International Amphitheatre Co. v. Vanguard Underwriters Ins. Co.

• Decision Date: 21 December 1988
• Docket Number: No. 87-3165,87-3165
• Parties: , 126 Ill.Dec. 808 INTERNATIONAL AMPHITHEATRE COMPANY, Plaintiff-Appellee, v. VANGUARD UNDERWRITERS INSURANCE COMPANY, Defendant-Appellant and Cross-Defendant and Appellant and Counterplaintiff and Third Party Plaintiff-Appellant (Al-Par, Inc., et al., Defendants; Denise Morales et al., Cross-Plaintiffs-Appellees; Rainbow Productions, Inc., Cross-Defendant; David Cox, Intervening Petitioner and Counter-Defendant-Appellee; W. Russell Hummel & Company, Inc., Third Party Defendant-Appellee).
• Court: United States Appellate Court of Illinois

Page 493

532 N.E.2d 493

177 Ill.App.3d 555, 126 Ill.Dec. 808

INTERNATIONAL AMPHITHEATRE COMPANY, Plaintiff-Appellee, v. VANGUARD UNDERWRITERS INSURANCE COMPANY, Defendant-Appellant and Cross-Defendant and Appellant and Counterplaintiff and Third Party Plaintiff-Appellant (Al-Par, Inc., et al Defendants; Denise Morales et al Cross-Plaintiffs-Appellees; Rainbow Productions, Inc. Cross-Defendant; David Cox, Intervening Petitioner and Counter-Defendant-Appellee; W. Russell Hummel & Company Inc., Third Party Defendant-Appellee).

No. 87-3165.

Appellate Court of Illinois, First District, Third Division.

Dec. 21, 1988.

Kralovec, Marquard, Doyle & Gibbons, Chartered, Chicago for appellant, Vanguard Underwriters (Nancy Jo Arnold and Henry J. Marquard, of counsel).

Jacobson and Sorkin, Ltd., Chicago for appellees, Denise Morales and Martha Novales (Milton C. Jacobson, Steven M. Sandler and Kitra K. Killen, of counsel).

Williams & Montgomery Ltd., Chicago for appellee, Intern. Amphitheatre Co. (Barry L. Kroll, Mary A. Sliwinski, David E. Morgans, Lloyd E. Willims, Jr., of counsel).

Hinshaw, Culbertson, Moelmann, Hoban & Fuller for appellees, David Cox and W. Russell Hummel & Co., Inc. (Kevin R. Sido, Stephen R. Swofford and Lynn D. Dowd, of counsel).

Justice FREEMAN delivered the opinion of the court:

Defendant Vanguard Underwriters Insurance Company (Vanguard) appeals from the trial court's granting of the following three motions in a declaratory judgment action: (1) the motion for summary judgment of plaintiff, International Amphitheatre Company (Amphitheatre), on the issue of Vanguard's duty to defend the Amphitheatre in certain personal injury suits; (2) the motion for summary judgment of cross-plaintiffs Denise Morales (Morales), Hugo Novales and Martha Novales (Novales) on the issue of Vanguard's duty to defend cross-defendant Rainbow Productions (Rainbow) in the personal injury suits; and (3) the motion to dismiss Vanguard's counterclaim against counter-defendant David Cox (Cox) and Vanguard's third-party complaint against third-party defendant W. Russell Hummel & Company (Hummel).

For the reasons stated below, we affirm the judgment of the circuit court.

The record indicates the following. Vanguard, an insurer, issued a general liability policy, number GL 1041, to defendants Al-Par, Inc. (Al-Par) and Maryland Leisure Corporation (Maryland), as the named insureds, for the policy period from July 29, 1981 to July 29, 1982. The policy covers bodily injury and property damage liability. Pursuant to its general liability provisions, the policy provides coverage for "Social Gatherings & Meetings on premises not owned or operated by the insured." Further, regarding independent contractors, the policy states, "Operations [ ] Excluding Security and Crowd Control" come within coverage. The policy also contains four endorsements regarding coverage.

Prior to December 29, 1981, Amphitheatre entered into an agreement to lease its premises in Chicago to Rainbow for a rock concert to be held on December 29, 1981. On December 29, 1981, Vanguard, through its managing agent, authorized Hummel to issue a certificate of insurance pursuant to policy GL 1041 to Talent Coordinators of America, Inc. (Talent), a co-promoter and co-producer of the concert, naming Amphitheatre, Rainbow, and the rock musicians as additional insureds.

Vanguard contends that at the time of negotiations for the policy, it was anticipated that Al-Par and/or Maryland would be involved in the promotion of approximately 2000 concerts during the first year of the policy. Vanguard asserts that whenever a new concert was scheduled by Al-Par or Maryland, a telephone call would be made from their offices to the office of the insurance agent, Hummel. Hummel would then inform Vanguard of the date of the concert and the entities who were to be named as additional insureds. Vanguard would issue a change endorsement to the policy, adding the additional insureds for that particular concert. The insurance agent would issue a certificate of insurance to the new additional insureds for the concert.

