FOURTH DIVISION
March 8, 2007
No. 1-05-3511
SEARS, ROEBUCK AND COMPANY, a New York ) Appeal from the
Corporation, and ALFREDO JIJON, ) Circuit Court of
) Cook County.
Plaintiffs-Appellees, )
)
v. )
)
CHARWIL ASSOCIATES LIMITED PARTNERSHIP, )
) Honorable
) Patrick E. McGann,
Defendant-Appellant. ) Judge Presiding.
PRESIDING JUSTICE QUINN delivered the opinion of the court:
Defendant Charwil Associates, L.P. (Charwil), appeals from
the trial court's judgement for plaintiffs Sears, Roebuck & Co.
and Alfredo Jijon (hereafter collectively referred to as Sears)
following a trial upon stipulated facts. On appeal, Charwil
contends that the trial court erroneously interpreted that the
lease agreement it entered into with Sears required Charwil to
maintain automobile liability coverage on behalf of Sears for an
injury caused by Sears' employee while driving a customer's
vehicle in a common area of a shopping mall.
BACKGROUND
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The stipulated facts presented to the trial court provide a
sufficient summary of the facts in this case. On or about May
30, 1989, Sears, as tenant, entered into a lease agreement with
Charwil, as landlord, for a store and automotive center to be
located in the Charlestowne Mall (Mall) in St. Charles, Illinois.
Charwil was a limited partnership formed to own the Mall.
Charwil hired Wilmorite, Inc. (Wilmorite), a real estate
development company and affiliate of Charwil, to develop the
mall.
The original form of the lease agreement, which was prepared
by Sears, was provided to Wilmorite as the form to be used for
developments in which Sears had agreed to lease space. The lease
included insurance provisions in paragraphs 21 and 22 of Part I.
Paragraph 21, entitled "Landlord's Insurance," provided in
pertinent part:
"Landlord will obtain and maintain or cause
to be obtained and maintained, at all times
during the construction of the improvements
specified in Part I, Section 4, and
throughout the Term, the following insurance
with companies approved by Tenant and
containing standard provisions:
* * *
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(b) Comprehensive General Liability Insurance
Including, but not limited to, coverage
for Personal Injuries with limits of not less
than Five Million Dollars ($5,000,000.00)
combined single limit for bodily injury and
property damage, per occurrence, including
Tenant as a named insured."
In addition, paragraph 22, entitled "Landlord's Common Area
Indemnity," provided:
"Landlord agrees to be responsible for,
indemnify Tenant, its directors, officers,
agents and employees, against, and save
Tenant, its directors, officers, agents and
employees harmless from, all liability from
any and all damages, claims or demands that
may arise from or be occasioned by the
condition, use or occupancy of all Common
Areas on the Entire Tract by the customers,
invitees, licensees and employees of
Landlord, Tenant and Landlord's other tenants
and all other occupants on the Entire Tract,
and Landlord will defend Tenant against any
such claim or demand and reimburse Tenant for
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any cost incurred in connection therewith,
including reasonable attorneys' fees. Land-
lord will obtain and maintain in a reputable
insurance company or companies qualified to
do business in the City of St. Charles,
County of Kane, State of Illinois, liability
insurance having limits for bodily injury or
death of not less than Two Million Dollars
($2,000,000.00) for each person, Five Million
Dollars ($5,000,000.00) for each occurrence
and Two Hundred Fifty Thousand Dollars
($250,000.00) for property damage, and
insuring the indemnity agreement. Tenant
shall be named insured, on this policy.
Further, each policy will expressly provide
that it will not be subject to cancellation
or material change without at least thirty
(30) days prior written notice to Tenant.
Landlord will furnish Tenant, concurrently
with the execution of this lease, with
insurance certificates and upon request by
Tenant, copies of such policies required to
be maintained hereunder."
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The lease agreement further provided, in pertinent part, in
paragraph 25 of Part I, entitled "Defaults":
"No failure by Landlord or Tenant to insist
upon performance or the strict performance of
any covenant, condition or other provisions
of this Lease or to exercise any right or
remedy consequent upon a breach or other
default thereof shall constitute a waiver or
assumption thereof by the other party, and no
acceptance, use or occupancy of the Tenants'
Demised Premises or Common Area shall
constitute a waiver or assumption by Tenant
of any duty or obligation of Landlord with
respect thereto."
