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12/30/88 Empire Fire & Marine v. Faith Truck Lines

December 30, 1988

EMPIRE FIRE & MARINE INSURANCE COMPANY, PLAINTIFF-APPELLANT

v.

FAITH TRUCK LINES, INC., ET AL., DEFENDANTS (JERRY ADAMS ET AL., DEFENDANTS-APPELLEES)



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIFTH DIVISION

533 N.E.2d 441, 178 Ill. App. 3d 356, 127 Ill. Dec. 569 1988.IL.1938

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

APPELLATE Judges:

JUSTICE PINCHAM delivered the opinion of the court. LORENZ, P.J., and MURRAY, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE PINCHAM

Plaintiff, Empire Fire & Marine Insurance Company (Empire), filed a declaratory judgment action against defendant Faith Truck Lines (Faith), a trucking company, seeking a declaration that under the provisions of its insurance policy, Empire had no duty to defend or indemnify Faith and Faith's driver, Jerry Adams, both Empire's insureds, for claims or judgments arising from an explosion. Following a bench trial, the trial court held that Empire was bound to assume the obligations of the defense and indemnification of Faith and Adams and entered judgment in favor of the defendants. Empire appeals. We affirm.

The facts are as follows. On July 19, 1982, Jerry Adams, a truck driver for defendant, Faith, delivered a load of hydrochloric acid, purchased from K & A Steel Chemicals by Electronic Plating, to Electronic Plating. During the course of Adams' delivery of the acid at Electronic Plating, a chemical reaction and explosion occurred inside the tank into which the acid was being pumped, chlorine gas escaped from the tank and several people in the vicinity were overcome by fumes.

Charlie Woodard, president and owner of Faith, telephoned Bruce Reinger, president of IMC Insurance Agency, the afternoon of July 19, 1982, and notified him of the accident. Faith had acquired most of its insurance through the IMC Insurance Agency. Reinger and IMC were not expressly designated authorized agents of Empire. Clemens & Associates in Bloomington was the only authorized agent of Empire in the State of Illinois. However, from the inception of Faith's original policy with Empire, on October 22, 1979, and during the subsequent renewal periods leading up to the July 19, 1982, accident, Faith gave notice of all claims against it to Reinger, who then reported the claims to Clemens and Clemens notified Empire, which never objected to this procedure. Empire used Reinger and IMC as intermediaries or agents in contacting Faith for delivery of Faith's policies, billing, collecting premiums and other matters related to the policies.

On July 26, 1982, Reinger mailed a written report to Fireman's Fund Insurance Companies, which he believed covered Faith's loss under a general liability policy. Fireman's Fund contends that it did not receive notice of the accident until June 10, 1983.

In January 1983, Electronic Plating brought suit against Faith, Adams and K & A seeking compensation and punitive damages for property losses incurred as a result of the accident. Faith forwarded documents pertaining to the suit to Reinger, who did not forward the papers to anyone else. A default judgment was entered against Faith. Faith sent notice of the default to Reinger. After Reinger received notice of the default judgment, Reinger contacted Fireman's Fund to inquire about the status of the claim. Fireman's Fund advised Reinger that Faith's policy with Fireman's Fund did not cover the accident and suggested that Reinger contact Faith's automobile insurance carrier. By early July 1983, Reinger contacted Clemens about the accident. On July 8, 1983, Clemens forwarded notice of the loss to Empire.

The subject insurance policy, Empire Business Auto Policy number BA955062, was issued to Faith in 1979. Faith was the only insured named in the policy, which stated, inter alia, "Anyone else is an insured while using with your permission a covered auto you own, hire or borrow . . .." (Emphasis in original.) The policy also provided that Empire would pay "all sums the insured legally must pay as damages because of bodily injury or property damage . . . caused by an accident and resulting from the ownership, maintenance or use of a covered auto." (Emphasis in original.) Other pertinent provisions include:

"WORDS AND PHRASES WITH SPECIAL MEANING . . .

A. ' You ' and ' your ' mean the person or organization shown as the named insured in ITEM ...


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