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United States Fidelity and Guaranty Co. v. Shorenstein Realty Services

December 8, 2008


The opinion of the court was delivered by: Elaine E. Bucklo United States District Judge


This is a declaratory judgment action arising out of an incident that occurred during a construction project at the John Hancock Center (the "Hancock Center") in Chicago. On March 9, 2002, scaffolding fell, injuring and killing several people. Numerous lawsuits were filed by the injured persons and by the administrators of the estates of those killed during the incident. Those lawsuits have all been settled. Plaintiff United States Fidelity and Guaranty Company ("USF&G") filed its complaint against defendants Shorenstein Realty Services, LP, Shorenstein Management, Inc., Shorenstein Company, LLC, SRI Michigan Avenue Venture, LLC, SRI Michigan Avenue Management, Inc. (collectively "Shorenstein"), and 175 East Delaware Place Homeowners Association ("HOA"), seeking a declaration that it did not have a duty to defend or indemnify defendants, under a commercial general liability insurance policy issued to a non-party, for the underlying lawsuits filed as a result of the scaffolding incident. Plaintiff moves for summary judgment pursuant to FED. R. CIV. P. 56. For the following reasons, the motion is denied.


Summary judgment is appropriate where the record shows that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c). A genuine issue for trial exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). I must construe all facts in the light most favorable to the non-movant and draw all justifiable inferences in favor of that party. See id. at 255.


In the spring of 2000, as part of a construction project at the Hancock Center, defendants Shorenstein and HOA, joint owners of the building, entered into various contracts, including a written construction contract with third-party Eckland Consultants, Inc. ("Eckland"). Shorenstein's contract with Eckland required Eckland to procure insurance and name Shorenstein and HOA as additional insureds for the duration of the Hancock Center project and for some period of time thereafter. Plaintiff issued an insurance policy and subsequent renewals of that policy to Eckland in connection with the Hancock Center project, including a renewal policy effective January 1, 2002 through January 1, 2003. Certificates of insurance evidencing defendants' additional insured status under the policy issued on March 15, 2002 and April 9, 2002.

The 2002-2003 policy was endorsed with a Broadened Liability Coverage endorsement (the "Broadened Endorsement"), which included a provision for "additional insureds."*fn1 The pertinent portion of the Broadened Endorsement reads as follows:

3. The following is added to Paragraph 2. of Section II-WHO IS AN INSURED:

I. If you are required to add another person or organization as an insured under this policy by a written work contract or agreement which is in effect during the policy period and a certificate of insurance has been issued listing that person or organization as an Additional Insured, that person or organization is an insured. Such person or organization is referred to in this Coverage Part as an Additional Insured.


Under Illinois law,*fn2 the interpretation of an insurance policy is a question of law. Illinois Sch. Dist. Agency v. Pacific Ins. Co., Ltd., 471 F.3d 714, 719 (7th Cir. 2006) (citing Zurich Ins. Co. v. Walsh Constr. Co. of Ill., Inc., 816 N.E.2d 801, 805 (Ill.App.Ct. 2004)). An insurance policy is treated the same as any other contract and the same rules of construction apply. Geschke v. Air Force Ass'n, 425 F.3d 337, 342 (7th Cir. 2005). Where words in an insurance policy are unambiguous, I give them their plain and ordinary meaning. See Utility Audit, Inc. v. Horace Mann Serv. Corp., 383 F.3d 683, 687 (7th Cir. 2004) (citing Trade Ctr. v. Dominick's Finer Foods, 711 N.E.2d 333, 335 (Ill.App.Ct. 1999)). However, insurance policies are issued under factual circumstances and should not be interpreted in a vacuum. Granite State Ins. Co. v. Degerlia, 925 F.2d 189, 192 (7th Cir. 1991).

Plaintiff argues that defendants do not qualify as additional insureds under the 2002-2003 policy because certificates of insurance acknowledging their insured status for the 2002-2003 policy year were not requested or issued until after the March 9, 2002 incident. Plaintiff suggests that the endorsement language "a certificate of insurance has been issued," unambiguously means a party is not an additional insured until the issue date of the certificate of insurance. Defendants argue that certificates issued under earlier related policies for the same construction project and/or those that "have been issued" during the 2002-2003 policy year satisfy any purported certificate requirement.

Plaintiff cites Cincinnati Ins. Co. v. Gateway Const. Co. Inc., 865 N.E.2d 395 (Ill.App.Ct. 2007), in support of its argument. In that case, the court found the defendant subcontractor was not an additional insured because the underlying policy required the defendant to have entered into a written contract with the insured in order for additional insured status to attach.*fn3 Id. at 399. At the time of the loss, the parties only had an oral agreement in place. Id. at 397. The court found an interpretation triggering coverage at the time of the oral promise would render the phrase "under a written contract" meaningless in light of the policy as a whole. Id. at 399. The court explained:

Here, there was no promise under a written agreement at the time of the accident, and no other documentation confirming additional insured coverage at the time of the accident. Even the original draft agreement between [the parties], dated after the accident, did not provide for additional insured coverage, and the subsequent addendum adding that requirement was not executed until five months after the Gateway employee was injured. A certificate of ...

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