Essex Insurance Company v. Wright

• Court: Appellate Court of Illinois
• Decided: February 9, 2007
• Docket: 1-05-0267 Rel
• Status: Published

Opinion

SIXTH DIVISION February 9, 2007

No. 1-05-0267

ESSEX INSURANCE COMPANY, ) Appeal from the ) Circuit Court of Plaintiff-Appellee, ) Cook County ) v. ) ) HAROLD WRIGHT, Special Administrator of ) the Estate of Brian Wright, Deceased, ) ) Defendant-Appellant ) ) (O'Hare Auto Recycling, ) Honorable ) William Maki, Defendant). ) Judge Presiding

JUSTICE McNULTY delivered the opinion of the court:

Essex Insurance Company brought an action for declaratory

judgment against its insured, O’Hare Auto Recycling, to determine

whether its commercial general liability insurance policy covered

a spoliation of the evidence claim filed against O’Hare. The

trial court entered summary judgment in favor of Essex. We

affirm.

BACKGROUND

Brian Wright died on October 13, 2002, when the Ford Bronco

he was driving rolled over. O’Hare, which is in the business of

recycling automobiles, acquired Wright's Bronco from a towing

company. An attorney for Wright's estate paid O’Hare $675 to 1-05-0267

store the vehicle. When the attorney later tried to obtain the

vehicle, O’Hare informed him that it had been crushed.

On August 6, 2003, Linda Wright, as special administrator of

Wright's estate, filed a two-count complaint alleging a products

liability action against Ford Motor Company and a spoliation of

the evidence claim against O’Hare. Linda alleged in her

complaint that O’Hare owed her a contractual duty to store and

preserve the Bronco as evidence for the products liability

lawsuit. She alleged that O'Hare "[f]ailed to maintain *** the

Bronco ***; [or] [d]estroyed the vehicle."

O'Hare asked Essex to defend it against the estate's claims.

Essex sued for a judgment declaring that it had no duty to defend

or indemnify O’Hare under its commercial general liability

insurance policy. The policy reads in pertinent part:

"1. Insuring Agreement

a. We will pay those sums that the insured becomes

legally obligated to pay as damages because of 'bodily

injury' or 'property damage' to which this insurance

applies. *** [W]e will have no duty to defend the

insured against any 'suit' seeking damages for 'bodily

injury' or 'property damage' to which this insurance

does not apply. ***

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2. Exclusions

This insurance does not apply to:

***

b. Contractual Liability

'Bodily injury' or 'property damage' for which the

insured is obligated to pay damages by reason of the

assumption of liability in a contract or agreement.

This exclusion does not apply to liability for damages:

(1) That the insured would have in the

absence of the contract or agreement ***.

* * *

j. Damage To Property

'Property damage' to:

(4) Personal property in the care, custody or

control of the insured."

The policy defines "property damage" as "[p]hysical injury

to tangible property, including all resulting loss of use of that

property," or "[l]oss of use of tangible property that is not

physically injured."

Essex moved for summary judgment. The trial judge said:

"The question here is what duty is there from

O’Hare Auto Recycling to Linda Wright. The only duty

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that I see alleged is a contractual duty, and that’s

specifically excluded in the policy *** exclusion 2b

***. *** I’m going to grant the motion for summary

judgment."

Harold Wright, as special administrator of the estate,

appeals the judgment in favor of Essex.

ANALYSIS

We note first that nothing in the record shows a motion for

substitution of Harold Wright for Linda Wright as special

administrator of the estate. In Trapp v. Orr, 43 Ill. App. 3d

888, 889 (1976), as in this case, "all parties and the trial

court treated the matter as though a formal order allowing the

substitution had been entered." The court in Trapp held:

"Plaintiff [appellant] does not argue that the substitution was

improper and we will therefore treat the matter as the parties

have done." Trapp, 43 Ill. App. 3d at 889. Essex, like the

appellant in Trapp, does not contest the substitution. Following

Trapp, we will treat the case as though Harold properly

substituted for Linda.

The estate contends that the trial court erred in granting

Essex summary judgment because the spoliation of evidence claim

falls within the coverage of the policy. We disagree.

"[S]ummary judgment is properly granted if the pleadings,

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depositions, and admissions on file, together with any

affidavits, show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment

as a matter of law." Caisson Corp. v. Home Indemnity Corp., 151

Ill. App. 3d 130, 133 (1986). We review de novo the decision to

grant a party summary judgment. General Agents Insurance Co. of

America, Inc. v. Midwest Sporting Goods Co., 215 Ill. 2d 146, 153

(2005).

First the estate argues that the case involves two forms of

property damage. The estate seeks to recover not only for the

damage to the destroyed vehicle, but also for the diminution of

the value of the product liability claim resulting from the

destruction of the evidence. Appellant argues that such a

negligence cause of action is a form of property covered by

O’Hare’s policy. We reject that notion.

The insurance policy at issue in Iowa Mutual Insurance Co.

v. Hennings, No. 05-3073, slip op. at 3 (C.D. Ill. October 13,

2006), like the insurance policy here, defined property damage as

"physical injury to tangible property" or "loss of use of

tangible property." The insurer in Iowa Mutual sued for a

judgment declaring that it had no duty to defend its insured

against an underlying suit for damages arising from the loss in

value of a workers compensation claim. The court held: "Property

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damag[e] is limited to damage to tangible property. The damage to

the cause of action is not damage to tangible property. Thus, the

diminution in the value of his workers compensation claim is not

covered." Iowa Mutual, No. 05-3073, slip op. at 7.

