American Freedom Insurance Co. v. Garcia , 2021 IL App (1st) 200231 ( 2021 )

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Appellate Court Date: 2022.07.29
10:30:09 -05'00'
American Freedom Insurance Co. v. Garcia, 2021 IL App (1st) 200231Appellate Court AMERICAN FREEDOM INSURANCE COMPANY, Plaintiff-
Caption Appellant, v. RAMON GARCIA, LUIS FLORES-JIMENEZ,
NANCY BENITEZ-YANEZ, and DIRECT AUTO INSURANCE
COMPANY, Defendants-Appellees.
District & No. First District, Sixth Division
No. 1-20-0231
Filed June 25, 2021
Decision Under Appeal from the Circuit Court of Cook County, No. 19-CH-4812; the
Review Hon. Eve M. Reilly, Judge, presiding.
Judgment Affirmed.
Counsel on Keely Hillison, of Keely Hillison Law LLC, of Chicago, for appellant.
Appeal
Mark L. Evans, of Beermann LLP, of Chicago, for appellee Direct
Auto Insurance Company.
No brief filed for other appellees.
Panel JUSTICE HARRIS delivered the judgment of the court, with opinion.
Justices Connors and Oden Johnson concurred in the judgment and
opinion.
OPINION
¶1 This case concerns a declaratory judgment action by plaintiff-appellant American Freedom
Insurance Company (American) against defendants-appellees Ramon Garcia, Luis Flores-
Jimenez, Nancy Benitez-Yanez, and Direct Auto Insurance Company (Direct) arising out of a
2013 vehicular collision involving Garcia and Benitez-Yanez. American sought a judgment
that Benitez-Yanez was covered by Direct at the time of the incident so that Garcia did not
have an uninsured motorist claim against American. In defense, Direct raised an earlier
judgment finding Benitez-Yanez and Flores-Jimenez to not be Direct’s insureds at the time of
the 2013 incident. Garcia was a party to the earlier judgment, but American was not. The trial
court in the instant case denied American’s summary judgment motion and granted Direct’s
motion to dismiss.
¶2 On appeal, American contends that the court erred in doing so because (1) American was
not a party to the earlier judgment or in privity with a party, (2) the prior litigation did not
determine whether Benitez-Yanez was an uninsured motorist or that Direct owed no coverage
for the 2013 incident, (3) American has a due process right to be heard on the issue of coverage
for the 2013 incident before its right to contest coverage is extinguished because it was a
necessary party to the earlier litigation but not joined as a party, (4) res judicata should bar
Direct from litigating the coverage issue as to American, (5) the earlier judgment was void for
failure to include American as a necessary party, and (6) the earlier judgment was erroneous
on the merits so that Benitez-Yanez was covered by Direct at the time of the 2013 incident.
For the reasons stated below, we affirm.
¶3 I. JURISDICTION
¶4 On American’s 2019 declaratory judgment complaint, the trial court denied American’s
summary judgment motion and granted Direct’s motion to dismiss on January 15, 2020.
American filed its notice of appeal on February 3, 2020. Accordingly, this court has jurisdiction
over this matter pursuant to article VI, section 6, of the Illinois Constitution (Ill. Const. 1970,
art. VI, § 6), and Illinois Supreme Court Rules 301 (eff. Feb. 1, 1994) and 303 (eff. July 1,
2017).
¶5 II. BACKGROUND
¶6 Garcia was American’s insured on a policy including uninsured motorist coverage. A
collision occurred on September 23, 2013, between a vehicle owned and driven by Garcia and
one owned and driven by Benitez-Yanez. The traffic crash report for the incident stated that
American was Garcia’s insurer and Direct was Benitez-Yanez’s insurer.
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¶7 A. First Action
¶8 In 2014, Direct brough a declaratory judgment action, case No. 14-CH-14898, against
Flores-Jimenez, Benitez-Yanez, and Garcia. American was not named as a party to the first
action. Direct alleged that it issued an automobile insurance policy to Flores-Jimenez and
Benitez-Yanez, Benitez-Yanez was involved in a vehicular incident with Garcia on September
23, 2013, and Garcia made a claim against Direct’s policy arising out of that incident. Direct
alleged that Flores-Jimenez made an intentional and material misrepresentation in his
insurance application earlier in September 2013 by not disclosing a member of his household
at least 13 years old as required by Direct, that Direct would not have issued the policy at the
premium it charged Flores-Jimenez had it known of the misrepresentation, and that it rescinded
the policy upon learning of the misrepresentation. Direct sought a declaration that it owed no
coverage for the 2013 incident.
