Konstant Products, Inc. v. Liberty Mutual Fire Insurance Co. ( 2010 )

SECOND DIVISION
May 4, 2010
No. 1-09-0080
KONSTANT PRODUCTS, INC., ROGER W. MEYERS ) Appeal from the
and ST. PAUL FIRE AND MARINE INSURANCE ) Circuit Court of
COMPANY, Individually and as Subrogee of ) Cook County
Konstant Products, Inc. and Roger W. )
Meyers, )
) No. 07 CH 05310
Plaintiffs-Appellants, )
)
v. ) Honorable LeRoy K.
) Martin, Jr.,
LIBERTY MUTUAL FIRE INSURANCE COMPANY, ) Judge Presiding.
RICKY FELTES and PATRICIA L. FELTES, )
)
Defendants-Appellees.
JUSTICE KARNEZIS delivered the opinion of the court:
Plaintiffs Konstant Products, Inc. (Konstant), Roger W.
Meyers (Meyers) and St. Paul Fire and Marine Insurance Company
(St. Paul), individually and as subrogee of Konstant and Meyers,
appeal from the circuit court’s order granting summary judgment
in favor of defendants Liberty Mutual Fire Insurance Company
(Liberty Mutual), Ricky Feltes (Feltes) and his wife, Patricia
Feltes. On appeal, plaintiffs contend the circuit court erred in
(1) concluding that an allegation made by Feltes in his original
complaint constituted a judicial admission; (2) failing to
consider extrinsic evidence when determining Liberty Mutual’s
obligations to Meyers and Konstant; and (3) failing to consider
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Feltes' second amended complaint in determining Liberty Mutual's
duty to defend. For the following reasons, we affirm.
BACKGROUND
This cause of action arose as a result of an accident
occurring at Konstant Products' facility in Quincy, Illinois, in
which Feltes was injured. On April 1, 2003, Feltes, during the
course of his employment with Alter Scrap Co., drove an Alter
Scrap truck to Konstant Products' facility to pick up a dumpster
of scrap iron and load it onto his truck. As Feltes stood in
front of the truck, it began to roll forward and pinned Feltes
between the truck and the dumpster. Meyers, a Konstant Products
employee, heard Feltes’ cries for help and got into the truck.
In attempting to back the truck away from Feltes, Meyers placed
it in the wrong gear and drove the truck into Feltes. Feltes
filed a verified complaint against Konstant Products and Meyers.
In paragraph 6A of the complaint, he alleged that Meyers
negligently and carelessly operated the truck "against [Feltes']
verbal request." St. Paul, Konstant Products' commercial
liability insurer, accepted and undertook the defense of Konstant
Products and Meyers. St. Paul then tendered the defense to Alter
Scrap’s auto carrier, Liberty Mutual, on the basis that the
Liberty Mutual auto policy provided coverage for Meyers as a
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"permitted user" of the Alter Scrap truck. Liberty Mutual
subsequently denied the tender because it contended that Meyers
was not a permissive user since the verified complaint expressly
alleged that Meyers operated the vehicle against Feltes'
objections. Feltes subsequently filed a second amended verified
complaint, which omitted paragraph 6A. St. Paul continued
defending Konstant and Meyers and ultimately settled the lawsuit
on their behalf for $40,000.
Thereafter, St. Paul filed a declaratory judgment action
seeking a declaration that Liberty Mutual had a duty to defend
Konstant and Meyers in connection with the Feltes' lawsuit and
further sought reimbursement of defense costs and the $40,000
settlement payment. Ultimately, both Liberty Mutual and St. Paul
filed cross-motions for summary judgment. The court granted
Liberty Mutual's motion, from which plaintiffs now appeal.
ANALYSIS
On appeal, plaintiffs contend the circuit court erred in
concluding that paragraph 6A of the original complaint
constituted a judicial admission that was binding throughout the
litigation for purposes of determining Liberty Mutual’s duty to
defend. Specifically, paragraph 6A alleged:
"Against Plaintiff’s verbal request, [Meyers]
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negligently and carelessly entered Plaintiff’s vehicle,
against Plaintiff’s request and drove the vehicle into
the dumpster three (3) times causing Plaintiff each
time to be pinned between the truck and the dumpster."
Feltes' second amended complaint was identical to the
original complaint, except that paragraph 6A was omitted. The
circuit court, in granting Liberty Mutual’s motion for summary
judgment, found that Feltes’ allegation in the original complaint
that Meyers did not have permission to drive the truck was a
binding judicial admission that "did not go away" merely by
filing an amended complaint.
Judicial admissions are formal admissions in the pleadings
that have the effect of withdrawing a fact from issue and
dispensing wholly with the need for proof of the fact. Robins v.
