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McDonald's Operators Risk Management Association, Inc. v. Coresource

August 20, 1999

MCDONALD'S OPERATORS RISK MANAGEMENT ASSOCIATION, INC., AN ILLINOIS CORPORATION, PLAINTIFF-APPELLANT,
v.
CORESOURCE, INC., A DELAWARE CORPORATION, F/K/A CREATIVE RISK MANAGEMENT CORPORATION, A MICHIGAN CORPORATION,)HONORABLE DEFENDANT-APPELLEE.



The opinion of the court was delivered by: Justice Hartman

Appeal from the Circuit Court of Cook County. Lee S. Preston, Judge Presiding.

Plaintiff McDonald's Operators Risk Management Association, Inc. (MORMA) appeals from the circuit court's grant of summary judgment to defendant CoreSource, Inc. (CoreSource) and against MORMA. The court concluded as a matter of law that CoreSource did not breach its service agreement (Agreement) with MORMA to provide claims administration services for a fee, finding that CoreSource was required to handle claims only during the Agreement's two-year term and not to the Conclusion of each claim, as MORMA alleged. The issues presented by this appeal include whether the circuit court erred when it (1) entered summary judgment in favor of CoreSource and denied MORMA's motion therefor; and (2) stayed discovery until after its consideration of the cross-motions for summary judgment.

MORMA is a not-for-profit corporation that operates as a group workers' compensation self-insurance pool, providing workers' compensation, occupational disease and other employer liability coverage to individual McDonald's franchise owners. MORMA sought proposals from various insurance pooling administrators to manage and oversee the combined workers' compensation funds of numerous store owners, focusing on two criteria: (1) each administrator's relative ability to offer McDonald's employees consistent and reliable handling for any and all job related injury claims; and (2) efficient and competent management and claims handling services. MORMA alleged it was critical that the administrator be willing and able to handle and manage to Conclusion all claims which occurred during the term of the contract, which would permit employees' injury claims to be handled consistently and, after the end of a contract term, would not require MORMA to reassign claims files to a new administrator.

CoreSource, a third-party administrator providing claims administration services for workers' compensation programs, submitted proposals to MORMA. CoreSource proposed, in part, that it would "handle all claims to completion," that its professional review would be performed "until the claim is closed," and that each of its services would be provided "for the lifetime of the claim." MORMA asserts that these proposals and the related testimony and information are among the parol evidence which the circuit court should have considered in deciding the parties' cross-motions for summary judgment. After considering CoreSource's proposals, MORMA agreed to contract with CoreSource. The questions that emerge, however, are whether those CoreSource proposals were later articulated and incorporated in the contract prepared by MORMA and signed by the parties.

MORMA and CoreSource executed the MORMA Agreement, effective January 1, 1993. CoreSource agreed to provide "management and administration for all claims against MORMA which occur during the period of this agreement." MORMA agreed to pay CoreSource the precise amount CoreSource stated in its proposal, $336,000 per year. The Agreement specified that the period of the contract was from January 1, 1993, to December 31, 1994.

A MORMA executive averred, in an affidavit submitted in support of MORMA's summary judgment motion, that he was connected with the implementation of the Agreement; such agreements are commonplace in the industry; and they require an administrator to service all claims to Conclusion unless the contract explicitly provides otherwise, which the Agreement between MORMA and CoreSource did not stipulate. CoreSource informed the MORMA executive that it was required by the state of Michigan, the only other state in which CoreSource previously had conducted business, to include in its contract price the cost of handling all claims to Conclusion and that it used the same formula to determine the cost of providing administrative services to MORMA.

MORMA later requested that CoreSource also administer claims made during the preceding three-year period (1990-1992)(take over period) for an additional fee of $55,000. On May 26, 1993, MORMA sent CoreSource a letter confirming this arrangement which was identified by MORMA as the "Take Over Agreement" (May Agreement). As part of the May Agreement, CoreSource agreed "that if any new claims or reopening of existing claims occur for prior years, CoreSource [will] include those cases in the total payment of $55,000." The May Agreement was executed nearly five months after execution of the Agreement and was a completely separate document, which neither referenced the Agreement nor identified itself as an addendum.

When the term of the Agreement expired on December 31, 1994, MORMA did not renew it. CoreSource thereafter refused to continue servicing the claims which occurred during the Agreement period and the take over period. CoreSource averred, through an executive's affidavit submitted in support of its summary judgment motion, that although CoreSource performed claims administration services for MORMA during December 1994, MORMA failed to pay the monthly fee of $23,833.33.