In addition, paragraph 5 of Part III of the lease agreement,
entitled "No Waiver," provided in pertinent part:
"Any failure of Landlord or Tenant promptly
to exercise the rights or pursue the remedies
accruing hereunder by reason of any breach or
default of the other will not operate as a
waiver, but the respective rights and
remedies will be available to each party at
any time prior to the complete remedying of
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any breach or default by the other."
Subsequently, Charwil obtained a commercial general
liability insurance policy from Acceptance Insurance Company
(Acceptance), which named Sears as an insured. The Acceptance
policy provided limits of $1 million for each occurrence and $2
million in aggregate. Charwil also purchased excess liability
insurance from Travelers Casualty and Surety Company (Travelers),
which provided coverage of up to $25 million per occurrence in
excess of the Acceptance policy. During the negotiation of the
lease agreement, the parties did not discuss the subject of
defendant having to provide automobile liability insurance.
Finally, the record does not disclose whether plaintiff requested
or received certificates of insurance from defendant, nor does it
show that plaintiff objected to the insurance obtained by
defendant.
On June 1, 1996, Sears' customer Rosa Kresin was severely
injured when she was struck by another customer's vehicle that
Sears' employee Alfredo Jijon was backing out of a Sears
automotive service bay. Kresin sustained her injury in the ring
road of the mall, which is a common area.
On June 26, 1996, Kresin filed suit against Sears. She
thereafter obtained a judgment for $15,691,690, which was
affirmed on appeal. Kresin v. Sears, Roebuck & Co., 316 Ill.
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App. 3d 433 (2000). The parties ultimately settled the lawsuit
for $17,250,000, which Sears has paid Kresin.
As Sears dealt with Kresin's lawsuit, it filed a third-party
action against Charwil and its insurers, Acceptance and
Travelers. That action was severed and transferred to the
chancery division in December 1998. Subsequently, in January
2000, Sears filed its fourth amended complaint against Charwil,
Acceptance, and Travelers. Counts I and II were directed against
Charwil, counts III and IV were against Acceptance, and count V
against Travelers.
On January 4, 2001, the circuit court granted Sears' motion
to voluntarily dismiss count I, which alleged breach of an
express indemnity agreement against Charwil. Thereafter, on
February 16, 2001, the trial court granted summary judgment for
Acceptance and Travelers on counts III, IV, and V. That ruling
was affirmed on appeal. Sears, Roebuck & Co. v. Acceptance
Insurance Co., 342 Ill. App. 3d 167 (2003). Hence, only count
II, which alleged breach of contract against Charwil for its
failure to procure the insurance allegedly required as per
paragraph 22, remained. The record discloses that on August 3,
2001, the circuit court denied Sears' motion for summary judgment
on count II of its fourth amended complaint.
On September 1, 2004, the parties deposed Sears' expert
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witness, Michael Cass. They also deposed Charwil's expert
witness, Steven Sachs, on January 11, 2005.
The parties attached copies of the witnesses' deposition
transcripts to the agreed stipulation of facts. Cass testified
that he read the lease to require Charwil to obtain insurance
that would cover any incident that occurred in the common area of
the mall, including if an airplane owned by a tenant crashed into
the parking lot. He admitted, however, that he had never seen an
insurance policy in which a landlord obtained motor vehicle
coverage for a lessee and its employees driving in a parking lot.
Sachs in turn testified that in his 31 years in the
insurance industry, he had never seen an agreement where a
landlord agreed to insure a tenant for the tenant's own
liability. Sachs further testified that "common general
liability insurance" and "liability insurance" are used
interchangeably in the insurance industry, and that "liability
insurance" does not imply automobile insurance liability. He
concluded, as he did in his October 25, 2004, opinion letter,
that "use" in paragraph 22 referred to a "kiosk" or,
alternatively, to an event or attraction that drew people into
the store or served as an additional revenue stream, i.e., a
carnival or an automatic teller machine.
At trial, the parties presented the stipulated facts
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presented above and the deposition testimony of their experts.
On August 10, 2005, the trial court delivered its ruling.
