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08/06/87 Commonwealth Edison v. Encompas

August 6, 1987

COMMONWEALTH EDISON COMPANY, PLAINTIFF

v.

ENCOMPAS, INC., ET AL., DEFENDANTS (ENCOMPAS, INC., ET AL., THIRD-PARTY PLAINTIFFS-APPELLANTS; AVRECO, INC., THIRD-PARTY DEFENDANT-APPELLEE)



APPELLATE COURT OF ILLINOIS, THIRD DISTRICT

511 N.E.2d 988, 158 Ill. App. 3d 852, 110 Ill. Dec. 811 1987.IL.1138

Appeal from the Circuit Court of Tazewell County; the Hon. Donald Coursen, Judge, presiding.

APPELLATE Judges:

JUSTICE HEIPLE delivered the opinion of the court. SCOTT and STOUDER, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE HEIPLE

Third-party plaintiffs Encompas, Inc., and Douglas Reid appeal the trial court's dismissal of their third-party complaint for indemnity and/or contribution. The court found that because the cause of action arose in 1977, prior to the effective date of the Contribution Act (Ill. Rev. Stat. 1985, ch. 70, par. 301 et seq.), no contribution claim could be sustained. The court also found that because the third-party complaint was filed more than five years after the cause of action arose, it was not timely filed. We reverse.

In 1977, Commonwealth Edison (ComEd) and Midwest Power, Inc. (Midwest), a construction contractor, contracted for Midwest to perform certain repairs at one of ComEd's power plants. Under the terms of the parties' agreement, Midwest was obligated to obtain certain liability insurance which included ComEd as an additional insured party. Midwest contacted Encompas, Inc., an insurance broker, about obtaining the required insurance. An agent of Encompas', Douglas Reid, contacted Avreco, Inc. (Avreco), a corporation engaged as an insurance agent, about procuring the insurance required in the Midwest/ComEd contract. Reid relied on Avreco to procure insurance which satisfied the terms of the contract. Avreco then obtained insurance from Admiral Insurance Company, Inc. (Admiral). On September 29, 1977, Encompas issued a certificate of insurance to ComEd, indicating that ComEd was a "named additional insured" under the Admiral policy. In fact, ComEd was not an additional insured.

In January of 1978, a Midwest employee was injured at the ComEd plant. The injured employee filed an action against ComEd, and ComEd was served with the complaint in September of 1979. On October 10, 1979, ComEd tendered the defense of this case to Admiral, under the mistaken belief that it was an insured of Admiral's. Nine days later, Admiral denied coverage and a defense of the suit, so ComEd obtained counsel to defend the action. The injured employee obtained a $200,000 judgment against ComEd in 1981.

ComEd thereafter filed a complaint against Encompas, Reid, Midwest, Admiral, and Avreco, alleging, inter alia, negligence, breach of fiduciary duty, and breach of contract. In April of 1985, ComEd voluntarily dismissed the counts against Admiral and Avreco. Various answers, amendments, and other pleadings were filed by the parties from 1982 through 1985, but we need not concern ourselves with them for purposes of this appeal.

On April 25, 1986, Encompas and Reid filed a third-party complaint against Avreco in the pending action brought by ComEd. On agreement of the parties, the court subsequently allowed Encompas and Reid to file an amended third-party complaint. In the amended complaint, the third-party plaintiffs alleged that Avreco was given a copy of the Midwest/ComEd contract and was obligated to obtain insurance which satisfied the contract terms. The third-party plaintiffs also asserted that Avreco was negligent in that it failed to properly review the contract and other documents necessary to determine the type of insurance required and mistakenly issued insurance which it believed would cover Midwest and ComEd. Finally, the amended third-party complaint alleged that as a result of Avreco's negligence, Encompas and Reid are entitled to contribution and/or indemnity to the full extent of any liability incurred.

Avreco filed a motion to dismiss the third-party complaint, asserting that the cause of action sounded in tort and that the five-year statute of limitations, which began to run in 1977 when Avreco allegedly failed to procure the proper insurance, had expired long before the third-party complaint was filed. The court determined that any cause of action arising out of the facts here, including a common law indemnity action, must have been filed within five years of the date the cause of action accrued in order to be within the statute of limitations. (Ill. Rev. Stat. 1985, ch. 110, par. 13-205.) The trial court found that the cause of action was properly characterized as a tort arising out of a contractual relationship and that it accrued in 1977 when the contract was made, not when the damage was sustained. Finally, the court found that because the cause of action accrued prior to the enactment of the Contribution Act, no contribution claim could be sustained. After finding that the third-party complaint was not timely filed, the trial court dismissed the complaint.

The third-party plaintiffs filed a motion to reconsider, arguing that they are seeking indemnification and that because they have no right to indemnity from Avreco unless and until ComEd obtains a judgment against them, their third-party cause of action for indemnity did not accrue until that date and their complaint was not untimely filed. The court denied the motion to reconsider, and the third-party plaintiffs filed this appeal. Before this court, the third-party plaintiffs argue primarily that the third-party claim states a cause of action for contribution and that it was timely filed.

Avreco continues to maintain that the third-party plaintiffs' cause of action is a tort arising out of a contract and that the trial court correctly dismissed it because the action was not filed before the five-year statute of limitations expired. Avreco and the trial court have mischaracterized the third-party cause of action. A review of the amended complaint indicates that the third-party action is one for contribution and/or indemnity. It merely alleged that Avreco's liability for indemnity or contribution, if any, arose from Avreco's negligence in performing its duties under the contract. Therefore, the fact that the third-party complaint was filed over five years after Avreco obtained the insurance does not resolve the issue of whether the complaint was timely filed. See Monsen v. DeGroot (1985), 130 Ill. App. 3d 735.

We must determine whether the cause of action is one for contribution or indemnity before we are able to determine whether it was timely filed. The Contribution Act applies only to "causes of action arising on or after March 1, 1978." (Ill. Rev. Stat. 1985, ch. 70, par. 301.) Avreco contends that the underlying cause of action for purposes of the Contribution Act is Encompas' action against Avreco based on Encompas' oral ...


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