Illinois Appellate Court Finds That Complaint Exhibits Did Not Control Contrary Allegations

In a memorandum opinion written by a Cook County Circuit Court Chancery judge, it was ruled that an exhibit to the complaint did not control contrary allegations because the documents served as “mere evidence” rather than the foundation for a claim.

The judge’s opinion reflected that Illinois National Insurance Co. and American Home Assurance Co. filed the lawsuit as “subrogees of their insured Panduit Corp.” They claimed Arch Insurance Co. breached “its duty to indemnify Panduit” for an action in which Ronald Bayer allegedly “fell from a steel beam and was severely injured while working as an iron-worker for Area Erectors Inc.” at Panduit’s DeKalb, Ill., warehouse.

Bayer filed a lawsuit for his injury against Panduit and Garbe Iron Works. Panduit later filed a third-party complaint against Area Erectors for contribution.

Arch had issued a commercial general liability policy to Area that named Panduit and Garbe as additional insureds. Arch defended Panduit and Garbe in the Bayer lawsuit.

In the Bayer lawsuit, “counsel for Area presented a motion for good-faith finding and approval of settlement regarding a settlement with Bayer.” It was granted and Area was dismissed from the lawsuit with prejudice. Garbe also was dismissed “pursuant to a settlement agreement, but Panduit went to trial.”

According to the chancery judge’s opinion, Panduit was found liable in the Bayer lawsuit and sustained “an award of $64 million in favor of Bayer.” Panduit asked Arch to “help pay for the judgment from the Area policy, but Arch declined to indemnify Panduit stating that the policy was exhausted” due to the settlement between Bayer and Area.

Illinois National and American Home Assurance Co. also insured and “indemnified Panduit for its loss in the Bayer lawsuit.” In their amended complaint it was claimed “Arch wrongfully exhausted the policy of paying on behalf of Area instead of the additional insured” when “the CGL could not have covered any liability for Area in tort in relation to Bayer’s injuries” because the CGL policy specifically excluded “workers’ compensation for Area’s employees from coverage.”

Arch responded by moving to dismiss under Section 2-615 of the Illinois Code of Civil Procedure.  Arch relied on Area’s motion for a good-faith finding, which was an exhibit to Illinois National and American Homes’ amended complaint and which had “an unexecuted copy of the settlement agreement between Area and Bayer” as a part of it.

Arch argued that “the terms of the settlement agreement directly contradict[ed]” the “allegations that Arch paid on behalf of Area and not the additional insureds.”  The judge agreed that the settlement agreement’s terms did not “appear to contradict the allegations in the complaint” because they reflected that Arch’s payment would be “credited towards a settlement or judgment for Panduit or Garbe.”

The judge however disagreed that the exhibit was dispositive. He noted that Section 2-606 of the Code of Civil Procedure provides that “if a claim or defense is founded upon a written instrument, a copy thereof, or of so much the same as is relevant, must be attached to the pleading as an exhibit or recited therein.”

The chancery judge relied on Illinois Supreme Court holdings that if “there is a conflict between the written exhibit and the allegations of a pleading, the exhibits controls.” However, “when the exhibit is not an instrument upon the claims or defense is founded but . . . merely evidence supporting the pleader’s allegations, that rule is inapplicable.”

The settlement agreement was found to be the evidence of the alleged breach of the CGL and its terms did not control over the allegations in the complaint. The judge would not treat the settlement agreement’s terms “as judicial admissions.”

The circuit court judge deemed the exhibit (the settlement agreement) “distinguishable from the judicial admissions” in cases where exhibits were “documents that . . . allegedly constituted an accurate account of negotiations in which plaintiff participated” or “a letter drafted by the plaintiff.”  Accordingly, Illinois National and American Homes’ allegations stated a cause of action for breach of contract of the CGL and Arch has been ordered to answer or otherwise plead to that amended complaint.

Illinois National Insurance Co. v. Arch Insurance Co., 15 CH 7207, 2016 WL 3101369 (April 15, 2016).

Kreisman Law Offices has been handling catastrophic injury cases, nursing home abuse and neglect lawsuits, truck crash cases, interstate trucking accident cases and motorcycle crash cases for individuals and families who have been harmed, injured or died as a result of the carelessness or negligence of another for more than 40 years in and around Chicago, Cook County and its surrounding areas, including Schaumburg, Schiller Park, Rosemont, Winnetka, Waukegan, Joliet, Elgin, St. Charles, Aurora and Bensenville, Ill.

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