Lasky, 123 Ill. App. 3d 194, 198 (1984). Illinois law is well
established that when a pleading is verified it remains part of
the record even upon the filing of an amended pleading. Robins
v. Lasky, 123 Ill. App. 3d 194, 198 (1984). A party's admissions
contained in an original verified pleading are judicial
admissions that still bind the pleader even after the filing of
an amended pleading that supercedes the original. Yarc v.
American Hospital Supply Corp., 17 Ill. App. 3d 667, 670 (1974).
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Moreover, any admissions that are not the product of mistake or
inadvertence also bind the pleader throughout the litigation.
Rynn v. Owens, 181 Ill. App. 3d 232, 235 (1989).
Here, it is undisputed that the original verified complaint
contained Feltes' admission in paragraph 6A that unequivocally
stated that Feltes did not grant Meyers permission to use the
truck. Additionally, there is no evidence or assertion that this
admission was a result of a mistake or inadvertence. Thus,
Feltes' judicial admission remained binding on him throughout the
litigation, notwithstanding the amended complaint.
The admission also remained binding on Liberty Mutual in
determining its duty to defend. Our supreme court has made clear
that Illinois adheres to an “eight corners” analysis when
determining a carrier’s duty to defend. Valley Forge Insurance
Co. v. Swiderski Electronics, Inc., 223 Ill. 2d 352, 363 (2006)
(stating a court must compare the facts alleged in the underlying
complaint to the relevant provisions of the insurance policy to
determine duty to defend); see also Pekin Insurance Co. v. Dial,
355 Ill. App. 3d 516, 519 (2004) (stating a court should apply
the “eight corners rule” – that is the court should compare the
four corners of the underlying tort complaint with the four
corners of the insurance policy to determine whether facts
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alleged in the underlying complaint fall within or potentially
within coverage). Therefore, if a judicial admission remains
binding on Feltes throughout the litigation (including all
subsequent amended pleadings), then Feltes' admission must also
be considered binding on Liberty Mutual because Liberty Mutual’s
duty to defend is specifically determined by allegations
contained within the four corners of the underlying complaint.
We find this court’s decision in State Security Insurance
Co. v. Linton, 67 Ill. App. 3d 480 (1978), helpful since it also
involved a judicial admission that affected whether an insurance
carrier had a duty to defend. In Linton, the court held that the
plaintiff’s judicial admission that the court found binding on
the defendant was also binding on the insurance carrier in
determining the carrier’s duty to defend. Linton, 67 Ill. App.
3d at 484-85 (finding that the defendant’s judicial admission in
the answer to the insurer’s declaratory judgment complaint was
determinative in showing that a policy exclusion applied and
barred coverage under the policy).
Plaintiffs also contend that the circuit court improperly
concluded that its review was confined to the original complaint
and that the court should have considered evidence outside of the
complaint in determining Liberty Mutual’s duty to defend.
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Plaintiffs rely on several cases including Associated Indemnity
Co. v. Insurance Co. of North America, 68 Ill. App. 3d 807
(1979). The Associated Indemnity Co. court was careful in
stating its narrow holding:
"We do not even reach the issue of when, if ever,
an insurance carrier is obligated to conduct an
independent investigation of the facts underlying a
complaint filed against a putative insured. All we hold
is that an insurance carrier may not ignore unpleaded
facts within its knowledge, which it knows to be
correct, and which, when taken together with the
complaint's allegations, indicate that the claim
asserted against the putative insured is potentially
within the coverage of the insurance policy. (Emphasis
in original.) Of course, if the complaint contains
allegations which if true would exclude coverage under
the policy, the insurer has no obligation to defend."
Associated Indemnity Co., 68 Ill. App. 3d at 817.
(Emphasis added and omitted.)
Applying the reasoning in Associated Indemnity Co. to this
case, plaintiffs' argument fails. First, Liberty Mutual was
under no duty to conduct an independent investigation as to
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whether Meyers had permission to drive the truck. Furthermore,
Associated makes clear that if the complaint contains
allegations, which if true, would bar coverage, then the carrier
would have no duty to defend. Thus, the nonpermission allegation
in the original complaint, which remained binding throughout the
litigation, clearly would disqualify Meyers as a permissive
driver and exclude coverage under the policy.
Plaintiffs also rely on American Economy Insurance Co. v.
Holabird & Root, 382 Ill. App. 3d 1017 (2008), in support of
their contention that the circuit court may consider evidence
beyond the underlying complaint in determining an insurer’s duty
to defend. In Holabird, the issue on appeal was whether the
trial court erred in considering outside evidence (a third party
complaint) in determining a carrier’s duty to defend. The
plaintiff carrier, American Economy, had denied additional
insured coverage to Holabird under a policy issued to its
insured, Metrick (an electrical subcontractor), since the
underlying complaint did not allege any negligence against
Metrick as required for coverage to apply. In ruling against
American Recovery, the trial court looked outside the complaint
by taking into account a third-party complaint against Metrick
that specifically alleged Metrick negligently performed the
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installation that was at issue in the underlying case. The
Holabird court held that because American Economy was aware of a
true but unpleaded fact (that its insured Metrick allegedly
performed the installation), it had a duty to defend Holabird.
