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American Country Insurance Co. v. Kraemer Brothers Inc.

August 06, 1998

AMERICAN COUNTRY INSURANCE COMPANY, AN ILLINOIS CORPORATION, , PLAINTIFF-APPELLANT,
v.
KRAEMER BROTHERS, INC., A FOREIGN CORPORATION, UNITED STATES FIDELITY & GUARANTY, A FOREIGN CORPORATION, AND ROBERT G. COZZI, DEFENDANTS-APPELLEES.



The opinion of the court was delivered by: Justice McNAMARA

APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY

No. 95 CH 10940

HONORABLE JOHN K. MADDEN, JUDGE PRESIDING.

Plaintiff, American Country Insurance Co. (American Country), brought this action against defendants, Kraemer Brothers Construction Co. (Kraemer) and United States Fidelity and Guarantee Co. (USF&G), seeking a declaratory judgment that it had no duty to defend or indemnify Kraemer, its additional insured under a commercial general liability insurance policy issued to D.H. Johnson Construction Co. (D.H. Johnson), with respect to a personal injury lawsuit brought by an employee of D.H. Johnson to recover for injuries suffered in a construction accident. Plaintiff filed a motion for summary judgment and defendants filed a cross-motion for summary judgment. After hearing argument on the motions, the trial court entered summary judgment in favor of defendants and against plaintiff. Plaintiff appeals. The relevant facts are as follows.

Kraemer agreed to act as general contractor for the construction of a hotel in Elgin, Illinois (the project). Kraemer entered into a subcontract with D.H. Johnson for the performance of masonry work on the project. Pursuant to the terms of the subcontract, D.H. Johnson was required to have Kraemer named as an additional insured on its commercial general liability insurance policy.

From November 30, 1993, to November 30, 1994, D.H. Johnson was the named insured on a commercial general liability policy (CGL), No. CMP 0003503 00, issued by plaintiff, American Country. Plaintiff had authorized the South Suburban Insurance Agency (South Suburban) to issue certificates adding entities as additional insureds on the CGL. South Suburban issued a certificate to Kraemer on December 20, 1993, naming Kraemer as an additional insured on D.H. Johnson's CGL policy. The certificate contained no policy number but, rather, the term "binder." Kraemer received the certificate on December 26, 1993. The CGL policy was not actually written until January 21, 1994. Kraemer was also the named insured on a separate CGL policy issued by USF&G.

On March 1, 1995, a complaint was filed by Robert Cozzi, an employee of D.H. Johnson working at the project, alleging that he was injured on January 7, 1994, when he slipped and fell on an unnatural accumulation of snow and ice (the Cozzi lawsuit). He alleged that Kraemer was negligent in its maintenance and supervision of the project. He did not name D.H. Johnson as a defendant in the suit.

Kraemer filed a third-party complaint for contribution against D.H. Johnson on April 30, 1996, alleging that D.H. Johnson was negligent in its maintenance and supervision of the project and thereby contributed to Cozzi's injuries.

After being served with the Cozzi lawsuit, Kraemer tendered its defense to plaintiff. Kraemer informed plaintiff that Kraemer had put its own general liability insurer, USF&G, on notice of the suit, but had instructed USF&G not to engage in its defense or indemnification regarding the Cozzi lawsuit. Kraemer notified plaintiff that it had, pursuant to Institute of London Underwriters v. Hartford Fire Insurance Co., 234 Ill. App. 3d 70, 599 N.E.2d 1311 (1992), elected that plaintiff was to exclusively defend and indemnify Kraemer. Plaintiff rejected tender of Kraemer's defense and on November 13, 1995, filed a complaint for declaratory judgment.

Plaintiff filed a motion for summary judgment on May 20, 1996, arguing that it had no duty to defend Kraemer in the Cozzi lawsuit based on three separate endorsements to the policy. The first endorsement provides:

"1. 'Who is an Insured' is amended to include as an Insured the person or organization shown in the schedule as an Additional Insured. The coverage afforded to the Additional Insured is solely limited to liability specifically resulting from the conduct of the Named Insured which may be imputed to the Additional Insured.

*********************************************

3. This endorsement provides no coverage to the Additional Insured for liability arising out of the claimed negligence of the Additional Insured, other than which may be imputed to the Additional Insured by virtue of the conduct of the Named Insured." Plaintiff argued that because the Cozzi lawsuit did not name D.H. Johnson as a defendant or accuse D.H. Johnson of any misconduct that might be "imputed" to Kraemer, the Cozzi lawsuit failed to allege facts bringing Kraemer within the potential scope of coverage.

The second endorsement relied on by plaintiff added the following to the "Duties In The Event of Occurrence, Claim or Suit" paragraph:

"(5) Promptly give notice of an 'occurrence', an offense which may result in a claim, a claim which is made or a 'suit', to any other insurer which has available insurance for a loss we cover under Coverages A or B of this coverage part.

(6) Promptly tender the defense of any claim made or 'suit' to any other insurer which also has available insurance for a loss which we cover under Coverages A or B of this coverage part." Plaintiff argued that because Kraemer did not tender the defense of the Cozzi lawsuit to USF&G, Kraemer breached the cooperation ...


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