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Dawe's Laboratories v. Commercial Ins. Co.

MAY 20, 1974.




APPEAL from the Circuit Court of Cook County; the Hon. F. EMMETT MORRISSEY, Judge, presiding.


This appeal brings before us for review a summary judgment entered in favor of Dawe's Laboratories, N.V., a Belgian corporation (plaintiff) against Commercial Insurance Company of Newark, New Jersey, a corporation, (defendant). Defendant has appealed from this judgment. A general preliminary description of the proceedings is helpful.

Plaintiff obtained a general liability policy of insurance from defendant which included products liability. Plaintiff produces premixes of vitamins and various nutrients which are incorporated into poultry and livestock feed. The case involves one of plaintiff's plants operating in Belgium. A quantity of a certain premix was sold by plaintiff from its Belgian plant to a customer (Morgenstond) in the same country engaged in selling poultry feed. Negotiation commenced between plaintiff and Morgenstond regarding alleged deleterious effects upon poultry from premix sold by plaintiff. Defendant was given notice of the claim but denied coverage.

On April 27, 1970, a written agreement was entered into between plaintiff and defendant. The agreement recited that plaintiff had made a claim under the policy which had caused a dispute between the parties. They agreed that defendant would investigate, compromise and settle the claim and defend any action that might be brought by Morgenstond against plaintiff. Plaintiff agreed to be bound by any settlement effected by defendant and immediately to pay two-thirds "of any settlement and all expenses and costs." Defendant agreed to pay the remaining one-third upon the payment being made by plaintiff. The parties agreed to cooperate each with the other, all without prejudice to or waiver of any of their respective rights.

In due course, a settlement of $89,000 was negotiated. Each of the parties paid his agreed share. Plaintiff then filed the within action for declaratory judgment seeking a declaration that the policy covered the liability (Ill. Rev. Stat. 1973, ch. 110, par. 57.1); judgment that defendant reimburse plaintiff for that portion of the settlement and expenses paid by plaintiff and allowance of statutory attorney's fees (Ill. Rev. Stat. 1971, ch. 73, par. 767.) Plaintiff's motion for summary judgment (Ill. Rev. Stat. 1971, ch. 110, par. 57) was supported by the affidavits of Norbert Wuytack, a clerk in the employ of plaintiff and Jean (or John) Dreiss, former director of technical services for plaintiff and now its European director of marketing.

Defendant filed a response to plaintiff's motion for summary judgment. It set forth that its answer had alleged that it lacked knowledge of certain facts, which indicated that the facts were not undisputed; credibility of witnesses was involved and possible defenses were peculiarly within the knowledge of the plaintiff; the affidavits contained matter inadmissible in evidence; even if the facts were undisputed, it could not be inferred that the issue was one of law; affiants were subject to change of mind or impeachment, particularly where the facts were peculiarly within the knowledge of their employer; and the right to summary judgment was not free from doubt.

Defendant also moved to strike both of the affidavits on the grounds that they contained hearsay; were based upon unauthenticated documents and were replete with conclusions and self-serving statements. Plaintiff filed a response to this motion to strike which set forth that the affidavits were properly authenticated; accompanying exhibits need not be separately authenticated; affiants would be competent to testify to the material set forth; and inadmissibility of certain statements would not invalidate the entire affidavits. Plaintiff also set forth that issues of fact raised by the defendant's answer would not prevent summary judgment where the affidavits disclosed that there is no issue of fact.

Defendant filed counter-affidavits by Dr. Roland W. Winterfield and B.F. Biggs, Jr. Dr. Winterfield is a scientist with extensive qualifications and experience in agriculture and in the veterinary field. Mr. Biggs is an official of a large insurance company with 30 years of experience in the insurance industry. Defendant also took discovery and evidence depositions of a number of witnesses and filed excerpts from their testimony, authenticated by affidavits of counsel. These witnesses included among others Jean (or John) Dreiss and Norbert Wuytack, employees of plaintiff who made affidavits in support of the motion for summary judgment.

Plaintiff made a motion to strike the affidavits of Dr. Roland Winterfield and B.F. Biggs, Jr. As regards the former, the motion set forth that the affidavit was irrelevant and immaterial, contained conclusions rather than facts and raised no issue of fact. The motion averred that the latter was based upon hypothetical facts not before the court and was patently improper because it was directed to the ultimate issue in the case, the legal question of coverage under the policy.

Defendant filed a response to the motion to strike comprising some six pages and containing argument on the merits of the motion, including citation of legal authorities. After full hearing, the trial court granted the motion for summary judgment. Defendant was directed to afford coverage of the claim under the policy and to pay plaintiff the portion of the settlement it had paid to Morgenstond with interest. Defendant was also ordered to reimburse plaintiff for expenses incurred by plaintiff in handling the claim and negotiation of the settlement and to reimburse plaintiff for expenses incurred in the preparation and prosecution of the within action with these amounts to be reserved for further determination by the court. The order also sustained the motion of plaintiff to strike the affidavits of Winterfield and Biggs and the motion of defendant to strike the affidavits of plaintiff was denied.

In this court, defendant urges that the court erred in striking the counter-affidavits of Winterfield and Biggs and in entering summary judgment because there were conflicts and issues of fact and questions of credibility of witnesses which required trial. In response, plaintiff urges that whether a liability insurance policy provides coverage is determined by the claim of the injured party; summary judgment is proper when there is no genuine issue concerning any material fact; the policy of insurance does not exclude production mistakes, mistakes in formulas not prepared by plaintiff and active malfunctions of a product; the Morgenstond claim arose out of a production error during filling of a formula prepared by Morgenstond; defendant cannot deny coverage on the theory that the Morgenstond claim is groundless; and the trial court properly struck the Winterfield and Biggs affidavits.

The insurance policy issued by defendant contains a number of exclusions to which the coverage "does not apply." Since the difference of opinion between these parties is concerned with one of these exclusions, we will state it in full:

"This insurance does not apply: * * *

(e) to bodily injury or property damage resulting from the failure of the named insured's products or work completed by or for the named insured to perform the function or serve the purpose intended by the name insured, if such failure is due to a mistake or deficiency in any design, formula, plan, specifications, advertising material or printed instructions prepared or developed by any insured; but this exclusion does not apply ...

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