¶9 The court issued summary judgment for Direct in March 2015, finding that Direct’s policy
was rescinded due to Flores-Jimenez’s material representation on his application, Direct had
no duty to defend or indemnify Flores-Jimenez or Benitez-Yanez for the 2013 incident, and
“defendants are entitled to no monies under the Direct Auto policy.”
¶ 10 B. Garcia’s Claim
¶ 11 Garcia made an uninsured motorist claim against his American policy arising from the
2013 incident. In March 2019, Garcia filed a demand for arbitration of that claim.
¶ 12 C. Instant Action
¶ 13 American brought the instant action for declaratory judgment in April 2019, against Garcia,
Flores-Jimenez, Benitez-Yanez, and Direct. American alleged that Garcia, its insured, brought
an uninsured motorist claim for the 2013 incident but that American owed him no coverage on
that claim because Benitez-Yanez was insured by Direct at that time under a policy also issued
to Flores-Jimenez. American sought a declaratory judgment to that effect and a stay of the
arbitration of Garcia’s claim. Attached to the complaint was a copy of Garcia’s American
policy covering September 2013, the traffic crash report for the 2013 incident, Garcia’s
arbitration demand, and the Direct policy issued to Benitez-Yanez and Flores-Jimenez
encompassing September 23, 2013.
¶ 14 On American’s motion, the court stayed Garcia’s arbitration pending further order.
¶ 15 Garcia appeared and answered, admitting that he filed an uninsured motorist claim with
American based on the 2013 incident between himself and Benitez-Yanez and that he sought
arbitration of that claim, but denying that the Direct policy issued to Benitez-Yanez was in
effect on the day of the 2013 incident due to its rescission and the summary judgment in the
first action. Garcia raised affirmative defenses interposing the rescission of Direct’s policy and
the summary judgment in the first action and alleging that the court in the first action had
jurisdiction over Garcia, Benitez-Yanez, and Flores-Jimenez when it issued that judgment.
Garcia claimed that he therefore had a valid uninsured motorist claim against American and
argued that American excluding Benitez-Yanez’s vehicle in the 2013 incident as an uninsured
vehicle would be an interpretation of its insurance policy contrary to public policy. Garcia
sought a declaration that American owed him uninsured motorist coverage for the 2013
incident and a lifting of the stay of his arbitration.
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¶ 16 American answered Garcia’s affirmative defenses, admitting that Direct denied coverage
on the policy it issued Benitez-Yanez and Flores-Jimenez, otherwise denying the substantive
allegations, and alleging that “[a]ny judgment purportedly entered in” the first action was void
as to American and “void for lack of jurisdiction over necessary parties.”
¶ 17 1. Motion to Dismiss
¶ 18 Direct appeared and filed, and later amended, a motion to dismiss pursuant to section 2-
619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2018)). Direct interposed the
judgment in its favor in the first action and the rescission of Direct’s policy and alleged that
American was collaterally estopped from relitigating Benitez-Yanez’s coverage under the
rescinded Direct policy. The issues in both the first action and the instant action were whether
Benitez-Yanez was covered by Direct on the day of the 2013 incident with Garcia and whether
Garcia had a valid claim against Direct. The first action came to a final judgment on the merits,
and there was sufficient identity of parties between the cases, including parties in privity. While
American was not a party to the first action, Garcia was in privity with American. Garcia,
Benitez-Yanez, and Flores-Jimenez adequately represented the same interest in the first action
as American in the instant action. Also, American “had the opportunity to take control of
Ramon Garcia’s defense in the” first action but failed to exercise it. Benitez-Yanez was an
uninsured motorist pursuant to the judgment in the first action, as a motorist who had coverage
that was removed is just as much an uninsured motorist as one who never had coverage.
