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West Bend Mutual Insurance Company v. Mulligan Masonry Company

March 24, 2003

WEST BEND MUTUAL INSURANCE COMPANY, PLAINTIFF-APPELLANT AND CROSS-APPELLEE,
v.
MULLIGAN MASONRY COMPANY, INC., DEFENDANT-APPELLEE AND CROSS-APPELLANT (R.C. WEGMAN CONSTRUCTION COMPANY, DEFENDANT AND CROSS-APPELLANT AND DONALD WEEKS, DEFENDANT).



Appeal from the Circuit Court of Du Page County. No. 99-MR-0139 Honorable Ronald B. Mehling, Judge, Presiding.

The opinion of the court was delivered by: Justice Callum

Plaintiff, West Bend Mutual Insurance Company, sought a declaration that it had no duty to defend or indemnify its insured, defendant, Mulligan Masonry Company, Inc., against a third-party action arising out of an injury to defendant's employee, Donald Weeks. Ruling that plaintiff owed a duty to defend, the trial court denied plaintiff's motion for summary judgment and granted defendant's motion for summary judgment. On appeal, plaintiff argues that (1) the trial court erred in granting defendant affirmative relief even though defendant filed no pleading requesting such relief; and (2) the trial court incorrectly found that plaintiff owed a duty to defend. We affirm.

Our summary of the background facts is taken from the documents attached to the pleadings and to the motions for summary judgment. On January 27, 1995, plaintiff issued defendant a contractors business owners insurance policy. The policy included a standard commercial general liability (CGL) coverage form. Also, defendant was a named insured under a workers compensation and employers liability policy issued by Virginia Surety Company.

R.C. Wegman Construction Company (Wegman) was the general contractor on a construction project at St. Joseph Catholic Church in Aurora. Wegman hired defendant to perform the masonry work on the project. The contract between Wegman and defendant contained an indemnification clause and required defendant to maintain liability insurance and name Wegman as an additional insured. The policy issued by plaintiff included Wegman as an additional insured. The additional insured endorsement provided, however, that the insurance was excess over any other valid and collectible insurance and that it provided no coverage for liability arising out of the claimed negligence of Wegman or any party other than defendant.

On May 30, 1995, Weeks was injured while working at the church. He brought a negligence action against Wegman. Weeks's complaint alleged that, while Weeks was working on a scaffold, a bundle of bricks sitting on the scaffold fell over and injured him. The complaint alleged further that Wegman was negligent because it failed to inspect the site, improperly managed the site, and failed to erect a safe scaffold.

Wegman filed a third-party complaint against defendant. In count I, Wegman alleged that defendant's negligent acts or omissions were a proximate cause of Weeks's injuries and sought contribution in the amount of defendant's pro rata share of the common liability. Count II sought indemnity under the contract between Wegman and defendant, and count III alleged that defendant breached the contract by failing to provide primary liability coverage for Wegman as an additional insured. The trial court in the negligence action dismissed count II of the third-party complaint.

Defendant tendered the third-party claim to plaintiff, and plaintiff denied coverage. Plaintiff then filed a complaint seeking a declaration of the parties' rights under the policy. Plaintiff filed a first amended complaint that additionally sought a declaration that it did not have a duty to defend or indemnify Wegman against Weeks's negligence claim. Defendant answered the first amended complaint and submitted three affirmative defenses. The affirmative defenses were that (1) plaintiff was estopped to deny coverage, (2) the relevant policy terms were ambiguous, and (3) plaintiff was bound by its agent's representation that the policy covered losses like the one at issue here. In these pleadings, defendant asked the trial court to declare that plaintiff owed it a defense and indemnity.

Wegman ultimately filed a second amended third-party complaint. Again, count I sought contribution, and count III alleged a breach of the contract. Count II was entitled "liability assumed by contract" and relied on the indemnity clause in the contract. Count II alleged that the trial court in Weeks's negligence action found that there was a question of fact about whether defendant waived the liability limit afforded under the Workers' Compensation Act (820 ILCS 305/5 (West 1996)) and Kotecki v. Cyclops Welding Corp., 146 Ill. 2d 155 (1991). See Liccardi v. Stolt Terminals, Inc., 178 Ill. 2d 540, 550 (1997). Therefore, according to Wegman, under the contract, defendant was liable to pay Wegman contribution in excess of the "Kotecki cap" on defendant's liability.

