share of the common liability that resulted from the fire, and
we
hold that it is equitable to allow Delivery Network's liability insurance
carrier to seek contribution from ESL through its right of subrogation. There
are triable issues of fact concerning whether ESL was negligent and, if so,
the
extent of its prorated share of the common liability. Accordingly, the
circuit
court erred in granting ESL a summary judgment on Direct Network's claim for
contribution.

CONCLUSION

For the foregoing reasons, we reverse the judgment of the circuit court and
remand for further proceedings.

Reversed; cause remanded.

GOLDENHERSH and WEXSTTEN, JJ., concur.