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John Burns Construction Co. v. Indiana Insurance Co.

September 11, 1998

JOHN BURNS CONSTRUCTION COMPANY AND, ROYAL INSURANCE COMPANY, PLAINTIFFS-COUNTERDEFENDANTS-APPELLANTS,
v.
INDIANA INSURANCE COMPANY, DEFENDANT-COUNTERPLAINTIFF-APPELLEE, AND SIDNEY GAULT, DEFENDANT-COUNTERDEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County; No. 96 CH 5539, Honorable Thomas Durkin, Judge Presiding.

The opinion of the court was delivered by: Justice Quinn

JUSTICE QUINN delivered the opinion of the court:

Plaintiffs, John Burns Construction Company (John Burns) and Royal Insurance Company (Royal), appeal from the trial court's order granting defendant, Indiana Insurance Company's (Indiana Insurance) motion for judgment on the pleadings. At issue is whether an insurer to whom litigation is tendered may seek contribution from another insurer whose policy is applicable, where the insurer to whom tender is made has an "other insurance" clause in its policy, even though such action is contrary to the wishes of the insured. John Burns and Royal also appeal from the trial court's order denying their motion for leave to file an amended complaint.

In October 1993, John Burns subcontracted with Sal Barba Asphalt Paving, Inc. (Barba), to pave the parking lot at the Harvard, Illinois, Metra commuter rail station. Under the subcontract, Barba agreed to maintain insurance for John Burns under its insurance policy. Barba had an insurance policy with Indiana Insurance Company, effective from March 31, 1994, to March 31, 1997. Barba arranged for an endorsement to be added to this insurance policy naming John Burns as an additional insured, effective July 5, 1994.

On December 8, 1994, Sidney Gault (Gault) fell and was injured in the parking lot adjacent to the Harvard Metra train station. Gault filed a lawsuit in September 1995, under case No. 95 L 13295, alleging the negligence of various defendants, including John Burns for the paving work.

John Burns notified Barba of the lawsuit and requested that Barba's insurance company, Indiana Insurance Company, defend and indemnify John Burns. John Burns made this tender to Indiana Insurance through Barba in a letter dated September 20, 1995, on the basis that it was a primary carrier, based on Institute of London Underwriters v. Hartford Fire Insurance Co., 234 Ill. App. 3d 70, 599 N.E.2d 1311 (1992). In the same letter, John Burns stated that it looked solely to Barba's insurer, Indiana Insurance, for defense and indemnification. John Burns also advised Barba in the letter that it gave notice to its own insurance carrier, Royal, for "informational purposes only" and that it requested that Royal not become involved in the litigation.

In a letter to Johns Burns dated October 25, 1995, Indiana Insurance declined to defend John Burns in the Gault litigation. Indiana Insurance stated that it believed it did not have a duty to defend John Burns because Gault's injuries were not sustained during the operative period of the contract for the paving work. Indiana Insurance stated that it had retained counsel, the law firm of Condon & Cook, while it investigated the matter, but that it would instruct counsel to withdraw his appearance.

John Burns then sought defense from Royal in the Gault litigation. The case was subsequently settled after the trial court granted Indiana Insurance's motion for summary judgment. The court's order required Royal and Indiana to share in the costs of defense and indemnification.

John Burns and Royal filed a complaint for declaratory judgment on May 29, 1996. The complaint sought a declaration from the court that Indiana Insurance had a duty to defend and indemnify John Burns in the Gault litigation. Indiana Insurance filed an answer on October 25, 1996, admitting that the endorsement on the insurance policy providing for John Burns as an additional insured provided coverage for John Burns.

Indiana Insurance also filed a counterclaim for declaratory judgment, admitting that it owed John Burns the duty to defend but requesting a declaration by the court that Royal and Indiana Insurance both contribute equally to John Burns' defense and indemnification, based on the fact that both insurance policies had an "other insurance" provision. Indiana Insurance's policy stated the following:

"4. Other Insurance.

If other valid and collectible insurance is available to the insured for a loss we cover under Coverage A or B of this Coverage Part, our obligations are limited as follows:

a. Primary Insurance

This insurance is primary except when b.below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that ...


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