During the concert at the Amphitheatre on December 29, 1981, several persons in attendance allegedly were attacked and sexually abused. Four lawsuits were filed against the Amphitheatre and other defendants, alleging negligent and wilful and wanton conduct resulting in the plaintiffs' injuries. The tort plaintiffs include Morales, Novales, and other defendants/cross-appellees (tort plaintiffs) in the instant appeal. Several of the tort defendants tendered their defense in the personal injury suits to Vanguard. Vanguard undertook the defense of Al-Par, an officer of Al-Par, Maryland, Talent, and the musicians. Vanguard refused, however, to defend Amphitheatre and Rainbow.

Amphitheatre then filed a complaint for declaratory judgment, seeking a declaration that pursuant to the certificate of insurance issued by Vanguard, Amphitheatre was an additional insured under policy GL 1041 and the tort suits presented a potential liability for which Amphitheatre is covered by the Vanguard policy. The complaint for declaratory judgment also alleges that Amphitheatre had not been provided with a copy of the policy itself, but only with the certificate of insurance.

Amphitheatre filed a motion for summary judgment against Vanguard. The motion asserted, among other things, that policy endorsements numbers 3 and 4, on which Vanguard is relying to deny coverage, do not apply to Amphitheatre, since Amphitheatre was not furnished a copy of the policy.

Endorsement number 3 of the policy provides:

"IT IS HEREBY UNDERSTOOD AND AGREED THAT CO-PROMOTERS AND BUILDING OWNERS, MANAGERS, LESSORS AND LANDLORDS SHALL BE COVERED AS ADDITIONAL INSUREDS, UNDER THIS POLICY BUT ONLY WITH RESPECT TO THE SOLE NEGLIGENCE OF THE NAMED INSURED'S OPERATIONS.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED."

Endorsement number 4 of the policy states:

"IN CONSIDERATION OF THE PREMIUM CHARGED IT IS HEREBY UNDERSTOOD AND AGREED THAT THIS POLICY WAS ISSUED IN RELIANCE UPON THE FOLLOWING MATERIAL REPRESENTATIONS:

1. THE NAMED INSURED SHALL NOT ASSUME ANY OBLIGATION TO PROVIDE SECURITY OR CROWD CONTROL SERVICES AT ANY CONCERT SITE.

2. THE NAMED INSURED SHALL ENDEAVOR TO SECURE EVIDENCE OF GENERAL LIABILITY INSURANCE FROM EACH OWNER, LESSOR,

MANAGER OR LANDLORD FOR EACH CONCERT SITE.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED."

The trial court prepared a memorandum opinion. Regarding Amphitheatre's motion for summary judgment, the trial court found that the tort plaintiffs' complaints allege that all named tort defendants negligently operated and maintained the premises. The court stated that since Al-Par and Maryland may be found negligent in the control and maintenance of the premises, and since Al-Par and Maryland may be considered agents of Amphitheatre, therefore Amphitheatre may be held liable for the "sole negligence" of Al-Par and Maryland under endorsement number 3.

The court further found that endorsement number 4 provides coverage to the named insured only upon the named insured's representation that it will not assume any obligations to provide security and crowd control. The court concluded that since the tort complaints allege negligence and failure to furnish security and crowd control, there arises a duty to defend, since the allegations against Amphitheatre potentially come within coverage. Further, the trial court stated that, even if it found that endorsements numbers 3 and 4 failed to provide coverage, in any event, the endorsements cannot be raised against Amphitheatre, since Amphitheatre did not receive a copy of the policy.

The trial court also looked to the affirmative defenses raised by Vanguard in opposition to the motions for summary judgment. Vanguard asserted that the certificate of insurance issued to Amphitheatre is void since it was procured by a material misrepresentation of fact by an agent of Maryland. The trial court found that the requests for insurance were made orally, and that there was no written application for the policy. The court cited section 154 of the Illinois Insurance Code (Ill.Rev.Stat.1985, ch. 73, par. 766), which requires that an alleged misrepresentation made by an insured must appear in the written application for insurance. Since there was no such writing in the instant case, the court found that Vanguard was unable to show the alleged misrepresentation. Further, section 154 also requires a showing of actual intent to deceive or facts that materially affect the acceptance of the risk or the hazard assumed by the insurer. The trial court found no evidence to support Vanguard's assertions that Amphitheatre knew that Perry and Rainbow were the sole promoters of the concert, or that Amphitheatre concealed that fact from Vanguard when Vanguard issued its certificate of insurance.

In a prior appeal involving the parties to the instant case (International Amphitheatre Co. v. Vanguard Underwriters Insurance Co. (1988), 166 Ill.App.3d 369, 116 Ill.Dec. 800, 519 N.E.2d 1015) (the prior appeal), this court reviewed the dismissal of Vanguard's counterclaim against counterdefendant Cox. The trial court had dismissed the counterclaim with prejudice on the ground that it failed to state a cause of action, since it purported to sound in "non-express" indemnity, a cause of action no longer viable in view of the "Act in relation to contribution among joint tortfeasors" (Ill.Rev.Stat.1987, ch. 70, par. 301 et seq.) (the Contribution Act), which abolished actions based on implied indemnity. This court reversed the trial court and remanded the matter for further proceedings. This court found that the Contribution Act did not bear on Vanguard's action, since the counterclaim seeks indemnification and purports to state a cause of action based on agency and contract law.

After the trial court dismissed Vanguard's counterclaim and before this court issued...