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05/11/87 the St. Paul Mercury v. Statistical Tabulating

May 11, 1987

THE ST. PAUL MERCURY INSURANCE COMPANY, PLAINTIFF-APPELLEE

v.

STATISTICAL TABULATING CORP., DEFENDANT-APPELLANT AS TO THE ST. PAUL MERCURY INSURANCE COMPANY AND, DEFENDANT-APPELLEE AS TO EVANSTON INSURANCE



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIRST DIVISION

Company and Third-Party Plaintiff (Motive

Parts Company of America, Inc., Defendant; Evanston Insurance

Company, Defendant-Appellant; Marsh & McClennan, Inc., Third-Party, Defendant)

No. 85-1880

508 N.E.2d 433, 155 Ill. App. 3d 545, 108 Ill. Dec. 272 1987.IL.606

Appeal from the Circuit Court of Cook County; the Hon. Arthur L. Dunne, Judge, presiding.

APPELLATE Judges:

JUSTICE CAMPBELL delivered the opinion of the court. QUINLAN, P.J., and O'CONNOR, J. concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE CAMPBELL

This appeal arises out of a complaint for declaratory judgment filed by the St. Paul Mercury Insurance Company against Statistical Tabulating Corporation (Stat-Tab), Motive Parts Company of America, Inc., and Evanston Insurance Company, seeking a judicial determination that: (1) the professional liability insurance policy issued by St. Paul to Stat-Tab did not cover a claim filed by Motive Parts in February 1983 against Stat-Tab for negligent performance of its services in June 1979; (2) St. Paul has no duty to defend Stat-Tab in the lawsuit filed by Motive Parts; (3) St. Paul has no duty to pay any judgment awarded to Motive Parts; and (4) the alleged errors committed by Stat-Tab are covered under a professional liability insurance policy issued to Stat-Tab by Evanston Insurance Company. The Evanston policy had commenced on January 1, 1979, and was renewed annually until January 1, 1983, on which date a professional liability policy with St. Paul became effective. The Evanston policy allowed for a $50,000 deductible; the St. Paul policy had a $7,500 deductible.

Both Evanston and St. Paul moved for summary judgment against Stat-Tab, each claiming that, as a matter of law, its respective policy did not cover the alleged errors, and Stat-Tab filed a cross-motion for summary judgment against St. Paul, alleging that it was insured under St. Paul's policy. The trial court granted St. Paul's motion for summary judgment and denied Evanston's motion for summary judgment. Thereafter, Stat-Tab moved for summary judgment against Evanston, alleging that Evanston's policy covered the claims, and Evanston moved for a rehearing on its motion for summary judgment. The trial court granted Stat-Tab's motion, finding that Stat-Tab was covered by the Evanston policy, and denied Evanston's motion for a rehearing. Evanston appeals the orders which: (1) denied its motion for summary judgment against Stat-Tab; (2) denied its motion for rehearing; and (3) granted summary judgment to Stat-Tab. Stat-Tab appeals from the denial of its motion for summary judgment against St. Paul. For the reasons that follow, we reverse the judgments of the trial court and remand the cause for a trial on the merits as to St. Paul's and Evanston's liability to defend and indemnify Stat-Tab with respect to the claim filed by Motive Parts.

The record sets forth the following. In February 1979, Stat-Tab, a data processing services company, entered into an oral agreement with Motive Parts, a wholesaler and retailer of automotive parts, whereby Stat-Tab agreed to perform computer processing services for Motive Parts. Pursuant to the deposition of David Templin, president of Motive Parts, Motive Parts began experiencing problems with Stat-Tab's services from the beginning of their business relationship. In May and June 1979, the problems culminated in a series of alleged data processing errors which resulted in inaccurate billing to Motive Parts' customers. Templin stated that he had had several telephone conversations as well as a meeting with Stat-Tab regarding these errors. The first written communication between Stat-Tab and Motive Parts regarding the problem was a letter dated July 25, 1979, from Robert Hendrix, sales manager of Stat-Tab, to Templin, which referred to a recent meeting between Hendrix and Templin and offered to re-run Motive Parts' work at no cost and "to be of any assistance to ensure more positive results in July and the months ahead."

Subsequently, in a letter dated August 17, 1979, from Motive Parts to Stat-Tab, Templin purported to confirm admissions by Hendrix that Stat-Tab had "negligently failed to properly perform computer processing services for Motive Parts Company during the period beginning June 2, 1979 and ending June 20, 1979," and informed Stat-Tab that, as a result of the negligence, Motive Parts had suffered "considerable loss and expense," including customer goodwill. The letter concluded with the comment that although it had been in contact with its attorneys, Motive Parts assumed the problem could be resolved without having to resort to legal action.

Several months later, in a handwritten letter dated April 5, 1980, from Motive Parts to Stat-Tab, written in response to a bill collection letter, Motive Parts warned that the "next thing you [ sic ] company is going to hear from us is a sizeable lawsuit for Stat-Tab's careless actions almost putting us out of business." There was no further written correspondence with respect to Stat-Tab's alleged errors until a letter dated December 30, 1982, was sent from Motive Parts' law firm to Stat-Tab, outlining Stat-Tab's negligent performance and the resulting losses incurred by Motive Parts and demanding that Stat-Tab contact the law firm within 14 days to discuss the matter or a lawsuit would be initiated. Stat-Tab claims that it did not receive the letter until ...


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