{ "id": 5365572, "name": "CONTINENTAL CASUALTY COMPANY, Plaintiff-Appellee, v. HOWARD C. FLOMENHOFT, Indiv., et al., Defendants (John A. McGuinn et al., Defendants-Appellants)", "name_abbreviation": "Continental Casualty Co. v. Flomenhoft", "decision_date": "1994-04-25", "docket_number": "No. 1\u201492\u20140564", "first_page": "22", "last_page": "27", "citations": [ { "type": "official", "cite": "263 Ill. App. 3d 22" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "396 N.E.2d 504", "category": "reporters:state_regional", "reporter": "N.E.2d", "pin_cites": [ { "page": "508" } ], "opinion_index": 0 }, { "cite": "77 Ill. 2d 323", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5490059 ], "pin_cites": [ { "page": "332" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/77/0323-01" ] }, { "cite": "728 F.2d 374", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 57642 ], "pin_cites": [ { "page": "377" } ], "opinion_index": 0, "case_paths": [ "/f2d/728/0374-01" ] }, { "cite": "638 F. Supp. 259", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 3877294 ], "year": 1984, "opinion_index": 0, "case_paths": [ "/f-supp/638/0259-01" ] }, { "cite": "607 N.E.2d 1185", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "154 Ill. 2d 48", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 4820169 ], "opinion_index": 0, "case_paths": [ "/ill-2d/154/0048-01" ] }, { "cite": "532 N.E.2d 526", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 2, "pin_cites": [ { "page": "528" }, { "page": "528" } ], "opinion_index": 0 }, { "cite": "177 Ill. App. 3d 454", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3620451 ], "weight": 2, "pin_cites": [ { "page": "458" }, { "page": "458" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/177/0454-01" ] }, { "cite": "473 N.E.2d 405", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 3, "pin_cites": [ { "page": "408" }, { "page": "408" }, { "page": "408" } ], "opinion_index": 0 }, { "cite": "129 Ill. App. 3d 1089", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3490015 ], "weight": 3, "pin_cites": [ { "page": "1092" }, { "page": "1092" }, { "page": "1092" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/129/1089-01" ] }, { "cite": "566 N.E.2d 477", "category": "reporters:state_regional", "reporter": "N.E.2d", "pin_cites": [ { "page": "479" } ], "opinion_index": 0 }, { "cite": "207 Ill. App. 3d 881", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2554915 ], "pin_cites": [ { "page": "884" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/207/0881-01" ] }, { "cite": "523 N.E.2d 30", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1990, "pin_cites": [ { "page": "33" } ], "opinion_index": 0 }, { "cite": "168 Ill. App. 3d 726", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3511787 ], "year": 1990, "pin_cites": [ { "page": "730" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/168/0726-01" ] } ], "analysis": { "cardinality": 626, "char_count": 13832, "ocr_confidence": 0.775, "pagerank": { "raw": 7.317852702137001e-08, "percentile": 0.43582367157313034 }, "sha256": "ecbb1d81d5a61ff0c7d3090b63ba8106ea42a33d210f5756faee9b807568b1e5", "simhash": "1:9265e0de6f4ce406", "word_count": 2101 }, "last_updated": "2023-07-14T21:36:39.761555+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "CONTINENTAL CASUALTY COMPANY, Plaintiff-Appellee, v. HOWARD C. FLOMENHOFT, Indiv., et al., Defendants (John A. McGuinn et al., Defendants-Appellants)." ], "opinions": [ { "text": "JUSTICE BUCKLEY\ndelivered the opinion of the court:\nContinental Casualty Company (Continental) brought an action seeking a declaratory judgment that it was not required to defend or indemnify Howard Flomenhoft (Flomenhoft), an attorney, for his legal malpractice in connection with his formation and representation of Morgan Associates (Morgan), a limited partnership, in which Montclair Investments (Montclair) was a limited partner. Besides Flomenhoft, the named defendants are the partners in Montclair. Continental moved for summary judgment on the grounds that (a) the policy it issued Flomenhoft did not provide coverage because his negligence predated the policy period, and (b) coverage was precluded under the \u201cbusiness exclusion\u201d provision in the policy. The trial judge granted Continental\u2019s summary judgment motion \"on all bases argued.\u201d On appeal, defendants contend: (1) that Flomenhoft\u2019s negligent conduct continued during the policy period and did not constitute a single negligent \"occurrence\u201d which predated the coverage period; and (2) that the \"business enterprise\u201d exclusion does not apply to preclude coverage. We affirm.