Hankins v. Pekin Ins. Co.

• Decision Date: 14 July 1999
• Docket Number: No. 5-98-0028.,5-98-0028.
• Citation: 305 Ill. App.3d 1088,239 Ill.Dec. 394,713 N.E.2d 1244
• Parties: Louis C. HANKINS, d/b/a Louie's Cartage Company, Plaintiff and Counterdefendant-Appellee, v. PEKIN INSURANCE COMPANY, Defendant and Counterplaintiff-Appellant (Rudolf Express Company, Defendant and Counterdefendant-Appellee).
• Court: United States Appellate Court of Illinois

713 N.E.2d 1244

305 Ill. App.3d 1088

239 Ill.Dec. 394

Louis C. HANKINS, d/b/a Louie's Cartage Company, Plaintiff and Counterdefendant-Appellee, v. PEKIN INSURANCE COMPANY, Defendant and Counterplaintiff-Appellant (Rudolf Express Company, Defendant and Counterdefendant-Appellee).

No. 5-98-0028.

Appellate Court of Illinois, Fifth District.

July 14, 1999.

Robert Marc Chemers, David N. Larson, Pretzel & Stouffer, Chtd., Chicago, for Appellant.

Karen L. Kendall, Craig L. Unrath, Heyl, Royster, Voelker & Allen, Peoria, John D. Flodstrom, Keith E. Fruehling, Urbana, for Appellee.

Justice WELCH delivered the opinion of the court:

This is a declaratory judgment action brought by Louis Hankins, doing business as Louie's Cartage Company (Hankins), against its insurer, Pekin Insurance Company (Pekin), to determine a question of coverage. The circuit court of Effingham County determined, in a judgment on the pleadings, that coverage was provided by the Pekin policy and that Pekin had a duty to defend Hankins against a suit brought against it by Rudolf Express Company (Rudolf).

Hankins operates a trucking terminal in Effingham County. Hankins had entered into an "Independent Cartage Operator Agreement" (Agreement) with Rudolf Express Company, a motor freight carrier. Under the terms of this Agreement, Hankins agreed to provide a shipping and receiving terminal that Rudolf, a transportation company, was permitted to use to deliver and pick up loads of materials. Jerry Ervin was an employee of Hankins. While Ervin, in the employ of Hankins, was unloading a truck owned by Rudolf, an employee of Rudolf moved the truck away from the loading dock, causing Ervin's forklift to fall to the ground, injuring Ervin. Ervin sued Rudolf to recover for his injuries.

Rudolf filed a third-party complaint against Hankins, seeking contribution, indemnification, and damages for breach of contract, based in part on the Agreement. Hankins tendered the defense of this third-party complaint to its insurer, Pekin Insurance Company (Pekin). Pekin accepted the tender as to count I but refused the tender as to counts II and III. Count I was later severed from counts II and III, and only issues with respect to these latter two counts are before this court on appeal. The action by Ervin against Rudolf was settled for $100,000.

In its amended count II against Hankins, Rudolf seeks express contractual indemnification based upon the Agreement. Paragraph 11(a) of that agreement provides as follows:

"(a) Hold Harmless. CARTAGE OPERATOR agrees to indemnify and hold harmless CARRIER from and against all claims, damages, losses[,] and expenses, including reasonable attorney's fees which might arise out of the performance of any work to be performed hereunder by CARTAGE OPERATOR, including all damages for bodily injury, illness, death, property damage[,] and cargo loss, caused in whole or in part by CARTAGE OPERATOR'S negligent act or omission [or] non[]compliance with any part of this contract or that of anyone employed by CARTAGE OPERATOR or for whose acts CARTAGE OPERATOR may be liable."

In count II of its third-party complaint against Hankins, Rudolf alleges that the negligent conduct of Hankins or its employee contributed in whole or in part to Ervin's claimed injuries and that the claim brought by Ervin against Rudolf met the requirements of paragraph 11(a) because it involved a claim for injury that was caused in whole or in part by the negligence of Hankins. Count II sought indemnification under that paragraph for legal fees and expenses incurred by Rudolf in defending and settling the suit brought by Ervin against Rudolf.

