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SIXTH DIVISION
January 9, 2004

No. 1-02-3064


 

JUSTICE GALLAGHER delivered the opinion of the court:

Defendant First Nonprofit Mutual Insurance Company (FNMIC) appeals from an ordergranting summary judgment in favor of El Rincon Supportive Services Organization, Inc., a/k/a ElRincon Community Clinic, and ERC Properties Foundation, Inc. (El Rincon), concluding thatFNMIC owed coverage to El Rincon under a multiple-peril insurance policy for a claim againstthe policy for damages to El Rincon's property. On appeal, FNMIC first contends that ElRincon's use of the term "construction" in its complaint and in an exhibit amounts to a judicialadmission that the property damage resulted from "construction" activities. FNMIC nextcontends on appeal that the plain definition of the term "construction" encompasses all activitiesrelating to the construction process and that the insurance policy is not ambiguous. FNMIC alsocontends on appeal that this court should be persuaded by the reasoning underlying decisions inother jurisdictions finding comparable exclusion language unambiguous. FNMIC's finalcontention on appeal is that no question of fact exists in the record that precludes summaryjudgment in favor of FNMIC after the exclusion is found unambiguous.

El Rincon is an Illinois not-for-profit corporation. El Rincon provides professional socialservices, including but not limited to alcoholism and other drug dependency clinical services onthe west side of Chicago.

El Rincon procured an FNMIC multiple-peril insurance policy that was in effect from May15, 2001 until May 1, 2002 (policy). The policy provided coverage on El Rincon's propertylocated at 1874 N. Milwaukee Avenue, Chicago, Illinois (property). On or around September 1,2001, the property was physically damaged by the "acts, decisions, errors, or omissions of a thirdparty performing construction excavation and operations to an adjacent property" located at1868-1870 N. Milwaukee Avenue, Chicago, Illinois (the adjacent property). El Rincon notifiedFNMIC of the claim regarding the property damage (the claim). According to a site inspectionperformed on the property around October 3, 2001, by Engineering Systems, Inc. (ESI),construction operations on the adjacent property allegedly caused the following to the property:"damaged masonry walls, portions of walls left unsupported, a severely cracked parapet wall, andwalls that had been impacted." In a letter dated October 5, 2001, to El Rincon, FNMIC reservedits rights under the policy concerning the claim while it investigated the matter. On December 11,2001, FNMIC disclaimed coverage in a letter to El Rincon asserting exclusion 3.b(2) of the policybarred coverage.

Pertinent provisions of the policy, including exclusion 3.b(2), are as follows:

"GENERAL PROPERTY COVERAGE

A. COVERAGE AGREEMENT

We will pay for direct physical loss or damage to Covered Property at the premisesdescribed in the Declarations caused by or resulting from any Covered Cause of Loss.

* * *

2. Property Not Covered

Except as provided in C. Extensions of Coverage, Covered Property does notinclude:

* * *

d. The cost of excavations, grading, backfilling or filing;

E. EXCLUSIONS

* * *

3. We will not pay for loss or damage caused by or resulting from any of the following:

* * *

b. Faulty, inadequate, defective or negligent:

* * *

(2) Design, testing, specifications, workmanship, repair, construction, renovation,remodeling, grading or earth compaction;

* * *

of part or all of any property on or off the described premises."

On April 10, 2002, El Rincon filed a complaint for declaratory judgment and other relief inthe circuit court. The complaint claimed that the property was physically damaged by "acts,decisions, errors or omissions of a third party performing construction excavation and operationsto an adjacent property." The complaint further alleged FNMIC wrongfully denied coverage to ElRincon for the claim and sought a judgment that FNMIC had a duty to pay El Rincon for the losssuffered and that FNMIC was liable under section 155 of the Illinois Insurance Code (215 ILCS5/155 (West 2000)) for unreasonable delay in paying the claim.