\nFlomenhoft, through his professional corporation Howard C. Flomenhoft, Ltd., was the named insured under a professional liability policy issued by Continental. The coverage period under the policy was from September 7, 1977, through September 7, 1982. The policy provided that Continental would pay all damages which Flomenhoft became legally obligated to pay which arose out of his performance of professional services as an attorney \"because of an error, negligent omission or negligent act.\u201d The policy further provided that it would apply only \"to errors, negligent omissions and negligent acts taking place during the policy period.\u201d The policy also explicitly excluded coverage for errors, negligent acts or negligent omissions \"occurring while performing professional services for a business enterprise owned by an insured, a business enterprise in which the insured is a partner or a business enterprise which is controlled, managed or operated by an insured.\u201d\nIn the fall of 1976, Flomenhoft began exploring the possibility of setting up a \"tax shelter\u201d by forming a limited partnership which would invest in coal mines. At that time, the Internal Revenue Service (IRS) gave favorable treatment to coal mining investments and, therefore, the investors in the limited partnership would gain substantial tax advantages. In early October 1976, Flomenhoft began negotiating with Aminex Corp. (Aminex), an owner of certain mineral rights in coal mines, about the possibility of having a limited partnership formed by Flomenhoft sublease Aminex\u2019s mineral rights.\nSubsequently, the IRS announced that it was eliminating favorable tax treatment for coal mining investments effective October 28, 1976. The IRS stated, however, that this tax change would not affect deals which were already \"in place\u201d on October 28, 1976. According to Flomenhoft, he and Aminex reached an oral agreement on October 28. It is uncontested, however, that no agreement was reached between Flomenhoft and Aminex prior to October 28. Additionally, Flomenhoft admitted that the documents creating Morgan Associates, the limited partnership which would sublease Aminex\u2019s mineral rights, were not prepared nor was the partnership agreement signed until after October 28, 1976. Nonetheless, Flomenhoft advised others to use the date of October 28 as the date that Morgan was formed.\nFlomenhoft, through his professional corporation, was a 3% limited partner in Morgan. According to defendants, however, neither he nor his corporation \"controlled, managed, or operated\u201d Morgan. Additionally, neither he nor his corporation had any management or ownership interest in Montclair.\nFlomenhoft, however, was the general counsel for Morgan. In such capacity, he prepared Morgan\u2019s partnership agreement and investment memorandum which gave the date of Morgan\u2019s formation as October 28, 1976. According to defendants, in reliance upon Flomenhoft\u2019s advice that investors would gain substantial tax advantages, Montclair became a limited partner in Morgan on December 29, 1976. Additionally, as counsel to Morgan, Flomenhoft gave continuing legal advice to Morgan\u2019s limited partners which included defendants, the partners in Montclair, on numerous subjects including the purported tax savings investors would gain as limited partners in Morgan.\nFlomenhoft also prepared the partnership K-l tax returns for the years 1977 through 1981 which he distributed to Morgan\u2019s investors. Moreover, he represented Morgan during its IRS tax audit for the years 1976 and 1977. The IRS subsequently disallowed the tax deductions taken by Morgan on the ground that the limited partners, including Montclair, had not joined the partnership before October 28, 1976.\nAt the hearing on Continental\u2019s motion for summary judgment, Continental argued both that Flomenhoft\u2019s negligent acts which caused defendants\u2019 injuries constituted a single \"occurrence\u201d which predated the policy period and that, even if the policy was implicated, its \"business exclusion\u201d provision applied to preclude coverage. Defendants asserted that Flomenhoft\u2019s negligence continued through the policy period and that the policy was not triggered until defendants suffered injury. The trial judge accepted both arguments asserted by Continental and granted Continental\u2019s motion. Defendants filed this timely appeal.