Because the trial court could not rule in the instant action differently than it had in the first
action, American’s complaint should be dismissed.
¶ 19 American responded to Direct’s motion to dismiss. It argued that all necessary parties must
be joined in a declaratory judgment action to determine coverage, including the uninsured
motorist carrier, but American had not been a party to the first action. Direct had failed to join
all interested and necessary parties in other cases, and the appellate court had held against
Direct for doing so in Direct Auto Insurance Co. v. Bahena, 2019 IL App (1st) 172918.
American also argued that it was not in privity with Garcia, as Garcia and American were
adversaries on Garcia’s uninsured motorist claim, nor with any other party to the first action.
Garcia had little or no incentive to litigate in the first action in favor of Benitez-Yanez being
covered by Direct, as Garcia would collect from either Direct if she was covered or American
under the uninsured motorist coverage if she was not covered. As American was not in privity
with any party to the first action, the judgment in the first action could not have an effect in the
instant action under collateral estoppel or res judicata. Indeed, because Direct was aware of
American as Garcia’s insurer but did not name American as a defendant in the first action,
Direct was barred by res judicata from denying coverage, as res judicata bars a subsequent
action on matters that were actually decided or could have been decided in a prior action.
¶ 20 Direct replied in support of its motion to dismiss, arguing that American was not a
necessary party to the first action, as the named insured and injured parties are necessary parties
to a coverage case but the injured party’s insurer has not been held to be a necessary party. In
other words, a named insured (here, Benitez-Yanez and Flores-Jimenez) and an injured party
(here, Garcia) have rights under the named insured’s policy, but the uninsured motorist carrier
(here, American) does not. Direct also argued that Garcia was in privity with American because
he was American’s insured. Garcia had an incentive to oppose Direct in the first action, and he
was required by his policy with American to notify American of any lawsuit against him.
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¶ 21 Garcia also filed a reply in support of Direct’s motion to dismiss. He argued that American
was not a necessary party to the first action, as American did not have an immediate and
substantial interest in the first action but only a future interest contingent on the coverage
decision before the court in the first action. Also, Garcia was in privity with American because
of the insurance policy between them, regardless of their adversarial relationship on Garcia’s
uninsured motorist claim.
¶ 22 2. Summary Judgment Motion
¶ 23 American filed a summary judgment motion, arguing that res judicata barred Direct from
denying coverage because Direct intentionally failed to name American as a defendant in the
first action, knowing American was Garcia’s insurer and thus a necessary party to the first
action. Turning to the merits of the judgment in the first action, where Direct’s policy was
rescinded for a material misrepresentation or failure to disclose, American argued that there
was no evidence that the allegedly undisclosed household member was actually a household
member of Flores-Jimenez, ever drove the vehicle in the Direct policy, or was even licensed
to drive. Direct’s rescission was therefore improper, Direct’s policy was in effect on the day
of the 2013 incident, and Benitez-Yanez was not an uninsured motorist on that day. American
sought a declaratory judgment to that effect.
¶ 24 Direct responded to American’s summary judgment motion, arguing that American had
not pled a claim or cause of action seeking relief against Direct and that the issue of the validity
of Direct’s policy had been decided in the first action. As to the former, Direct argued that
American offered no affirmative evidence to support a summary judgment but improperly
relied on using the first action as “offensive” (as opposed to defensive) collateral estoppel.
¶ 25 American replied in support of its summary judgment motion, arguing that it does not have
to state a cause of action or seek relief against Direct to obtain a declaratory judgment. See 735
ILCS 5/2-701(a) (West 2018). American also argued that it need not present evidence that
Benitez-Yanez was uninsured, given Direct’s admission that it issued an insurance policy to
Benitez-Yanez and Flores-Jimenez encompassing the day of the 2013 incident and its failure
to offer affidavits or other evidence for denying coverage. American argued that it is not bound
by the judgment in the first action because it was a necessary party but was never joined as a
party, arguing that Direct admitted as much when it argued that determining whether Benitez-
Yanez was insured by Direct is necessary to determining whether American owed uninsured
motorist coverage. American argued that, while no Illinois court had found an injured party’s
insurer to be necessary to a coverage dispute, no Illinois court had found an injured party’s
insurer to not be a necessary party either. American argued that it was not in privity with Garcia
and could not be in privity with Benitez-Yanez. Lastly, American argued that, because it was
a necessary party to the first action but was not a defendant, Direct was barred by res judicata
from contesting or denying coverage for the 2013 incident.
