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Fremont Compensation Insurance Co. v. Ace-Chicago Great Dane Corp.

March 31, 1999

FREMONT COMPENSATION INSURANCE COMPANY, AS SUCCESSOR IN INTEREST TO CASUALTY INSURANCE COMPANY, PLAINTIFF AND COUNTERDEFENDANT,
v.
ACE-CHICAGO GREAT DANE CORPORATION, AN ILLINOIS CORPORATION, DEFENDANT AND COUNTERPLAINTIFF, AND FRED GROSSMAN, DEFENDANT ACE-CHICAGO GREAT DANE CORPORATION, AN ILLINOIS CORPORATION, THIRD-PARTY PLAINTIFF-APPELLANT,
v.
THE POTOMAC INSURANCE COMPANY OF ILLINOIS, AN ILLINOIS CORPORATION, THIRD-PARTY DEFENDANT-APPELLEE



The opinion of the court was delivered by: Justice Hoffman

APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY

HONORABLE ELLIS REID, JUDGE PRESIDING

This appeal arises from the circuit court's determination in a declaratory judgment proceeding that Potomac Insurance Company of Illinois (Potomac) is under no obligation to defend or indemnify its insured, Ace-Chicago Great Dane Corporation (Ace), in a separate action for negligent spoliation of evidence filed by Fred Grossman. Our analysis of the issues presented requires a brief recitation of the events leading up to this litigation and the procedural history of the case.

In 1992, Grossman filed suit in the circuit court of Cook County seeking damages for injuries he allegedly sustained when he fell from a ladder manufactured by Berg Ladders, Inc. (Berg). Grossman's action proceeded only against Berg until December 27, 1996, when he filed an amended complaint joining Ace as a party defendant, asserting a claim for negligent spoliation of evidence against it.

Ace tendered the defense of the Grossman action to its insurers, Casualty Insurance Company (Casualty) and Potomac. Casualty accepted the tender and undertook the defense of Ace subject to a reservation of rights. Potomac denied coverage. Thereafter, Fremont Compensation Insurance Company (Fremont), as successor in interest to Casualty, filed the instant action seeking a judgment declaring that Casualty is not liable under its policy of insurance for any judgment, award, or settlement sought against Ace in connection with Grossman's negligent spoliation of evidence claim and is not obligated to defend Ace in connection with that claim. Ace answered Fremont's complaint and filed a counterclaim against Fremont and a third-party claim against Potomac. For its part, Ace sought a judgment declaring that Casualty is obligated under its policy of insurance to both defend and indemnify it from Grossman's action, or in the alternative, that Potomac is so obligated under its policy of insurance.

Initially, Potomac responded to Ace's third-party complaint by moving for dismissal pursuant to section 2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 1996)), alleging that Ace had failed to plead facts in support of the proposition that the events alleged in Grossman's suit occurred within the period covered by its policy. However, Potomac withdrew its section 2-615 motion prior to obtaining a ruling. After securing leave of court, Potomac filed a section 2-619 motion (735 ILCS 5/2-619 (West 1996)), seeking an involuntary dismissal of Ace's third-party complaint. Potomac's section 2-619 motion was supported by its own policy of insurance and the deposition of Robert E. Nealon, taken in Grossman's underlying suit.

The trial court granted Potomac's section 2-619 motion, dismissed Ace's claim against Potomac, and found no just reason to delay enforcement or appeal from its order. Ace filed a timely notice of appeal, invoking our jurisdiction under Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)). For the reasons which follow, we affirm.

Since Ace's claim against Potomac was dismissed pursuant to a section 2-619 motion, our review is de novo. Kedzie & 103rd Currency Exchange, Inc. v. Hodge, 156 Ill. 2d 112, 116, 619 N.E.2d 732 (1993). As a preliminary matter however, we are compelled to comment on certain procedural deficiencies in Potomac's motion.

Potomac's section 2-619 motion appears to assert two grounds for relief. First, the motion asserts that Ace's claim against Potomac "fails to specifically plead facts to show that the alleged spoliation of evidence is due to an occurrence within the policy period." Second, the motion asserts that Nealon's deposition established that the subject ladder was in Ace's possession on August 21, 1991, and "therefore, the ladder was not disposed [of] until after the policy term of Ace-Chicago's policy of Commercial General Liability Coverage with Potomac."

