Joseph P. Postel
Commercial General Liability Coverage Litigation Highlights
 
1. Additional Insured Endorsement—HVAC Repairman Falls To His Death In Woodfield Mall Common Area—Mall Not Entitled To Coverage Under Tenant's Policy.

Liberty Mutual Fire Ins. Co. v. Woodfield Mall, LLC, et al., Circuit Court of Cook County, case no. 07 CH 8457 (June 5, 2009).

LensCrafters leased space in the Woodfield Mall in Schaumburg, Illinois for its eye care retail store. LensCrafters called its HVAC contractor, Carrier Corp., to repair its air conditioner, which was located in a common area on the roof of the mall. Carrier sent Mark Swanson, who, while descending a fixed ladder also in a common area of the mall, fell to his death. Swanson sued the mall, and the mall sought a defense from LensCrafters' insurer, Liberty Mutual, under an additional insured endorsement that limited the mall's coverage to liability "arising out of the leased premises." The mall contended that its liability to Swanson's estate did arise out of the leased premises, inasmuch as LensCrafters had summoned Swanson to the mall, and he was killed while performing the work he was summoned to perform. We argued that Ohio law controlled, since LensCrafters and its affiliates are headquartered there, and under Ohio law, the mall would not be covered unless it was vicariously liable for LensCrafters' acts or omissions, which would be a legal impossibility under the factual scenario alleged in the complaint filed by Swanson's estate. The court agreed and entered summary judgment for Liberty Mutual, finding and declaring that Liberty Mutual owed no defense or coverage to Woodfield Mall.

2. Additional Insured Vicarious Liability Endorsement—Construction Site Bodily Injury—General Contractor Covered Under Subcontractor's Policy.

American Country Ins. Co. v. Turner Constr. Co., Circuit Court of Cook County, case no. 07 CH 26453 (May 22, 2009), after remand from the Illinois Appellate Court, First District, case no. 1-05-1825 (unpublished) (2007).

Joseph Orth was an electrician employed by G&M on a construction project in Schaumburg, Illinois, for which Turner was the general contractor. He fell off a ladder owned by G&M and severely injured his leg. He sued Turner for his injury, alleging that Turner failed to properly control and supervise G&M's work. Turner tendered its defense to American Country, G&M's CGL insurer, which listed Turner as an additional insured. American Country filed a declaratory judgment action, contending that its additional insured coverage was limited to Turner's vicarious liability for G&M's acts and omissions, and that because Orth's complaint contained no allegation that G&M was guilty of any such acts or omissions, and that Turner itself was guilty of such acts or omissions, American Country had no duty to defend Turner. The court granted American Country's motion for summary judgment, and Turner appealed. The Appellate Court reversed, holding that the complaint did not foreclose the possibility that Turner could be vicariously liable for G&M's acts and omissions, and thus, American Country had a duty to defend Turner. While the appeal was pending, the underlying case settled, with Turner's insurer, Liberty Mutual, paying the settlement on behalf of Turner. On remand in the coverage litigation, the Circuit Court entered summary judgment in favor of Liberty Mutual, finding that American Country owed reimbursement for all defense and settlement costs, plus prejudgment interest, that Liberty Mutual incurred in defending Turner, and in paying the settlement on Turner's behalf. We represented Turner and its CGL carrier, Liberty Mutual, throughout the entirety of these proceedings.

3. Construction Defect—College Auditorium—No Coverage For Additional Insured General Contractor Under Subcontractor's Policy

Acuity v. F.H. Paschen, S.N. Nielsen, Inc. et al., Circuit Court of Cook County, case no. 07 CH 37008 (May 5, 2009).

The Wojcik Conference and Performing Arts Center at Harper College in Palatine, Illinois was defectively constructed, and the college incurred substantial costs in repairing the defects. The college sought to recover those costs by suing the general contractor, F.H. Paschen, S.N. Nielsen, Inc. ("Paschen"). Paschen tendered its defense to Acuity, our client, which insured the window subcontractor, Chakra, Inc. ("Chakra"). We moved for and obtained summary judgment on a number of grounds, including the following: (1) that the certificates of insurance issued by the broker, which listed Paschen as an additional insured on Acuity's policies, were ineffective to make Paschen an additional insured, because none of them pertained to the Harper College project, and in any event, a certificate cannot confer rights not conferred by the policy itself, (2) the college's complaint did not allege "property damage" caused by an "occurrence," as the policies define those terms, and (3) Paschen took too long to notify Acuity of the college's suit.

