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Modern Steel Treating Co. v. Liquid Carbonic Industrial/Medical Corp.

June 30, 1998


The opinion of the court was delivered by: Justice Cahill

Appeal from the Circuit Court of Cook County

90 L 3745

Honorable Arthur A. Sullivan, judge Presiding.

A refurbished steel treatment furnace owned and operated by plaintiff, Modern Steel Treating Company, exploded on September 11, 1989. The furnace was destroyed and the building that housed it was damaged by fire. Modern Steel sued defendant, Liquid Carbonic, which leased the control panel for the furnace to Modern Steel and supplied the fuel.

Count I of the complaint alleged several acts of negligence by Liquid Carbonic in the design and installation of a fuel injection system, including the control panel for the furnace. Counts II and III alleged breach of oral and written warranties. Defendant moved for summary judgment. The trial court first granted summary judgment on the warranty counts, finding that the warranty language of the contract between the parties excluded recovery for damages arising out of the explosion.

Subsequently, a motion for summary judgment on the negligence count was granted. The court first ruled that the Illinois Contract Indemnification for Negligence Act (740 ILCS 3511 et seq. (West 1996)) did not void an indemnity clause in the contract. The court found that a clause in the contract limiting defendant's liability to its "sole negligence" was enforceable. The court interpreted "sole negligence" as absolving Liquid Carbonic of liability if Modern Steel was shown to be even partly at fault. The court then concluded that the deposition testimony of plaintiff's expert, that plaintiff may have been as much as 10% negligent, precluded recovery in light of the "sole negligence" clause.

Modern Steel treated and processed steel at a plant in Chicago, Illinois. The heat-treating process hardens the surface of steel parts, such as railcar couplings, while allowing them to retain their interior toughness. At a certain degree of heat, the furnace is injected with a special atmosphere that provides the treatment.

The furnace was located in a separate building at the rear of Modern Steel's plant. In 1988, Modern Steel made the decision to rebuild the furnace, a project that took about one year to complete. As part of this project, Liquid Carbonic leased to Modern Steel an electrical control panel to supply a nitrogen and methanol atmosphere for the furnace. The control panel was used to regulate the atmosphere in the furnace and control the flow of fuel.

Installation of the control panel followed a letter dated August 1, 1988, from Richard McMahon of Liquid Carbonic to Modern Steel. The August 1, 1988, letter said that a "standard Bulk Gas Agreement" (BGA) would apply to Liquid Carbonic's installation of the system. At his deposition, the president of Modern Steel admitted that the BGA governed installation of the system.

Paragraph 14 of the BGA reads in part:

"INDEMNIFICATION: LIQUID shall be liable for any injury, death, or damage caused by it sole negligence ***. Except for the above, BUYER shall indemnify, defend, and save harmless LIQUID, its employees and agents, from and against all loss, liability, damage, claims, actions and proceedings, including all costs and expenses connected therewith arising directly or indirectly out of or in connection with this Agreement including, but not limited to, any loss, liability, damages, claims, actions, and proceedings caused or alleged to have been caused by the joint or concurrent negligence of LIQUID, its employees or agents. This entire provision shall survive the term of this Agreement."

In paragraph 22 of the agreement, Modern Steel and Liquid Carbonic agreed to terminate earlier agreements relating to the system. It reads in part:

"This writing constitutes the entire agreement between the parties hereto, and no change or modification may be made herein unless the same shall be in writing duly executed by BUYER and by a Vice President of LIQUID ***. This agreement terminates any prior agreements between the parties related to equipment, products, or services covered herein except for the settlement of rights already accrued under those Agreements."

After installation, Liquid Carbonic continued to "fine tune" the system through 1988 and 1989. On the date of the explosion ...

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