On May 24, 2002, FNMIC filed its motion for summary judgment. FNMIC's motion wasbased on exclusion 3.b(2) contending that there is no coverage under the policy because thedamage was caused by "faulty, inadequate or negligent construction work done on the adjacentproperty." In its response to the motion for summary judgment, El Rincon argued exclusion3.b(2) of the policy was ambiguous because the use of the term "property" was ambiguous andmisleading. El Rincon also argued the exclusion is ambiguous because the term "construction" istoo broad and it is unclear whether the term "excavation" is covered within the term"construction." El Rincon filed a five-count complaint at law, which included one count ofnegligence, against multiple parties, including companies and individuals, involved in theconstruction operations on the adjacent property that allegedly caused the damage to theproperty.

The trial court denied FNMIC's motion for summary judgment on August 9, 2002. Following the denial of FNMIC's motion for summary judgment, El Rincon made an oral motionfor summary judgment over FNMIC's objection. The trial court granted El Rincon's oral motion. The trial court agreed the policy was ambiguous because the term "excavation" was used in onepart of the policy and not used in exclusion 3.b(2), which created an ambiguity regarding whetherthe excavation activities occurring on the adjacent property were excluded under the policy.

On September 6, 2002, FNMIC filed a motion to reconsider, vacate and/or clarify theAugust 9, 2002, order. On September 18, 2002, the trial court denied FNMIC's motion to vacateand clarified that the August 9, 2002, order did not apply to the damages issues and El Rincon'sInsurance Code claims. In the September 18, 2002, order, the trial court stated that there was nojust cause to delay appeal of its grant of summary judgment in favor of El Rincon pursuant toIllinois Supreme Court Rule 304(a) (155 Ill.2d R. 304(a)). FNMIC timely filed its appeal onOctober 1, 2002.

On appeal, FNMIC first argues that El Rincon's use of the term "construction" in itscomplaint and exhibit to describe the activities that caused the property damage is a judicialadmission and precludes coverage. Facts admitted in a pleading amount to a judicial admission. Wheeler v. Sunbelt Tool Co., Inc., 181 Ill. App. 3d 1088, 1108, 537 N.E.2d 1332, 1346 (1989). The pleadings of a case include the exhibits attached to a complaint. Wysocki v. Bedrosian, 124Ill. App. 3d 158, 162, 463 N.E.2d 1339, 1343 (1984). A judicial admission is defined as "adeliberate, clear, unequivocal statement of a party, about a concrete fact, within that party'speculiar knowledge." Eidson v. Audrey's CTL, Inc., 251 Ill. App. 3d 193, 195, 621 N.E.2d 921,923 (1993); Cleveringa v. J.I. Case Co., 230 Ill. App. 3d 831, 844, 595 N.E.2d 1193, 1203(1992); Hansen v. Ruby Construction Co., 155 Ill. App. 3d 475, 480, 508 N.E.2d 301, 303(1987). Judicial admissions are " 'formal admissions in the pleadings *** which have the effect ofwithdrawing a fact from issue and dispensing wholly with the need for proof of the fact.' " StateSecurity Insurance Co. v. Linton, 67 Ill. App. 3d 480, 484, 384 N.E.2d 718, 721 (1978), quotingPrecision Extrusions, Inc. v. Stewart, 36 Ill. App. 2d 30, 50, 183 N.E.2d 547, 556 (1962).

FNMIC contends El Rincon's referral to the activities that caused the property damage as"construction excavation and operations" in its complaint amounted to a judicial admission. FNMIC also contends that ESI's engineering report, which is included in the record as an exhibit,states that the property damage was caused by "adjacent construction operations." FNMICcontends that these statements amount to a judicial admission that El Rincon's property wasdamaged from construction activities.