¶ 26 3. Judgment
¶ 27 On January 15, 2020, following arguments of the parties in which Garcia adopted the
arguments of Direct, the court denied American’s summary judgment motion and granted
Direct’s motion to dismiss in the instant action. The court found that American was in privity
with Garcia, who was a party to the first action, so that collateral estoppel barred the instant
action. It found that its dismissal was a final judgment as to all claims in the instant action.
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This appeal followed.
¶ 28 III. ANALYSIS
¶ 29 On appeal, American contends that the trial court erred in denying American summary
judgment and in granting Direct’s motion to dismiss. American contends that (1) it was not a
party to the first action or in privity with a party, (2) the first action did not determine whether
Benitez-Yanez was an uninsured motorist or that Direct owed no coverage for the 2013
incident, (3) American has a due process right to be heard on the issue of coverage for the 2013
incident before its right to contest coverage is extinguished because it was a necessary party to
the first action but not joined as a party, (4) res judicata should bar Direct from litigating the
coverage issue as to American, (5) the judgment in the first action was void for failure to
include American as a necessary party, and (6) the judgment in the first action was erroneous
on the merits so that Benitez-Yanez was covered by Direct at the time of the 2013 incident.
¶ 30 Direct responds that the dismissal of the instant action was proper because (1) American
was not a necessary party to the first action, (2) Benitez-Yanez was an uninsured motorist at
the time of the 2013 incident so that American’s claim in the instant action was affirmatively
defeated, and (3) collateral estoppel bars relitigation of that determination in the first action
because American was in privity with Garcia, a party to the first action. Direct also responds
that the trial court correctly denied summary judgment for American because American is
making no claim for relief against Direct and has not established that Benitez-Yanez was
uninsured at the time of the 2013 incident.
¶ 31 A. Legal Principles
¶ 32 A pleading or cause of action therein may be dismissed pursuant to section 2-619 of the
Code of Civil Procedure on various grounds, including that “the cause of action is barred by a
prior judgment” or “other affirmative matter avoiding the legal effect of or defeating the
claim.” Id. § 2-619(a)(4), (9). A section 2-619 motion admits the legal sufficiency of the
pleading but raises an affirmative defense that allegedly defeats it. Rehfield v. Diocese of Joliet,
2021 IL 125656, ¶ 21. In reviewing the disposition of a section 2-619 motion, the key issue is
whether the existence of a genuine issue of material fact should have precluded dismissal or,
absent such an issue of fact, whether dismissal is proper as a matter of law. Id. ¶ 23. On review
of the disposition of a section 2-619 motion, we accept as true all well-pled facts and all
reasonable inferences that may be drawn from them, and we construe the allegations in a
complaint or counterclaim in the light most favorable to the claimant. Id. ¶¶ 20, 22. We review
de novo a dismissal under section 2-619. Id. ¶ 23. We therefore may affirm a dismissal on any
basis supported by the record. Masters v. Murphy, 2020 IL App (1st) 190908, ¶ 9.
¶ 33 Both plaintiffs and defendants may file for summary judgment. See 735 ILCS 5/2-1005(a),
(b) (West 2018). It should be granted only where the pleadings, depositions, admissions, and
affidavits show that there is no genuine issue of material fact and that the movant is entitled to
judgment as a matter of law. Id. § 2-1005(c). A genuine issue of material fact precluding
summary judgment exists where material facts are disputed or reasonable persons may draw
different inferences from undisputed facts. Lewis v. Lead Industries Ass’n, 2020 IL 124107,
¶ 15. Because summary judgment is a drastic means of disposing of litigation, it should be
granted only where the movant’s right is clear and free from doubt. Id. Therefore, we must
construe the pleadings, depositions, admissions, and affidavits strictly against the movant. Id.-6-
We review de novo a grant of summary judgment. Id.¶ 34 1. Necessary Parties
¶ 35 A plaintiff may name as a defendant any person “whom it is necessary to make a party for
the complete determination or settlement of any question involved therein.” 735 ILCS 5/2-
405(a) (West 2018). Moreover, “[i]f a complete determination of a controversy cannot be had
without the presence of other parties, the court may direct them to be brought in. If a person,
not a party, has an interest or title which the judgment may affect, the court, on application,
shall direct such person to be made a party.” Id. § 2-406(a).
