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12/16/94 USX CORPORATION v. LIBERTY MUTUAL

December 16, 1994

USX CORPORATION, PLAINTIFF-APPELLEE
v.
LIBERTY MUTUAL INSURANCE COMPANY AND TURNER CONSTRUCTION COMPANY, DEFENDANTS-APPELLANTS



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. THE HONORABLE ARTHUR DUNNE, JUDGE PRESIDING.

The Honorable Justice Gordon delivered the opinion of the court: Cousins, Jr., P.j., and McNULTY, J., concur.

The opinion of the court was delivered by: Gordon

The Honorable Justice GORDON delivered the opinion of the court:

FACTS

On March 27, 1985, the co-defendant, Turner Construction Company (Turner), and the plaintiff, American Bridge Division of the United States Steel Company (USX), began to negotiate an agreement whereby USX was to act as a subcontractor to erect the structural steel for the construction of a building at 190 South LaSalle Street in Chicago, with Turner as the general contractor. At about that time, Turner submitted to USX a preprinted contract containing provisions in Article XXIII thereof, which required USX to "procure and maintain, at its own expense, until completion and final acceptance of the Work ... workers' compensation ... and ... comprehensive general liability insurance ...." Under the provisions of proposed Article XXIII, Turner was to be "named as an additional insured under these policies of insurance." The limits of the proposed insurance to be procured by USX were two million dollars.

Before this preprinted agreement was executed, USX sent a letter to Turner dated May 30, 1985, (hereinafter referred to as the Senneway letter) which stated as follows:

"This is in reference to insurance requirements contained in our contract for the erection of steel on the above project.

We enclose copies of certificates attesting to our authority to act as self-insurers of our Worker's Compensation risks in the State of Illinois.

We also ordinarily self-insure our Public Liability and Property Damage risks arising out of our construction activities. Therefore, with respect to Public Liability and Property Damage Insurance as required by our contract, American Bridge Division, United States Steel Corporation, by this undertaking, hereby itself assumes all such risks instead of providing insurance."

Pursuant to the Senneway letter, the insurance procurement provisions of Article XXIII of the preprinted contract were stricken, and on June 13, 1985, the contract was executed in final form and the stricken provisions of Article XXIII were initialed by both parties.

On February 1, 1986, a construction employee of USX filed suit against Turner for alleged violation of the Structural Work Act resulting from an injury sustained at the construction site in question on September 11, 1985. Turner tendered its defense to USX. On November 10, 1988, USX accepted the tender under a reservation of rights in a letter (hereinafter referred to as the Ellison letter) which stated in pertinent part:

"As you know, Jack Senneway's letter of May 30, 1985 confirmed that as a self-insurer ABD [American Bridge Division, USX] would assume the insurance requirements itself in lieu of purchasing commercial insurance. The contact placed limits on ABD's liability of $2,000,000 per occurrence and $2,000,000 in the aggregate. Beyond that amount ABD is not required to defend or indemnify. All rights in this regard are reserved."

Pursuant to the Ellison letter, USX retained the law firm of Querry and Harrow Ltd. to represent Turner in the Polk lawsuit.

More than two years later, on October 30, 1991, Querry and Harrow obtained leave of court to withdraw as attorneys for Turner. In their motion, Querry and Harrow stated that they had received written instructions from Turner to file a third party action for contribution against USX as Polk's employer but that USX instructed them to disregard those instructions. Thereafter, on May 24, 1991, USX filed a declaratory action against Turner and Liberty Mutual, as Turner's insurer, seeking a declaratory judgment that USX did not owe Turner a defense or indemnification in the Polk lawsuit. On November 14, 1991, USX filed an amended complaint seeking the same relief. On June 21, 1992, USX filed a motion for summary judgment.

On April 15, 1992, the trial court entered summary judgment in favor of USX stating,

"I further find the language of the contract is plain, unambiguous, and it does not need extrinsic evidence, letters, et cetra, of any sort in order to ... make a decision."

In November of 1991, following the filing by USX of its amended complaint for declaratory judgment, defendants, Liberty Mutual Insurance Company and Turner Construction Company, filed their counterclaim seeking a declaration of USX's liability to pay up to two million dollars on the underlying tort claim of Daniel Polk together with attorney's fees. On May 13, 1992, following the grant of summary judgment in favor of USX, the defendants sought leave to file an amended counterclaim adding a count for promissory estoppel. Contemporaneously, they moved to reconsider and vacate the summary judgment. On July 8, the court granted leave to defendants to file their amended counterclaim.

Subsequently, a motion to dismiss that counterclaim was filed. On September 18, 1992, the court denied the motion of defendants to reconsider and vacate the summary judgment and granted the motion of USX to dismiss the amended counterclaim by reason of that summary judgment.

For the reasons stated below we affirm the judgment of the trial court.

Defendants first contend that the trial court erred in its determination that the Senneway and Ellison letters were inadmissible and that resultantly the contract between Turner and USX was devoid of any undertaking by USX to provide insurance for Turner. We agree with this contention. In reaching its conclusion the trial court determined that the policy was not ambiguous and therefore could not permit extrinsic evidence such as the two letters in question to vary its terms.

We do not disagree with the underlying legal proposition that the admissibility of these letters cannot be predicated upon the parole evidence rule which requires a showing of ambiguity. We believe, however, that the trial court misconstrued the nature and purpose of these two letters. We recognize that without these two letters the insurance contract is not ambiguous since as far as the preprinted agreement was ...


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