El Rincon responds that the term "construction" in the phrase "construction excavationand operations" is the adjective used to describe the type of excavation that caused the propertydamage, not a noun stating the cause of the damage. Instead, El Rincon contends that the term "excavation" is the noun being described in the phrase "construction excavation and operations." El Rincon further responds that ESI's use of the term "construction" in the exhibit is not a judicialadmission and that the phrase "adjacent construction operations" should be read in its entirecontext, which is "The adjacent construction operations had excavated 8 feet below grade. Thisexposed the foundation under El Rincon building." El Rincon argues that ESI's engineeringreport identifies excavation as the cause of the damage to El Rincon's property. El Rinconcontends that the use of the term "construction" in its complaint and in ESI's engineering report isnot a judicial admission.

We agree with El Rincon that the use of the term "construction" in the statementsincorporated in its complaint and in the ESI engineering report does not amount to a judicialadmission. A judicial admission is a deliberate, clear and unequivocal statement about a concretefact within the party's knowledge. Eidson, 251 Ill. App. 3d at 195, 621 N.E.2d at 923;Cleveringa, 230 Ill. App. 3d at 844, 595 N.E.2d at 1203; Hansen, 155 Ill. App. 3d at 480, 508N.E.2d at 303. We do not conclude that El Rincon's use of the term "construction" in itscomplaint and in the engineering report was deliberate, unequivocal and intended to be anadmission of a fact. Moreover, El Rincon's use of the term "construction" is not sufficient tosupport the disposition of the issue that the property damage resulted from construction activities. Instead, the ordinary, plain meaning of the term "construction" must be determined.

FNMIC next argues on appeal that exclusion 3.b(2) is not ambiguous and excludescoverage for the El Rincon claim. Multiple interpretations of an insurance policy provision cancreate ambiguity. Rohe v. CNA Insurance Co., 312 Ill. App. 3d 123, 127, 726 N.E.2d 38, 41(2000). However, ambiguity is not created because controversy exists between the partiesregarding the meaning of a provision. See General Insurance Co. of America v. Robert B.McManus, Inc., 272 Ill. App. 3d 510, 514, 650 N.E.2d 1080, 1083 (1995). An undefined term inan insurance policy is given its plain and ordinary meaning, which can be obtained from adictionary. Fremont Casualty Insurance Co. v. ACE-Chicago Great Dane Corp., 317 Ill. App.3d 67, 74, 739 N.E.2d 85, 91 (2000). The standard used to determine whether an insurancepolicy is ambiguous is "what a reasonably prudent insured would understand the language tomean." First Financial Insurance Co. v. Bugg, 265 Kan. 690, 694, 962 P.2d 515, 519 (1998). We review a trial court's interpretation of an insurance policy de novo. Christy-Foltz, Inc. v.Safety Mutual Casualty Corp., 309 Ill. App. 3d 686, 691, 722 N.E.2d 1206, 1211 (2000).

FNMIC contends that the activities occurring on the adjacent property that caused theproperty damage were construction activities, which is apparent from El Rincon's complaint inwhich it refers to the activities as "construction excavation operations." FNMIC argues thatexclusion 3.b(2) excludes the property damage because the damage resulted from faulty ornegligent construction work. FNMIC also argues that the plain language of the policy andexclusion 3.b(2) is not ambiguous and the policy does not provide for "excavation" coverageelsewhere. FNMIC reasons that because the word "excavation" was used elsewhere in sectionA.2.d of the policy does not mean that the term is not incorporated into the broad meaning of theterm "construction" used in exclusion 3.b(2).

FNMIC further contends that the term "construction" encompasses any and all activitiesinvolved in the construction process, including excavations. FNMIC contends that the ordinarydictionary definition of the term "construction" should be applied in the instant case. FNMICprovides the dictionary definition of the term "construction," which is "the act of constructing orbuilding something." Word Net, "construction," at http://dictionary.reference.com/search?q=construction (last visited January 15, 2003). FNMIC argues that excavation activities involved inthe construction of a building are included in the definition of the term "construction." Ifexcavation activities were intended to be considered a separate activity excluded from coverage,FNMIC contends that the term "excavation" would have been included in exclusion 3.b(2). Instead, FNMIC contends that the broad, unrestricted term "construction" was used. FNMICargues further that the trial court found ambiguity in the insurance policy where none existed andcannot impose restrictions to the wording of the insurance policy's exclusion that are not stated inthe policy. See O'Rourke v. Access Health, Inc., 282 Ill. App. 3d 394, 404, 668 N.E.2d 214, 221(1996). FNMIC also contends that using the broad term "construction," the insured is placed onnotice that any aspect of construction that damages the insured's property is excluded. FNMICfurther argues that the reasonable interpretation of exclusion 3.b(2) is that damage to an insured'sproperty resulting from any and all construction activities is barred from coverage under theexclusion.