4. Construction Defect—School Building—No Coverage For Excavating Contractor.

Acuity v. MGT Trucking & Excavating, Inc., Circuit Court of Lake County, case no. 08 MR 477 (April 15, 2009).

Acuity insured MGT Trucking & Excavating, Inc. ("MGT"), an excavating contractor that was hired to excavate and do soil preparation work at the site of a new school building in Lake Zurich, Illinois. The school board filed suit against MGT, alleging that as a result of MGT's improperly performed work, the soil settlement was uneven, and the school building developed cracks and other defects. We moved for summary judgment in the ensuing coverage litigation, on the grounds that the school's complaint did not allege "property damage" caused by an "occurrence," as the policies define those terms, because the complaint sought only the cost of repairing defective work, as opposed to damage to property resulting from an accident. MGT contended that damage to the building itself was an accident, because MGT did not perform work on the building. MGT relied on cases holding that if the complaint alleges damage to "other property," as opposed to the work itself, there could be coverage. We responded that in order to qualify as "damage to other property," the damage would have to be to something other than the construction project. Merely alleging damage to other parts of the project beyond the particular part the insured worked on is not enough to constitute "damage to other property," we contended. Although there were a couple of federal district court decisions that supported our position, no Illinois appellate decision directly addressed this question. The court agreed with us, and entered summary judgment for our client, Acuity.

5. Pollution Control Board Proceedings—No Coverage For Mobile Home Park's Tainted Water Supply

Acuity v. Morton Mobile Home Park, LLC, Circuit Court of Cook County, case no. 08 CH 753 (March 16, 2009).

Loretta Thigpen, a resident of the Morton Mobile Home Park ("Morton") in downstate Tazewell County, filed a "citizen's complaint" in the Illinois Pollution Control Board, seeking civil penalties and other unspecified relief from Morton, which operated the mobile home park where she resided. She alleged that the mobile home park's drinking water supply was tainted with arsenic, in violation of standards promulgated by the Illinois Environmental Protection Agency. Morton sought a defense to the citizen's complaint under its CGL policy with Acuity. We filed a complaint for declaratory judgment, contending among other things that the complaint fell within the policy's "absolute pollution exclusion." Morton responded that arsenic is naturally occurring in the environment, and that the absolute pollution exclusion has been judicially interpreted to apply only to "traditional pollution," i.e., pollutants entering the air or water form another source, such as a factory. Accordingly, argued Morton, the exclusion did not apply. We replied by citing a case from the Supreme Court of Virginia, which recognized arsenic in a drinking water supply as a "pollutant" within the meaning of the "absolute pollution exclusion." We also cited the definition of "pollutants" found in the Federal Safe Drinking Water Act, which includes arsenic. The court agreed with our position, and entered summary judgment for Acuity, finding and declaring that Acuity had no duty to defend Morton with respect to Thigpen's citizen's complaint.

6. Mold—Defective Flood Remediation Work—No Duty To Defend

Acuity Ins. Co. v. Action Cleaners Restoration, Circuit Court of McHenry County, No. 04 MR 248 (July 12, 2007).

We represented Acuity in this case. Acuity's policyholder, ACR, provided mold and flood remediation service. One of its customers, RPS Products, suffered flood damage from a burst water pipe, and hired ACR to clean up the damage. Several months later, RPS noticed that several of its office employees were getting sick. RPS discovered that mold was growing behind wall panels where ACR had performed its flood remediation work. RPS sued ACR for the cost of remediating the mold damage, and ACR tendered the suit to its insurer, Acuity. Acuity filed a declaratory judgment action, seeking a determination that it was under no duty to defend ACR. We moved for summary judgment on the grounds that no occurrence, as defined by the policy, had taken place, no covered property damage had occurred, and that the "business risk" exclusions applied. The trial judge granted summary judgment to Acuity.