The question of whether Ace pled sufficient facts to show that the events alleged in Grossman's amended complaint occurred within the term of Potomac's policy pertains to the issue of whether Ace's claim states a cause of action against Potomac. Allegations pertaining to a complaint's failure to state a cause of action must be raised pursuant to section 2-615 of the Code, not section 2-619. Smith v. Chemical Personnel Search, Inc., 215 Ill. App. 3d 1078, 1081, 576 N.E.2d 340 (1991); Rowan v. Novotny, 157 Ill. App. 3d 691, 694, 510 N.E.2d 1111 (1987). A section 2-619 motion admits the legal sufficiency of the complaint to which it is addressed. Kedzie & 103rd Currency Exchange, 156 Ill. 2d at 115. However, because Ace had the opportunity to respond to the merits of Potomac's hybrid motion and in fact did so before the trial court, we will consider each of the issues raised in the interest of judicial economy. See Smith, 215 Ill. App. 3d at 1081-82.

"An insurer's duty to defend its insured is much broader than its duty to indemnify." Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 125, 607 N.E.2d 1204 (1992). If it is determined that an insurer has a duty to defend its insured, its duty to indemnify will not be determined until the adjudication of the action to be defended. Outboard Marine, 154 Ill. 2d at 127-28. However, where a court properly determines that an insurer has no duty to defend, it may also determine that the insurer has no duty to indemnify. State Farm Fire & Casualty Co. v. Hatherley, 250 Ill. App. 3d 333, 336, 621 N.E.2d 39 (1993).

In determining whether an insurer is obligated to defend its insured, we generally compare the allegations of the underlying complaint to the relevant provisions of the insurance policy. American States Insurance Co. v. Koloms, 177 Ill. 2d 473, 479, 687 N.E.2d 72 (1997); Outboard Marine, 154 Ill. 2d at 125. "The allegations in the underlying complaint must be liberally construed in favor of the insured." Outboard Marine, 154 Ill. 2d at 125; see also United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill. 2d 64, 74, 578 N.E.2d 926 (1991). If the underlying complaint alleges facts even potentially within the policy's language, the insurer is obligated to defend its insured (Koloms, 177 Ill. 2d at 479), even if the allegations in the underlying complaint are groundless, false, or fraudulent (Wilkin Insulation Co., 144 Ill. 2d at 73).

The commercial general liability insurance policy issued by Potomac, and upon which Ace's third-party claim is based, insured Ace for certain specified bodily injury and property damage claims arising from events occurring during the period from July 29, 1990, to July 29, 1991. Grossman's negligent spoliation of evidence claim against Ace (hereinafter referred to as the underlying complaint) alleges, inter alia, that on July 26, 1991, the day of Grossman's injury, an employee of Ace took possession of the ladder from which Grossman fell. According to Grossman's underlying complaint, Ace "knew or should have known that the ladder was a material piece of evidence" in his lawsuit against Berg; but, nevertheless, "[s]ubsequent to July 26, 1991, *** Ace *** disposed of said ladder, without notifying Fred Grossman or his attorneys." The truth or falsity of these facts is not at issue here. Ace has alleged the content of Grossman's underlying complaint and the fact that these allegations appear therein must be taken as true, regardless of whether Potomac's motion is viewed as a section 2-615 motion (Ziemba v. Mierzwa, 142 Ill. 2d 42, 46-47, 566 N.E.2d 1365 (1991)) or a section 2-619 motion (Storm & Associates, Ltd. v. Cuculich, 298 Ill. App. 3d 1040, 1047, 700 N.E.2d 202 (1998)).

Since Grossman's underlying complaint alleged that Ace disposed of the ladder "subsequent to July 26, 1991," and Potomac's policy covered a term ending on July 29, 1991, Grossman's underlying complaint, when liberally construed in favor of Ace, alleges an event potentially occurring within the policy term. Consequently, we reject Potomac's section 2-615 argument that Ace's claim fails to plead sufficient facts to show that the events alleged in Grossman's underlying complaint potentially occurred within the term of its policy. Our Conclusion in this regard is further supported by the proposition that the pleading requirements of ...


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