El Rincon responds that FNMIC's use of the term "excavation" elsewhere in the policydemonstrates FNMIC's awareness that "excavation" activities differ from "construction" activitiesand contradicts FNMIC's argument that the term "construction" encompasses "excavation." ElRincon provides the definition of the term "construction" as "the process, art, or manner ofconstructing something." Merriam-Webster Dictionary On-Line, "construction," athttp://www.m-w.com/cgi-bin/dictionary?/book=Dictionary&va=construction (last visited on May23, 2003). El Rincon also provides the dictionary definition of the term "excavation," which is"the action or process of excavating; a cavity formed by cutting, digging, or scooping." Merriam-Webster Dictionary On-Line, "excavation," at http://www.m-w.com/cgi-bin/dictionary?/book =Dictionary&va =excavation (last visited on May 23, 2003). El Rincon argues that, based on thedefinition of the terms "construction" and "excavation," it is not obvious that the two terms aresynonymous or that one fits neatly inside the other. El Rincon also argues that FNMIC attemptsto combine two distinct processes into one word. El Rincon points to the trial court's holding,which stated in part that "I do not believe that you can clump excavations and constructiontogether. Those things happen in phases in terms of the work." El Rincon contends that sinceFNMIC listed instances that are excluded from coverage in exclusion 3.b(2), FNMIC's failure toinclude the term "excavation" indicates that "excavation" is not excluded from coverage under thepolicy terms. El Rincon further contends that since it is unclear what activities are excluded underthe term "construction," exclusion 3.b(2) is ambiguous and therefore unenforceable.

We do not find El Rincon's arguments persuasive. We acknowledge that the policyincludes the phrase "cost of excavations" under the section titled "Property Not Covered" anddoes not include the term "excavation" under the section titled "Exclusions." However, weconsider the omission of the term "excavation" in exclusion 3.b(2) of little importance, and it doesnot render the policy ambiguous. The exclusion set forth in exclusion 3.b(2) provides thatdamages resulting from the faulty, inadequate, defective or negligent construction of part or all ofany property on or off the described premises is excluded from coverage. The parties do notdispute that the construction excavation and operations activities occurring on the adjacentproperty and not on El Rincon's property caused the property damage to El Rincon's property. The parties disagree, however, regarding the definition of the term "construction" and whetherexcavation activities are part of construction activities. We do not find the parties' contentionsregarding the appropriate construction of the phrase "construction excavation and operations" ofassistance. Rather, our conclusion regarding the meaning of the term "construction" is premisedon a more authoritative dictionary definition of the term. The term "construction" is defined as"something built or erected." Webster's Third New International Dictionary 498 (1993). Theterm "excavation" is defined as "the action or process of excavating." Webster's Third NewInternational Dictionary 791 (1993). The term "excavate" is defined as "to dig out and remove." Webster's Third New International Dictionary 791 (1993). Based on the plain, ordinary meaningof the term "construction," we conclude that a reasonable person would consider the constructionprocess to encompass excavation activities. For instance, it is commonly understood thatexcavating activities are necessary to lay the foundation in the construction of a building. Sincewe conclude that the term "construction" includes excavation activities, the property damageresulting from the construction excavation operations on the adjacent property is excluded underthe policy.

