Dash Messenger Service, Inc. v. Hartford Ins. Co. of Illinois

• Decision Date: 04 November 1991
• Docket Number: Nos. 1-89-3084,1-89-3085,s. 1-89-3084
• Parties: , 164 Ill.Dec. 313 DASH MESSENGER SERVICE, INC., Plaintiff-Appellant, v. HARTFORD INSURANCE COMPANY OF ILLINOIS, Defendant-Appellee (Donald and Monica Schwartz, Defendants-Appellants; J.M.B. Insurance Agency & Daniel Berman, Defendants).
• Court: United States Appellate Court of Illinois

Page 1257

582 N.E.2d 1257

221 Ill.App.3d 1007, 164 Ill.Dec. 313

DASH MESSENGER SERVICE, INC., Plaintiff-Appellant, v. HARTFORD INSURANCE COMPANY OF ILLINOIS, Defendant-Appellee (Donald and Monica Schwartz Defendants-Appellants; J.M.B. Insurance Agency & Daniel Berman, Defendants).

Nos. 1-89-3084, 1-89-3085.

Appellate Court of Illinois First District, First Division.

Nov. 4, 1991.

Hofeld and Schaffner, Chicago (James N. Karahalios, of counsel), for appellants.

Kiesler & Berman, Chicago (Robert L. Kiesler and Patti M. Deuel, of counsel), for defendant-appellee.

Justice CAMPBELL delivered the opinion of the court:

Plaintiff, Dash Messenger Service, Inc. ("Dash"), brought a declaratory judgment action against defendants Hartford Insurance Co. ("Hartford"), J.M.B. Insurance Co. and Daniel Berman to determine whether these defendants owed a defense and "Premises & Related Operations" coverage under a "special Multi-flex" insurance policy issued by Hartford. ¹ On cross-motions for summary judgment, the trial court ruled that the Hartford policy did not cover the underlying occurrence and that Hartford had no duty to defend Dash against the underlying lawsuit. Defendants Donald and Monica Schwartz (the plaintiffs in the underlying suit) and Dash now appeal. For the following reasons, we reverse and remand the proceedings to the circuit court.

The underlying complaint brought by Donald and Monica Schwartz against Dash and Dash employee Gilbert Aaron alleges that on February 17, 1987, Donald Schwartz, a physician, was crossing the intersection of Randolph and Wabash in Chicago. Aaron allegedly rode a bicycle down the street the wrong way, entered the crosswalk against the traffic light and struck Dr. Schwartz. The record indicates that Dr. Schwartz has permanent brain damage and, as of August 25, 1989, had incurred approximately $310,000 in medical costs, which were continuing to accrue at the rate of $5,000 per month.

Count I of the Schwartzes' complaint alleges liability based on the negligent and unlawful operation of the bicycle. Count II alleges loss of consortium on the same theory as count I. Count III alleges that Dash negligently failed to adequately screen, train and supervise its employees; failed to warn the public of these other failures; and scheduled so many deliveries to its employees in the course of a day that the employees rushed to complete their assignments in disregard of the safety of the public, including Dr. Schwartz.

Hartford filed an appearance on Dash's behalf, pursuant to the "special Multi-flex" policy it had previously issued to Dash. The terms of this policy will be discussed as necessary later in this opinion. Later, Hartford denied coverage on the ground that the accident did not occur on Dash's premises and obtained a court order allowing it to withdraw from the case. Dash retained new counsel and filed the complaint for declaratory judgment which is the subject of this appeal, alleging that the accident was covered by the Hartford policy and that Hartford had a duty to defend Dash in the personal injury suit. The Schwartzes were later joined as defendants in the declaratory judgment action.

Following a hearing on the parties' cross-motions for summary judgment, the trial court ruled in favor of Hartford. The trial court held that there was no coverage under the Hartford policy and that Hartford therefore had no duty to defend Dash. The trial court also struck two paragraphs from an affidavit of Calvin Palmer, Dash's president, on the ground that Palmer's expectation of coverage was hearsay and conclusory, in violation of Illinois Supreme Court Rule 191 (134 Ill.2d R. 191). Dash and the Schwartzes now appeal.

The Schwartzes and Dash first argue that the order granting summary judgment to Hartford is based upon a misinterpretation of both the policy and Illinois insurance law. Summary judgment is proper when the pleadings, depositions and admissions on file, together with any affidavits, show there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. (Ill.Rev.Stat.1987, ch. 110, par. 2-1005(c).) In order to survive a motion for summary judgment, the nonmoving party must come forward with evidentiary material that establishes a genuine issue of fact. (Salinas v. Chicago Park District (1989), 189 Ill.App.3d 55, 136 Ill.Dec. 660, 545 N.E.2d 184.) Nevertheless, because summary judgment is a drastic method of terminating litigation, the movant's entitlement must be free from doubt; the court must construe the evidence strictly against the movant and liberally in favor of the nonmoving party. Logan v. Old Enterprise Farms, Ltd. (1990), 139 Ill.2d 229, 233-34, 151 Ill.Dec. 323-325, 564 N.E.2d 778, 780.

