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G.e. Mathis Co. v. Centennial Ins. Co.

OPINION FILED JANUARY 29, 1980.

G.E. MATHIS COMPANY, PLAINTIFF-APPELLEE,

v.

CENTENNIAL INSURANCE COMPANY, DEFENDANT-APPELLANT.



APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR L. DUNNE, Judge, presiding.

MR. JUSTICE STAMOS DELIVERED THE OPINION OF THE COURT:

Plaintiff, the G.E. Mathis Company, filed this action against defendant, the Centennial Insurance Company, seeking a declaratory judgment that under the terms of a liability insurance policy, defendant was obliged to defend a personal injury action brought against plaintiff by James J. Sullivan. Plaintiff also sought relief on the theory that plaintiff had instructed defendant's agent to procure, and had relied on the agent's representation that he had procured, insurance covering all the risks of plaintiff's business.

The cause was tried to a jury in the circuit court of Cook County. At the close of all the evidence, the court directed a verdict for defendant on plaintiff's estoppel theory; the correctness of this ruling is not questioned on this appeal. The court further determined that the question of coverage under the policy was purely a matter of law. Ultimately the court held that while the policy did not cover the products liability and negligence counts contained in the personal injury complaint, the policy did not exclude the implied warranty liability alleged therein, and defendant owed plaintiff a defense on that count.

Defendant has appealed from the portion of the judgment holding that it owes plaintiff any defense. Plaintiff initially filed a cross-appeal from the court's ruling on the products liability and negligence counts, but the cross-appeal has been abandoned. The controlling issue on appeal therefore is the correctness of the trial court's interpretation of the terms of the insurance policy so as to require defendant to undertake plaintiff's defense on the implied warranty theory of recovery alleged in the personal injury complaint.

Insofar as this appeal is concerned, the facts are undisputed. In January of 1971, James J. Sullivan was injured when a cart fabricated by plaintiff and sold to Sullivan's employer collapsed while Sullivan was using it. Sullivan sued plaintiff, among others, for resulting damages. His second amended complaint in three counts sought recovery under the theories of products liability, negligence, and breach of an implied warranty of merchantability, respectively.

At the time of the occurrence, plaintiff was insured by defendant under a policy, the first section of which covered comprehensive physical damage to plaintiff's buildings and personal property, as well as damage to its earnings, at a premium of $2097. Section II of the policy contained automobile liability insurance, for which the premium totaled $2529, and "Comprehensive General Liability Insurance Coverage," at a premium of $207, for a total premium of $4833.

The "Comprehensive General Liability Insurance Coverage Part" (Item 1 of Section II) of the policy begins by providing that, subject to the policy provisions:

"The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

Coverage A. bodily injury or

Coverage B. property damage

to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage * * *."

Immediately following is a list of exclusions, the first of which provides that the insurance does not apply:

"* * * to liability assumed by the insured under any contract or agreement except an incidental contract; but this exclusion does not apply to a warranty of fitness or quality of the named insured's products or a warranty that work performed by or on behalf ...


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