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Sheppard, Morgan & Schwaab v. U.s. Fidelity

OPINION FILED NOVEMBER 18, 1976.

SHEPPARD, MORGAN AND SCHWAAB, INC., PLAINTIFF-APPELLEE,

v.

UNITED STATES FIDELITY AND GUARANTY COMPANY, DEFENDANT-APPELLANT.



APPEAL from the Circuit Court of Madison County; the Hon. HORACE L. CALVO, Judge, presiding.

MR. JUSTICE EBERSPACHER DELIVERED THE OPINION OF THE COURT:

This is an appeal from a declaratory judgment entered by the circuit court of Madison County construing certain provisions of a liability insurance policy issued by the defendant, United States Fidelity and Guaranty Company.

The plaintiff, Sheppard, Morgan and Schwaab, Inc., an engineering firm, brought this action seeking a declaratory judgment to require the defendant to defend a lawsuit brought against the present plaintiff, by one John Saley. The plaintiff also sought an award of attorney fees and expenses incurred in the defense of the said suit. The court found that the Saley complaint stated a claim potentially within the coverage of the policy issued by this defendant and that this defendant breached the contract of insurance issued this plaintiff in refusing to defend and is now estopped to deny coverage; and ordered this defendant to proceed with the defense of this plaintiff and make payment of reasonable attorney fees and expenses incurred in the defense of the Saley case. From such order this defendant has appealed.

The facts were stipulated by the parties and are as follows: the plaintiff was insured under insurance policy # CC457386 entitled "Comprehensive General Liability Insurance" in 1973. The plaintiff herein was sued in Madison County circuit court as a defendant in the case of John Saley v. City of Alton, a municipal corporation, and, Sheppard, Morgan & Schwaab, Inc., a corporation. Sheppard, Morgan & Schwaab then tendered the case to United States Fidelity and Guaranty Company for defense. The defendant, after investigation, determined that there was no coverage under the terms of the said policy and refused to defend on the grounds of a policy exclusion, whereupon the plaintiff retained its own counsel.

In the Saley complaint it was alleged, among other things, that the plaintiff was guilty of negligence which had resulted in Saley's injuries in that the plaintiff had failed to properly supervise the construction of sewers on a job that it had engineered and that there had been a violation of the Structural Work Act because of improper supervision.

The court received into evidence the insurance policy in question, the Saley complaint, as well as the letters from the defendant to plaintiff, the first letter acknowledging receipt of the Saley summons and complaint with a "limited acceptance," and also the letter refusing to defend the Saley suit.

The policy contained the following language:

"This endorsement modified such insurance as is afforded by the provisions of the policy relating to

Comprehensive General Liability Insurance

Manufacturers' and Contractors' Liability Insurance

Owners', Landlords' and Tenants' Liability Insurance

EXCLUSION

(Engineers, Architects or Surveyors Professional Insurance) It is agreed that the insurance does not apply to bodily injury or property damage arising out of any professional services ...


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