When interpreting an insurance policy, the parties' intent is the most significant factor. (Weeks v. Aetna Insurance Co. (1986), 150 Ill.App.3d 90, 94-95, 103 Ill.Dec. 328, 331, 501 N.E.2d 349, 352.) Intent may be ascertained from the circumstances surrounding the issuance of the policy, including the situation of the parties and the purpose for which the policy was obtained. (Dora Township v. Indiana Insurance Co. (1980), 78 Ill.2d 376, 378, 36 Ill.Dec. 341, 342, 400 N.E.2d 921, 922.) All the provisions of the insurance contract, rather than an isolated part, should be read in light of each other to determine whether an ambiguity exists. See Cobbins v. General Accident Fire & Life Assurance Corp. (1972), 53 Ill.2d 285, 290 N.E.2d 873.

Because the interpretation of insurance contracts is governed by the rules for interpreting contracts generally (e.g., Consolidated Rail Corp. v. Liberty Mutual Insurance Co. (1981), 92 Ill.App.3d 1066, 48 Ill.Dec. 485, 416 N.E.2d 758), whether a policy is ambiguous is a question of law for the court to decide (see Kukla Press, Inc. v. Family Media, Inc. (1985), 133 Ill.App.3d 939, 943, 89 Ill.Dec. 110, 113, 479 N.E.2d 1116, 1119), but if the court decides it is ambiguous, the construction of the contract becomes a question of fact. (See Quake Construction, Inc. v. American Airlines, Inc. (1989), 181 Ill.App.3d 908, 913, 130 Ill.Dec. 534, 537, 537 N.E.2d 863, 866, aff'd (1990), 141 Ill.2d 281, 152 Ill.Dec. 308, 565 N.E.2d 990.) A court should consider the plain meaning of the policy language and should not search for a non-existent ambiguity. (United States Fire Insurance Co. v. Schnackenberg (1981), 88 Ill.2d 1, 5, 57 Ill.Dec. 840, 840, 842, 429 N.E.2d 1203, 1205.) Nevertheless, even in doubtful cases, courts should be quick to construe the policy in favor of coverage so that the insured is not deprived of a benefit for which the insured paid. (Bellmer v. Charter Security Life Insurance Co. (1986), 140 Ill.App.3d 752, 755, 94 Ill.Dec. 945, 948, 488 N.E.2d 1338, 1340.) In turn, when a complaint sets forth allegations potentially within the policy coverage, the insurer must defend the action. E.g., Thornton v. Paul (1978), 74 Ill.2d 132, 144, 23 Ill.Dec. 541, 545, 384 N.E.2d 335, 339.

In this case, the record indicates that the trial court considered itself bound by Schnackenberg, in which an insurance company sought a declaratory judgment against its insureds, Barbara Schnackenberg and her son Mark, and the plaintiff in the underlying suit, Maria Strehlow. The underlying complaint alleged that Strehlow was injured by a bicycle ridden by Mark Schnackenberg as she was crossing the street at an intersection approximately 2 1/2 blocks from the Schnackenberg home. The homeowner's policy covering the two-family dwelling stated:

"The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

A. bodily injury or

B. property damage to which this insurance applies, caused by an occurrence and arising out of the ownership, maintenance or use of the insured premises and all operations necessary or incidental thereto * * *."

* * * * * *

" 'insured premises' means the premises described below (2444 N. Orchard, Chicago, Illinois) or designated in the policy as subject to this endorsement, including the ways immediately adjoining * * * " Schnackenberg, 88 Ill.2d at 3-4, 57 Ill.Dec. at 841, 429 N.E.2d at 1204.

The supreme court held that there was no coverage, due to the unambiguous meaning of "the ways immediately adjoining" the "insured premises" in the policy. (Schnackenberg, 88 Ill.2d at 8, 57 Ill.Dec. at 843-44, 429 N.E.2d at 1206-07.) The court then stated that bicycle riding was only incidental to the use of the premises until the bicycle left the premises; otherwise, there would be no geographic limit to the coverage. The insurer did not need to use other limiting policy language because the Schnackenbergs' interpretation could not reasonably have been contemplated by the parties when they entered into the contract of insurance. Schnackenberg, 88 Ill.2d at 8, 57 Ill.Dec. at 844, 429 N.E.2d at 1207.

In this case, the "Premises and Related Operations in Progress" portion of the Hartford policy contained a coverage provision virtually identical to the policy language in Schnackenberg, except for the location of the "insured premises." The record indicates that the accident in this case did not occur on Dash's insured premises, which are on the second floor of an office building on Roosevelt Road. The record also shows that the two-room office suite is used to take orders and dispatch the messengers, who pick up and deliver packages out on location.

Hartford relies primarily on the decisions of our supreme court in Schnackenberg and Cobbins. It does not follow as a matter of law, however, that there is no coverage simply because the Hartford coverage provision is virtually identical to the clause in Schnackenberg and similar to that in Cobbins. Both Schnackenberg and Cobbins state that we may not focus exclusively on one provision in a policy when reading a policy in its entirety renders the policy ambiguous. (Schna...