7. Additional Insured Coverage—Blanket Endorsement—No Contract Requiring Coverage.

Hughes & Duggan Builders, Inc. v. Best Built Fabricating, Inc., Illinois Appellate Court, First District, case no. 1-04-3235 (unpublished) (2006).

We represented the appellee, Liberty Mutual, in this action brought by a general contractor's insurer. That insurer tried to secure additional insured coverage for its policyholder under a subcontractor's policy issued by Liberty Mutual. We contended that the general contractor was not an additional insured because our additional insured endorsement was a blanket endorsement that required the existence of a contract in order to confer additional insured status. The general contractor and its insurer contended that a prior course of dealings between the two contractors satisfied this requirement, but the trial and appellate courts disagreed.

8. Owners And Contractors Protective Liability Policy—Completed Operations Exclusion; CGL Blanket Additional Insured Endorsemento Contract Requiring Coverage—No Insured Contract Claim Because No Indemnity Judgment

Liberty Mutual Fire Ins. Co. v. St. Paul Fire & Marine Ins. Co., Illinois Appellate Court, First District, 363 Ill. App. 3d 335 (2005).

We represented the appellee, Liberty Mutual, in this action brought by St. Paul to recover $7,000,000 in defense and settlement costs with respect to an underlying elevator accident at a central Illinois power plant that severely injured 21 boilermakers. St. Paul paid these sums on behalf of the power company, which was sued by the injured boilermakers in Madison County. Both St. Paul and Liberty Mutual issued OCP policies to the power company. Liberty Mutual also issued a CGL policy to the elevator constructor. St. Paul contended that the power company was covered under both of the Liberty Mutual policies. We obtained summary judgment for Liberty Mutual with respect to both of its policies, and St. Paul appealed. The Appellate Court affirmed, holding that the "completed operations" exclusion to OCP coverage applied, because the elevator had been put to its intended use, and that the power company was not an additional insured on Liberty Mutual's policy, because the contract between the power company and the elevator constructor did not require such status. Rather, the contract required only that the elevator constructor carry liability insurance for itself. Finally, the court held that no claim was available under the contractual liability coverage of Liberty Mutual's CGL policy absent a judgment for indemnity against the elevator constructor, which was lacking, because that indemnity claim had been determined in the elevator constructor's favor.

9. Equitable Subrogation Available To Excess Insurer—Equitable Contribution Not Available To Insurer That Covered Different Risk

The Home Ins. Co. v. Cincinnati Ins. Co., Illinois Supreme Court, 213 Ill.2d 307 (2004).

We wrote and filed a brief on behalf of amicus curiae Liberty Mutual in this case, in support of appellant the Home Ins. Co. The issue was whether the identity of insured risks element of a claim for equitable contribution is also an element of a claim for equitable subrogation. We contended that it is not. The Supreme Court agreed with us, and reversed the Appellate Court.

10. Exclusion For Injury To An Employee Of The Insured—Insured Contract Exception

Alberici-Eby j.v. v. Liberty Mutual Ins. Co., Illinois Appellate Court, Fifth District, case no. 5-98-0630 (unpublished) (2000).

In this case, an employee of the general contractor sued Liberty Mutual's named insured subcontractor for a construction site injury in Madison County. The subcontractor sued the general contractor for contribution. The general contractor tendered the defense of the contribution claim to Liberty Mutual. The general contractor was an additional insured on Liberty Mutual's CGL policy. Liberty Mutual disclaimed coverage on the basis of its exclusion for injury to an employee of the insured, since the employee was employed by the general contractor that was seeking coverage. The general contractor contended that an exception to that exclusion applied: for liability assumed in an insured contract. Liberty Mutual contended that the exception did not apply, because the contract in this case did not fit the definition of "insured contract." We lost in the circuit court, but we were successful in obtaining a reversal and judgment for Liberty Mutual from the Fifth District Appellate Court.