¶ 36 A necessary party is a person or entity having a present, substantial interest in the matter
being litigated, not a mere expectance or future contingency, in whose absence a complete
resolution of a matter in controversy cannot be achieved without affecting that interest. City of
Elgin v. Arch Insurance Co., 2015 IL App (2d) 150013, ¶ 34. A necessary party is one whose
participation is required to (1) protect its interest in the subject matter of the case that would
be materially affected by a judgment entered in its absence, (2) reach a decision protecting the
interests of parties already before the court, or (3) allow the court to completely resolve the
controversy. Id. A judgment or order issued by a court without jurisdiction over a necessary
party is void, and failure to join a necessary party can be raised at any time by any party or by
the court sua sponte. Certain Underwriters at Lloyd’s London v. The Burlington Insurance
Co., 2015 IL App (1st) 141408, ¶ 15.
¶ 37 2. Insurance
¶ 38 Construction of an insurance policy is a question of law. Thounsavath v. State Farm Mutual
Automobile Insurance Co., 2018 IL 122558, ¶ 15. An insurance policy is a contract interpreted
under the rules of construction for contracts, and courts must ascertain and carry out the parties’
intention as expressed in the policy language. Id. ¶ 17. The clear and unambiguous terms of an
insurance policy must be enforced as written unless doing so would violate public policy as
expressed in the constitution, statutes, and judicial decisions of Illinois. Id.
¶ 39 It is public policy that, because insurance is not solely a private matter between an insurer
and its insured, an injured party’s rights against a liability insurer vest at the time of the
occurrence giving rise to a claim. Bahena, 2019 IL App (1st) 172918, ¶ 48. Stated another way,
the injured party is a beneficiary of the liability insurer and becomes a real party in interest in
the insured’s policy at the time of the occurrence giving rise to his or her injuries. Id. Thus, the
injured party can file a declaratory judgment action to determine the liability insurer’s coverage
under the insured’s policy, so long as underlying liability for the occurrence is not at issue. Id.
¶¶ 48-49. Similarly, the injured party is a necessary party to a declaratory judgment action by
the liability insurer to determine coverage of the claim against its insured. Id. ¶ 51.
¶ 40 3. Res Judicata and Collateral Estoppel
¶ 41 The doctrine of res judicata provides that a final judgment on the merits rendered by a
court of competent jurisdiction acts as an absolute bar to a subsequent action between the same
parties or their privies involving the same claim or cause of action. Id. ¶ 58. For res judicata
to apply, (1) a final judgment on the merits must be rendered by a court of competent
jurisdiction, (2) there must be identity of the cause of action, and (3) there must be an identity
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of parties or their privies. Id. Causes of action are identical when the same set of facts is
necessary to maintain and prove both cases. Id. ¶ 59.
¶ 42 The doctrine of collateral estoppel prevents relitigation of issues resolved in prior litigation.
State Building Venture v. O’Donnell, 239 Ill. 2d 151, 158 (2010). For collateral estoppel to
apply, (1) the issue decided in the prior litigation must be identical to the one in the instant
case, (2) the prior adjudication must have been a final judgment on the merits, and (3) the party
against whom estoppel is asserted must have been a party to the prior adjudication or in privity
with such a party. Hope Clinic for Women, Ltd. v. Flores, 2013 IL 112673, ¶ 77. Collateral
estoppel is an equitable doctrine, and courts can determine not to apply it if injustice would
result, as a party should have a full and fair opportunity to present its case. In re Estate of Ivy,
2019 IL App (1st) 181691, ¶ 38; In re J.D., 2018 IL App (1st) 180580, ¶ 45.
¶ 43 A key difference between res judicata and collateral estoppel is that res judicata bars
litigation not only of issues raised in prior proceedings but issues that could have been raised.
