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Kehoe v. Commonwealth Edison Co.

May 15, 1998

MARK J. KEHOE, PLAINTIFF,
v.
COMMONWEALTH EDISON COMPANY DEFENDANT-APPELLEE/CROSS-APPELLANT,
v.
ABBOTT CONTRACTORS, INC., THIRD-PARTY DEFENDANT-APPELLANT/ CROSS-APPELLEE.



No. 93-L-3459 Appeal from the Circuit Court of Cook County. Honorable William Maddux, judge Presiding.

The opinion of the court was delivered by: Justice Theis

The issues raised by this appeal and cross-appeal stem from a dispute over a contribution action brought by Commonwealth Edison Company as owner of a construction site against its contractor, Abbott Contractors, Inc., in connection with a personal injury suit brought by Abbott employee Mark J. Kehoe against Commonwealth Edison. Abbott appeals the trial court's denial of its post-trial motion and its judgment ordering contribution by Abbott in the amount of $118,564.21. On appeal, as below, Abbott claims its purchase of insurance for Commonwealth Edison from Aetna Casualty & Surety Company (Aetna), pursuant to the parties' construction contract and in an amount sufficient to extinguish Commonwealth Edison's liability to Kehoe, operated as a legal bar to Commonwealth Edison's contribution action.

Commonwealth Edison cross-appeals as to the amount of contribution owed, claiming the trial court erred when it determined the parties' contract did not provide for pure contribution and that Abbott's amount of contribution was limited to the amount of its liability under the Workers' Compensation Act. Commonwealth Edison maintains the parties' contract contains a waiver of the statutory limitation on employer liability and provides for pure contribution from Abbott in the amount of $1,326,313.51, the amount of the settlement corresponding to the percentage of liability attributed to Abbott for Kehoe's personal injury. For the following reasons, we reverse.

Abbott entered into a construction contract with Commonwealth Edison. By separate provision, the contract required Abbott to obtain an insurance policy for Commonwealth Edison in Commonwealth Edison's own name with limits of liability of $2 million. The construction contract also contains a provision calling for "Contractor's Indemnification," one clause of which attempts to obtain for Commonwealth Edison indemnification for its own negligence.

Pursuant to the construction contract, Abbott purchased from Aetna a separate owners and contractors protective ("OCP") liability insurance policy for Commonwealth Edison with Commonwealth Edison as the sole named insured and Abbott as the designated contractor. The OCP policy provided liability coverage for Commonwealth Edison in the amount of $3 million, $1 million in excess of the construction contract's requirement. At the same time, Abbott also obtained a commercial general liability ("CGL") policy with Aetna in its own name. Abbott's CGL policy's Schedule of Exclusions excludes from coverage the OCP policy. Abbott also had obtained workers' compensation insurance from another insurer.

During the period that Commonwealth Edison's OCP policy and Abbott's CGL policy with Aetna were in effect, Abbott employee Mark Kehoe was injured on the job and brought a personal injury action against Commonwealth Edison and the City of Chicago, alleging that each was negligent and that each had violated the Structural Work Act. 740 ILCS 150/0.01 et seq. (West 1992). The City was subsequently dropped from the suit, leaving Commonwealth Edison as the sole defendant.

Upon being sued by Kehoe, Commonwealth Edison filed and twice amended a third-party contribution complaint against Abbott. Count I of Commonwealth Edison's final amended complaint alleged various negligent acts or omissions by Abbott and sought contribution from Abbott for that portion of Kehoe's damages proximately caused by Abbott. Count II repeated the acts or omissions alleged in count I and invoked the construction contract's "Contractor's Indemnification" provision in support of its contribution claim. In count II, Commonwealth Edison requested contribution from Abbott "in any amount whatsoever," alleging that Abbott had "waived the worker's compensation defense by contract."