FNMIC next argues on appeal that the reasoning underlying decisions of otherjurisdictions that found comparable exclusion language unambiguous should be adopted. FNMICacknowledges that no court in other jurisdictions addressed the issue of whether the omission ofthe term "excavation" from the exclusion makes the exclusion ambiguous. FNMIC contends thatother jurisdictions have held that the construction process includes multiple phases or parts andthat we should be persuaded by the reasoning underlying those decisions. See Capelouto v.Valley Forge Insurance Co., 98 Wash. App. 7, 990 P.2d 414 (1999); Tzung v. State Farm Fire &Casualty Co., 873 F.2d 1338 (9th Cir. 1989); Schultz v. Erie Insurance Group, 754 N.E.2d 971(Ind. App. 2001); L.F. Driscoll Co. v. American Protection Insurance Co., 930 F. Supp. 184(E.D. Pa. 1996), aff'd, 114 F.3d 1172 (1997); Kroll Construction Co. v. Great AmericanInsurance Co., 594 F. Supp. 304 (N.D. Ga. 1984); Brodkin v. State Farm Fire & Casualty Co.,217 Cal. App. 3d 210 (Cal. App. 1989); McDonald v. State Farm Fire & Casualty Co., 119Wash. 2d 724, 837 P.2d 1000 (1992).

El Rincon in response contends that the cases from the other jurisdictions pointed to byFNMIC are nonbinding and irrelevant. El Rincon further contends that the cases are "faultyworkmanship" cases, which is not at issue in the instant case.

We agree with El Rincon that the cases cited by FNMIC are nonbinding. Although theinsurance policies at issue in the cases cited by FNMIC contain excerpts of exclusion languagesimilar to the language at issue in the instant case, the analyses in those cases focused on thephrase "faulty workmanship" or did not directly address the issue in the instant case. We are notpersuaded by the cases cited by FNMIC and have not relied upon those cases in reaching ourdecision.

FNMIC's final argument on appeal is that there is no question of fact in the record thatprecludes granting of summary judgment once the exclusion is found valid. FNMIC notes that thetrial court raised the possibility that a question of fact may exist regarding whether theconstruction operations that allegedly caused the damage to El Rincon's property were performednegligently or were faulty. FNMIC contends, however, that El Rincon's complaint in theseproceedings suggests the improper acts, omissions and errors of the construction excavation andoperations caused the property damage. FNMIC contends that the trial court erred in notgranting its motion for summary judgment.

El Rincon responds that FNMIC attempts to divert the court's attention to an ancillaryissue and away from the issue of this appeal focusing on the interpretation of the exclusion. ElRincon contends that FNMIC must first overcome the finding that the exclusion language isambiguous to prevail on its motion for summary judgment.

We conclude, however, that exclusion 3.b(2) is not ambiguous. We, therefore, now turnto address the issue of whether a genuine issue of material fact exists supporting the trial court'sdenial of FNMIC's motion for summary judgment. The granting of summary judgment is properwhen there is no genuine issue of material fact. Dakovitz v. Arrow Road Construction Co., 26 Ill.App. 3d 56, 59, 324 N.E.2d 444, 447 (1975); Crooks Terminal Warehouses, Inc. v. AmericanNational Bank & Trust Co. of Chicago, 83 Ill. App. 3d 693, 698, 404 N.E.2d 889, 894 (1980). We review the denial or granting of summary judgment de novo. Ragan v. Columbia MutualInsurance Co., 183 Ill. 2d 342, 349, 701 N.E.2d 493, 496 (1998).