11. Trigger Of Coverage—Damage Occurred After Policy Lapsed

Argonaut Ins. Co. / EWC Contractors v. Liberty Mutual Ins. Co., Circuit Court of Cook County, case no. 96 CH 10794 (September 24, 1999).

This insurance coverage dispute arose out of the construction of an upscale residential high-rise apartment building in the fashionable Streeterville District of Chicago, at 401 East Ontario Street. The construction was completed in 1989. In 1995, according to a complaint filed by the building's owner, it was discovered that defective concrete was falling off the building. A complaint was filed against the general contractor, E.W.C., seeking damages of $15,000,000. The most recent settlement demand from the owner was $9,750,000. EWC sought coverage under various CGL policies issued by various insurers between 1987 and 1995, both to E.W.C., and to its subcontractors (EWC was an additional insured on the subcontractors' policies). Our client, Liberty Mutual, issued policies between 1987 and 1989 to Adjustable Forms, which fabricated the wooden forms into which the structural concrete for the building was poured. EWC was an additional insured on the Liberty policies. Liberty moved for summary judgment on the grounds that the occurrence triggering coverage did not take place during the periods of policy coverage. The court determined that the underlying complaint alleged a sudden and calamitous concrete failure occurring on or around February 24, 1995, and that therefore, any policies that lapsed before that time were not triggered. This included the policies issued by Liberty Mutual. Accordingly, summary judgment was entered in favor of Liberty Mutual.

12. Equitable Contribution—Subcontractor's Insurer Waived Right To Challenge Reasonableness Of Settlement—"Arising Out Of" Condition.

Liberty Mutual Ins. Co. v. Westfield Ins. Co., Illinois Appellate Court, First District, 301 Ill. App. 3d 49 (1998).

We filed this action against a subcontractor's insurer to recover payments Liberty Mutual made to defend and settle a bodily injury suit by the subcontractor's employee against Liberty Mutual's named insured, the general contractor. The general contractor was an additional insured on the subcontractor's CGL policy. The coverage, written on the standard form, conditioned coverage on the additional insured's liability arising out of the named insured's work. The subcontractor's insurer made a fact-specific argument as to why it thought the liability did not arise out of the named insured's work, but we succeeded in the trial court on a motion for summary judgment, and on appeal, we persuaded the Appellate Court to hold that where the claimant is employed by the named insured, the additional insured's liability arises out of the named insured's work as a matter of law.

13. Additional Insured Coverage—"Arising Out Of" Condition Satisfied By Plaintiff's Employment With Named Insured.

American States Ins. Co. v. Liberty Mutual Ins. Co., Illinois Appellate Court, First District, 291 Ill. App. 3d 336 (1997).

Liberty Mutual insured the general contractor, Turner Constr. Co., which was being sued by an injured employee of a subcontractor that was insured by American States. Turner was an additional insured on American States' policy. American States agreed to defend and indemnify Turner, but claimed that those duties were equally owed by Liberty Mutual. Liberty Mutual contended that an excess other insurance clause in its policy rendered its coverage excess over American States'. American States argued that Liberty Mutual's excess clause operated only with respect to those theories of recovery against Turner that were within American States' coverage, and that Liberty Mutual furnished the sole coverage with respect to other theories. The circuit and appellate courts held that all of the injured plaintiff's claim fell within American States' coverage, and therefore, American States had the sole duty to defend and indemnify Turner.

14. Construction Defect Complaint Against Architect Falls Within Professional Services Exclusion In Contractor's CGL Policy.

Prisco Serena Sturm Architects, Ltd. v. Liberty Mutual Ins. Co., 126 F.3d 886 (7th Cir. 1997).

This was a construction defect suit by a school against the architect and general contractor. The architect was defended by its professional liability insurer, which filed a declaratory judgment action seeking to shift the coverage to Liberty Mutual, which issued a CGL policy to the general contractor and which added several endorsements making the architect an additional insured. Liberty Mutual contended that coverage was negated by the policy's definition of occurrence, by the business risk exclusions, and by the professional services exclusion. The district court disagreed, and entered judgment against Liberty Mutual, as well as bad faith damages. The 7th Circuit reversed and held that there was no coverage, and no bad faith, because the professional services exclusion clearly applied.