Sheppard, Morgan & Schwaab, Inc. v. U.S. Fidelity & Guaranty Co.

• Decision Date: 18 November 1976
• Docket Number: No. 76--78,76--78
• Citation: 3 Ill. Dec. 138,358 N.E.2d 305,44 Ill.App.3d 481
• Parties: , 3 Ill.Dec. 138 SHEPPARD, MORGAN AND SCHWAAB, INC., a corporation, Plaintiff-Appellee, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 305

358 N.E.2d 305

44 Ill.App.3d 481, 3 Ill.Dec. 138

SHEPPARD, MORGAN AND SCHWAAB, INC., a corporation, Plaintiff-Appellee, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant-Appellant.

No. 76--78.

Appellate Court of Illinois, Fifth District.

Nov. 18, 1976.

David B. Stutsman, Donald J. Dahlmann, Walker & Williams, Professional Corporation, Belleville, for defendant-appellant.

Robert E. Ryan, Alton, for plaintiff-appellee.

EBERSPACHER, Justice.

This is an appeal from a declaratory judgment entered by the circuit court of Madison County construing certain provision of a liability insurance policy issued by the defendant, United States Fidelity and Guaranty Company.

The plaintiff, Sheppard, Morgan and Schwaab, Inc., an engineering firm, brought this action seeking a declaratory judgment to require the defendant to defend a lawsuit brought against the present plaintiff, by one John Saley. The plaintiff also sought an award of attorney fees and expenses incurred in the defense of the said suit. The court found that the Saley complaint stated a claim potentially within the coverage of the policy issued by this defendant and that this defendant breached the contract of insurance issued this plaintiff in refusing to defendant and is now estopped to deny coverage; and ordered this defendant to proceed with the defense of this plaintiff and make payment of reasonable attorney fees and expenses incurred in the defense of the Saley case. From such order this defendant has appealed.

The facts were stipulated by the parties and are as follows: the plaintiff was insured under insurance policy #1 CC457386 entitled 'Comprehensive General Liability Insurance' in 1973. The plaintiff herein was sued in Madison County circuit court as a defendant in the case of John Saley v. City of Alton, a municipal corporation, and, Sheppard, Morgan & Schwaab, Inc., a corporation. Sheppard, Morgan & Schwaab then tendered the case to United States Fidelity and Guaranty Company for defense. The defendant, after investigation, determined that there was no coverage under the terms of the said policy and refused to defend on the grounds of a policy exclusion, whereupon the plaintiff retained its own counsel.

In the Saley complaint it was alleged, among other things, that the plaintiff was guilty of negligence which had resulted in Saley's injuries in that the plaintiff had failed to properly supervise the construction of sewers on a job that it had engineered and that there had been a violation of the Structural Work Act because of improper supervision.

The court received into evidence the insurance policy in question, the Saley complaint, as well as the letters from the defendant to plaintiff, the first letter acknowledging receipt of the Saley summons and complaint with a 'limited acceptance', and also the letter refusing to defend the Saley suit.

The policy contained the following language:

'This endorsement modified such insurance as is afforded by the provisions of the policy relating to

Comprehensive General Liability Insurance

Manufacturers' and Contractors' Liability Insurance

Owners', Landlords' and Tenants' Liability Insurance

EXCLUSION

(Engineers, Architects or Surveyors Professional Insurance) It is agreed that the insurance does not apply to bodily injury or property damage arising out of any professional services performed by or for the Named Insured, including 1. the preparation or approval of maps, plans, opinions, reports, surveys, designs or specifications and

2. supervisory, inspection or engineering services.'

The 'Saley' complaint alleged in Count II:

'1. That on February 5, 1973 and for some time prior thereto * * *, Sheppard, Morgan & Schwaab, Inc., a corporation, was engaged in the business of engineering * * * furnishing plans and specifications, consultation and supervision, of various construction projects * * *.

'2. Prior to the date aforesaid, the City of Alton, had contracted with and retained * * *, Sheppard, Morgan & Schwaab, Inc., an engineering firm to do the necessary engineering work on the construction of sewers in the City of Alton and to Supervise the construction of said sewers. (Emphasis ours.)

'6. That the defendants, or its agents and employees, were guilty of one or more of the following negligent acts or omissions:

(a) Negligently and carelessly failed to supervise and inspect the trench as used to determine whether or not it was safe to use.

(b) Negligently and carelessly failed to require shoring be used in the excavation, although the defendant knew or in the exercise of ordinary care should have known that the absence of shoring rendered the trench unsafe for workmen, and particularly the plaintiff.

(c) Negligently and carelessly failed to stop the work until the unsafe condition had been remedied, although the defendants knew or in the exercise of reasonable care should have known that the trench as constructed was inadequate and unsafe.

(d) Otherwise negligently and carelessly failed to apply to the work under its supervision, the degree of skill and care for safety which would customarily by exercised on such work by competent engineers.'

Count IV of the Saley complaint alleged that the plaintiff herein

'Knowingly violated, * * * the Structural Work Act in that it, while acting in its supervisory capacity as engineer for the sewer installation under construction, wilfully and knowingly failed to require...