On March 15, 1996, MORMA filed a four-count complaint against CoreSource. Counts I and II alleged breaches of contract in that CoreSource failed to provide claims administration services with respect to workers' compensation claims made against MORMA during the periods 1993-94 and 1990-92, respectively, but not concluded by December 31, 1994, as required under the terms of the Agreement and the May Agreement. Counts III and IV were dismissed with prejudice on April 4, 1997.

In its answer to counts I and II of MORMA's complaint, CoreSource admitted the existence of the contract to provide claims administration services, but denied MORMA's allegations as to the terms of the contract, denied that it breached the contract and denied that MORMA sustained damages. Concurrently, CoreSource filed a counterclaim, alleging that MORMA wrongfully withheld the final monthly payment under the Agreement in the amount of $23,833.33. Subsequently, CoreSource and MORMA each moved for summary judgment.On January 21, 1998, the circuit court awarded summary judgment to CoreSource on counts I and II of MORMA's complaint and on CoreSource's counterclaim, and denied MORMA's cross-motion for summary judgment. In its written opinion, the court found: (1) the Agreement and May Agreement established that the obligations of the parties ended on the specified termination date; and (2) that MORMA's interpretation of the Agreement, namely, that the language of paragraph 2(a) of the contract imposed a continuing obligation on CoreSource to service workers' compensation claims beyond the termination of the Agreement, was unreasonable and did not render the contract ambiguous. MORMA appeals.

I.

MORMA first contends that the circuit court erred when it granted CoreSource's motion for summary judgment and denied MORMA's cross-motion for summary judgment, based upon MORMA's conception of the plain meaning of both contracts, that is, both the Agreement and the May Agreement require CoreSource to handle all claims to Conclusion.

Summary judgment is properly granted where the pleadings, depositions, admissions on file and affidavits show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005 (West 1996); Mobil Oil Corp. v. Maryland Casualty Co., 288 Ill. App. 3d 743, 751, 681 N.E.2d 552 (1997) (Mobil); Maher and Associates, Inc. v. Quality Cabinets, 267 Ill. App. 3d 69, 77, 640 N.E.2d 1000 (1994) (Maher). The movant's right must be clear and free from doubt; any evidence supporting the motion must be strictly construed against the movant and liberally construed favoring the respondent. Kleinwort Benson North America, Inc. v. Quantum Financial Services, Inc., 285 Ill. App. 3d 201, 208-09, 673 N.E.2d 369 (1996); Maher, 267 Ill. App. 3d at 77. A genuine issue of material fact exists in contract cases when a key provision of a contract is ambiguous, requiring admission of extrinsic evidence. Dudek, Inc. v. Shred Pax Corp., 254 Ill. App. 3d 862, 868-69, 626 N.E.2d 1204 (1993) (Dudek); Montes v. Hawkins, 126 Ill. App. 3d 419, 424, 466 N.E.2d 1271 (1984) (Montes). Whether such ambiguity exists is a question of law for the circuit court to decide (see Quake Construction, Inc. v. American Airlines, Inc., 141 Ill. 2d 281, 288, 565 N.E.2d 990 (1990)); if reasonable persons could draw different inferences from undisputed facts, summary judgment is inappropriate, and the matter should proceed to trial. Maher, 267 Ill. App. 3d at 77; Montes, 126 Ill. App. 3d at 423-24. Because this case is an appeal from an order granting summary judgment not involving credibility determinations, review is de novo. Mobil, 288 Ill. App. 3d at 751; English Co. v. Northwest Envirocon, Inc., 278 Ill. App. 3d 406, 410, 663 N.E.2d 448 (1996).MORMA argues that summary judgment should have been entered in its favor on the breach of Agreement count (count I) of its complaint, where: (1) the plain meaning of section 2(a) of the Agreement established that CoreSource would handle to Conclusion all claims which occur during the term of the Agreement; and (2) the Agreement as a whole required a finding that CoreSource must handle all claims to Conclusion.

CoreSource responds that the plain language of the MORMA Agreement expressly limited its duration to two years and is devoid of any provision imposing a continuing obligation to administer claims beyond the termination date. CoreSource argues that the parties clearly contemplated a two-year duration when they negotiated the service fee. Moreover, ...


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