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March 31, 1995



The Honorable Justice T. O'brien delivered the opinion of the court: Gordon and Mcnulty, J.j., concur.

The opinion of the court was delivered by: O'brien

JUSTICE T. O'BRIEN delivered the opinion of the court:

Plaintiffs appeal from an order of the circuit court which dismissed with prejudice their four count amended complaint for declaratory judgment and other relief. The trial court held that defendant Zurich Insurance Co. (Zurich) did not owe a duty to defend or indemnify plaintiff Oakley Transport, Inc. (Oakley) in connection with a motor vehicle accident involving one of Oakley's employees. We affirm.

Because the trial court dismissed each of the counts in question pursuant to § 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 1992)), the factual allegations in the complaint are taken as true.

Oakley is a Florida corporation engaged in the interstate trucking business. On September 21, 1991, an employee of Oakley was involved in a motor vehicle accident that resulted in bodily injury and property damage. The accident occurred while the employee was operating a semi-tractor during the course of his employment. The employee allegedly drove the truck off the road and into a number of homes.

The injured parties and persons on their behalf filed four separate lawsuits against Oakley and its employee. As to Oakley, each of the complaints asserted several theories of liability, including negligent entrustment and negligent supervision. Oakley in turn tendered the defense of each of the suits to co-plaintiff Planet Insurance Co. (Planet). Planet accepted the tender in accordance with a Trucker's Liability Policy and ultimately contributed funds in settlement of the tort claims.

Oakley also tendered the defense of the underlying litigation to Zurich pursuant to a Commercial General Liability Policy (CGL). Zurich, however, rejected coverage in a letter dated September 21, 1992. The rejection letter indicated that an exclusion in the CGL policy precluded coverage for bodily injury and property damage arising out of the "entrustment" of an "auto" as defined in the policy. The exclusion provided in pertinent part:

"This insurance does not apply to:

g. 'Bodily injury' or 'property damage' arising out of the ownership, maintenance, use or entrustment to others of any aircraft, 'auto', or watercraft owned or operated by or rented or loaned to any insured."

On December 29, 1992, Oakley and Planet filed a complaint for declaratory judgment against Zurich, seeking among other things reimbursement for the costs incurred in defending and settling the underlying litigation. In Count I, plaintiffs requested a declaration that Zurich was estopped from denying coverage based upon Zurich's purportedly improper rejection of Oakley's tender of defense. Counts II and III sounded in "bad faith" and breach of contract, respectively, and Count IV sought statutory sanctions for vexatious and unreasonable refusal to pay. 215 ILCS 5/155 (West 1992).

Zurich responded with a motion to dismiss the complaint under § 2-6l5 for failure to state a cause of action. (735 ILCS 5/2-615 (West 1992).) Zurich's motion was based primarily upon the "auto" exclusion which was cited in its letter of rejection. The trial court granted the motion without prejudice.

Plaintiffs thereafter filed an amended complaint for declaratory relief on July 20, 1993. Zurich again moved to dismiss the complaint under § 2-615 for failure to state a cause of action, repeating its contention that the "auto" exclusion precluded coverage. The trial court agreed and granted the motion to dismiss. The court held that Zurich's insurance policy excluded coverage for any claims of negligent entrustment or negligent supervision as alleged in the underlying complaints, and therefore dismissed the declaratory action with prejudice. Plaintiffs then filed this appeal.

On appeal, plaintiffs initially contend that the trial court erred in looking beyond the allegations of the underlying complaints by "engaging counsel in a lengthy inquiry regarding the background facts and theories of the underlying litigation." Specifically, plaintiffs refer to the fact that during the hearing on Zurich's motion to dismiss the amended complaint, the trial judge discussed with counsel an order of partial summary judgment entered in one of the underlying litigations. *fn1 The order itself incorporated ...

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