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06/27/94 BERNARD LEHMAN v. IBP

June 27, 1994

BERNARD LEHMAN, PLAINTIFF,
v.
IBP, INC., A CORPORATION; IBP SERVICE CENTER CORP., A CORPORATION; DIERCKS LTD. COMPANIES, VERPLAETSE EXCAVATING CO., A CORPORATION; AND LANGMAN CONSTRUCTION, INC., A CORPORATION, DEFENDANTS, AND IBP, INC., A CORPORATION, AND IBP SERVICE CENTER CORP., A CORPORATION, THIRD PARTY PLAINTIFFS-APPELLANTS, V. CONTRACTING CORP. OF ILLINOIS, A CORPORATION, THIRD PARTY DEFENDANT-APPELLEE.



Appeal from the Circuit Court of the 14th Judicial Circuit, Rock Island County, Illinois. No. 89-L-179. Honorable James T. Teros, Judge, Presiding.

As Modified On Denial of Rehearing August 30, 1994. Released for Publication August 30, 1994. Petition for Leave to Appeal Denied December 6, 1994.

Present - Honorable Kent Slater, Presiding Justice, Honorable Tom M. Lytton, Justice, Honorable Michael P. Mccuskey, Justice

The opinion of the court was delivered by: Lytton

MODIFIED ON DENIAL OF PETITION FOR REHEARING

JUSTICE LYTTON delivered the opinion of the court:

This appeal involves a dispute over a contract provision requiring the contractor, Contracting Corp. of Illinois (CCI), to cover the project owner, IBP, Inc. (IBP), as an additional insured on its general liability insurance policy. CCI claims that IBP waived enforcement of the clause and that the clause violated the Construction Contract Indemnification for Negligence Act (Act) (740 ILCS 35/1 (West 1992)). The trial court granted CCI's motion to dismiss IBP's third party breach of contract complaint under section 2-619 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619 (West 1992)), and IBP appealed. We find neither a waiver nor a violation of the Act and reverse and remand for trial.

In August 1987, IBP awarded CCI a contract to build an addition to IBP's Joslin, Illinois, plant. Under the contract, IBP was to be included under CCI's comprehensive general liability insurance policy as an additional insured, and CCI was to furnish documentation of coverage before beginning work. CCI provided IBP with a certificate of insurance dated September 17, 1987, prior to commencing work on the project during the week of September 28, 1987. This certificate failed to name IBP as an additional insured on CCI's policy. CCI sent another certificate of insurance, dated October 2, 1987, that again failed to name IBP as an additional insured. Then, IBP mailed a letter to CCI on November 16, 1987, requesting a renewal certificate of insurance and included a sample certificate naming IBP as an additional insured. CCI furnished two more certificates, dated November 20, 1987, and January 14, 1988, but neither covered IBP. CCI eventually submitted a certificate dated August 4, 1988, that showed IBP as an additional insured.

Meanwhile, on October 12, 1987, a CCI employee, Bernard Lehman, was injured while working on the Joslin project. Lehman sued IBP for negligence and violations of the Structural Work Act. IBP filed a third party breach of contract claim against CCI for failure to name IBP as an additional insured, as required by the contract. CCI filed a motion to dismiss the third party complaint under section 2-619 of the Code, and the trial court granted the motion.

On appeal, IBP contends that its conduct did not waive its contract rights and that the issue of waiver creates a material question of fact. CCI claims that dismissal was proper as a matter of law because IBP's failure either to insist on insurance coverage prior to commencement of work or to stop work when the corrected certificate was not forthcoming waived its right to coverage under Whalen v. K-Mart Corp. (1988), 166 Ill. App. 3d 339, 519 N.E.2d 991, 116 Ill. Dec. 776, and Geier v. Hamer Enterprises, Inc., (1992), 226 Ill. App. 3d 372, 589 N.E.2d 711, 168 Ill. Dec. 311.

Whether IBP waived its right to insurance coverage under the contract hinges upon the components of implied waiver. Waiver requires that a known right be voluntarily and intentionally relinquished. ( Lavelle v. Dominick's Finer Foods, Inc. (1992), 227 Ill. App. 3d 764, 771, 592 N.E.2d 287, 292, 169 Ill. Dec. 800.) The key to implied waiver in this case is establishing a clear inference, under the circumstances, of an intention to waive. ( Lavelle, 227 Ill. App. 3d at 771, 592 N.E.2d at 291; Whalen, 166 Ill. App. 3d at 343, 519 N.E.2d at 994.) Implied waiver may be established when "the conduct of the person against whom waiver is asserted is inconsistent with any other intention than to waive." Whalen, 166 Ill. App. 3d at 343, 519 N.E.2d at 994.

In Lavelle, the court considered whether a project owner had waived a contract provision requiring the contractor to furnish insurance for the owner. The contractor, K & S, failed to provide the required certificate of insurance naming Dominick's, the owner, as an additional insured. Dominick's allowed K & S to start and finish its work without requesting a corrected certificate. When a K & S worker was injured and sued Dominick's for negligence and Structural Work Act violations, Dominick's filed a third party breach of contract complaint against K & S for failure to procure the required insurance coverage. The trial court granted K & S's motion to dismiss. The appellate court reversed and remanded for trial, stating that implied waiver had not been proven as a matter of law because Dominick's failure to take any specific action when it was not named in the policy did not clearly infer an intent to permanently relinquish its right to coverage. Lavelle, 227 Ill. App. 3d at 771, 592 N.E.2d at 292.

Here, the contract provision at issue states: "Before commencing work on the project, Contractor shall furnish IBP with certificates of insurance, using the form attached hereto; substantiating the fact that the coverages required by this Contract are in effect." Although IBP did not demand a correct certificate prior to CCI commencing work, it did not silently acquiesce until performance under the contract was completed, tender payment, and only later request technical compliance with the insurance provision.

IBP expressed its intent to enforce its contract rights by sending the November 16th letter to CCI requesting a renewal certificate that included IBP as an additional insured. This conduct does not indicate an intent to waive the coverage. (See Whalen, 166 Ill. App. 3d at 343, 519 N.E.2d at 994.) If more than one inference or Conclusion can be drawn from the facts, summary judgment should not be granted. ( Vicorp Restaurants v. Corinco Insulating Co. (1991), 222 Ill. App. 3d 518, 525, 584 N.E.2d 229, 234, 165 Ill. Dec. 50.) IBP's actions created a genuine issue of material fact regarding its intention to waive that should be resolved at trial.

Whalen and Geier are distinguishable because in those cases the waiving parties allowed the contractors to start and finish work, then paid them in full, without ever objecting to the lack of coverage. The insurance issue was only raised after the underlying litigation began. "A party to a contract may not lull another into a false assurance that strict compliance with a contractual duty will not be required and then sue for noncompliance." ( Whalen, 166 Ill. App. 3d at 343, 519 N.E.2d at 994.) In any case, Whalen and Geier are strictly ...


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