In response to the second amended third-party complaint, plaintiff filed a second amended complaint containing essentially the same allegations as its earlier complaints. In its answer to plaintiff's second amended complaint, defendant again asked the trial court to declare that plaintiff owed it a defense and indemnity.

Plaintiff and defendant each moved for summary judgment. Plaintiff relied on the "employer's liability" exclusion, which excludes coverage for work-related injuries sustained by an employee of the insured, and the "contractual liability" exclusion, which excludes coverage for liability the insured assumed in a contract. Defendant argued that, under the exception for liability assumed by the insured under an "insured contract," these exclusions did not apply. Plaintiff and Wegman also filed cross- motions for summary judgment.

The trial court granted plaintiff summary judgment against Wegman and declared that plaintiff owed Wegman no defense. Finding that plaintiff owed defendant a duty to defend the third-party claim, the trial court denied plaintiff's summary judgment motion and granted defendant's motion. The court reserved a finding on the duty to indemnify until a judgment or settlement was reached in the underlying litigation. The court found, pursuant to Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)), that there was no just reason to delay the enforcement or appeal of its order. Plaintiff timely appealed. Defendant and Wegman cross-appealed the trial court's finding that plaintiff did not owe Wegman a duty to defend. The parties have not filed briefs addressing the cross-appeal. During the oral argument, the parties informed us that defendant and Wegman are abandoning the cross-appeal. Therefore, we address only plaintiff's appeal.

Summary judgment is properly granted if, when viewed in the light most favorable to the non-movant, the pleadings, affidavits, depositions, admissions, and exhibits on file reveal that there is no genuine issue of material fact and that the movant is entitled to a judgment as a matter of law. Diehl v. Polo Cooperative Ass'n, 328 Ill. App. 3d 576, 579 (2002). The non-movant need not prove its case at the summary judgment stage but must come forward with evidence that establishes a genuine issue of material fact. Diehl, 328 Ill. App. 3d at 579. We review de novo the trial court's ruling. General Casualty Insurance Co. v. Lacey, 199 Ill. 2d 281, 284 (2002).

Plaintiff's first contention on appeal is that the trial court improperly granted defendant affirmative relief, i.e., a declaratory judgment in defendant's favor, even though defendant did not file a counterclaim seeking such relief. Defendant filed an answer and affirmative defenses. In these pleadings, defendant asked the trial court to declare that plaintiff owed it a defense and indemnity.

In declaratory judgment actions, an answer that includes a prayer for specific relief may be considered a counterclaim. Kendle v. Village of Downers Grove, 156 Ill. App. 3d 545, 553 (1987); In re Estate of Soderholm, 127 Ill. App. 3d 871, 875 (1984). Where the answer to a complaint for a declaratory judgment meets and controverts the issues raised by the complaint, no formal counterclaim is required to allow the court to declare the rights of all of the parties. Johnson v. Town of the City of Evanston, 39 Ill. App. 3d 419, 423 (1976). If plaintiff's complaint for a declaration that it owes no duty to defend Wegman's third-party claim is without merit, then it naturally follows that plaintiff does owe a duty to defend. Under the circumstances, the trial court properly construed the pleadings liberally and declared the parties' rights under the policy. See Norman A. Koglin Associates v. Valenz Oro, Inc., 176 Ill. 2d 385, 395-96 (1997).

Plaintiff's second contention on appeal is that it does not owe defendant a duty to defend Wegman's third-party action. An insurer owes its insured a duty to defend an action brought against the insured if the underlying complaints allege facts within or potentially within the policy's coverage. Northbrook Property & Casualty Co. v. Transportation Joint Agreement, 194 Ill. 2d 96, 98 (2000). An insurer may not justifiably refuse to defend an action against its insured unless it is clear from the face of the underlying complaints that the allegations fail to state facts that bring the case within or potentially within the policy's coverage. Northbrook Property, 194 Ill. 2d at 98.

Plaintiff asserts that the "employer's liability" and the "contractual liability" exclusions apply and therefore that it does not owe defendant a duty to defend. The policy states:

"2. Exclusions

This insurance does not apply to:

***

b. Contractual Liability

'Bodily injury' or 'property damage' for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:

(1) Assumed in a contract or agreement that is an 'insured contract,' provided the 'bodily injury' or 'property damage' occurs subsequent to the ...


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