Bahena, 2019 IL App (1st) 172918, ¶¶ 58-59. In other words, res judicata bars matters that
were litigated and resolved in the prior action and “any matter which might have been raised
in that suit to defeat or sustain the claim or demand.” Rein v. David A. Noyes & Co., 172 Ill.
2d 325, 336 (1996). Thus, a party cannot split its single cause of action into more than one
proceeding, as res judicata would bar the later litigation. Bahena, 2019 IL App (1st) 172918,
¶ 59.
¶ 44 A key similarity between res judicata and collateral estoppel is that privity is defined the
same way for both. Id. ¶ 62 n.9. A nonparty may be bound pursuant to privity if his or her
interests were so closely aligned to those of a party that the party was the nonparty’s virtual
representative. Id. ¶ 62. Privity generally exists when parties adequately represent the same
legal interests. Id. While there is not one prevailing definition of privity applied in all cases,
Illinois courts have generally applied the principle that “ ‘ “privity” refers to a cluster of
relationships, [citation], under which the preclusive effects of a judgment extend beyond a
party to the original action and apply to persons having specified relationships to that party.’ ”
(Internal quotation marks omitted.) Id. ¶ 63 (quoting State Farm Fire & Casualty Co. v. John
J. Rickhoff Sheet Metal Co., 394 Ill. App. 3d 548, 559 (2009)). Illinois courts have recognized
three categories of relationships that may establish privity: (1) expressly representative
relationships such as trustee or executor, (2) substantive legal relationships in which one party
is deemed to have the capacity to bind the other to a judgment, such as parties who are
vicariously liable for one another, and (3) successors in interest to property. Id. ¶ 64.
¶ 45 B. Necessary Party and Summary Judgment
¶ 46 Here, American was not a party to the first action but contends that it was a necessary party
thereto, citing various cases holding injured parties and insureds to be necessary parties.
However, none of these cases hold that an injured party’s insurer is a necessary party to an
action to determine whether the insured is owed coverage by his or her liability insurer for the
incident, nor do they support that proposition. While an injured party is a necessary party, it
does not follow that his or her insurer is also a necessary party. The injured party has a present
and substantial interest in litigation to determine whether the liability insurer owes coverage to
its insured for the injured party’s claim. The injured party’s underlying claim is not contingent
on the outcome of such litigation but is in fact the cause and subject of it. By contrast, the
existence of an uninsured motorist claim by an injured party against his or her insurer is wholly
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contingent on the outcome of litigation between the liability insurer and its insured; that is, the
injured party could bring an uninsured motorist claim against his or her insurer only if the
insured’s liability policy was found to not cover the incident for some reason.
¶ 47 Placed in terms of this case, Garcia was a necessary party to the first action, Direct’s
litigation to determine its obligations under the policy with Benitez-Yanez. The first action
would not have existed if Garcia did not have or present a claim against Benitez-Yanez arising
out of the 2013 incident. However, Garcia only had an uninsured motorist claim against
American for the 2013 incident because the court in the first action had determined that Direct
did not owe Benitez-Yanez coverage for the 2013 incident. In short, American’s interest in the
first action was contingent.
¶ 48 Moreover, American’s presence in the first action was not necessary to a complete
resolution of the matter in controversy therein. Garcia presented a claim against Benitez-Yanez
arising out of the 2013 incident for which Direct may have owed coverage pursuant to Benitez-
Yanez’s liability policy with Direct. Direct therefore sought a determination that it did not owe
coverage to Benitez-Yanez and would not have to defend her or pay Garcia. Direct would have
had no reason to seek in the first action a declaratory judgment regarding its relationship with
American because it did not and would not have a relationship with American. Regardless of
the outcome of the first action, Direct would owe no duty to American, nor would American
owe any duty to Direct. We conclude that American was not a necessary party to the first
action.