We find of importance ESI's report prepared in conjunction with this litigation on behalf ofEl Rincon regarding the property damage, which is part of the record on appeal. We note thefollowing excepts from the ESI report: "ESI observed distress to the structure that appears to becaused by movement of the foundation by the adjacent construction"; "the adjacent constructionoperations were ordered to stop construction by the City of Chicago. However, there was [sic]backfilling operations occurring during the time of ESI's inspection"; "There were dangerousconditions caused by the adjacent construction operations: damaged masonry walls, portions ofwalls left unsupported, a severely cracked parapet wall, and walls that had been impacted, etc.";"if the contractor will continue to have work progress in an unsafe manner"; and "if the work onthe adjacent property continues to be done in the manner exhibited to date, ESI is concernedabout the structural integrity of the El Rincon building." Based on a reading of the ESI report, wefind no genuine issue of material fact regarding the negligent or faulty activities occurring on theadjacent property. The language of the ESI report amply supports the contention that theactivities occurring on the adjacent property were not of the standard or quality expected ofconstruction work. We conclude that no genuine issue of material fact exists sufficient topreclude summary judgment in favor of FNMIC.

El Rincon raises a final contention in its brief that FNMIC's interpretation of the policyrenders the policy useless because it covers almost nothing. El Rincon contends that it madetimely payments to El Rincon in exchange for a policy that offers no coverage. El Rincon furthercontends that in determining when coverage is appropriate, the court can consider a policyholder'sreasonable expectations and the coverage intended by the insurance policy. Hoglund v. StateFarm Mutual Automobile Insurance Co., 148 Ill. 2d 272, 279, 592 N.E.2d 1031, 1034 (1992). El Rincon argues that it is unimaginable that El Rincon would purchase a multiple-peril policyfrom FNMIC with the expectation that there would be no coverage if the structure was damagedor destroyed by the acts of a third party on the adjacent property. El Rincon further argues thatFNMIC's denial of coverage leaves one to wonder what the multiple-peril policy actually covers.

We find little merit to El Rincon's contentions. El Rincon's contentions amount to the"reasonable expectations" doctrine. The "reasonable expectations" theory provides that " 'theobjectively reasonable expectations of applicants and intended beneficiaries regarding the terms ofinsurance contracts will be honored even though painstaking study of the policy provisions wouldhave negated those expectations.' " (Emphasis omitted.) Zurich Insurance Co. v. NorthbrookExcess and Surplus Insurance Co. v. Raymark Industries, Inc., 145 Ill. App. 3d 175, 191-92, 494N.E.2d 634, 645 (1986) (quoting Keene Corp. v. Insurance Co. of North America, 667 F.2d1034, 1042, n.12 (D.C. Cir. 1981), aff'd, 118 Ill. 2d 23, 514 N.E.2d 150 (1987). "The 'reasonableexpectations' doctrine is not recognized in Illinois." Zurich Insurance Co., 145 Ill. App. 3d at192, 494 N.E.2d at 645. However, we acknowledge the supreme court's statement in Hoglund v.State Farm Mutual Automobile Insurance Co., which El Rincon cites, that exculpatory languagemust be read in conjunction with the insured's reasonable expectations relating to uninsuredmotorist coverage and in conjunction with the public policy underlying the uninsured motoriststatute. Hoglund, 148 Ill. 2d at 279, 592 N.E.2d at 1034. Even in light of Hoglund, we do notconclude that an insured purchasing a multiple-peril insurance policy whose operation consists ofproviding professional social services would expect coverage for damages resulting fromconstruction excavation activities on an adjacent property by a contractor it did not hire. Thepolicy purchased by El Rincon included coverage for general property, equipment breakdown,crime, bodily injury and property damage liability, social work, foster care and counseling liability,personal and advertising injury liability, nonowned and hired auto liability, fire and water damagelegal liability and medical payments. We do not agree that concluding that the property damagefalls within the exclusion leaves one to wonder what the multiple-peril policy actually covers. Coverage relating to property damage was only one portion of the total coverage provided by themultiple-peril policy. The policy provided some coverage for property damage but, as stated,excluded construction operations.

Accordingly, for all of the stated reasons, we reverse the trial court's order granting summary judgment in favor of El Rincon and denying FNMIC's motion for summary judgment,and we enter judgment in favor of FNMIC.

Reversed.

O'MARA FROSSARD, P.J., and SMITH, J., concur.