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General Casualty Company of Illinois v. Carroll Tiling Service

September 03, 2003


Appeal from the Circuit Court of Carroll County. No. 00--MR--4 Honorable Richard E. DeMoss, Judge, Presiding.

The opinion of the court was delivered by: Justice O'malley


Defendant and third-party plaintiff, Todd M. Carroll (Todd), appeals from the order of the circuit court of Carroll County denying his motion for summary judgment and granting plaintiff General Casualty Company's (General Casualty) cross-motion for summary judgment. Todd also appeals the trial court's order dismissing as time-barred his third-party complaint against third-party defendants Clark Carroll (Clark) and Law Insurance Agencies (Law). We affirm in part, reverse in part, and remand the cause.

General Casualty filed a declaratory judgment action against Carroll Tiling Service, Inc. (Carroll Tiling), and Todd, seeking a determination that it was not required to provide workers' compensation coverage to Todd for the policy period of April 1, 1999, to April 1, 2000. After the parties completed discovery, General Casualty and Todd filed cross-motions for summary judgment.

The undisputed facts in the record show that Todd was an employee of Carroll Tiling. On May 14, 1999, he was injured while performing his duties for Carroll Tiling. Todd filed a workers' compensation claim against Carroll Tiling. General Casualty denied coverage and initiated this declaratory judgment action.

General Casualty was Carroll Tiling's workers' compensation insurance carrier. Carroll Tiling obtained its workers' compensation policies through Clark. Clark worked for Law, and Law, in turn, was General Casualty's agent. In 1993, Carroll Tiling first obtained workers' compensation insurance from General Casualty. At that time, J. Craig Carroll (Craig), Todd's father and president of Carroll Tiling, was excluded from coverage under the workers' compensation policy. (We note that the efficacy of this withdrawal, either from the operation of the Workers' Compensation Act (Act) (820 ILCS 305/1 et seq. (West 2000)) or from insurance coverage, is not raised by any party and we express no position on it.)

In 1997, Carroll Tiling sought to reduce its premium costs for workers' compensation insurance. On September 15, 1997, Todd, who was Carroll Tiling's vice president, and his mother, Vianne Carroll (Vianne), Carroll Tiling's secretary, both executed a written form requesting to be excluded from coverage under General Casualty's workers' compensation policy. The form was entitled "Illinois Workers Compensation Benefits Rejection Form" and provided:

"If you are either the sole owner of your business or a business partner, Illinois'[s] workers compensation law automatically applies to you. This means that you are automatically covered under your business workers compensation policy and that your payroll will be included when we calculate the premium for your policy.

If you do not want to be covered under this policy, you must specifically reject the coverage by signing this form and returning it to your agent."

In October 1997, General Casualty issued an endorsement, effective for the April 1, 1997, to April 1, 1998, policy period, listing Todd and Vianne as individuals excluded from coverage under the workers' compensation policy. Instead of providing a single endorsement sheet showing that Todd, Vianne, and Craig were excluded from the workers' compensation insurance policy, General Casualty created a second endorsement sheet listing only Todd and Vianne. Craig was listed as excluded on another typewritten endorsement. As a result of excluding Todd and Vianne from the coverage of its workers' compensation insurance policy, Carroll Tiling's premiums were reduced by $1,236.

At the same time that Todd and Vianne were excluded from workers' compensation coverage, Clark advised Carroll Tiling to obtain major medical insurance. A policy providing major medical insurance covering Todd was subsequently purchased.

The record demonstrates that, following the exclusion of Todd from workers' compensation insurance coverage, Carroll Tiling did not pay any premium associated with Todd's salary. In fact, Vianne specifically noted on an April 28, 1998, audit form that Todd was excluded from coverage.

When the workers' compensation policy was renewed for the period April 1, 1999 to April 1, 2000, General Casualty sent to Carroll Tiling a copy of the policy, which did not indicate that Todd was excluded from coverage; the exclusion endorsement listed only Craig as being excluded from coverage. General Casualty explained that the omission occurred when the physical policy was assembled for renewal and the person assembling the endorsements looked only for a single exclusion endorsement. Through happenstance, that person came upon the typewritten exclusion of Craig first. As a result, the renewal policy was assembled with only Craig being listed on the exclusion endorsement. General Casualty maintains that Craig, Vianne, and Todd were shown as excluded from coverage on its computerized records. General Casualty maintains that the exclusion of Todd (and Vianne) was consistent with its billing practices after September 1997, to charge no premium for Todd's salary, as well as consistent with the audits of Carroll Tiling's salaries performed after September 1997.