¶ 49 It follows directly from this conclusion that the summary judgment in the first action is not
void for failing to include a necessary party. It also follows that the court in the instant action
did not err in denying summary judgment for American. American contends that, because it
was a necessary party to the first action, the issue of whether it owes uninsured motorist
coverage to Garcia could have been but was not raised in the first action and Direct should be
barred by res judicata from denying liability coverage for the 2013 incident. However,
American was not a necessary party to the first action. Similarly, the relationship between
Garcia and American was not a “matter which might have been raised in that suit to defeat or
sustain the claim or demand” (Rein, 172 Ill. 2d at 336) by Direct as plaintiff in the first action,
which as stated above was whether Direct would be obligated by its liability policy with
Benitez-Yanez to defend her or possibly pay Garcia. Stated another way, Direct did not split
its claims against American by not naming American as a defendant in the first action because
Direct had no claims or causes of action against American.
¶ 50 C. Collateral Estoppel and Motion to Dismiss
¶ 51 We turn now to the issue of Direct’s motion to dismiss, which the trial court granted
because it found that American was collaterally estopped by the judgment in the first action
from claiming in the instant action that Benitez-Yanez was an uninsured motorist and Garcia
had an uninsured motorist claim against American arising from the 2013 incident.
¶ 52 American contends that the issue decided in the first action is not identical to the one in the
instant action and that the summary judgment in the first action is not an unambiguous final
judgment on the merits. However, as noted above, American has also sought a res judicata
effect from the first action in the instant action, which is an implicit argument that the first
action was a final judgment on the merits, as that is an element of both res judicata and
collateral estoppel. Supra ¶¶ 41-42. Moreover, we conclude that there was a common issue key
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to both the first action and instant action: whether Direct owed coverage to Benitez-Yanez on
the day of the 2013 incident. The summary judgment in the first action makes a final
adjudication that it did not: “Direct Auto has no duty to defend or indemnify *** Benitez-
Yanez for the accident described in the complaint.” 1 American’s complaint in the instant
action firmly alleges that it did and therefore that American owes no coverage to Garcia on his
uninsured motorist claim. Under these circumstances, we see no reason to find that either of
the first two elements of collateral estoppel was not duly established.
¶ 53 As American was not a party to the first action, dismissal of the instant action based on
collateral estoppel was appropriate only if American was in privity with a party to the first
action. While this court has stated that insureds and insurers are in privity, it did so in the
context of non-coverage litigation, where the insurer was defending the insured pursuant to the
policy between them. See Preferred America Insurance v. Dulceak, 302 Ill. App. 3d 990, 995-
96 (1999). This privity does not necessarily exist in a declaratory judgment action litigating
coverage. Oshana v. FCL Builders, Inc., 2013 IL App (1st) 120851, ¶ 26.
¶ 54 That said, there was a distinct conflict of interests in Oshana (id.) that did not exist here.
In the first action, Direct was seeking to declare that its policy with Benitez-Yanez did not
cover the 2013 incident. Garcia had filed a claim for that incident against Direct’s policy and
therefore had an interest in Direct not obtaining the declaration it sought. The fact that Garcia
opposed American in the instant action regarding his uninsured motorist claim does not change
that their interests were aligned at the time of the first action. Indeed, Benitez-Yanez
presumably would have preferred to be covered by Direct pursuant to the liability policy she
and Flores-Jimenez paid for. We conclude that the court did not err in finding American to be
in privity with a party to the first action and thus did not err in granting Direct’s motion to
dismiss.
¶ 55 Lastly, as to the fairness of applying collateral estoppel against American, we find that
fairness supports estopping American. Garcia was a party to the first action and is indisputably
bound under res judicata by the judgment therein that ended his prospect of having a claim
against Direct. If this court were to disregard that and remand for the instant action to proceed,
either the trial court would have to find squarely contrary to its judgment on the merits in the
first action or it would leave Garcia without either a liability claim against Direct or an
uninsured motorist claim against American. That does not strike us as fair or just.
¶ 56 IV. CONCLUSION
¶ 57 Accordingly, we affirm the judgment of the circuit court.
¶ 58 Affirmed.
1
We reject American’s disingenuous argument that the reference in the first action’s judgment to
the accident in the first action complaint is ambiguous. While that complaint includes a reference to
“the accident of January 6, 2013,” as American contends, it also clearly refers to the collision or incident
between Garcia and Benitez-Yanez as occurring “on September 23, 2013,” and repeatedly refers to that
date as a key date in the first action litigation.
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