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RUSH PRESBYTERIAN ST. LUKE'S MED. CTR. v. SAFECO I

September 28, 1989

RUSH PRESBYTERIAN ST. LUKE'S MEDICAL CENTER, Plaintiff,
v.
SAFECO INSURANCE COMPANY OF AMERICA, et al., Defendants. WINDOWMASTER CORPORATION, et al., Plaintiffs, v. MORSE/DIESEL, INC., et al., Defendants



The opinion of the court was delivered by: DUFF

 BRIAN BARNETT DUFF, UNITED STATES DISTRICT JUDGE

 Motion by motion, ruling by ruling, these cases inch closer to resolution. In the wake of various rulings on motions to dismiss and motions for summary judgment, see Rush Presbyterian St. Luke's v. Safeco Ins. Co., 712 F. Supp. 1344 (N.D. Ill. 1989), the parties have inundated the court with more motions for summary judgment and -- a sure sign that a trial looms -- motions in limine. The court will address the motions for summary judgment first.

 Morse/Diesel's Motion for Summary Judgment

 In its previous opinion, the court granted Morse/Diesel, Inc. summary judgment on a portion of Count 1 of Safeco Insurance Company of America's Cross-Claim. See id. at 1348-49. Encouraged by its earlier victory, Morse/Diesel now seeks summary judgment on Count 2 of Safeco's Cross-Claim. While this court perceives no link between its earlier ruling and the decision which it renders now, Morse/Diesel is succeeding in reducing Safeco's claims against it.

 In Count 1 of Safeco's Cross-Claim, Safeco alleged that Morse/Diesel owed Safeco a duty to monitor payments to Morse/Diesel's subcontractor, Windowmaster Corporation, prior to Morse/Diesel's declaring Windowmaster in default of its subcontract. In Count 2, by contrast, Safeco alleges harm occurring after Morse/Diesel declared default. Safeco alleges further in Count 2 that Morse/Diesel owed it a more rigorous duty of supervising Windowmaster after the default than before the default. Morse/Diesel makes the same argument against Count 2 as it did against Count 1: it had no duty to Safeco.

 Resolving the parties' dispute over Count 2 requires less looking at the parties' contracts and more looking at the parties' pleadings. In its brief in opposition to Morse/Diesel's motion, Safeco claims that Morse/Diesel's duty to supervise Windowmaster stemmed from three sources: a July 16, 1981 letter Agreement incorporating the terms of Windowmaster's subcontract with Morse/Diesel, Morse/Diesel's review and endorsement of Windowmaster's work tickets after the Letter Agreement, and a second Letter Agreement dated March 12, 1982. What is curious is that Safeco pleaded this in Count 2:

 
19. MORSE/DIESEL, INC. of Illinois breached Article XVI of the General Conditions *fn1" by failing to process or accept written notices for change orders from SAFECO during the completion of [Windowmaster's] curtainwall subcontract work and by failing to allow price adjustments to the contract price for work outside the scoep [sic] of the original curtainwall subcontract.

 While Safeco acknowledged the Letter Agreements in its Cross-Claim, see para. 18, its pleadings never elevated them or Morse/Diesel's post-July 1981 activities to the level of a contract creating the duties claimed here. If Safeco wishes to amend Count 2 to allege a different source of obligation other than Article XVI of the General Conditions, it should so move. This court will not allow Safeco to amend its pleadings absent a motion. See Federal Deposit Ins. Corp. v. Linn, 671 F. Supp. 547, 564 n.43 (N.D. Ill. 1987) (citations omitted) ("litigants' efforts to paper over pleading deficiencies in their legal memoranda are all too common, but nevertheless inherently improper.")

 This said, the court finds that Morse/Diesel is entitled to summary judgment on Count 2, as Safeco has pleaded it. One searches in vain, in Safeco's memorandum in opposition to Morse/Diesel's motion, for an explanation as to how Article XVI of the General Conditions created the duties which Morse/Diesel allegedly breached. It is not obvious from Article XVI how Morse/Diesel owed Safeco such duties, and the court will not speculate as to how Safeco interprets the article. Accordingly, this court enters summary judgment in favor of Morse/Diesel on Count 2 of Safeco's Cross-Claim.

