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08/18/89 O.C. Smith, v. Chicago Housing Authority

August 18, 1989





543 N.E.2d 852, 187 Ill. App. 3d 798, 135 Ill. Dec. 284 1989.IL.1273

Appeal from the Circuit Court of Cook County; the Hon. Dean Sodaro, Judge, presiding.


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


This appeal involves the denial of the Chicago Housing Authority's post-trial motion for indemnification by Interstate Service Corporation for costs incurred in the defense of a personal injury suit.

We reverse and remand the cause with directions.

On October 2, 1979, O.C. Smith, a North Carolina Mutual Insurance Company sales representative, travelled to 4101 South Federal Street in Chicago to collect an insurance premium from Jim Jones. Jones lived in a second-floor apartment in the Robert Taylor Homes housing project located at that address. While in Jones' apartment, Smith observed a conversation between Jones and John Rice. After Smith collected the premium, he left. As Smith was returning to his automobile via the north stairwell of the building, Rice appeared, shouted at Smith, and shot Smith in the back. Smith eventually recovered from the gunshot wound. Rice was subsequently convicted for the shooting.

On September 12, 1981, Smith filed a personal injury action against the Chicago Housing Authority arising out of the shooting. The complaint, as amended, alleged that the CHA was negligent in the following ways: hiring incompetent security personnel, failing to provide sufficient security in areas where and when criminal conduct was likely, carelessly positioning security personnel, providing security personnel at a time and place which actually increased the likelihood of criminal conduct, failing to warn security personnel of the likelihood of criminal conduct, and failing to properly secure an area where criminal conduct was likely.

In turn, the CHA filed a third-party complaint against Interstate Service Corporation (Interstate). The third-party complaint was based on an indemnification agreement in a contract originally executed in February 16, 1946. Pursuant to that contract, the CHA engaged Interstate to provide security service for the CHA's housing projects. Paragraph 5(f) of the contract embodied the indemnification provision. That paragraph provided Interstate would

"hold the CHA harmless from and shall defend the CHA against any and all suits, claims and demands whatsoever brought by any person . . . for injuries to . . . any person or damage to or loss of property . . . alleged or claimed to have been caused or to have arisen out of or in connection with or incidental to any work to be done by [Interstate] hereunder, whether or not such loss, injury or damage shall be caused or contributed to by the joint or Concurring negligence of the , . . . and to pay, liquidate and satisfy any and all judgments, awards or expenses which may be rendered against or incurred by [the] CHA in connection therewith, including . . . all costs of suits, attorneys fees and reasonable expenses therewith whether or not such judgment, award or expense shall be rendered against or incurred by the CHA in whole or in part because of the joint or Concurring negligence of the CHA, its agents or employees; provided, however, that the CHA shall have the right at its option to participate in any such litigation without relieving [Interstate] of any of its obligations under the contract. [Interstate] shall insure all the liability assumed hereunder and shall furnish the CHA with satisfactory evidence (subject to the approval of the CHA) of such insurance coverage. [Interstate] shall hold and save the CHA, its officers, agents, servants, and employees harmless from liability for the use of any invention, article, or appliance used in the performance of the contract."

Interstate denied the material allegations of the third-party complaint and asserted, as an affirmative defense, that no basis for indemnification could exist because the security personnel provided under the contract were joint servants of the CHA and Interstate.

Prior to the commencement of trial, an order was entered outlining the obligation of Interstate to indemnify the CHA under paragraph 5(f). Specifically, the order provided paragraph 5(f)

"require[d] [Interstate] to hold harmless and defend [the] CHA, pursuant to [the agreement's] terms, only in the event that a claimed injury was caused by, or arose directly from, the act or failure to act solely by [Interstate] . . . or from the joint acts or failures to act by [Interstate] . . . and [the] CHA . . .. [Interstate] shall not be required to hold harmless and defend [the] CHA under the terms of the indemnity agreement ...

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