Abbott answered, raising the Workers' Compensation Act (820 ILCS 305/11 (West 1992)) as an affirmative defense to count I and requesting that any judgment against it be confined to the amount of its liability under the Workers' Compensation Act. As defenses to count II, Abbott raised the Construction Contract Indemnification for Negligence Act (Indemnity Act) (740 ILCS 35/1 (West 1992)), and the fact that the parties' contract preceded the court's decision in Kotecki v. Cyclops Welding Corp., 146 Ill. 2d 155, 585 N.E.2d 1023 (1991).

Additionally, as an affirmative defense to both counts, Abbott maintained that, pursuant to the parties' contract, it had obtained and paid for two liability insurance policies issued by Aetna: the CGL policy insuring Abbott and the OCP policy insuring Commonwealth Edison in its own name and listing Abbott as the designated contractor. Abbott further argued that the parties' agreement that insurance was to be provided should be interpreted as one of mutual exculpation, that the parties' should be deemed to have agreed to look solely to the insurance in the event of a loss.

Kehoe tried his case against Commonwealth Edison to a jury. At the close of Kehoe's case in chief, Commonwealth Edison settled with Kehoe. The court issued an order on July 8, 1996, stating that "the complaint of the plaintiff against Commonwealth Edison is dismissed as all matters in controversy have been settled and adjusted between them," and allowing the case to continue as a third-party action between Commonwealth Edison and Abbott. The contribution action was tried by a jury, which found Abbott 68% liable and Commonwealth Edison 32% liable. Commonwealth Edison stipulated that it was defended under and would be indemnified for the settlement by the policy Abbott purchased for it from Aetna.

Abbott then filed a post-trial motion pursuant to section 2-1202 of the Code of Civil Procedure (735 ILCS 5/2-1202 (West 1992)), asking the trial court to vacate its judgment entered on the jury verdict and requesting entry of judgment in its favor notwithstanding the verdict or, alternatively, a new trial. Abbott maintained it was not liable to Commonwealth Edison in any amount and repeated its claim that Commonwealth Edison's action for contribution was barred as a matter of law.

Thereafter, the trial court entered an order dated November 13, 1996, confirming that Commonwealth Edison had made a good faith settlement with Kehoe for $2 million and an assignment of rights under the Workers' Compensation Act to Commonwealth Edison. Previously, Kehoe had received workers' compensation in the amount of $402,684.14. In that order, also addressing Abbott's post-trial motion, the court found that Commonwealth Edison had a right to bring an action for contribution against Abbott, but determined that Abbott had not contractually waived the limitation on its liability under the Workers' Compensation Act. As a result, the trial court concluded that Abbott owed Commonwealth Edison, not pure contribution in the amount of 68% of the settlement, but rather $118,564.21, an amount constituting 68% of plaintiff's expenses and 25% of the workers' compensation lien of $402,684.14.

Abbott appeals the trial court's judgment and denial of its post- trial motion. Commonwealth Edison contends on cross-appeal that the parties' construction contract provides for pure contribution and that Abbott is liable to Commonwealth Edison for 68% of the settlement, an amount of $1,326,313.51. We review de novo as a matter of law the trial court's judgment and finding that Commonwealth Edison's contribution action against Abbott was not barred. Zook v. Norfolk & Western Ry. Co., 268 Ill. App. 3d 157, 169, 642 N.E.2d 1348, 1357 (1994).

In Illinois, two analytical approaches have developed as to the purchase of insurance in the context of contractual indemnification. In some instances, courts have analyzed the parties' contract to determine whether they intended to mutually exculpate one another from liability through the mechanism of the purchase of insurance. Dowling v. Otis Elevator Co., 192 Ill. App. 3d 1064, 549 N.E.2d 866 (1989); Rome v. Commonwealth Edison Co., 81 Ill. App. 3d 776, 401 N.E.2d 1032 (1980). By contrast, another series of decisions turned not upon contract analysis, but primarily upon the courts' application of the general rule of law that, when parties to a business transaction agree insurance will be provided as part of the bargain, the agreement must be interpreted as providing mutual exculpation to the bargaining parties. Monical v. State Farm Insurance ...


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