\nDefendants\u2019 first assertion on appeal is that Continental is responsible for coverage because defendants suffered injury during the policy period. Continental, on the other hand, responds that the policy it issued Flomenhoft did not provide coverage because Flomenhoft\u2019s negligence predated the policy period. Although a legitimate question of coverage exists, for purposes of this appeal, we will assume that the policy provided coverage and choose to decide this cause under defendant\u2019s second contention.\nSummary judgment is only proper if, after reviewing all the pleadings, affidavits, and other evidence on file in the light most favorable to the nonmovant, it is clear that no material question of fact is at issue and that the movant is entitled to judgment as a matter of law. (Ill. Rev. Stat. 1991, ch. 110, par. 2\u20141005 (now 735 ILCS 5/2\u20141005 (West 1992)); Srivastava v. Russell\u2019s Barbecue, Inc. (1988), 168 Ill. App. 3d 726, 730, 523 N.E.2d 30, 33.) The construction of insurance contracts is a question of law and thus a proper subject of motions for summary judgment. Scottish & York International Insurance Group/ Guarantee Insurance Co. v. Comet Casualty Co. (1990), 207 Ill. App. 3d 881, 884, 566 N.E.2d 477, 479.\nWe also note that the general rules of contract construction apply equally to insurance contracts. (Management Support Associates v. Union Indemnity Insurance Co. (1984), 129 Ill. App. 3d 1089, 1092, 473 N.E.2d 405, 408.) Therefore, where policy language is clear and unambiguous, it will be given \"its plain, ordinary and popular meaning\u201d (Management Support, 129 Ill. App. 3d at 1092, 473 N.E.2d at 408) and there is no need for a court to construe that language. (Mason v. Home Insurance Co. (1988), 177 Ill. App. 3d 454, 458, 532 N.E.2d 526, 528.) Additionally, we will examine the policy language in light of the policy as a whole. Management Support, 129 Ill. App. 3d at 1092, 473 N.E.2d at 408.\nDefendants\u2019 second contention on appeal is that the \"business enterprise\u201d exclusion included within the policy does not apply to preclude coverage. Continental\u2019s policy explicitly excluded coverage for Flomenhoft\u2019s errors, negligent acts, or negligent omissions \"occurring while performing professional services for a business enterprise owned by an insured, a business enterprise in which the insured is a partner or a business enterprise which is controlled, managed or operated by an insured.\u201d (Emphasis added.) Flomenhoft, through his professional corporation, was a 3% limited partner in Morgan. He had no partnership interest, however, in Montclair, the limited partner in Morgan in which defendants were partners. Defendants argue that the relevant business enterprise was Montclair. Defendants maintain that \"there should be no dispute that as Flomenhoft acted as attorney for Morgan, he likewise acted as an attorney for Montclair.\u201d In support of this contention, defendants cite Collins v. Reynard (1992), 154 Ill. 2d 48, 607 N.E.2d 1185, where, according to defendants\u2019 interpretation, the Illinois Supreme Court \"made it clear that an attorney could be held liable for economic damages caused by the attorney\u2019s negligence where the party seeking relief is an intended third-party beneficiary of the contractual agreement with the attorney.\u201d Since Flomenhoft had no partnership interest in Montclair, defendants contend that the exclusion does not preclude coverage.\nContinental, on the other hand, asserts that the relevant business enterprise for which Flomenhoft was rendering legal services was Morgan and not Montclair. In support of this assertion, Continental points to Mursau Corp. v. Florida Penn Oil & Gas, Inc. (W.D. Pa. 1986), 638 F. Supp. 259, and Quintel Corp., N.V. v. Citibank, N.A. (S.D.N.Y. 1984), 589 Supp. 1235, both of which held that an attorney, by virtue of his representation of a limited partnership, is not also the attorney for the limited partners. Since Flomenhoft was a limited partner in Morgan, Continental asserts that the policy exclusion applies.\nAlthough we agree with defendants that an attorney owes a duty to third parties who are intended beneficiaries of his services, this duty is not synonymous with an attorney-client relationship. Flomenhoft clearly owed a duty to defendants and they can surely seek redress for damages caused by his breach of that duty. The question here, however, is whether Continental is responsible, under the terms of its policy, to pay those damages.