However, the instant case is distinguishable from Holabird.
First, the critical fact at issue (permission) was pled by Feltes
(unlike Holabird, where the fact was not pled). Moreover, there
is nothing in the record, nor did plaintiffs present any
evidence, to indicate that Feltes had granted Meyers permission
to use the truck. Thus, Liberty Mutual was never aware of "a
true, but unpleaded fact" (that Meyers did actually have
permission), as required by the Holabird holding. In contrast,
American Economy, in Holabird, did have actual knowledge of a
true but unpleaded fact that would have been relevant to its
duty-to-defend analysis by the filing of a third-party complaint,
which made American Economy aware that its insured was alleged to
have negligently performed the installation even though that was
not alleged in the underlying complaint. Thus, the Holabird
decision does not apply here.
Plaintiffs also argue that, based on deposition testimony,
Meyers had implied permission to drive the truck due to exigent
circumstances and thus should qualify as an insured under the
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Liberty Mutual auto policy. Implied permission generally may be
inferred from a course of conduct or relationship between the
parties in which there is mutual acquiescence or lack of
objection under circumstances signifying permission. Country
Mutual Insurance Co. v. Bowe, 13 Ill. App. 3d 386, 389 (1973).
However, Feltes’ judicial admission in the original complaint
established that Meyers did not have permission and, furthermore,
there was no mutual acquiescence or lack of objection, thus
rendering the implied permission argument unviable. Further, the
circuit court did not need to consider anything further than the
affirmative nonpermission allegation in accordance with the eight
corners rule. Therefore, the implied permission analysis is
inapplicable here.
Finally, plaintiffs contend that Liberty Mutual owed a
primary duty to defend and indemnify Meyers and Konstant against
the Feltes' lawsuit merely because the truck involved in the
accident was owned by Feltes' employer. Plaintiffs reason that
since the Liberty Mutual auto policy provides primary coverage
for any covered auto and because Illinois public policy mandates
that primary liability should rest with the insurance carrier for
the owner of the auto rather than on the insurance carrier for
the driver, Liberty Mutual’s policy should respond. However,
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plaintiffs fail to recognize that although Liberty Mutual’s
policy is a primary policy, coverage is still limited to those
entities that qualify as insureds under the policy, such as the
named insured, its employees and permitted users. According to
plaintiffs’ logic, the driver of the vehicle would be irrelevant
since the owner's policy would respond as primary in all
instances. However, this logic is misplaced since, for example,
if a vehicle is stolen and the driver subsequently causes injury
or damage to a third party, it would not be fair to force the
auto owner’s insurance policy to respond in that instance.
Moreover, it would be increasingly difficult for carriers to
accurately underwrite risks and assess proper premiums when
potentially all drivers, whether they have permission or not,
would have to be covered. Accordingly, we reject plaintiffs’
argument that Liberty Mutual’s policy should respond as primary
merely because the truck in the underlying accident was owned by
Liberty Mutual’s insured, Alter Scrap.
Accordingly, we affirm the circuit court's judgment granting
Liberty Mutual's motion for summary judgment.
Affirmed.
CUNNINGHAM, P.J. and THEIS, J., concur.
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REPORTER OF DECISIONS - ILLINOIS APPELLATE COURT
KONSTANT PRODUCTS, INC., ROGER W. MEYERS and ST. PAUL FIRE AND
MARINE INSURANCE COMPANY, Individually and as Subrogee of Konstant Products,
Inc. and Roger W. Meyers,
Plaintiffs-Appellants,
v.
LIBERTY MUTUAL FIRE INSURANCE COMPANY, RICKY FELTES and PATRICIA L.
FELTES,
Defendants-Appellees.
No. 1-09-0080
Appellate Court of Illinois
First District, Second Division
May 4, 2010
JUSTICE KARNEZIS delivered the opinion of the court.
CUNNINGHAM, P.J. and THEIS, J., concur.
Appeal from the Circuit Court of Cook County.
The Honorable LeRoy K. Martin, Judge Presiding.
For APPELLANT, Cassiday Schade LLP, Chicago, IL (Jamie L. Hull and Deborah A.
Martin-Sheridan, of counsel)
For APPELLEE, Judge, James & Kujawa, LLC, Park Ridge, IL (Jay S. Judge, Andrew
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G. Witik, of counsel)
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