APPELLATE COURT OF ILLINOIS, FOURTH DISTRICT
552 N.E.2d 254, 194 Ill. App. 3d 888, 141 Ill. Dec. 886 1989.IL.1526
Appeal from the Circuit Court of Champaign County; the Hon. George S. Miller, Judge, presiding.
JUSTICE GREEN delivered the opinion of the court. LUND and KNECHT, JJ., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE GREEN
This appeal is from a summary declaratory judgment determining a liability insurer has a duty to both defend and indemnify its insureds in regard to pending litigation. The principal legal question involved concerns the matters which may be considered in determining whether a duty to defend is shown, i.e., whether the question of that duty should be determined entirely upon the basis of the terms of the insureds' policy and the allegations of the complaint in the pending litigation. We conclude that extrinsic facts may be considered as long as they do not bear upon issues in the underlying litigation. After considering such extrinsic information as was before the trial court at the time of the hearing on the summary judgment issue, we reverse the judgment on appeal.
On August 3, 1987, plaintiff Millers Mutual Insurance Association filed a complaint in the circuit court of Champaign County against others seeking a declaration as to its obligations under a policy of liability insurance it issued insuring defendants Ainsworth Seed Company, Inc. , R. Clayton Ainsworth, and their employees, in regard to litigation brought against those defendants and others in the circuit court of Mason County by defendant Sophia Cross. Plaintiff filed a motion seeking a summary judgment declaring it had no duty to defend or indemnify defendants ASC, Edmund Nunn, R. Clayton Ainsworth, or Frank Short. Later, the foregoing defendants filed a countermotion for a summary judgment declaring plaintiff was required to defend and indemnify them. On December 30, 1988, the court granted defendants' motion and denied plaintiff's motion. Plaintiff has appealed.
No dispute exists that plaintiff issued a policy of general liability insurance covering a period from July 1, 1985, to July 1, 1986, with ASC and R. Clayton Ainsworth as named insureds and with employees of ASC and R. Clayton Ainsworth also covered. Nor do the parties dispute that Nunn and Short are such employees. The complaint and amended complaint in the Mason County case brought by Cross allege she was injured on September 27, 1985, a date within the time frame of the policy which covers liability for personal injury or property damage occurring within those dates. Plaintiff maintains, however, that the "completed operations hazards" and "products hazards" exclusions of the policy prevent coverage here. On this basis, plaintiff maintains the circuit court erred in declaring plaintiff was required to defend and indemnify the various defendants and should have declared plaintiff had no such duties.
Copies of the complaint and amended complaint of Cross in the Mason County case are attached to both motions for summary judgment. As to ASC, the complaint alleges (1) prior to September 27, 1985, ASC was in the business of designing, manufacturing, installing, and servicing various machinery and equipment; (2) prior to that date ASC "designed, manufactured, sold, and installed" certain equipment "at the premises of De Kalb Pfizer Company (Pfizer) or its predecessor" on "Highway 10" in Mason County; (3) on or about the above date, Cross was employed by Pfizer and was using the aforesaid equipment when she was injured; (4) ASC was negligent in the design, installation, and construction of the foregoing equipment; and (5) that negligence was a proximate cause of the injuries to Cross.
The counts against Ainsworth, Nunn, and Short differ from those against ASC in that those counts charged those three defendants with negligently "designing, assembling, installing, or constructing" equipment for "Ainsworth Seed Company or its successors" with the "premises" involved being those "located at Highway 10, Mason County, Illinois." Otherwise, the same negligence with resulting injury to Cross while she was working there for Pfizer was alleged.
The confusion in the pleadings in the Mason County case is explained, to some extent, by the undisputed affidavit of R. Clayton Ainsworth which was presented to the court at the time of the hearing on the motion for summary judgment. In that document, he stated (1) a corn-sorting system was the equipment Cross was using when she was injured; (2) in 1969, when that system was installed, he, Nunn, and Short were employed by a firm also known as Ainsworth Seed Company and the system was installed in a "sorting building" owned by that firm; (3) through various name changes and mergers, that Ainsworth Seed Company became known as Pfizer Genetics, Inc., which has joined with De Kalb Corporation to form a partnership called De Kalb Pfizer Genetics; (4) it owns the building where the sorting system was being used and the "business" which was operating the system; and (5) the present defendant ASC was not begun until 1972 and has never owned or operated the sorting system or the premises upon which it sits. Ironically, plaintiff now relies upon the facts set forth in that affidavit to show the existence of facts establishing the completed-operations exclusion of the policy.
We first consider whether plaintiff owed a duty to defend. A general rule is recognized that the obligation of an insurer to defend an action brought against its insured must be decided by comparing the allegations of the complaint against the insured with the terms of the policy. (Thornton v. Paul (1978), 74 Ill. 2d 132, 384 N.E.2d 335; Maryland Casualty Co. v. Peppers (1976), 64 Ill. 2d 187, 355 N.E.2d 24.) In some jurisdictions, this rule has not been followed when actual facts known to exist negate the duty to defend. (44 Am. Jur. 2d Insurance § 1410, at 353-55 (1982).) In Thornton, the court stated the duty to defend was determined by the allegations of the complaint even if it were shown those allegations were not true, but drew an exception to the rule when the evidence showed collusion between the insured and the party suing the insured.
Plaintiff called our attention to the case of Fidelity & Casualty Co. v. Envirodyne Engineers, Inc. (1983), 122 Ill. App. 3d 301, 461 N.E.2d 471. There, in a carefully drafted opinion, the Appellate Court for the First District held that in determining the duty of a liability carrier to defend an insured, a court may look beyond the allegations of the complaint in the underlying suit. However, that court held no consideration could be given to factual matters which might be relevant to issues in the underlying litigation. The Envirodyne court explained it had been unable to find any other Illinois case holding that matters outside the allegations of the underlying complaint could be so considered. The court then noted that in Mid America Fire & Marine Insurance Co. v. Smith (1982), 109 Ill. App. 3d 1121, 441 N.E.2d 949, matters not set forth in a complaint in an underlying suit had been considered in a similar declaratory judgment action to determine the questions of obligation to defend without the propriety of that consideration being raised. The Envirodyne opinion also noted Thornton had permitted consideration of facts not set forth in the underlying complaint under the special circumstances of that case.
In Envirodyne, an engineering firm was sued under the Structural Work Act (Ill. Rev. Stat. 1981, ch. 48, pars. 60 through 69) for personal injuries received by a workman on a construction project. The engineering firm performed work on the project. The firm's insurer sought a declaratory judgment relieving it of liability to defend the action based upon a provision of the policy which excluded coverage for liability arising from consulting services. The appellate court held the trial court could properly consider extrinsic evidence of the nature of services performed by the engineering firm and could properly determine these services were entirely of a consulting nature. That court deemed the nature of ...