Court Finds No General Liability Coverage
November 18, 2008
The 1st District Appellate Court recently held that a certificate of insurance and contractual requirements requiring a prospective additional insured to be added as an additional insured with respect to certain types of insurance, were not sufficient to confer additional insured status for commercial general liability purposes. United Stationers Supply Co. v. Zurich American Ins. Co., 2008 WL 4683291 (Sept. 30).
The prospective additional insured, United, was represented by the law firm of Schiff & Hulbert. The firm of Meckler, Bulger, Tilson, Marick & Pearson LLP represented the insurer, Zurich.
In 2004, United and D.C. Taylor Co. entered into a construction contract for Taylor to replace the roof of commercial property owned by United. The contract required, among other things, that Taylor obtain a certificate of insurance demonstrating compliance with the insurance requirements of the contract and stating that United was an additional insured, on a primary basis, but not specifying the type of insurance on which United was to be an additional insured.
The contract also required that Taylor hold United harmless against all claims in connection with injury to any person; and that Taylor purchase workers' compensation, employer's liability, contractual liability, auto and hazardous material cov-erage for the project.
Zurich issued a CGL policy to Taylor for the relevant time period which, among other things, provided coverage for any person that Taylor was "required to add as an additional insured... under a written contract." The additional insured coverage was limited to bodily injury or property damage resulting from Taylor's negligence. Another provision made the coverage applicable to any person for whom Taylor was providing services and with whom Taylor had agreed in writing to "be added as an additional insured."
In connection with the construction project, Taylor obtained a certificate of insurance, apparently from its broker, identifying United as the certificate holder of the Zurich CGL policy and stating that United was "an Additional Insured... on a primary and non-contributory basis with respect to the operations of the insured." The certificate further stated that it was issued for "information only," it did not alter the terms of the policy to which it referred, and coverage provided was subject to the terms of the policy.
An employee of United brought suit against Taylor alleging that he was injured as the result of Taylor's negligence in connection with the roof replacement project. Thereafter, Taylor filed a third-party complaint for contribution against United. In response, United took the position that its liability was limited to its workers' compensation coverage, pursuant to Kotecki v. Cyclops Welding Corp., 146 Ill. 2d 155 (1991), with which the circuit court agreed.
In addition, United tendered defense of the third party action to Zurich, pursuant to a letter to Taylor's counsel citing the certificate of insurance in which United was identified as an additional insured under the Zurich policy. Following Zurich's apparent denial of coverage, United filed the instant declaratory judgment action seeking a determination that Zurich was obligated to defend and indemnify United in the underlying action.
Zurich filed an answer and counterclaim, in which it asserted that United did not qualify as an additional insured but that, even if it did, coverage was excluded by various exclusions. Zurich filed a motion for summary judgment, and United filed a cross-motion for judgment on the pleadings in which it argued, among other things, that Zurich was barred from asserting coverage defenses because it had breached its duty to defend United.
The circuit court granted Zurich's motion and denied that of United, finding no coverage but not specifically addressing whether United was an additional insured under the Zurich policy. United took this appeal.
In an opinion by Justice Patrick J. Quinn, the 1st District affirmed. Quinn focused on United's status as an additional insured. He found the case of West American Ins. C. v. J.R. Construction Co., 334 Ill.App.3d 75 (1st Dist. 2002), relevant to the extent that it found that a general contractor was an additional insured under a policy issued to a subcontractor based in part on language in a certificate of insurance and in part on other documents, such as the insurer's internal communications.
Quinn also noted two lines of Illinois cases relating to certificates of insurance, one line giving priority to language of the certificate over the actual insurance policy, and the other finding that policy language itself governs the extent and terms of coverage where the certificate language expressly stated that it did not govern. Quinn determined that the second line of cases would apply here.
He further noted that, while this case involved some similarity to J.R. Construction, unlike that case, no evidence was presented here demonstrating an intent by the parties to include United as an additional insured under the Zurich CGL policy. Specifically, the contract between United and Taylor contained no express language requiring that United be an additional insured under the CGL policy, and there were no internal Zurich documents reflecting its understanding that United was an additional insured.
Also, while the roofing contract did require that Taylor purchase certain kinds of policies, CGL coverage was not among them. In addition, the certificate-of-insurance provision was silent as to which types of insurance were to be included under the certificate. And, said Quinn, the indemnity language itself did not require the purchase of insurance on behalf of United.
Accordingly, even though the circuit court made no determination as to whether United was an additional insured, Quinn concluded that it was not. Quinn based his finding on the grounds that (1) United was not specifically listed as an additional insured under the Zurich policy, (2) the construction contract did not specifically require the purchase of CGL coverage, (3) there was no evidence of intent by the parties that United was to be added as an additional insured under the CGL policy, and (4) the certificate of insurance could not alter the additional insured cover-age of the policy.
The court therefore affirmed the judgment in favor of Zurich, finding it unnecessary to address the policy exclusions relied on by Zurich.