We agree with the court in Iowa Mutual that a cause of

action does not qualify as tangible property. Thus, O’Hare’s

policy does not cover the diminution in the value of appellant’s

products liability claim.

We turn our focus instead to the damage to the destroyed

Bronco. In reaching the conclusion that O’Hare’s insurance policy

excludes coverage of Wright’s spoliation claim, we find the

personal property exclusion most persuasive. That provision

excludes property damage to "[p]ersonal property in the care,

custody or control of the insured."

The "care, custody or control" exclusion "prevent[s] the

general liability insurer from becoming a guarantor of the

insured's workmanship in his ordinary operations. Failures of

workmanship are a normal business risk which the insured is in

the best position to prevent." Stewart Warner Corp. v. Burns

International Security Services, Inc., 527 F.2d 1025, 1030 (7th

Cir. 1975). To determine whether property is in the care, custody

or control of an insured so as to preclude liability under such

an exclusion clause, Illinois courts employ a two-pronged test.

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"If the property damaged is within the possessory control of the

insured at the time of the loss and is a necessary element of the

work performed, the property is considered to be in the care,

custody, or control of the insured." Caisson Co., 151 Ill. App.

3d at 133. "While the control exercised by the insured must be

exclusive, it need not be continuous, and if the insured has

possessory control at the time the property is damaged, the

exclusion clause will apply." Country Mutual Insurance Co. v.

Waldman Mercantile Co., 103 Ill. App. 3d 39, 42 (1981).

In Maryland Casualty Co. v. Holmsgaard, 10 Ill. App. 2d 1, 3

(1956), the owner of a car brought it to a shop to have a trailer

hitch welded to the frame. The welding caused a fire that

destroyed the car. First the car's owner sued the shop and then

the shop's insurer sued the shop for a judgment declaring that it

had no duty to defend or indemnify the shop against the car

owner's lawsuit. The appellate court held:

"[The shop owner] had actual possession of the

automobile. He had dominion over it. He managed and

controlled it at his place of business and was in the

act of welding a trailer hitch to the automobile at the

time of the damage complained of. Under our statutes,

he was entitled to a lien for his services. There can

be no doubt that a bailment carries with it the

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surrender of possession and custody." Maryland

Casualty, 10 Ill. App. 2d at 9.

The court held that the exclusion for property in the insured's

care, custody, and control applied, and therefore the court

affirmed summary judgment for the insurer.

Here, as in Maryland Casualty, the insured had actual

possession and control of the automobile at issue. O'Hare

exercised possessory control over the Bronco first by storing it

and then by destroying it.

Moreover, the allegations of the complaint show at least a

constructive bailment of the vehicle.

"'Where *** one person has lawfully acquired the

possession of personal property of another and holds it

under circumstances whereby he ought, upon principles

of justice, to keep it safely and restore it or deliver

it to the owner, such person, and the owner of the

property are, by operation of law, generally treated as

bailee and bailor under a contract of bailment,

irrespective of whether or not there has been any

mutual assent, expressed or implied, to such

relationship.'" Chesterfield Sewer & Water, Inc. v.

Citizens Insurance Co. of New Jersey, 57 Ill. App. 2d

90, 94, (1965), quoting Woodson v. Hare, 244 Ala. 301,

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303-04, 13 So. 2d 172, 174 (1943).

O'Hare acquired the Bronco from the towing company. Once

the attorney for the estate notified O'Hare of the need to

preserve the vehicle as evidence, and especially after O'Hare

accepted money for storing the Bronco, O'Hare had possession

under circumstances whereby it ought to have kept it safely and

returned it to the estate. Accordingly, we find that O'Hare

acted as bailee of the vehicle when, according to the complaint,

O'Hare either destroyed the vehicle, or failed to maintain it.

See also Estep v. Johnson, 123 Ohio App. 3d 307, 314, 704 N.E.2d

58, 62-63 (1998). The bailment includes possessory control of

the vehicle. Maryland Casualty, 10 Ill. App. 2d at 9.

We also find that the Bronco was a necessary element of the

work O’Hare performed. O’Hare earns its income by recycling

automobiles. Without automobiles to recycle, O’Hare would not be

able to carry out its daily operations. Thus, in light of the

nature of O’Hare’s business, we find that the Wright’s Bronco was

a necessary element of the work performed. See Waldman

Mercantile, 103 Ill. App. 3d at 43.

The allegations of the estate's complaint and the evidence

presented leave no issue of material fact for trial. O'Hare had

exclusive possessory control over the Bronco, and the Bronco was

a necessary element of O'Hare's work. Thus, O'Hare had care,

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custody or control of the Bronco within the meaning of the policy

exclusion. The trial court correctly held that the exclusion

clause establishes that Essex has no liability for the damage to

the vehicle or to the estate's cause of action against Ford.

Accordingly, we affirm.

Affirmed.

FITZGERALD SMITH, P.J., and O'MALLEY, J., concur.

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