The record demonstrates that at no time after September 1997 did anyone from Carroll Tiling ever request, either orally or in writing, to reinstate coverage for Todd under Carroll Tiling's workers' compensation policy. Likewise, no one from Carroll Tiling ever requested, either orally or in writing, specifically to exclude Todd from coverage at any time after September 1997.

When Todd was injured, he filed a workers' compensation claim, prompting General Casualty's denial of coverage and the institution of this declaratory judgment action. Thereafter, Todd filed a third-party complaint against Clark and Law. This complaint was filed both individually and as assignee of Carroll Tiling. Todd alleged that Clark and Law breached their fiduciary duties to him and Carroll Tiling by failing to inform Todd that his election to be excluded from coverage in 1997 would be renewed each year and by failing to make sure that Todd was covered by workers' compensation insurance.

Todd and General Casualty filed cross-motions for summary judgment. The trial court denied Todd's motion and granted General Casualty's motion, finding that, by the terms of the contract at issue, unless a party took action to cancel the contract, it automatically renewed for the following year with the same terms in place as were used in the previous year. Because there were no further negotiations to change or modify the terms of coverage between Carroll Tiling and General Casualty, the court found that Todd was excluded from coverage by virtue of the September 1997 exclusion election. The trial court held that General Casualty had clearly and convincingly proved that the failure to include Todd on the physical copy of the exclusion endorsement was a clerical error.

In addition, Clark and Law filed a motion to dismiss, alleging that the two-year statute of limitations had run and that Todd's claim was time-barred. The court agreed, finding that the cause of action accrued no later than the first renewal following Carroll Tiling's election to exclude Todd from workers' compensation coverage. Todd timely appeals.

On appeal, Todd contends that the trial court erred by granting General Casualty's motion for summary judgment. Summary judgment is appropriate where the pleadings, depositions, admissions, affidavits, and exhibits on file, when viewed in the light most favorable to the nonmoving party, 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(c) (West 2000); Jones v. Chicago HMO Ltd., 191 Ill. 2d 278, 291 (2000). We review the trial court's grant of summary judgment de novo. Jones, 191 Ill. 2d at 291. Our function on an appeal from the grant of summary judgment is limited to determining whether the trial court correctly found that no genuine issue of material fact existed and, if that was the case, whether the trial court correctly entered judgment as a matter of law. State Farm Insurance Co. v. American Service Insurance Co., 332 Ill. App. 3d 31, 36 (2002). Where the parties have filed cross-motions for summary judgment, they agree that there are no factual issues present and that the cause presents only legal issues to resolve. State Farm, 332 Ill. App. 3d at 36. The court must determine for itself, nevertheless, that there are no factual issues sufficient to preclude summary judgment, after which the court may determine the issues presented as questions of law. State Farm, 332 Ill. App. 3d at 36.

As an initial matter, we note that Todd's initial argument appears to be based on a faulty premise. Todd repeatedly argues that the trial court determined "reformation [of the insurance contract] to be inappropriate" and that "it was not considering parol evidence." Todd then constructs his argument as if this court is bound to give deference to the trial court's determination on the issues of reformation and parol evidence. We emphasize that our review is de novo and, therefore, we give no deference to the trial court's determination of those issues; rather, if necessary, we determine the relevance and applicability of those issues ourselves.

That said, we turn to Todd's contention that the trial court erred in interpreting the workers' compensation policy as allowing General Casualty to exclude Todd from coverage in the absence of a written exclusion included with the written policy sent to Carroll Tiling. Todd points to the provision of the policy that states:

"This policy includes at its effective date the Information Page and all endorsements and schedules listed there. It is a contract of insurance between you (the employer named in Item 1 of the Information Page) [Carroll Tiling] and us (the insurer named on the Information Page) [General Casualty]. The only agreements relating to this insurance are stated in this policy. The terms of this policy may not be changed or waived except by endorsement issued by us to be part of this policy."

Todd interprets the above-quoted passage as limiting the agreement to that which is embodied in the written policy delivered to Carroll Tiling. According to Todd, the fact that General Casualty did not include an exclusion endorsement listing Todd as excluded leads to the conclusion that Todd was covered by the workers' compensation insurance policy. We disagree.

The construction of an insurance policy presents a question of law. State Farm Mutual Automobile Insurance Co. v. Villicana, 181 Ill. 2d 436, 441 (1998). When construing an insurance policy, the court is to ascertain and give effect to the intention of the parties as expressed in the agreement, according the terms used in the policy their plain and ordinary meanings. Villicana, 181 Ill. 2d at 441. The court is to apply those terms as written, reading the policy as a whole and considering the type of insurance, the nature of the risks involved, and the overall purpose of the contract. Villicana, 181 Ill. ...

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