Therein, the court first determined that Charwil honored its
obligations under paragraph 21(b) of the lease agreement. The
trial court then determined that "[a] plain reading of Paragraph
22 yields Charwil's agreement was twofold." The court found that
Charwil agreed to indemnify Sears for any liability "that may
arise from or be occasioned by the condition, use or occupancy of
all Common Areas" of the Mall, and that its second obligation was
to purchase insurance to fund that promise. The court stated
that, in the instant case, "any failure to purchase the agreed
upon insurance would only give rise to a claim for breach of
contract if the duty to indemnify arose as a result of the
crash."
The trial court proceeded to conclude that the language of
the lease agreement was clear and unambiguous, and thus Sachs'
testimony was inadmissible. The court then held that the "any
and all" language in paragraph 22 was sufficient "to include
indemnification for the Plaintiff's own negligence."
The trial court subsequently stated that Kresin's injuries
did arise out of "the condition, use or occupancy" of the common
area. Thus, the court stated that "Charwil breached its duty to
indemnify Sears resulting in damages of $2,000,000.00," pursuant
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to the limitations in paragraph 22 of the lease. The court
concluded,
"The failure of Sears to press its claim for
indemnification is of no moment. This is
clear because the vehicle agreed upon between
the parties to fund Charwil's promise was the
insurance policy. The failure to perform
this separate promise gives rise to Sears'
recovery."
Charwil now appeals.
DISCUSSION
In this court, Charwil contends that the trial court
erroneously interpreted the lease agreement to conclude that it
required Charwil to obtain and maintain insurance on behalf of
Sears to cover an injury such as that sustained by Kresin. We
disagree.
"The interpretation of a lease presents a question of law
that a reviewing court is to determine independent of the trial
court's judgment." NutraSweet Co. v. American National Bank &
Trust Co. of Chicago, 262 Ill. App. 3d 688, 694 (1994). The
rules for interpreting a lease are the same as those for
interpreting a contract. NutraSweet Co., 262 Ill. App. 3d at
694. The instrument needs no interpretation and speaks for
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itself where its language is definite and precise. NutraSweet
Co., 262 Ill. App. 3d at 694. That said, where the instrument is
"susceptible to one of two constructions, one of which makes it
fair, customary, and such as prudent men would naturally execute,
while the other makes it inequitable, unusual, or such as
reasonable men would not likely enter into, the interpretation
which makes a rational and probable agreement must be preferred."
NutraSweet Co., 262 Ill. App. 3d at 695. Where doubt or
uncertainty exists as to the meaning of the language used in a
lease, it should be construed against the lessor and in favor of
the lessee. NutraSweet Co., 262 Ill. App. 3d at 695.
We initially note that there is no dispute that Charwil
obtained and maintained comprehensive general liability insurance
with Sears named in accordance with paragraph 21 of the lease
agreement. That said, this court has concluded that the June 1,
1996, incident was not covered under the comprehensive general
liability insurance obtained by Charwil since it contained an
automobile exclusion barring coverage. Sears, Roebuck & Co., 342
Ill. App. 3d at 175-176.
The language in paragraph 22, however, explicitly provided
that Charwil, as the landlord, agreed to indemnify and hold
harmless Sears, as the tenant, from
"all liability from any and all damages,
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claims or demands that may arise from or be
occasioned by the condition, use or occupancy
of all Common Areas on the Entire Tract by
the customers, invitees, licensees and
employees of Landlord, Tenant and Landlord's
other tenants and all other occupants on the
Entire Tract."
It further provided:
"Landlord will obtain and maintain in a
reputable insurance company or companies
qualified to do business in the City of St.
Charles, County of Kane, State of Illinois,
liability insurance having limits for bodily
injury or death of not less than Two Million
Dollars ($2,000,000.00) for each person, Five
Million Dollars ($5,000,000.00) for each
occurrence and Two Hundred Fifty Thousand
Dollars ($250,000.00) for property damage,
and insuring the indemnity agreement."
A plain reading of the catch-all language in reference to
Charwil's agreement to indemnify Sears for "any and all" claims
arising from the use of the common area by a customer of the
tenant clearly provided for indemnification of the June 1, 1996,
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accident where Kresin, a customer of a tenant, Sears, suffered
injuries arising from her use of the mall's common area. If the
parties had intended otherwise, they could have provided
exclusions in the lease to limit insurance coverage.
