Appellate Court Rejects Request To Reform Contract To Create Additional Insured Status In Connection With 69 West Washington Fire
October, 2007
A deadly fire occurred in the Cook County Administration Building at 69 West Washington in Chicago. The County, and the company that managed the county-owned building, sought coverage for the underlying lawsuits as additional insureds under the CGL policy issued to a security services subcontractor. The trial court found coverage but the appellate court reversed in Clarendon America Ins. Co. v. 69 West Washington Management LLC, 870 N.E.2d 978 (Ill. App. 2007)
Facts
Aargus entered into a contract with 69 West, acting as the manager and agent of Cook, to provide security guard services to the commercial high-rise building located at 69 West Washington Street in Chicago. The contract provided that Aargus was to purchase and maintain specific types of insurance, and was required to name 69 West and Cook as additional insureds in those policies. Aargus and BGK entered into a contract entitled "Joint Venture Agreement, 69 West Washington Management Company, L.L.C., 69 West Washington, Chicago, IL 60602" (hereafter, Aargus/BGK Agreement) in which the parties agreed to jointly provide security guard service at the 69 West Washington building. The Aargus/BGK Agreement also provides that the obligations under "the Contract shall be joint and several, unless otherwise agreed herein." BGK obtained a CGL policy from Clarendon which included a "Blanket Additional Insured Endorsement" extending coverage as an additional insured to any person or organization the named insured was obligated by valid written contract to provide such coverage, but only with respect to liability for 'bodily injury' or 'property damage' arising solely out of 'your work' on behalf of said additional insured for which coverage is provided by this policy." Scottsdale issued an excess liability policy to BGK, which followed form to the Clarendon policy.
On October 17, 2003, a fire occurred at the 69 West Washington building. As a result of the deaths and injuries that occurred in the fire, 22 lawsuits were filed in the Circuit Court of Cook County. 69 West, Cook, Aargus and BGK were named as defendants, third-party defendants, and/or counterdefendants and tendered defense of the underlying lawsuits to Clarendon. In July 2004, Clarendon filed the instant suit seeking a declaration that the Clarendon policy issued to BGK did not include 69 West and Cook as additional insureds. Scottsdale was granted leave to intervene in the circuit court and filed its own complaint for declaratory judgment. On cross motions for summary judgment, the trial court found coverage for 69 West and Cook.
Analysis
The appellate court reversed, holding that 69 West and Cook are not "additional insureds" because the blanket additional insured endorsement in the Clarendon policy applies only to liability "arising solely out of" BGK's services. Finding silence in the agreement as to a purported requirement that BGK obtain coverage for any other party , the court refused to unilaterally correct these alleged mistakes and recognize an intention for BGK to be held accountable for the insurance provisions in the 69 West/Aargus Contract.
The court noted that the parties to the contract were not parties to the appeal. The appellate parties consisted of parties asserting mistakes in the contract. They were third parties to the contract, and their attempt to reform the
contract could negatively impact rights of Clarendon and Scottsdale by requiring them to defend 69 West and Cook.
[I]t is generally recognized that while mistakes will be corrected or relieved against as between parties to the original transaction and those claiming under them with notice, the courts will not grant relief against mistakes so as to affect the intervening rights of third parties.
In refusing to reform the contract to find an obligation to provide coverage to 69 West and Cook as additional insureds, the court examined the language of the agreement. Finding there was no intent to provide additional insured status, the court observed that Aargus and BGK agreed that their obligations to fulfill the services were joint and several, unless otherwise agreed. Another portion of the contract indicated the parties' intent to leave open the subject of insurance for a future agreement. Finally, because the parties included an integration clause, they explicitly manifested their intention to protect themselves against misinterpretations of the contract which might arise from extrinsic evidence. It is assumed that the parties' written agreement expresses their mutual intentions, and this conclusion will not yield to any other unless the contrary evidence is clear and convincing. Therefore, based upon the foregoing considerations, the appellate court declined to extend additional insured status.
Learning Point
For a contract to incorporate all or part of another document by reference, the reference must show an intention to incorporate the document and make it part of the contract. This fundamental principle applies in ascertaining additional insured status under a blanket additional insured endorsement in a CGL policy.
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