In its amended count III against Hankins, Rudolf seeks damages for breach of the Agreement. Paragraph 11(b) of that agreement required that Hankins procure commercial liability insurance with policy limits of one million dollars and that Rudolf be named as an additional insured on that policy. Count III alleges that Hankins failed to obtain the required insurance, forcing Rudolf to tender its defense in the Ervin lawsuit to its own insurance carrier, resulting in damage to Rudolf.

We turn now to the policy of insurance, and specifically, the exclusion that Pekin argues applies to exclude coverage of count II of the amended third-party complaint. This provision of the policy excludes most liabilities contractually assumed by the insured:

"This insurance does not apply to:

* * *

b. `Bodily injury' or `property damage' for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement."

However, according to the policy:

"This exclusion does not apply to liability for damages:

(1) Assumed in a contract or agreement that is an `insured contract,' provided the `bodily injury' or `property damage' occurs subsequent to the execution of the contract or agreement."

The term "insured contract," as used in the exception to the assumed-liability exclusion above, is defined in the Pekin policy as follows, in pertinent part:

"That part of any other contract or agreement pertaining to your business * * * under which you assume the tort liability of another to pay damages because of `bodily injury' or `property damage' to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement * * *."

On March 26, 1997, Hankins filed this declaratory judgment action against Pekin, alleging that Pekin had breached its obligations and duties under the policy of insurance by denying coverage and refusing to provide a defense for Hankins. Hankins sought judgment against Pekin. On April 18, 1997, Pekin answered Hankins' complaint for declaratory judgment and filed its own counterclaim for declaratory judgment, contending it had no duty or obligation to defend Hankins in the underlying action because the claim in count II falls within an exclusion to the policy and the claim in count III, for breach of contract, is not covered by the policy.

On June 13, 1997, Pekin filed a motion for a judgment on the pleadings, pursuant to section 2-615 of the Illinois Code of Civil Procedure (735 ILCS 5/2-615 (West 1992)). A hearing was held on the motion, and on September 19, 1997, the circuit court of Effingham County entered a judgment on the pleadings in favor of Hankins. The trial court found that although the Agreement did not explicitly and unequivocally express an intention that Hankins would be responsible for Rudolf's negligence, it did provide that Hankins would indemnify Rudolf for all losses suffered by Rudolf as a result of Hankins' negligence. Because the complaint alleged that the negligence of Hankins was at least in part the cause of Ervin's injuries, Hankins could potentially be liable for all of Rudolf's damages, including those due to Rudolf's own negligence. Thus, paragraph 11(a) did constitute an "insured contract," and Pekin was obligated to defend Hankins against count II of Rudolf's third-party complaint. The duty to defend Hankins against count III followed from the duty to defend against count II. The court expressly indicated that it was not ruling on Pekin's duty to indemnify, which could not be determined until after a trial on the third-party complaint. Pekin appeals.

A motion for a judgment on the pleadings raises the issue of the sufficiency of the pleadings. See Daymon v. Hardin County General Hospital, 210 Ill.App.3d 927, 932, 155 Ill.Dec. 316, 569 N.E.2d 316 (1991). Upon the consideration of a motion for a judgment on the pleadings, the court is to ascertain whether there is any issue of material fact presented by the pleadings, and if there is no such issue, the question is which party is entitled to a judgment as a matter of law. See Daymon, 210 Ill.App.3d at 932, 155 Ill.Dec. 316, 569 N.E.2d 316. The only matters to be considered in ruling on such a motion are the allegations of the pleadings. See Daymon, 210 Ill.App.3d at 932, 155 Ill. Dec. 316, 569 N.E.2d 316. A judgment on the pleadings is only appropriate when an examination of the pleadings discloses the absence of any material fact and the rights of the parties can be declared as a matter of law. See Richco Plastic Co. v. IMS Co., 288 Ill.App.3d 782, 786, 224 Ill.Dec. 74, 681 N.E.2d 56 (1997). The parties in the instant case do not dispute that a...