Defense Duty Based On Extraneous Documents
September 15, 2010
The 1st District Appellate Court recently held that an insurer had a duty to defend an additional insured under an endorsement extending coverage for "liability incurred solely as a result of some act or omission of the named insured," even though the underlying complaint made allegations of negligence against the additional insured, and contained no allegations based on vicarious liability. First Insurance Co. v. Pulte Home Corp., 2010 WL 3359558 (Ill. Ct. App. 1st Dist. Aug. 25, 2010).
The additional insured, Pulte, was represented by Belgrade & O'Donnell P.C., and Pretzel & Stouffer Chartered represented the insurer, Pekin.
Pulte was a general contractor on a home-building project, and Jim Kunde Construction Inc. was Pulte's sewer and water subcontractor. In August 2007, an employee of Commonwealth Edison, Kaiser, brought suit against both Pulte and Kunde, claiming that he injured himself when he fell into an unguarded sewer manhole on the project.
The contract between Pulte and Kunde required Kunde to indemnify Pulte and to add it as an additional insured on Kunde's liability insurance policy. Kunde's policy, issued by Pekin, thus contained a blanket additional insured endorsement extending coverage to Pulte, but only for liability resulting from Kunde's negligence and not for Pulte's own independent negligence.
Kaiser's complaint contained allegations that both Pulte and Kunde committed various negligent acts, including failing to inspect the site, failing to warn and failing to barricade or cover the manhole. The underlying complaint did not allege vicarious liability on the part of Pulte. In response to a request to admit in the underlying litigation, however, Kaiser admitted that vicarious liability was one of the theories he was pursuing.
In response to the complaint, Pulte denied the allegations, raised various affirmative defenses and tendered its defense to Pekin. Pekin denied coverage on the ground that the additional insured endorsement did not provide coverage for Pulte's own acts or those in which Pulte played a role. Pekin also filed this declaratory judgment action for a determination of its rights and obligations under the policy.
Pekin and Pulte subsequently filed cross motions for summary judgment, and the trial court ruled that Pekin had a duty to defend. This appeal followed.
In an opinion by Justice Patrick J. Quinn, the 1st District affirmed. He noted Pekin's main argument that no duty to defend was owing because the underlying complaint did not allege that Pulte is solely liable as a result of some act of the named insured. According to the complaint, argued Pekin, Pulte faced only direct liability for its own negligent acts and not vicarious liability for those of Kunde.
Quinn said, however, that a trial court is not limited to the allegations in the complaint in determining whether an insurer has a duty to defend. In support, he cited several cases, including American Economy Insurance Co. v. Holabird & Root, 382 Ill. App. 3d 1017 (1st Dist. 2008), and Fidelity & Casualty Co. of New York v. Envirodyne Engineers, Inc., 122 Ill. App. 3d 301 (1st Dist. 1983).
He further observed that in Pekin Insurance Co. v. Wilson, 237 Ill. 2d 446 (2010), the Illinois Supreme Court endorsed the holdings in Holabird & Root and Envirodyne, stating that they set forth the proper consideration for deciding whether a court should examine evidence beyond that contained in the underlying complaint in deciding the duty to defend.
To the contrary, Pekin cited Pekin Insurance Co. v. Roszak, No. 1-09-1709 (1st Dist. June 25, 2010), decided after Wilson, in which the 1st District limited its analysis on the issue of the duty to defend by looking solely at the underlying complaint, and stating that "we are still tied to the words of the complaint." Quinn countered that Roszak was decided by a different division of the 1st District and that it was contrary to Wilson. He therefore determined that the court could look not only to the underlying complaint but also to other relevant pleadings and documents.
Quinn thus cited to Kaiser's response to the request to admit in the underlying case indicating that he was pursuing a theory of vicarious liability against Pulte. Quinn also noted Kunde's answer to Pulte's counterclaim admitting that Kunde was in the sewer and water business and was responsible for the portion of the construction project that was the subject of Kaiser's lawsuit. These were indicia, according to Quinn, that Kunde could be found solely negligent and that Pulte's liability, if any would be solely vicarious.
Quinn also found relevant the contract between Pulte and Kunde. It contained language stating that Kunde would defend and indemnify Pulte unless the claims were determined by a trier of fact to be the sole negligence of Pulte. This language suggested to Quinn that Kaiser's allegations were within or potentially within coverage.
Pekin cited several additional cases holding that, under language similar to that contained in the additional insured endorsement here, an insurer does not have a duty to defend an additional insured where the underlying complaint alleges that the additional insured's liability is based on its own acts or omissions.
Quinn found all of Pekin's cases distinguishable in part on the ground that the courts in those cases did not look beyond the underlying complaint, as permitted by Wilson, to analyze the terms of the contract between the contractor and subcontractor, or to analyze other documents or evidence that could help in resolving the duty to defend.
Ultimately, said Quinn, under the terms of the subcontract between Pulte and Kunde, as well as the facts giving rise to the underlying litigation, Pekin had a duty to defend Pulte until a trier of fact made a determination regarding liability.
The court therefore affirmed summary judgment in favor of Pulte on the duty to defend.
