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12/18/89 Northbrook National v. Nehoc Advertising Service

December 18, 1989

NORTHBROOK NATIONAL INSURANCE COMPANY, PLAINTIFF-APPELLANT AND CROSS-APPELLEE

v.

NEHOC ADVERTISING SERVICE, INC., D/B/A LEE ENTERPRISES, ET AL., DEFENDANTS-APPELLEES AND CROSS-APPELLANTS



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIRST DIVISION

554 N.E.2d 251, 196 Ill. App. 3d 448, 143 Ill. Dec. 316 1989.IL.1966

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

APPELLATE Judges:

JUSTICE BUCKLEY delivered the opinion of the court. MANNING, P.J., and CAMPBELL, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE BUCKLEY

This appeal arises from a declaratory judgment action brought by Northbrook National Insurance Company (Northbrook) in the circuit court of Cook County against NEHOC Advertising Service, Inc. , seeking an order declaring that it was not obligated to defend or indemnify NEHOC for potential claims brought by third parties. The circuit court granted summary judgment in favor of Northbrook and against NEHOC on Northbrook's second-amended declaratory judgment complaint. Thereafter, NEHOC's motion for summary judgment on its counterclaim was granted. It is from these rulings that Northbrook appeals and NEHOC cross-appeals. We affirm.

The facts giving rise to such claims against NEHOC are as follows: In August 1984, Uarco, Inc., contracted with NEHOC for the performance of certain mailing services in connection with materials prepared by a Uarco client, the Viguerie Company , for the 1984 presidential election. The Uarco project was assigned to NEHOC employee James Matt. Matt, NEHOC's general manager, was responsible for production scheduling and completion. This specific project required Matt to assemble and mail approximately 2.5 million pieces of correspondence soliciting funds to be contributed to Ruff PAC, a political action committee.

Matt performed only a portion of the Uarco project. Work which was claimed to have been completed was not, documentation was falsified by him so that it appeared that the correspondence was mailed, and hundreds of thousands of pieces of mail which were claimed to have been mailed were discarded and delivered to a trash collector for disposal as waste.

Northbrook filed its original declaratory judgment action on March 26, 1986, to determine its obligations to defend or indemnify NEHOC for its potential liability to Uarco, TVC and Ruff PAC, the three of whom had brought suit in the Federal district court seeking damages from NEHOC on contract and tort grounds.

As part of its answer to Northbrook's declaratory judgment complaint, NEHOC filed a counterclaim asserting (1) that claims were asserted against it as a defendant and counterdefendant by Uarco, TVC and Ruff PAC in a Federal court action originally brought by Uarco against TVC; (2) that NEHOC had "notified Northbrook of all of the claims asserted against it and . . . tendered the defense of those claims to Northbrook pursuant to the terms of the Insurance Policy"; and (3) that "Northbrook is obligated to defend NEHOC and indemnify it for any judgment which may be entered against it upon those claims."

On October 14, 1986, Northbrook was granted leave to file a first-amended declaratory judgment complaint. On April 30, 1987, Northbrook was granted leave to file a second-amended declaratory judgment complaint when the procedural posture of the pending litigation in Federal court had changed. Due to a settlement of disputes, TVC and Ruff PAC were no longer parties to the Federal case, and therefore not included in Northbrook's second-amended declaratory judgment complaint. The only remaining claim against NEHOC was count I of a cross-claim brought by Uarco alleging a breach of contract.

Northbrook filed a motion for summary judgment on September 14, 1987, based upon its second-amended declaratory judgment complaint after NEHOC had agreed to settle Uarco's breach of contract claim for $284,582.12. In response, NEHOC filed a cross-motion for summary judgment based upon the second-amended declaratory judgment complaint and a motion for summary judgment on its counterclaim. In its motion, NEHOC contended that Northbrook had an obligation to defend and indemnify NEHOC against Uarco's claim against NEHOC in Federal court.

On January 12, 1988, the circuit court granted summary judgment in favor of Northbrook and against NEHOC on Northbrook's secondamended declaratory judgment complaint. The circuit court denied NEHOC's motion for summary judgment on its counterclaim. On January 19, 1988, NEHOC moved to vacate the January 12, 1988, order, and a hearing on NEHOC's motion to vacate the order was held on February 4, 1988. The circuit court made a finding that the portion of the January 12, 1988, order denying NEHOC's motion for summary judgment on its counterclaim be vacated and hearing on such motion be rescheduled for February 18, 1988. *fn1 On that date, the circuit court granted NEHOC's motion for summary judgment on its counterclaim and denied Northbrook's motion to reconsider the ruling.

Initially, as to Northbrook's appeal of the circuit court's entry of summary judgment in favor of NEHOC, Northbrook contends that NEHOC is not entitled to relief under the policy because it failed to file a counterclaim to Northbrook's amended declaratory judgment complaints. After Northbrook filed its first- and second-amended ...


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