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T.H.E. Insurance Co. v. Chicago Fireworks Manufacturing Co.

December 30, 1999

T.H.E. INSURANCE COMPANY, PLAINTIFF-APPELLEE,
v.
CHICAGO FIREWORKS MANUFACTURING CO., CITY OF CHICAGO HEIGHTS, MANUEL ANTHONY CADENA, A MINOR BY HIS MOTHER AND NEXT FRIEND, ARELI MORENO; LARISA CADENA, A MINOR BY HER MOTHER AND NEXT FRIEND, DELIA GARCIA; ANDRES CADENA, A MINOR BY HIS MOTHER AND NEXT FRIEND, DELIA GARCIA; MARCELLA GARCIA, BY HER MOTHER AND NEXT FRIEND, DELIA GARCIA; DALE BAIKAUSKAS, INDIVIDUALLY AND AS FATHER AND NEXT FRIEND OF CHRISTOPHER BAIKAUSKAS, A MINOR; TONI MCLELLAN, INDIVIDUALLY AND AS MOTHER AND NEXT FRIEND OF MICHAEL MCLELLAN, A MINOR, AND JERRICA MCLELLAN A MINOR, SALLY HERNANDEZ AND KELLEY HERNANDEZ, DEFENDANTS-APPELLANTS.



The opinion of the court was delivered by: Justice McNULTY

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

This consolidated appeal involves a dispute regarding coverage under a certificate of insurance and an insurance policy issued by T.H.E. Insurance Company (T.H.E.) to Chicago Fireworks Manufacturing Co. (Fireworks), the insured, and the City of Chicago Heights (City), an additional insured. The trial court entered declaratory judgment in favor of T.H.E., finding that Fireworks and City failed to comply with a condition precedent to coverage, and therefore the policy provided no coverage for claims against City and Fireworks. We reverse.

On July 3, 1991, Fireworks conducted a fireworks display at Bloom Township High School in Chicago Heights. City sponsored the fireworks display and provided security and fire personnel for the display. A 12-inch aerial shell exploded in the crowd of spectators, injuring Manuel Anthony Cadena, Larisa Cadena, Andres Cadena, Marcella Garcia, Dale Baikauskas, Christopher Baikauskas, Toni McLellan, Michael McLellan, Jerrica McLellan, Sally Hernandez and Kelley Hernandez. These eleven injured persons filed tort actions, some in state court and some in federal court, against Fireworks and City. We will refer to the eleven injured persons as the Tort Plaintiffs.

T.H.E. undertook defense of Fireworks and City in the tort actions under a reservation of rights letter. In the letter, T.H.E. maintained that Fireworks and City had failed to comply with an endorsement to the insurance policy. T.H.E. reserved the right to deny coverage or liability under the policy.

On January 22, 1992, T.H.E. filed this action for declaratory judgment. T.H.E. sought a declaration that it had no duty to defend Fireworks and City, and that the policy covered none of the Tort Plaintiffs' claims. T.H.E. maintained that the endorsement required compliance with the National Fire Protection Association's NFPA 1123 Code for the Outdoor Display of Fireworks (1990 Ed.) (NFPA 1123), and that the failure of Fireworks and City to comply with NFPA 1123 constituted a breach of a condition precedent to coverage. T.H.E. named Fireworks, City and the Tort Plaintiffs as defendants to the declaratory judgment action.

In the Tort Plaintiffs' actions, the state court granted summary judgment in favor of City. We affirmed that decision. See Cadena v. Chicago Fireworks Manufacturing Co., 297 Ill. App. 3d 945, 697 N.E.2d 802 (1998). The Court of Appeals for the Seventh Circuit reached a similar decision in McLellan v. City of Chicago Heights, 61 F. 3d 577 (7th Cir. 1995). Thus, City is no longer a defendant in the underlying tort actions, and does not have an interest in this appeal.

The insurance policy in question is a commercial general liability policy of insurance which afforded coverage to Fireworks for firework displays staged between May 1, 1991, and May 1, 1992. T.H.E. issued a Certificate of Insurance to City, naming City as an additional insured under the policy, and providing coverage to City for the fireworks display staged on July 3, 1991.

The policy contained an endorsement which provides in part:

"For and in consideration of the premium charged, it is hereby understood and agreed that coverage provided by this policy is void if the Named Insured and all Additional Insureds fail to strictly comply with all applicable provisions of the Firework Codes and Standards as published by the National Fire Protection Association (NFPA). ***.

Coverage under this policy is conditioned on compliance with this endorsement."

The 1990 edition of NFPA 1123 contains guidelines for the separation of spectators from the firework displays. The following provisions of NFPA 1123 are relevant:

"1-4 Definitions. For the purpose of this code, the following terms shall have the meanings shown below: Approved. Acceptable to the 'authority having jurisdiction.' NOTE: * * * In determining the acceptability of installations or procedures, equipment or materials, the authority having jurisdiction may base acceptance on compliance with NFPA or other appropriate standards. In the absence of such standards, said authority may require evidence of proper installation, procedure or use. ***

Authority Having Jurisdiction. The 'authority having jurisdiction' is the organization, office or individual responsible for 'approving' equipment, an installation or a procedure.

NOTE: *** Where public safety is primary, the 'authority having jurisdiction' may be a *** local or other regional department ***. For insurance purposes, an insurance inspection department, rating bureau, or other insurance company ...


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