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William J. Templeman Co. v. Liberty Mutual Insurance Co.

August 15, 2000

WILLIAM J. TEMPLEMAN COMPANY, AN ILLINOIS CORPORATION AND WILLIAM J. TEMPLEMAN, PLAINTIFFS-APPELLEES, V.
LIBERTY MUTUAL INSURANCE COMPANY, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County No. 97 CH 6172 Honorable Michael B. Getty, Judge Presiding.

The opinion of the court was delivered by: Justice Gordon

Plaintiffs William J. Templeman Company and William J. Templeman (collectively "Templeman" or "plaintiffs") appeal from an order of the circuit court of Cook County granting summary judgment in favor of defendant Liberty Mutual Insurance Company (Liberty). The circuit court found that two insurance policies (collectively the "policy") issued by Liberty to Templeman which covered claims against Templeman for malicious prosecution did not cover liability incurred by Templeman due to sanctions imposed by the circuit court pursuant to Illinois Supreme Court Rule 137. On appeal Templeman argues that the trial court erred because the malicious prosecution language in the policy provides coverage for its conduct which was found to be sanctionable; because its conduct potentially raised liability under the policy and thus gave rise to a duty on the part of Liberty to defend Templeman; and because the term "malicious prosecution" in the insurance policies is ambiguous and should thus be construed in favor to Templeman. For the reasons discussed below, we affirm.

BACKGROUND

There is no dispute as to the underlying facts in this case. This litigation arose out of a construction dispute surrounding the building of an Embassy Suites hotel in Rosemont, Illinois. The hotel in question was owned by E.S. O'Hare Associates (O'Hare) and the general contractor for the project was W.E. O'Neil Construction Company (O'Neil). O'Neil entered into a subcontract with Templeman's predecessor in interest Premier Electric Company (Premier) whereby Premier would install fire alarm and detection equipment in the hotel. Premier later sued O'Hare and O'Neil seeking to recover for extra work performed on the Embassy Suites project and for interference and delays in its performance of the subcontract which it alleged were caused by O'Neil and O'Hare. The trial court granted partial summary judgment in favor of O'Neil. O'Neil then moved for sanctions pursuant to Illinois Supreme Court Rule 137 (155 Ill. 2d R. 137) against Templeman and its attorney, Walter J. Trittipo (Trittipo).

On December 13, 1995, the trial court found that Templeman and Trittipo had engaged in sanctionable conduct, a decision which was ultimately upheld on appeal. William J. Templeman Co. et al., v. W.E. O'Neil Construction Co. et al., Nos. 1-96-3434 & 1-96-3557 (cons.) (1998) (unpublished order under Supreme Court Rule 23). On January 8, 1996, Templeman gave written notice to Liberty of its claim for coverage and requested that Liberty defend it against the sanctions proceedings which were still ongoing, as the court had not yet decided the amount of the sanctions. Templeman's insurance policy provided for coverage of claims against Templeman for malicious prosecution. Liberty never responded to Templeman's notice of its claims. Templeman thereupon filed a declaratory judgment action against Liberty seeking coverage. The trial court granted summary judgment in favor of Liberty. This appeal followed.

ANALYSIS

The plaintiffs first argue that the malicious prosecution language in the policy is sufficient to provide coverage for the liability which plaintiffs incurred as a result of conduct which the trial court found sanctionable pursuant to Rule 137. We disagree.

The relevant policy language is as follows:

"1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of 'personal injury' *** to which this coverage part applies. We will have the right and duty to defend any 'suit' seeking those damages.

b. This insurance applies to: (1) 'Personal injury' caused by an offense arising out of your business, excluding advertising, publishing, broadcasting or telecasting done by or for you;

10. 'Personal injury' means injury, other than 'bodily injury,' arising out of one or more of the following offenses:

b. Malicious prosecution;"

As is evident from the forgoing language the policy provides coverage for malicious prosecution, a specific common law tort. "The common law tort of malicious prosecution contains significant strictures and rules." Spiegel v. Zurich Ins. Co., 293 Ill. App. 3d 129, 135, 687 N.E.2d 1099, 1102 (1997). Although the conduct which would support a finding of sanctions under Rule 137 may well overlap with the elements necessary to support a finding of malicious prosecution, the two categories are nevertheless discrete and distinct and under ...


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