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Whitehead v. Fleet Towing Co.





Appeal from the Circuit Court of Madison County; the Hon. Thomas Hildebrand, Judge, presiding.


Rehearing denied December 6, 1982.

This garnishment action was brought by Lanny Whitehead, plaintiff, to collect a personal injury judgment from insurance policies issued by defendants, Lloyds of London, English and American Insurance Co. and Orion Insurance Co. The trial court entered judgment in favor of plaintiff for $76,000 plus interest, from which defendants-garnishees appeal.

Fleet Towing Company, a maritime company doing business on the Mississippi River in 1972, hired the brokerage firm of Lawton-Byrne-Byrner of St. Louis, Missouri, to procure liability insurance for two of its towboats. Lawton-Byrne-Bruner subsequently referred the coverage to another broker, Puritan Marine Insurance Co. of Boston. Puritan Marine decided to have the insurance coverage written in three layers. The primary layer was to provide coverage for the first $50,000 of any loss. The second layer was to provide coverage for $100,000 in excess of the first $50,000 and the third layer was to provide for coverage of $850,000 in excess of $150,000 of any one loss.

Puritan Marine referred the securing of the excess insurance to K. Bell Associates, a New York broker, which in turn referred the business to John Holman & Sons, Ltd., in London. In the course of negotiations for the excess insurance, K. Bell, by telex, advised John Holman & Sons, Ltd., that the first $50,000 of coverage was placed with Glacier Insurance Company. John Holman & Sons, Ltd., in turn, approached various London insurers and placed the excess coverage with defendants-garnishees.

Plaintiff was injured on October 4, 1972, during the effective dates of the excess insurance policies. During the course of litigation, Fleet Towing discovered that primary insurance was never procured by Puritan Marine. Instead, a certificate of insurance was found to have been issued by Puritan Marine showing that primary coverage of $50,000 was placed with Standard Marine Insurance Co., Ltd. No insurance policy, however, was ever issued.

Prior to trial, plaintiff's attorney made a demand to settle the case for $70,000 which was communicated to a representative of the excess carriers. In June 1977, the excess carriers authorized an expenditure of $20,000 as their contribution to settle the case. On the first day of trial, December 12, 1977, the demand to settle was withdrawn. A jury trial was held in Madison County and a judgment was rendered on December 19, 1977, in favor of Lanny Whitehead and against Fleet Towing in the sum of $126,000.

In August 1978, Fleet Towing filed a lawsuit in Wayne County, Missouri, against its broker, Lawton-Byrne-Bruner, seeking monetary damages for the broker's failure to procure primary insurance. Lanny Whitehead intervened in that suit and received $25,000 in settlement and in return signed a release. A partial satisfaction of judgment was filed in this action for $50,000 of the judgment obtained against Fleet Towing.

Subsequently, Utah Home Insurance Co. commenced a lawsuit against Fleet Towing and its creditors in the United States District Court in St. Louis, Missouri. Utah Home Insurance Co. had issued a hull insurance policy in the amount of $250,000 on one of the tow-boats owned by Fleet Towing, which was later destroyed. Numerous creditors claimed an interest in the insurance proceeds, and in order to resolve the claims, Utah Home Insurance Co., by way of interpleading, tendered its policy limits into the Federal Court. On June 20, 1979, Lanny Whitehead intervened in that proceeding asserting his Madison County judgment as a lien against the insurance proceeds. Judgment was entered in the Federal Court based on affidavits filed on behalf of Lanny Whitehead that $76,000 remained unsatisfied on the Madison County judgment. The court then distributed to Whitehead the sum of $24,248.74 as his pro rata share of the insurance proceeds.

Whitehead filed this garnishment action in Madison County, Illinois, against the excess insurance carriers alleging that $76,000 plus interest remained unpaid on his judgment. The court ruled in favor of Whitehead, plaintiff, and against the excess insurers, defendants-garnishees.

On appeal, defendants-garnishees (hereinafter garnishees) maintain that they are not liable on the excess insurance policy and assert three arguments in support thereof. First, garnishees contend that plaintiff signed a release which released them from liability. Second, they maintain that Fleet Towing's failure to secure primary insurance constituted either a breach of warranty or a material misrepresentation which voided their potential liability on the excess policies. Third, garnishees argue that plaintiff's acceptance of $25,000 for partial satisfaction of $50,000 voids their obligation under the excess policies.

Garnishee's first contention is that the release signed by plaintiff was a general release which absolved them from liability. Plaintiff, on the other hand, argues that the release is more limited and does not discharge the excess insurance carriers in the garnishment action.

• 1 The dispute regarding the scope of plaintiff's release stems in part from the fact that two distinct releases were offered into evidence. Though both releases bear plaintiff's signature and are dated May 11, 1979, their terms differ in some significant respects. One release, marked as plaintiff's exhibit 7, is a four-page long instrument which bears the Madison County caption of this proceeding. This release, which is obviously a comprehensive and carefully drafted document, purports to release only those persons and firms liable for the first $50,000 of the judgment while reserving the right to proceed for the remainder of the judgment against Fleet Towing and its excess carriers. The other release, by contrast, is a simple one-page document which by its terms relates only to the allegations and issues made up in case No. C-66-76 in the circuit court of Wayne County, Missouri, and does not include any reservation of rights. Despite this discrepancy, plaintiff fails to demonstrate any relation between the two releases even though he cites both in his brief. This omission, we believe, suggests that the more complex instrument was executed by plaintiff in anticipation of future litigation. Our discussion of plaintiff's release, henceforth, will be limited to the second release, marked as defendant's exhibit 4. As the releases are inconsistent, we are obliged to give effect to the general release as it is not claimed that it was executed under any mistake of law or fact.

A release is a contract whereby a party abandons a claim to a person against whom that claim exists. (Murphy v. S-M Delaware, Inc. (1981), 95 Ill. App.3d 562, 420 N.E.2d 456.) The intention of the parties controls the scope and effect of the release, and such intent is discerned from the language used and the circumstances of the transaction. LaGrange Federal ...

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