That said, we must determine whether Charwil breached the
insurance provision in paragraph 22. In doing so, we recognize
that as Charwil contends, the circuit court dismissed Sears'
breach of promise to indemnify claim in count I with prejudice
upon Sears' voluntary motion to dismiss that count. Contrary to
Charwil's contention, however, that dismissal neither constituted
an adjudication on the merits of count I nor damaged Sears' claim
in count II for breach of a promise to insure.
First, Charwil erroneously supports its argument that Sears'
dismissal of count I constituted an adjudication on the merits
with Village of Arlington Heights v. American National Bank &
Trust Co. of Chicago, 72 Ill. App. 3d 744 (1979). In Village of
Arlington Heights, the plaintiff's voluntarily dismissal of its
entire case against a defendant resulted in dismissal with
prejudice of that defendant, and thus was "tantamount to an
adjudication on the merits." Village of Arlington Heights, 72
Ill. App. 3d at 746. Conversely, in this case, plaintiff
voluntarily dismissed one of the counts of his complaint, not a
defendant. As such, that case is inapposite.
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Second, Sears did not have to show that Charwil breached its
promise to indemnify in order to establish its claim that Charwil
breached its promise to obtain and maintain insurance. This
court has held that a promise to obtain insurance is not the same
as a promise to indemnify. Bosio v. Branigar Organization, Inc.,
154 Ill. App. 3d 611, 614 (1987). Under an indemnity agreement,
the promisor agrees to assume all responsibility and liability
for any injuries or damages. Bosio, 154 Ill. App. 3d at 614.
Conversely, under an agreement to obtain insurance, a promisor
simply agrees to procure insurance and pay premiums. Bosio, 154
Ill. App. 3d at 614. Thus, under an agreement to obtain
insurance, the promisor bears no responsibility in the event of
an injury or damages once the insurance is obtained. W.E. O'Neil
Construction Co. v. General Casualty Co. of Illinois, 321 Ill.
App. 3d 550, 557 (2001).
Here, paragraph 22 not only provided a promise by Charwil to
indemnify Sears, but also provided immediately thereafter that
Charwil promised to obtain and maintain insurance. It clearly
stated that Charwil agreed to indemnify Sears for all liability
from any claims that arose from the use of the mall common area
by a tenant's customer. The paragraph then provided that Charwil
was to obtain and maintain insurance for the purposes of
"insuring the indemnity agreement." Given that language, we find
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that the parties clearly intended for Charwil to obtain and
maintain insurance for Sears to cover all liability from any
claims that arose from a customer's use of the common area.
Thus, where Charwil only obtained comprehensive general limited
liability insurance which did not cover the June 1, 1996,
accident involving a tenant's customer's use of the mall's common
area (Sears, Roebuck & Co., 342 Ill. App. 3d 167), it breached
its promise to provide insurance in paragraph 22 of the lease
agreement.
In reaching this conclusion, we find that the clarity of the
lease language negated the need for extrinsic evidence, including
the testimony of the parties' experts. Nonetheless, we briefly
comment on the deposition testimony of the parties' expert
witnesses. With regard to Cass, we find that his interpretation
as to the insurance that Charwil was required to obtain as per
paragraph 22 presented an extreme hypothetical involving a
tenant's airplane crashing into the parking lot. Although we
need not decide whether such an unforeseen incident would be
covered, we do agree that the "any and all" language of the lease
did provide for insurance coverage for an automobile collision,
which presented a clearly foreseeable event in a shopping mall
parking lot. As for Charwil's expert Sachs, we observe that he
provided an absurdly narrow definition of "use" when defining
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that term as used in paragraph 22. Despite the inclusive
language of paragraph 22, Sachs proffered that "use" therein
merely referred to kiosks or other events used to draw people
into Sears. His definition of Sears' "use" of the common area
not only neglected the "any and all" claims language in paragraph
22, but also ignored the language as to a customer's use of the
common area. As such Sachs' interpretation of "use" in paragraph
22 would have provided no support to Charwil's interpretation of
the lease agreement.
CONCLUSION
For the above reasons, we affirm the judgment of the circuit
court of Cook County.
Affirmed.
CAMPBELL and NEVILLE, JJ., concur.
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