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06/28/95 BITUMINOUS CASUALTY CORPORATION v.

June 28, 1995

BITUMINOUS CASUALTY CORPORATION, PLAINTIFF,
v.
COMMERCIAL UNION INS. CO., DEFENDANT, COMMERCIAL UNION INS. CO., THIRD PARTY PLAINTIFF, V. THE SWENSON COMPANY, THE SWENSON/BOLANDER JOINT VENTURE, AND SAFETY MUTUAL CASUALTY CORPORATION, THIRD PARTY DEFENDANTS, THE SWENSON COMPANY AND THE SWENSON/BOLANDER JOINT VENTURE, COUNTER-PLAINTIFFS/APPELLEES, V. SAFETY MUTUAL CASUALTY CORPORATION, COUNTER-DEFENDANT/APPELLANT.



Appeal from the Circuit Court of Cook County. Honorable, Francis Barth, Judge Presiding.

The Honorable Justice Cerda delivered the opinion of the court: Greiman, P.j., And Rizzi, J., Concur.

The opinion of the court was delivered by: Cerda

JUSTICE CERDA delivered the opinion of the court:

This appeal arises out of a breach of contract counterclaim brought by The Swenson Company (Swenson) and The Swenson/Bolander Joint Venture (Joint Venture) against one of their insurers, Safety Mutual Casualty Corporation (Safety). The underlying suit was a wrongful death action in which three construction companies, Swenson, The Eric Bolander Construction Company (Bolander), and Joint Venture, had been joined as third-party defendants. The underlying suit and all claims except this one have been settled and are not part of this appeal. Safety is appealing the summary judgment the trial court granted in favor of Swenson and Joint Venture against Safety, for breach of contract which included damages of $32,885.85, the amount of attorneys' fees incurred during litigation with Commercial Union Insurance Company (Commercial Union).

The main issue in the breach of contract action is whether the trial court erred when it granted summary judgment in favor of Swenson and Joint Venture on their contract claim, which alleged that Safety breached its contractual obligation by failing and refusing to reimburse Swenson and Joint Venture in the underlying action. The complaint alleged that as a result of the breach, Swenson and Joint Venture incurred damages in the form of attorneys' fees related to Commercial Union's third party complaint.

For the reasons that follow, we affirm the summary judgment entered in favor of Swenson and the Joint Venture.

In 1982, Swenson and Bolander formed Joint Venture for the purpose of a project with the Illinois State Toll Highway Authority(Authority) involving bridge repair on Highway Interstate 294. On September 3, 1982, a worker, Tony Coe, was struck and killed by an Illinois Central Gulf (ICG) train. Subsequently, the administrator of Coe's estate brought a wrongful death action against the ICG, the train engineer, and Joint Venture. The ICG and the engineer then brought a third party complaint for contribution against Swenson, Bolander, and Joint Venture on the basis that Coe was their employee.

Eventually, the underlying litigation was settled, but it spawned various insurance coverage disputes. Bituminous Casualty Corporation (Bituminous) filed a declaratory judgment complaint against Commercial Union, Swenson, Bolander, ICG, the train engineer, and the administrator of Coe's estate in which it requested a judicial declaration of the rights and liabilities of the parties and their insurers.

Commercial Union then filed a third party complaint against Swenson, Bolander, Bituminous, and Safety on the basis that Coe was an employee of both Swenson and Joint Venture. Commercial Union alleged that it had no obligation to defend or indemnify Swenson or Joint Venture because its comprehensive liability policy specifically excluded coverage for bodily injury to an insured's employee arising out of his employment. The policy limit was one million dollars. Commercial Union also sought a declaratory judgment that Safety had a duty to defend and indemnify Swenson and Joint Venture for the underlying action.

After cross motions for summary judgment were filed in Commercial Union's third-party action, Safety responded to a letter from Commercial Union. In that letter dated January 5, 1990, Safety analyzed the pending claims against Swenson and Joint Venture. Safety stated that Commercial Union had the duty to defend Joint Venture as to all pending allegations, Commercial Union's policy was a primary insurance policy, Joint Venture was not a co-insurer with Commercial Union, and Safety's obligations arose only after Commercial Union's policy limits for indemnity and Joint Venture's self-insured retention had been exhausted.

Later, after Commercial Union accepted the defense of Swenson and Joint Venture in the underlying declaratory judgment suit, Safety wrote a letter to the attorneys for Swenson and Joint Venture dated April 3, 1990, in which it stated that it was not obligated to indemnify Joint Venture if a verdict was entered against it on two of three counts of the third party complaint against Joint Venture. Safety stated that its policy would not provide coverage; instead, Commercial Union's policy did provide coverage.

The letter of April 3, 1990 in part states:

"For the reasons articulated in my letter of January 5, 1990 to Commercial Union's attorney, it is Safety Mutual's position that it does not have the duty to indemnify the joint venture in the event a verdict is returned against it on either Count II of the Plaintiff's First Amended Complaint or Count VI of the Second Amended Third Party Complaint. *** Safety Mutual's policy is an excess aggregate policy that contains no defense obligations. Therefore, Swenson retained counsel to defend it against the third party action in accordance with its obligations as a self-insured." *** in no event, would it be covered by Safety Mutual's excess employers liability coverage."

After receiving the letter, Swenson and Joint Venture filed a counterclaim against Safety. Count I alleged that if Commercial Union succeeded with its action, Swenson and Joint Venture were entitled to indemnity from Safety. Count II alleged that Safety breached its contractual duties because it failed and refused to cover Swenson and ...


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