\nThe policy specifically excludes coverage for damages caused by Flomenhoft\u2019s negligent acts or omissions committed while acting as an attorney for \"a business enterprise in which [Flomenhoft] is a partner.\u201d In our opinion, the facts do not support the Montclair defendants\u2019 assertions that Flomenhoft was their attorney. In fact, defendants alleged in their complaint that Flomenhoft was Morgan\u2019s attorney and that defendants relied on his legal expertise \"as the attorney for Morgan Associates.\u201d Therefore, the relevant business enterprise for purposes of the policy exclusion is Morgan. Since Flomenhoft was a partner in Morgan at the time he committed his negligent acts and omissions, it would appear that the policy exclusion applies to preclude coverage.\nDefendants assert, however, that even assuming that Morgan is the relevant business enterprise, \"Flomenhoft\u2019s partnership interest in Morgan, as a three percent limited partner, did not rise to the requisite general partnership level which could cause the business enterprise exclusion to apply.\u201d Defendants argue that the limited rights and obligations of a limited partner make the only reasonable reading of the term \"partner\u201d in the policy to be \"general partner.\u201d\nWe note that we would exceed our authority if we did not attempt \"to effectuate the intent of the parties as expressed by the contract.\u201d (Emphasis added.) (Mason, 177 Ill. App. 3d at 458, 532 N.E.2d at 528.) As we stated above, when language in an insurance contract is clear and unambiguous, it must be given its plain, ordinary and popular meaning \"without further construction.\u201d Michigan Chemical Corp. v. American Home Assurance Co. (6th Cir. 1984), 728 F.2d 374, 377.\nAccording to Webster\u2019s dictionary, a \"partner\u201d is \"one of two or more persons associated as joint principals in carrying on any business with a view to joint profit: a member of a partnership.\u201d (Webster\u2019s Third New International Dictionary 1648 (1981).) According to Webster\u2019s, the terms \"general partner\u201d and \"limited partner\u201d are encompassed by this definition of \"partner\u201d and serve merely to describe the legal relationships among partners and to define their differing legal rights, obligations and duties. Although limited partners in reality may only be \"passive investors,\u201d they are \"entitled to share in the profits and losses of the partnership\u201d (see Kramer v. McDonald\u2019s System, Inc. (1979), 77 Ill. 2d 323, 332, 396 N.E.2d 504, 508) and, as such, are still partners in the ordinary and common meaning of that term.\nThis policy clearly excludes coverage for damages caused by the negligent acts or omissions of Flomenhoft while performing legal services \"for a business in which [Flomenhoft] is a partner.\u201d (Emphasis added.) The ordinary and common understanding of the term \"partner\u201d includes both limited and general partners. There is no basis upon which we can conclude that when the term \"partner\u201d is used in a contract it is synonymous with general partner and not meant to include limited partner. If the parties intended a distinction between these two types of business partners, it is not unreasonable to expect that they would have provided for such a distinction in their contract. Thus, Continental is not liable under the policy because Flomenhoft was rendering services for a business in which he was a partner.\nAccordingly, for the foregoing reasons, we affirm the judgment of the circuit court of Cook County.\nAffirmed.\nCAMPBELL, P.J., and O\u2019CONNOR, J., concur.", "type": "majority", "author": "JUSTICE BUCKLEY" } ], "attorneys": [ "Kane, Obbish, Propes & Garippo, of Chicago (Susan G. Feibus, of counsel), for appellants.", "Hinshaw & Culbertson, of Chicago (D. Kendall Griffith, of counsel), for appellee." ], "corrections": "", "head_matter": "CONTINENTAL CASUALTY COMPANY, Plaintiff-Appellee, v. HOWARD C. FLOMENHOFT, Indiv., et al., Defendants (John A. McGuinn et al., Defendants-Appellants).\nFirst District (1st Division)\nNo. 1\u201492\u20140564\nOpinion filed April 25, 1994.\nKane, Obbish, Propes & Garippo, of Chicago (Susan G. Feibus, of counsel), for appellants.\nHinshaw & Culbertson, of Chicago (D. Kendall Griffith, of counsel), for appellee." }, "file_name": "0022-01", "first_page_order": 40, "last_page_order": 45 }