2016 IL App (1st) 152036
No. 1-15-2036
Opinion filed June 30, 2016
Modified Upon Denial of Rehearing August 2, 2016
Second Division
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
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BRIAN HARWELL, Appeal from the Circuit Court
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of Cook County.
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Plaintiff-Appellant,
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v. No. 13 CH 24479
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FIREMAN’S FUND INSURANCE COMPANY
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OF OHIO and KIPLING DEVELOPMENT The Honorable
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CORPORATION, Diane J. Larsen,
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Judge, presiding.
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Defendants-Appellees.
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JUSTICE HYMAN delivered the judgment of the court, with opinion.
Presiding Justice Pierce and Justice Simon concurred in the judgment and opinion.
OPINION
¶1 Plaintiff Brian Harwell appeals from the trial court’s grant of summary judgment in favor
of defendant Fireman’s Fund, Inc., which insured Kipling Development Corporation. A jury
found Kipling, as general contractor, negligent in supervising the construction site where
Harwell was injured. Fireman’s Fund refused to pay damages to Harwell, an employee of a
subcontractor, claiming that Kipling had not complied with an endorsement to the insurance
policy. Because equitable principles estop Fireman’s Fund from asserting that endorsement
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against Harwell, we hold that the trial court erred in granting summary judgment for Fireman’s
Fund and should have granted summary judgment to Harwell.
¶2 BACKGROUND
¶3 In 2006, Kipling was building a home in Will County, Illinois. As general contractor,
Kipling hired subcontractors to handle specific aspects of the job, including Speed-Drywall and
United Floor Covering. When service technician Brian Harwell entered the site to replace a
furnace filter, the stairs leading from the first floor to the basement collapsed beneath Harwell,
sending him falling into the basement. Harwell sustained injuries and filed suit against Kipling as
the general contractor of the building site. He alleged that Kipling was negligent in failing to
properly supervise and direct construction and failing to furnish Harwell with a safe workspace
and a safe stairway. Harwell also sued Speed-Drywall and United Floor Covering, alleging they
had modified or failed to secure the stairwell. In September 2007, Kipling’s attorneys (paid for
by Fireman’s Fund, as the insurance company had a duty to defend Kipling) filed an answer to
Harwell’s interrogatories stating that Kipling had liability insurance with Fireman’s Fund
Insurance Company, and that the maximum liability limit under the policy was $1 million.
¶4 Kipling’s policy with Fireman’s Fund included an endorsement requiring Kipling to
obtain certificates of insurance and hold harmless agreements from all subcontractors. If Kipling
failed to do so “at the time of an ‘occurrence’ involving a subcontractor,” then Fireman’s Fund
would pay a maximum of $50,000 for all damages and defense costs due to any “bodily injury”
“arising out of any covered acts” of the subcontractor. In 2008, after Kipling’s attorneys had
answered Harwell’s interrogatories, Fireman’s Fund sent Kipling a series of letters informing
Kipling that, because Kipling had failed to comply with the endorsement, the limits of Fireman’s
Fund’s liability had been reduced to $50,000 from $1 million. Fireman’s Fund reiterated this
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position in 2011. But Kipling’s attorneys (who also represented Fireman’s Fund) did not amend
the interrogatory answer to reflect this change, and Harwell’s attorneys had no knowledge of the
change.
¶5 In 2012, the matter went to jury trial against only Kipling, with Kipling’s defense funded
by Fireman’s Fund. Harwell argued that the drywall contractor damaged the staircase, while
Kipling’s counsel argued that the flooring contractor was responsible. Harwell prevailed. The
jury found Kipling negligent and awarded $255,186 in damages. (United Floor Covering had
been dismissed without prejudice, and Speed-Drywall settled with Harwell for $45,000 (reducing
Kipling’s damages by that amount)).
¶6 Kipling went out of business and had no assets to satisfy the judgment. In 2013, Harwell
brought suit for declaratory judgment against Kipling and Fireman’s Fund, asking for a
declaration that Fireman’s Fund’s policy on Kipling covered Harwell’s damages. In response,
Fireman’s Fund alleged that the endorsement limited its liability to $50,000, and the $50,000
limit had been reached in paying for Kipling’s defense.
¶7 Both parties moved for summary judgment. The trial court granted Fireman’s Fund’s
motion.
¶8 STANDARD OF REVIEW
¶9 We review a trial court’s grant of summary judgment de novo. Argonaut Midwest
Insurance Co. v. Morales, 2014 IL App (1st) 130745, ¶ 14. Summary judgment may be granted
where there is no triable issue of material fact and the movant is entitled to judgment as a matter
of law. 735 ILCS 5/2-1005(c) (West 2010). Genuine issues of material fact exist where the
material facts are disputed or, if undisputed, reasonable persons might draw different inferences
from those facts. Id.
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¶ 10 ANALYSIS
¶ 11 Years before Harwell asked Fireman’s Fund to pay the damages for his accident–indeed,
years before Harwell litigated a jury trial to determine Kipling’s negligence for the accident–
Fireman’s Fund had already informed Kipling that it was limiting its liability to $50,000. Yet
Kipling’s lawyers (paid for by Fireman’s Fund, as required by its policy with Kipling), who had
earlier told Harwell that the policy limit was $1 million, failed to inform Harwell of this material
change in position. This violated Illinois Supreme Court Rule 213(i) (eff. July 1, 2002), which
states that “[a] party has a duty to seasonably supplement or amend any prior answer or response
whenever new or additional information subsequently becomes known to that party.”
