APPEAL from the Circuit Court of St. Clair County; the Hon.
THOMAS P. O'DONNELL, Judge, presiding.
MR. JUSTICE HARRISON DELIVERED THE OPINION OF THE COURT:
The defendant Liberty Mutual Insurance Company (Liberty) appeals from the order of the circuit court of St. Clair County declaring that plaintiff, Consolidated Rail Corporation (Con Rail), was afforded coverage under a certain liability insurance policy issued by defendant. The declaratory judgment of March 7, 1980, ordered Liberty to assume the defense of Con Rail in certain personal injury suits pending against the railroad. It also ordered Liberty to satisfy any judgments against Con Rail within the policy limits. We affirm.
The issues presented on appeal are these: (1) Whether the trial court erred in ruling that Con Rail was an insured in each of the personal injury suits; (2) whether the trial court erred in ruling that Liberty had a duty to defend Con Rail; (3) whether Liberty was estopped from asserting noncoverage by virtue of its refusal to accept tender of defense of the suits; and (4) whether the trial court erred in ruling that Liberty had a duty to indemnify Con Rail.
The record discloses that Pennsylvania Truck Lines (PTL), a wholly owned subsidiary of Con Rail, provides various services to Con Rail in its piggyback operation at railroad yards located in Fairmont City, St. Clair County, Illinois. Through a leasing agreement dated July 2, 1965, Con Rail leased to PTL a parcel of land covering approximately 8900 square feet situated within an area known as Roselake Yards at Fairmont City. According to the terms of the lease, PTL procured liability insurance from Liberty for personal injury and for property damage. Con Rail was named as an "additional insured" in appropriate provisions within the policy. The policy contains the usual clause obligating the insurer to defend its insured.
During the term of this policy, and while it was in full force and effect, 11 PTL employees filed personal injury suits against Con Rail alleging that they were injured while laboring at or in connection with the piggyback operation owned by Con Rail. As each suit was filed, Con Rail duly tendered its defense to Liberty Mutual. Liberty assumed the defense of the first two but thereafter refused the next four. Con Rail subsequently sued on July 12, 1979, seeking a declaration as to the coverage of those that Liberty had refused. While this action was pending, Liberty refused to defend an additional five claims. These five were then added by amendment to Con Rail's suit for declaratory judgment, bringing the total to nine.
At the March hearing, a representative for Liberty testified that Liberty did not immediately notify Con Rail of its intention to refuse tender of the suits. When Liberty did contact Con Rail, it gave no reason for its refusal. The Liberty spokesman admitted that he failed to respond to inquiries made by Con Rail's attorneys. He further stated that Liberty did not issue the customary reservation of rights, nor did it institute a declaratory judgment action of its own. These omissions led the trial court to conclude that Liberty had breached its duty under the policy, and it therefore rendered a judgment in favor of Con Rail.
• 1 On appeal, Liberty asserts first that Con Rail is not an insured in each of the personal injury lawsuits filed below. The determinative provisions of the policy are serial endorsement No. 4 and serial endorsement No. 9. Both designate Consolidated Rail Corporation as an additional insured. Serial endorsement No. 4 states:
The `Person Insured' provision is amended to include as an insured the person or organization designated below, but only with respect to his liability arising out of
(a) his financial control of the named insured or
(b) premises owned, maintained or controlled by him while said premises are leased to or occupied by the named insured."
According to endorsement No. 4, Con Rail is an insured and entitled to coverage if its liability under the nine personal injury lawsuits arises out of (a) its financial control of PTL, or (b) the premises owned by Con Rail while those premises are leased to or occupied by PTL.
Appellant focuses on part (b) of endorsement No. 4, thoroughly examining the law surrounding the insurance term "occupied by" and the various derivatives therefrom. While accurate, this examination ignores the key phrase "arising out of." We believe that the decision whether Con Rail is an insured turns on the construction of that phrase.
The words "arising out of" have been construed frequently in workmen's compensation claims and in insurance litigation to mean that a mere causal connection suffices to bring facts within the ambit of an insurance clause which is prefaced with that phrase. The court held in Williams v. Country Mutual Insurance Co. (1975), 28 Ill. App.3d 274, 277, 328 N.E.2d 117, that an injury can be said to arise out of one's employment if its origin is in some way connected with the employment so that there is a causal connection between the employment and the accidental injury. The supreme court agreed that this phrase contemplates only a causal connection between an injury and a defendant. (Chmelik v. Vana (1964), 31 Ill.2d 272, 277, 201 N.E.2d 434.) The court often employs such synonyms as "connected with" or "incidental to" when defining the phrase "arising out of." (Lynch ...