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John Burns Construction Company v. Indiana Insurance Company

January 21, 2000

JOHN BURNS CONSTRUCTION COMPANY ET AL., APPELLANTS,
v.
INDIANA INSURANCE COMPANY ET AL., APPELLEES.



The opinion of the court was delivered by: Justice Miller

Agenda 34-May 1999.

The plaintiffs, John Burns Construction Company and Royal Insurance Company, brought the present action in the circuit court of Cook County seeking a determination of coverage under an insurance policy issued by defendant Indiana Insurance Company. The trial judge ruled in favor of Indiana, and Burns and Royal appealed. The appellate court affirmed the circuit court. 299 Ill. App. 3d 169. We allowed Burns and Royal's petition for leave to appeal (177 Ill. 2d R. 315(a)), and we now reverse the judgments of the courts below.

The procedural history of this case is uncomplicated and requires only a brief recitation here. John Burns Construction Company entered into a subcontract in October 1993 with Sal Barba Asphalt Paving, Inc., for Barba to pave a parking lot at a commuter railroad station in Harvard, Illinois. The agreement required Barba to maintain liability insurance for Burns. Pursuant to the contract, Barba arranged for Burns to be added to Barba's policy with defendant Indiana Insurance Company by way of an endorsement naming Burns as an additional insured. Burns' coverage under the Indiana policy took effect on July 5, 1994. In December 1994, following completion of the construction work, a person using the rail station, Sidney Gault, slipped and fell in the parking lot that Barba had paved. Gault subsequently sued Burns and several other defendants for his injuries, alleging, among other things, that the lot had been improperly paved; Barba was not named a defendant in the case.

By letter dated September 20, 1995, Burns informed Barba of Gault's suit and asked that Indiana defend and indemnify Burns in the action. Burns stated in the letter that it looked solely to Indiana for defense and indemnification. Burns further explained that, although it had notified its own insurer, Royal Insurance Company, of the action, Burns did not want Royal to become involved in the suit. Burns sent Royal a copy of this letter.

Indiana initially refused to defend Burns in the Gault action. In a letter to Burns dated October 25, 1995, Indiana maintained that it did not have a duty to defend Burns because Gault's injuries were not sustained during the period of the contract for the paving work. In the wake of Indiana's refusal, Burns sought defense from Royal with regard to the Gault litigation.

Burns and Royal later filed the present action for a declaratory judgment in the circuit court of Cook County, seeking a declaration that Indiana alone had the duty to defend and indemnify Burns in the Gault action. Indiana, in its answer, said that it had "come to accept as plausible" Burns' contention that Indiana's obligations to Burns were controlled by the terms of the additional insured endorsement, rather than by the terms of the subcontract between Burns and Barba. In a counterclaim for declaratory judgment, filed with the answer, Indiana admitted that Burns was an additional insured under Barba's policy and allowed that it did have a duty to defend and indemnify Burns in the Gault litigation. Indiana asserted, however, that Royal was required to share the defense and indemnity duties, for the Indiana policy contained an "other insurance" provision. Indiana requested in the counterclaim that the court require Royal to contribute equally to Burns' defense and indemnification in the Gault matter.

Indiana later filed a motion for judgment on the pleadings, repeating its contention that Indiana and Royal should share equally the costs of defending and indemnifying Burns in the Gault litigation. Burns and Royal filed a motion for summary judgment, arguing that Burns was entitled to select which of the two insurers would bear the duties of defense and indemnity and that in this case Burns had chosen Indiana alone for those tasks. Following a hearing, the trial judge granted Indiana's motion for judgment on the pleadings and denied Burns and Royal's motion for summary judgment. The judge held that the two insurance companies were required to contribute equally to Burns' defense and indemnification in the Gault litigation. The trial judge concluded that Royal's duty to defend was triggered when Burns tendered the case to it, after Indiana had initially refused to undertake Burns' defense.

Burns and Royal appealed. The appellate court affirmed the circuit court but relied on a different rationale. 299 Ill. App. 3d 169. The appellate court concluded that the initial tender by Burns to Indiana was sufficient to trigger the "other insurance" provision in the Indiana policy, which in turn activated Royal's duty to defend its insured. We allowed Burns and Royal's petition for leave to appeal (177 Ill. 2d R. 315(a)), and we now reverse the judgments of the courts below. We granted leave to W.E. O'Neil Construction Company to file an amicus brief in behalf of Burns. 155 Ill. 2d R. 345.

The policy language contained in Indiana's "other insurance" provision states, in pertinent part:

"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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