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Krusinski Construction Co. v. Northbrook Property and Casualty Insurance Co.

November 13, 2001


Appeal from the Circuit Court of Cook County No. 99 CH 1006 The Honorable Dorothy Kinnaird, Judge Presiding.

The opinion of the court was delivered by: Justice Cousins.


In November 1994, Krusinski Construction Company (Krusinski) was named the general contractor for the construction of approximately 300,000 square feet of office and warehouse space in Buffalo Grove, Illinois, for Courtesy Corporation (Courtesy). Krusinski hired eight subcontractors to perform the construction services. In 1997, a dispute arose between Krusinski and Courtesy. Krusinski filed a demand for arbitration. Courtesy filed a counterclaim against Krusinski alleging that the eight subcontractors performed defective construction services. Krusinski tendered its defense and indemnification to its commercial general liability insurer, Northbrook Property & Casualty Insurance Company (Northbrook), and the subcontractors' insurers. Each of the insurers denied coverage.

Krusinski sought a declaratory judgment finding that the subcontractors' respective insurers had a duty to defend and indemnify it as to any liability it may incur in the underlying Courtesy arbitration.

In a March 13, 2000, order, the trial court held that Northbrook was responsible for seven of the eight claims against Krusinski and that American Country Insurance Company (American Country) was responsible for one of the eight claims against Krusinski. Northbrook filed a motion to reconsider on April 12, 2000. On July 12, 2000, the trial court allowed Northbrook to file a second amended complaint instanter. The trial court denied Northbrook's motion to reconsider and entered judgment in favor of American Country on counts II and III of the second amended complaint. Northbrook now presents the following issue upon appeal: whether Northbrook has a duty to defend Krusinski relative to seven of the eight claims brought by Courtesy in the underlying arbitration.


In November 1994, Krusinski was named the general contractor for the Courtesy office and warehouse project, to be completed November 15, 1995. In order to complete the project, Krusinski secured contracts with eight subcontractors: Binzel Industries, Inc. (Binzel); Kole Construction Company, Inc. (Kole); Sellergren Brothers (Sellergren); Chicago Heights Glass, Inc. (Chicago Heights Glass); Haley Floor & Wall Design, Inc. (Haley); O'Hare Engineering, Inc. (O'Hare); Century Concrete Construction Company (Century); and Lenzini Excavating, Inc. (Lenzini). Article 13.6 of all of the subcontracts provided:

"THE SUBCONTRACTOR WILL NAME THE CONTRACTOR, OWNER, ARCHITECT AND ENGINEER AS ADDITIONAL INSUREDS TO THE COMPREHENSIVE GENERAL LIABILITY AND UMBRELLA POLICIES. The coverage afforded the Additional Insured under these policies shall be primary insurance. If the Additional Insured has other insurance which is applicable to the loss, such other insurance shall be on an excess or contingent basis."

General contractor Krusinski acquired commercial general liability insurance from Northbrook. The pertinent sections of Northbrook's policy provide:

"a. We [Northbrook] will pay those sums that the Insured [Krusinski] becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies. We will have the right and duty to defend any suit seeking those damages. We may at our discretion investigate any occurrence and settle any claim or suit that may result.

b. This insurance applies to any bodily injury and property damage only if:

(1) The bodily injury or property damage is caused by an occurrence that takes place in the coverage territory; and

(2) The bodily injury or property damage occurs during the policy period.

4. Other Insurance

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


This insurance is primary except when paragraph 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 other insurance by method described in

c. below.


This insurance is excess over any other insurance, whether primary, excess, contingent or on any other basis;

(1) That is property insurance, such as, but not limited to Fire, Extended Coverage, Builder's Risk or Installation Risk Coverage applicable to your work;


When this insurance is in excess, we will have no duty under Coverages A or B to defend any claim or suit that any other insurer has a duty to defend. When no other insurer defends, we will undertake to do so, but we will be entitled to the Insured's rights against all those other insurers."

Northbrook's "other insurance" clause, as amended by endorsement, provides:

"Commercial Liability Conditions is hereby amended to include the following:


4. In those instances where the named insured (you) under this policy is an additional insured on a policy issued by any other insurer, but only if this policy would have provided such coverage for the named insured (you)."

Subcontractor Lenzini secured an insurance policy with American Country. American Country's "Additional Insured" endorsement provides:

"WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization (called additional insured) whom you are required to add as ...

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