¶ 12 Our supreme court has instructed that their rules “are not mere suggestions. Rather, they
have the force of law, and the presumption must be that they will be obeyed and enforced as
written.” People v. Houston, 226 Ill. 2d 135, 152 (2007). The disclosure requirements of Rule
213 are mandatory and subject to strict compliance by the parties. Sullivan v. Edward Hospital,
209 Ill. 2d 100 (2004). To allow a party to ignore its plain language “defeats its purpose and
encourages tactical gamesmanship.” Clayton v. County of Cook, 346 Ill. App. 3d 367, 378
(2003). Enforcing the rule may even go so far as to reverse a jury verdict and remand for a new
trial. See, e.g., Copeland v. Stebco Products Corp., 316 Ill. App. 3d 932, 946 (2000).
¶ 13 The impact of this violation is obvious: had Harwell known in 2008 that Fireman’s Fund
was limiting its liability to only $50,000, he could have sought settlement with Kipling or
changed his trial strategy. It does Fireman’s Fund no good to argue that it owed its duty to
disclose only to Kipling, its insured; Harwell was the opposing party in the original lawsuit,
Fireman’s Fund was controlling Kipling’s defense, and Fireman’s Fund therefore had a duty to
be forthcoming under supreme court rules. Nor does it help to argue that Fireman’s Fund
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answered the interrogatory accurately because the original policy did have a limit of $1 million;
the asserted limit of $50,000 qualified as “additional” information that Fireman’s Fund should
have disclosed through Kipling because it represented the maximum liability limit under the
policy. The $1 million figure was no longer accurate.
¶ 14 Instead of disclosing this information, Fireman’s Fund went forward with trial, handling
Kipling’s defense. At oral argument, Fireman’s Fund’s counsel admitted that no matter what the
outcome at trial, Fireman’s Fund would not have paid out on the policy (because of the
endorsement limiting liability to $50,000 due to subcontractor involvement in Harwell’s injury).
In other words, by not supplementing the interrogatory, Kipling and Fireman’s Fund’s counsel
fashioned a “heads I win, tails I win” outcome. But, like so many best-laid plans, this one
backfired. In his petition for rehearing, Fireman’s Fund’s counsel alleges that following this
Court’s ruling would have forced them to withdraw from representing both Kipling and
Fireman’s Fund, and in doing so implicitly acknowledges the conflict of interest inherent in our
analysis.
¶ 15 Fireman’s Fund’s agenda seems clear: deny coverage to Kipling, control the flow of
information to Harwell, fight Harwell tooth and nail through the original case, and after losing
the trial–reveal the endorsement. This smacks of sandbagging, which we do not condone.
Instead, we find that equity demands that Fireman’s Fund be estopped from asserting the
endorsement against Harwell. This adheres to a fundamental maxim of the common law, which
applies when dealing with improper discovery disclosures–a party should not be permitted to
take advantage of a wrong, which he or she has committed.
¶ 16 Estoppel is a defensive action that will “prevent a party’s disavowal of previous conduct
if such repudiation would not be responsive to the demands of justice and good conscience.”
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(Internal quotation marks omitted.) Nationwide Mutual Insurance Co. v. Filos, 285 Ill. App. 3d
528, 533 (1996). More specifically, it “prevents the assertion of a contractual condition by a
party who, through words or conduct, has fostered the impression that the condition will not be
asserted as a legal defense.” Id. A party claiming the benefit of an estoppel must show reasonable
reliance on the acts of the other party, without “knowledge or convenient means” of learning the
truth. National Ben Franklin Insurance Co. v. Davidovitch, 123 Ill. App. 3d 88, 93 (1984). The
reliance must have resulted in prejudice or detriment. Id. Here, Fireman’s Fund represented to
Harwell in the answer to interrogatories that Kipling’s insurance policy had a liability limit of $1
million. Afterwards, Fireman’s Fund changed its position on the liability limit but did not tell
Harwell, who was relying on Fireman’s Fund’s truthful representations while it was handling
Kipling’s defense. Harwell relied on this to his detriment and Fireman’s Fund is now preventing
him from collecting his damages.
¶ 17 Typically, this doctrine of estoppel attaches when an insurance company withholds
information from, or misleads, the insured party. See, e.g., RLI Insurance Co. v. Illinois National
Insurance Co., 335 Ill. App. 3d 633, 645 (2002). Here, Kipling was the insured and Farmer’s
Fund informed Kipling early on about the endorsement’s effect on the liability limit. But Kipling
went out of business at some point in the litigation and in any event seemed to play no role in
either suit. It was Harwell who needed to know about the endorsement and the liability limit to
make informed decisions about the litigation, and Harwell to whom Kipling’s attorneys–the ones
paid for by Fireman’s Fund–owed a duty to supplement the interrogatory under supreme court
rules. Broad principles of equity–the desire to prevent fraud and injustice—dictate that Fireman’s
Fund should not benefit from its attempted ruse.
¶ 18 Given we reverse, we need not address the parties’ other arguments.
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¶ 19 Reversed and remanded.
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