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05/17/89 State Street Bank and v. United States Fidelity and

May 17, 1989

STATE STREET BANK AND TRUST COMPANY OF QUINCY, PLAINTIFF-APPELLANT

v.

UNITED STATES FIDELITY AND GUARANTY COMPANY, DEFENDANT-APPELLEE



APPELLATE COURT OF ILLINOIS, FOURTH DISTRICT

539 N.E.2d 779, 181 Ill. App. 3d 1081, 132 Ill. Dec. 216 1989.IL.745

Appeal from the Circuit Court of Adams County; the Hon. Dennis K. Cashman, Judge, presiding.

APPELLATE Judges:

JUSTICE GREEN delivered the opinion of the court. KNECHT, J., concurs. JUSTICE LUND, specially Concurring.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE GREEN

This action was brought in the circuit court of Adams County by plaintiff State Street Bank and Trust Company (Bank) against defendant United States Fidelity and Guaranty Company for attorney fees and costs incurred by the Bank in defending an action against it. On April 21, l988, the trial court entered an order granting USF&G's motion for summary judgment and denying a similar motion by the Bank. The plaintiff Bank appeals from that order. We affirm.

The Bank's second-amended complaint alleged: (1) in count I, that defendant breached its duty to defendant the plaintiff in an action in the same court entitled O'Brien v. State Street Bank & Trust Co. (case No. 75 -- L -- 57); and (2) in count II, that defendant breached its duty to indemnify plaintiff for its attorney fees, costs, and other incidental expenses incurred by the Bank in defending in case No. 75 -- L -- 57. The alleged breach of duty in each of counts I and II is based upon a contract of insurance issued by defendant insuring plaintiff pursuant to a "Banker's Blanket Bond," commonly known as a fidelity bond.

The "INSURING AGREEMENTS" of the bond provide that the underwriter agrees to indemnify and hold harmless the insured (Bank) from that which in paragraph thereof is described under the heading "FIDELITY" as:

"Loss through any dishonest or fraudulent act of any of the Employees, committed anywhere and whether committed alone or in collusion with others, including loss, through any such act of any of the Employees, of Property held by the Insured for any purpose or in any capacity and whether so held gratuitously or not and whether or not the Insured is liable therefor."

The policy also provides, under General Agreement D:

"The Underwriters will indemnify the Insured against court costs and reasonable attorney's fees incurred and paid by the Insured in defending any suit or legal proceeding brought against the Insured to enforce the Insured's liability or alleged liability on account of any loss, claim or damage which, if established against the Insured, would constitute a valid and collectible loss sustained by the Insured under the terms of this Bond." (Emphasis added.)

General Agreement D also gives USF&G the right to defend "at the underwriter's election."

In case No. 75 -- L -- 57, John O'Brien filed a two-count complaint wherein he alleged the Bank (1) intentionally and (2) negligently interfered with his existing and prospective business relationships. He alleged the Bank (1) by and through its agent, David Carey, an assistant vice-president of the Bank, made certain representations to him concerning a debt he owed the Bank; (2) later, contrary to Carey's representations, accelerated the due dates of debts which O'Brien owed it; (3) offset and seized O'Brien's bank accounts; (4) seized, repossessed and sold certain property belonging to O'Brien; and (5) confessed judgments against O'Brien as to various debts. O'Brien's complaint alleged these acts were (1) as to count I, wilful, wanton, intentional, malicious, reckless, and in bad faith; and (2) as to count II, negligent and careless and in bad faith. The trial court dismissed

The Bank does not indicate it disputes the propriety of the summary judgment against it as to count I. In any event, we agree the court ruled properly. The instrument upon which plaintiff sought recovery was an indemnity bond and not a liability policy. The only provision in regard to defendant defending the plaintiff was the statement in General Agreement D giving defendant the right to defend "at the underwriter's election." In a case concerning the duty of an underwriter to defend an indemnitee under a similarly worded bond, the court held ...


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