 Safeco's Motion For Summary Judgment on Windowmaster's Complaint

 In its prior ruling, the court granted Safeco's motion to dismiss Count 5 of Windowmaster's *fn2" Third Amended Complaint for failure to state a claim upon which this court could grant relief. See Rush, 712 F. Supp. at 1346-48. Safeco now moves for summary judgment on Counts 1 and 3 of the Third Amended Complaint.

 Safeco's first contention is that Windowmaster does not have standing to bring Count 1, its prayer for a declaration that Windowmaster has no obligation to Safeco to pay sums expended by Safeco in completing the Rush project, or Count 3, a claim that Safeco breached its duty of good faith under a General Indemnity Agreement. Safeco rests this argument upon a provision of the bond which Safeco issued in favor of Morse/Diesel, a bond which the General Indemnity Agreement covered. That provision stated: "No right of action shall accrue on this bond to or for the use of any person or corporation other than [Morse/Diesel] or the heirs, executors, administrators or successors of [Morse/Diesel]."

 In previous opinions, this court has applied Illinois law to Safeco and Windowmaster's dispute over the duties imposed by the General Indemnity Agreement. See, for example, Rush, 712 F. Supp. at 1345. Under Illinois law, indemnity contracts are construed as any other contract, and the Illinois courts usually construe the language of contracts according to their plain meaning. See Plepel v. Nied, 106 Ill. App. 3d 282, 290-91, 435 N.E.2d 1169, 1176, 62 Ill. Dec. 197 (1984); Montgomery Ward & Co. v. Wetzel, 98 Ill. App. 3d 243, 251, 423 N.E.2d 1170, 1177, 53 Ill. Dec. 366 (1981); National Bank v. West Construction Co., 41 Ill. App. 3d 686, 689, 355 N.E.2d 43, 47 (1976). Here, the "no-action" provision of Safeco's bond is limited to the bond itself, and not the General Indemnity Agreement. Safeco has given this court no reason why it should expand the limitation beyond the bond, and thus Windowmaster has standing to assert its claims under Counts 1 and 3.

 Safeco's remaining attacks apply only to Count 3. Safeco first argues that § 155(1) of the Illinois Insurance Code, Ill.Rev.Stat. ch. 73, § 767(1) (1987), preempts Count 3. Section 155(1) reads:

 
In any action by or against a company wherein there is in issue the liability of a company on a policy . . . of insurance or the amount of the loss payable thereunder, or for an unreasonable delay in settling a claim, and it appears to the court that such action or delay is vexatious or unreasonable, the court may allow as part of the taxable costs in the action reasonable attorney fees, other costs, plus an amount not to exceed any one of the following amounts: . . . .

 Safeco rests its argument for preemption on the holdings of cases such as Kush v. American States Ins. Co., 853 F.2d 1380 (7th Cir. 1988), and Barr Co. v. Safeco Ins. Co. of America, 706 F. Supp. 616 (N.D. Ill. 1989). In Kush, the Seventh Circuit held that § 155(1) preempted an insured's claim that his insurer intentionally inflicted emotional distress upon him for refusing to cover or defend the insured in a lawsuit. The court reasoned that § 155(1) preempted "' any count alleging nothing more than the conduct proscribed by section 155 . . . .'" Id. at 1385, quoting Combs v. Insurance Co., 146 Ill. App. 3d 957, 964, 497 N.E.2d 503, 508, 100 Ill. Dec. 525 (1986) (emphasis in Combs). In Barr, Judge Moran noted that the Illinois doctrine supporting preemption was that "courts should not implement or expand by judicial decree remedies already provided by the legislature." The judge thus held that § 155(1) preempted an insured's common-law claims for the tort of willful and wanton misconduct and breach of the covenant of good faith and fair dealing, brought against an insurer who allegedly delayed payment on a claim. Barr, 706 F. Supp. at 617-18.

 Careful analysis of § 155(1) reveals that it covers three types of cases: those involving (1) an issue of the liability of the insurance company under a policy; (2) an issue regarding the amount of loss payable under a policy; and (3) allegations of unreasonable delay in settling a claim. Section 155(1) does not preempt claims that allege items in addition to or exclusive of these. See Kush, 853 F.2d at 1385 (plaintiff can bring claims on conduct other than that covered in § 155(1)); National Union Fire Ins. v. Continental Illinois, 673 F. Supp. 267, 270-72 (N.D. Ill. 1987) (claims of improper refusal to ...


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