Defense Duty Not Based On 3d-Party Complaint
June 16, 2009
The 1st District Appellate Court recently held that the allegations of an additional insured's third-party complaint against the named insured could not be considered in deciding whether the insurer had a duty to defend the additional insured in an underlying lawsuit by an employee of the insured against the additional insured. National Fire Insurance of Hartford v. Walsh Construction Co., 2009 WL 1393417 (May 18, 2009).
The insurer, National Fire, was represented by law firm of Litchfield, Cavo LLP. Kralovec & Marquard Chtd. represented the additional insureds, Walsh and the Chicago Historical Society.
The owner of a construction project, the CHS hired Walsh as a general contractor for the renovation of a building in Chicago. Walsh subcontracted with J.L. Adler Roofing to provide labor and materials for the roofing portion of the project. As part of the agreement between Walsh and Adler, Walsh and the CHS were named as additional insureds on Adler's CGL policy with National Fire.
The policy limited additional insured coverage solely for liability due to Adler's negligence for the additional insureds and excluded coverage for liability resulting from the sole negligence of the additional insureds.
In December of 2005, an Adler employee, Ira Brainerd, was injured while performing work on the roof. He filed a two-count complaint against Walsh and the CHS alleging that their negligent acts caused his injuries. Specifically, he alleged that his injuries were caused by an employee of Walsh who moved a section of the roof's support, causing the roof deck to fall and resulting in his injuries.
He further alleged that he was not provided with a safe place to work and that Walsh retained control of the work being performed by Adler. He made similar allegations against the CHS as owner.
Walsh tendered the Brainerd complaint to National Fire for defense and indemnification. National Fire rejected the tender, concluding that the complaint made no allegation of negligence on the part of Adler. It subsequently filed a complaint seeking a declaration that it had no obligation to defend Walsh or the CHS.
Subsequently, Walsh and the CHS filed a third-party complaint against Adler in the underlying lawsuit. They alleged that Brainerd was injured in the scope of his employment for Adler, that Adler failed to provide Brainerd with a safe place to work, and that it otherwise failed to properly supervise Brainerd while he worked on the roof.
The parties in the coverage action filed cross motions for summary judgment, and the trial court granted National Fire's and denied that of the defendants. Walsh and the CHS then took this appeal.
In an opinion by Justice Rodolfo Garcia, the 1st District affirmed. He began by addressing Walsh's argument that Brainerd's underlying allegations that he was not provided a safe place to work implicitly implicated his own employer, Adler. Garcia acknowledged that it was possible that both Adler and Walsh shared a duty to provide Brainerd with a safe place to work, but said that the real question was whether the exclusion in the policy applicable to the underlying defendants' "sole negligence" had been triggered.
He further noted that there are cases, such as L.J. Dodd Construction Inc. v. Federated Mutual Ins. Co., 365 Ill.App.3d 260, 848 N.E.2d 656 (1st Dist. 2006), in which the claimed injury arises solely from the negligence of the general contractor. To the extent that the defendants were contending that the mere fact that an employee of the named insured is injured on the job site is itself sufficient to give rise to an inference of negligence on the part of named insured, Garcia said that such a proposition was rejected.
Rather, said Garcia, something more than some unspecified breach of the subcontractor's duty to provide a safe work place is required to support a claim that the underlying complaint implicates negligence on the part of the subcontractor. Here, the underlying complaint placed the alleged negligence on no one other than the general contractor. Since the duty to defend arises from the allegations of the underlying complaint, no such duty could arise here.
The defendants argued, however, that under American Economy Ins. Co. v. Holabird & Root, 382 Ill.App.3d 1017, 886 N.E.2d 1166 (1st Dist. 2008), the trial court erred in not considering the allegations of the third-party complaint against Adler in deciding the duty to defend. In American Economy, the 1st District relied in part on the allegations of a third-party complaint in finding that an insurer had an obligation to provide additional insured coverage to a defendant named in the original action.
According to Garcia, however, a court's consideration of a third-party complaint is limited. In American Economy, the third-party complaint was filed by the additional insured's co-defendant in the main lawsuit, whereas here it was Walsh, the additional insured itself, that filed the third-party complaint, although Garcia acknowledged that CHS was a nominal plaintiff in the third-party action as well.
In addition, Garcia observed that Walsh filed its third-party pleading after National Fire brought the instant declaratory judgment action. This timing suggested that the third-party complaint sought to add what the underlying construction negligence complaint did not state, namely, that Adler was contributorily negligent.
Under these circumstances, Garcia said that the allegations of the third-party complaint should not be considered in resolving the duty to defend. The court therefore affirmed the decision for National Fire.
