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American Country Insurance Co. v. Cline

December 10, 1999


The opinion of the court was delivered by: Justice Buckley

Appeal from the Circuit Court of Cook County. The Honorable Dorothy Kirie Kinnaird, Presiding Judge.

Plaintiff, American Country Insurance Company, filed a complaint in the circuit court of Cook County on May 14, 1997, seeking declaratory relief against defendants Robert Cline (Cline), Pepper Construction Company of Illinois (Pepper) and Andersen Consulting Company, Incorporated (Andersen). This complaint arose out of an underlying tort action in which Cline sought damages for injuries he allegedly sustained on March 28, 1995, while working for Hinsdale Electric Company (Hinsdale), an electrical subcontractor, on a construction project. Pepper was the general contractor for the construction project, Andersen owned the construction site and plaintiff was Hinsdale's insurer. Specifically, the complaint for declaratory relief asked the court to find that plaintiff had no duty to defend or indemnify any of the defendants in the underlying tort action.

On April 27, 1998, the circuit court granted Pepper and Andersen's motion for summary judgment, denied plaintiff's motion for a judgment on the pleadings and dismissed the remaining indemnification claim without prejudice. On May 27, 1998, plain-tiff filed a timely notice of appeal.

On appeal, plaintiff maintains that the circuit court erred in granting defendant's motion for summary judgment for the following reasons: (1) according to this court's decision in American Country Insurance Co. v. Kraemer Brothers, Inc., 298 Ill. App. 3d 805 (1998), an additional insured endorsement in a commercial general liability insurance policy is not void as against public policy because it solely limits coverage for the additional insured to liability specifically resulting from conduct of the named insured, which is imputed to the additional insured; and (2) according to Kraemer Brothers, an additional insured endorsement in a commercial general liability policy limiting coverage for the additional insured to liability specifically resulting from conduct of the named insured, which is imputed to the additional insured, does not afford coverage for liability to an employee of the additional insured's subcontractor. For the reasons set forth below, we reverse the judgment of the circuit court.


Andersen, the owner of property located on Willow Road in Northbrook, Illinois, executed a contract in October of 1994 with Pepper. According to the contract, Pepper was to serve as the contractor for demolition and renovation work on Andersen's Willow Road property. On February 7, 1995, Pepper subcontracted with Hinsdale to "[f]urnish all labor, material, equipment and supervis-ion necessary to complete the DEMO WORK for the above referenced project, in accordance with the contract documents." Furthermore, the contract documents provided that Hinsdale would "provide labor for *** temporary support of conduit pipe," "provide adequate protection of adjacent construction and materials installed under this Subcontract, be solely responsible for all hoisting of materials and all scaffolding necessary, provide scaffolding or hoisting equipment in conformance with all local code requirements including but not necessarily limited to those of state and federal OSHA," and provide "fall protection *** in strict accordance with OSHA's Fall Protection Requirements."

Hinsdale also agreed to another matter in the subcontract, to "comply with and maintain the insurance specified in the form of Subcontractor's Safety, Indemnity and Insurance Requirements." That form required Hinsdale to obtain comprehensive general liability (CGL) insurance naming both Pepper and Andersen as additional insureds in its policy covering the Andersen project. The form stated that Hinsdale's insurance would be "primary to any insurance carried by any of the ADDITIONAL INSUREDS." Finally, the form also included a paragraph titled "INDEMNIFICATION." The paragraph provided that Hinsdale "shall indemnify and hold harmless PEPPER" and Andersen "from and against all claims, damages, losses and expenses *** arising out of or resulting from Subcontractor's performance of its work."

From September 13, 1994, through September 13, 1995, Hinsdale was insured by plaintiff via CGL policy No. CMP 0007125. On February 10, 1995, after entering into the subcontract for the Andersen project, Hinsdale obtained a certificate of insurance from its insurance broker identifying Andersen and Pepper as "additional insureds" under the CGL policy. The certificate provided that it was "issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, maintain or alter the coverage afforded by the policies below." The "BLANKET ENDORSEMENT FOR ADDITIONAL INSUREDS" stated that, "[i]n consideration for a Flat Premium Charge of $150.00, it is understood and agreed that this policy is amended to include *** Blanket Endorsement for Additional Insureds--as per conditions in form AC 2030M."

Form AC 2030M defined "additional insureds" as follows:

"1. 'Who is an Insured' is amended to include as an Insured the person or organiza-tion shown in the schedule as an Additional Insured. The coverage afforded to the Addi-tional 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 aris-ing out of the claimed negligence of the Addi-tional Insured, other than which may be imputed to the Additional Insured by virtue of the conduct of the Named Insured."

On March 28, 1995, Cline was working on the Willow Road project as a journeyman electrician employed by Hinsdale. According to the complaint Cline filed in the circuit court of Cook County on March 27, 1997 (No. 97 L 3645), he was injured on the Willow Road project site "when a forty (40) foot span of electric conduit pipe fell upon the ladder upon which he was working, crushed the ladder and caused him to fall about six (6) feet from the ladder to the deck of the third floor." The complaint alleged that Pepper "was actively engaged in the supervision, management and control of the repairs, alterations or construction"; that Andersen "was in charge of and was actively supervising the work in progress"; and as a result both Pepper and Andersen "carelessly and negligently" failed to secure the conduit pipe to the ceiling, failed to design and provide adequate support for the electrical piping, failed to warn that the overhead pipe was not properly secured, failed to warn of the insecure pipe, removed the supports for the conduit, and failed to remove the conduit in smaller sections.

On April 11, 1997, Pepper tendered its defense in the Cline lawsuit to plaintiff. After plaintiff refused the tender, Pepper filed a two-count third-party complaint against Hinsdale on June 25, 1997, seeking contribution from Hinsdale (count I) and alleging breach of contract (count II).

On May 14, 1997, plaintiff filed its complaint for declaratory relief against Cline, Pepper and Andersen, seeking a declaration that it has "no duty to pay, defend or indemnify" Pepper or Andersen for Cline's injury. On July 7, 1997, Pepper filed an answer and counterclaim against plaintiff. Count I of the counterclaim sought a declaration that plaintiff was estopped from denying the duty to defend because Hinsdale's certificate of insurance represented that Pepper was an additional insured under the policy. Count II stated that if form AC 2030M precludes coverage, then the CGL policy contains a mutual mistake and should be reformed to reflect the mutual intent to create coverage for Pepper.

On August 18, 1997, plaintiff filed a motion to dismiss Pepper's counterclaim. The circuit court entered an order on December 11, 1997, dismissing both counts of Pepper's counterclaim. Specifically, as to count I of the counterclaim, the court ruled that the language in the certificate of insurance put Pepper on notice that "it should look to the policy for the terms of coverage." As to count II, the court found that while there may have been a mutual mistake ...

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