Modern Track Machinery, Inc. v. Bry-Lon, Ltd., BRY-LO

• Decision Date: 08 May 1990
• Docket Number: LTD,BRY-LO,No. 2-89-0888,2-89-0888
• Citation: 197 Ill.App.3d 560,554 N.E.2d 1104,144 Ill.Dec. 65
• Parties: , 144 Ill.Dec. 65 MODERN TRACK MACHINERY, INC., Plaintiff-Appellant, v., et al., Defendants-Appellees (The Cincinnati Insurance Company, Defendant).
• Court: United States Appellate Court of Illinois

Page 1104

554 N.E.2d 1104

197 Ill.App.3d 560, 144 Ill.Dec. 65

MODERN TRACK MACHINERY, INC., Plaintiff-Appellant, v. BRY-LON, LTD., et al., Defendants-Appellees (The Cincinnati Insurance Company, Defendant).

No. 2-89-0888.

Appellate Court of Illinois Second District.

May 8, 1990.

Condon & Zopp, Ltd., Joseph P. Condon, Crystal Lake, for Modern Track Machinery, Inc.

Brittain, Ketcham, Strass, Terlizzi, et al., Elgin, William H. Weir, Daniel E. Compton, for Bry-Lon, Ltd., Bryant Longway Agency, Inc., Cincinnati Ins. Co.

Presiding Justice UNVERZAGT delivered the opinion of the court:

Plaintiff, Modern Track Machinery, Inc. (Modern Track), filed a three-count amended complaint against defendants, Cincinnati Insurance Company (Cincinnati), Bry-Lon, Ltd., and Bryant-Longhway Agency, Inc. (hereinafter referred to jointly as Bry-Lon). Counts I and II were directed against Cincinnati; count I sought a declaratory judgment that plaintiff's insurance policies with Cincinnati covered certain liability, and count II sought reformation of the insurance policies. Count III was directed against Bry-Lon and alleged fraudulent misrepresentation. Counts I and II were dismissed and are not at issue in this appeal. Count III was dismissed pursuant to section 2-615 of the Code of Civil Procedure (Ill.Rev.Stat.1987, ch. 110, par. 2-615), and plaintiff appeals the dismissal of that count.

In December 1982, Modern Track purchased insurance policies from Cincinnati through its agent, Bry-Lon. The policies provided workers' compensation coverage, general comprehensive liability coverage and excess or umbrella coverage. On January 10, 1983, Modern Track entered into a contract with the Atchison, Topeka and Santa Fe Railway Company (Santa Fe) whereby Modern Track would lease certain machinery to Santa Fe.

The lease agreement provided, in relevant part, that Modern Track would indemnify Santa Fe against all claims of loss when the loss was the result of the sole negligence of Modern Track and that Modern Track would procure and maintain certain insurance policies covering all of the equipment provided and services performed by Modern Track pursuant to the agreement. Under the agreement, Modern Track was required to obtain the following insurance: (1) workers' compensation coverage; (2) comprehensive general liability coverage, including personal injury and property damage; (3) comprehensive automobile liability coverage; (4) products and completed operations (products liability) coverage; and (5) contractual liability coverage covering all liability assumed by Modern Track under the agreement.

On January 12, 1983, apparently at Modern Track's request, Bry-Lon issued a certificate of insurance informing Santa Fe that Cincinnati had issued certain insurance policies to Modern Track. The certificate states:

"This is to certify to * * * [Santa Fe] that the Policies of Insurance * * * described herein have been issued to the Named Insured * * * with limits of liability as set forth herein covering the type of operations described below, and further to certify that said policies are in full force and effect on the date of this Certificate. * * *

* * * * * *

1. Named Insured: MODERN TRACK MACHINERY, INC.

* * * * * *

4. Policies described below cover All Operations of Named Insured except the following:

Products/Completed Operations Coverage."

The certificate lists the policies that Modern Track had with Cincinnati, that is, workers' compensation, comprehensive general liability and excess or umbrella coverage, and lists the policy numbers and the limits of liability under each policy. After the list of policies, the following appears:

"Contractual Liability: The policy(ies) hereinabove referred to are extended to cover liability for bodily injury including death, and for damage to property, which liability the named insured has assumed by virtue of the wording contained in Agreement(s) dated Jan. 10, 1983 with Santa Fe.

Comprehensive General Liability Insurance includes coverage for the following: * * *

Yes No

1. Products and Completed Operations? X "

Sometime after the certificate was issued, a Santa Fe employee was injured while operating a machine leased to Santa Fe by Modern Track. The employee filed suit against Santa Fe in Federal district court in Texas, and Santa Fe filed a third-party action against Modern Track. When Modern Track presented the complaint to Cincinnati, Cincinnati denied coverage because (1) the Texas claim involved products or completed operations liability and Cincinnati did not cover Modern Track for that type of liability; and (2) the contractual liability coverage provided under the general liability policy was limited to incidental contracts and the contractual liability paragraph in the certificate was not within the definition of an incidental contract.

Thereafter, plaintiff filed its three-count complaint against Cincinnati and Bry-Lon. In count III, the only count at issue, plaintiff claimed that the certificate of insurance which Bry-Lon issued contained a false statement. The allegedly false statement in the certificate was the following:

"Contractual Liability: The policy(ies) hereinabove referred to are extended to cover liability for bodily injury including death, and for damage to property, which liability the named insured has assumed by virtue of the wording contained in Agreement(s) dated Jan. 10, 1983 with Santa Fe."

Plaintiff contended that the statement was false in that the policies had not, in fact, been extended to cover all of the liability which Modern Track assumed by virtue of its contract with Santa Fe, that in reliance on this misrepresentation Modern Track had made no effort to obtain further coverage, and that Modern Track was...