Appeal from the Circuit Court of Cook County 97 CH 12265 Hon. Dorothy Kirie Kinnaird, Judge Presiding.
The opinion of the court was delivered by: Presiding Justice McBRIDE
This dispute *fn1 arises out of a declaratory judgment action filed by plaintiff-appellant and cross-appellee, West American Insurance Company (West American), against defendant-appellee and cross-appellant, J.R. Construction Company. The declaratory judgment complaint was brought against J.R. Construction as a result of a lawsuit filed against J.R. Construction by an injured employee of All Estimating, Inc. (All Estimating), a subcontractor of Altra Steel (Altra), also a subcontractor of J.R. Construction. J.R. Construction tendered the defense of that suit to West American and it denied coverage. On a motion for partial summary judgment, the trial court found in favor of J.R. Construction on the issue of coverage and further found that West American was estopped from asserting any policy defenses. The court also denied J.R. Construction's request for damages under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 1998)).
The issues raised on appeal are: (1) whether the trial court properly granted summary judgment in favor of J.R. Construction on West American's duty to defend; (2) whether West American was barred from denying coverage on the ground of estoppel; and (3) whether J.R. Construction was entitled to damages from West American under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 1998)). We state the following background facts.
West American issued a general liability insurance policy, number BKW (97)52109160, to Altra, a steel fabrication subcontractor, for the period December 31, 1996, to December 31, 1997. J.R. Construction, the general contractor, contracted with Altra to supply and install steel components for a building being constructed for the Fuchs Lubricants Company in Harvey, Illinois. Altra subcontracted with All Estimating to assist with some of the ironwork on the project. The record shows that a term of the agreement between Altra and J.R. Construction required that J.R. Construction be added as an insured on the policy issued to Altra by West American. Joseph Ramacci, president of J.R. Construction, stated in an affidavit that Altra orally agreed to obtain this insurance for his company. He further said that it was the corporate practice of J.R. Construction to require subcontractors to include J.R. Construction as an additional insured on their policies.
On July 29, 1997, the Braman Agency, West American's agent, issued a certificate of insurance listing J.R. Construction as an additional insured on the policy at issue. The certificate stated:
"THIS CERTIFICATE WAS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW."
On October 10, 1997, Charles Masunas, an employee of Altra's subcontractor, All Estimating, was injured at the Fuchs jobsite. Masunas filed a lawsuit (the underlying suit) against J.R. Construction, "by and through its agents, servants and employees," for failure to supervise, inspect, and prevent unsafe conditions at the jobsite. Specifically, the underlying complaint alleged that J.R. Construction was negligent in that it:
"(a) Failed to make a reasonable inspection of the premises and the work being done thereon, when the Defendant knew, or in the exercise of ordinary care should have known, that said inspection was necessary to prevent injury to the Plaintiff;
(b) Improperly operated, managed, maintained and controlled the aforesaid premises, so that as a direct and proximate result thereof, the plaintiff was injured ***."
On October 23, 1997, J.R. Construction tendered the underlying suit to West American. J.R. Construction also tendered the defense to All Estimating's insurer, Agora Syndicate, Inc. (Agora), which had listed J.R. Construction as an additional insured on that policy. Agora agreed to defend J.R. Construction and continued to do so until it became insolvent.
In a letter dated November 14, 1997, West American acknowledged J.R. Construction's tender by stating, "[t]his will confirm that J.R. Construction Company is listed as an additional insured under Altra Steel's policy." The letter further stated, "[a]ny coverage provided here under shall be excess over any other valid or collectable insurance available to the additional insured whether primary, excess, contingent or on any other basis unless the contract specifically requires that this insurance be primary or you request that it apply on a primary basis." The record reveals that this language only appears in paragraph 4b of the blanket additional insured endorsement to the West American policy. The letter concluded by stating: "It is our position that any potential coverage available to the additional insured, J.R. Construction [C]ompany[,] would be excess coverage."
On March 4, 1998, an internal memorandum revealed that West American considered J.R. Construction an additional named insured under its policy, but determined its policy was excess over a policy issued to All Estimating by Agora, which also named J.R. Construction as an additional insured. The memorandum stated that West American was "holding the file open," to see if Altra was named in the underlying suit. In another internal memorandum dated May, 1997, West American indicated an awareness that it "may be third partied into" the underlying litigation, and diaried the file ahead "to see if Agora tries to have [it] contribute to the claim." In a third internal memorandum, dated January 21, 1998, West American indicated that it might receive a third-party complaint or that Altra may be named as a direct defendant in the underlying suit.
In a letter of April 12, 1999, West American contacted Agora and stated that it was considering a tender by J.R. Construction with regard to the underlying suit. In the same letter, West American informed Agora that, should the tender be accepted, it was "certain the defense and indemnity obligations could be apportioned fairly." On August 25, 1999, West American filed the instant declaratory judgment action seeking a declaration that it had no duty to defend J.R. Construction. On August 27, 1999, West American wrote to J.R. Construction and said that it was denying coverage on the grounds that there was no written contract between J.R. Construction and Altra requiring J.R. Construction to be named an additional insured and the underlying complaint did not seek damages from J.R. Construction for liability arising out of the work of Altra. In the same letter, and for the first time, it notified J.R. Construction that it reserved the right to bring a declaratory judgment action.
In the proceedings below, J.R. Construction moved for partial summary judgment on West American's duty to defend under the policy. West American filed a cross-motion for summary judgment seeking a declaration that it had no duty to defend. On August 28, 2000, the trial court concluded that J.R. Construction was an insured under the West American policy and that West American owed a primary duty to defend J.R. Construction in the underlying suit. Without stating any reasons, however, the court also found that J.R. Construction was not entitled to damages under section 155 of the Insurance Code (215 ILCS 5/155 (West 1998)). West American has appealed the trial court's ruling on the duty to defend and J.R. Construction has cross-appealed the finding in regard to damages under section 155 of the Insurance Code. I. Duty to Defend
We first address whether West American owed J.R. Construction a duty to defend under the instant policy. In all cases involving summary judgment, we review the evidence in the record de novo. In re Estate of Hoover, 155 Ill. 2d 402, 411, 615 N.E.2d 736 (1993). "The construction of an insurance policy and a determination of the rights and obligations thereunder are questions of law for the court and appropriate subjects for disposition by summary judgment. [Citation.]" Konami (America), Inc. v. Hartford Insurance Co. of Illinois, 326 Ill. App. 3d 874, 877, 761 N.E.2d 1277 (2002). The trial court determined that J.R. Construction was an insured under West American's policy on the grounds that Braman issued a certificate of insurance designating J.R. Construction as an additional insured and that West American's letter dated November 14, 1997, also confirmed that J.R. Construction was an insured under the policy.
On appeal, West American argues that J.R. Construction's coverage, if any, arises because of a blanket endorsement provision contained in the insurance policy. Part of that blanket provision provides:
"WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization who you are required to name as an additional insured on this policy under a written contract or agreement."
West American contends that, because a written contract was required to confer status upon J.R. Construction as an additional insured under the blanket provision, and because no written contract was executed in this case, J.R. Construction was not an insured and therefore was not entitled to a defense in the underlying suit. J.R. Construction responds that coverage arises not because of the endorsement, but because of the certificate of insurance, the oral agreement between J.R. Construction and Altra, and other writings executed by the insurer, all of which indicate that J.R. Construction was an additional insured under the instant policy. We agree with J.R. Construction that the blanket ...