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Pekin Insurance Co. v. Designed Equipment Acquisition Corp.

Court of Appeals of Illinois, First District, First Division

September 12, 2016

PEKIN INSURANCE COMPANY, Plaintiff-Appellee,
v.
DESIGNED EQUIPMENT ACQUISITION CORPORATION, an Illinois Corporation, d/b/a Designed Equipment Corporation, and HERON SALGADO, Defendants (Designed Equipment Acquisition Corporation, an Illinois Corporation, d/b/a Designed Equipment Corporation, Defendant-Appellant).

         Appeal from the Circuit Court of Cook County, No. 14-CH-10908; the Hon. Peter Flynn, Judge, presiding.

         Affirmed.

          Gregory R. Spelson, of Daniel G. Suber & Associates, of Chicago, for appellant.

          Robert Marc Chemers and Peter G. Syregelas, both of Pretzel & Stouffer Chtrd., of Chicago, for appellee.

          PRESIDING JUSTICE CONNORS delivered the judgment of the court, with opinion. Justice Cunningham and Justice Harris concurred in the judgment and opinion.

          OPINION

          CONNORS PRESIDING JUSTICE

         ¶ 1 This case involves a declaratory action that was brought as a result of an insurance policy coverage dispute. Both parties to the litigation filed cross-motions for summary judgment. The trial court granted plaintiff's motion and denied defendant's motion, effectively denying coverage for defendant. Defendant now appeals, arguing that the policy at issue contains an ambiguity that the court below should have construed in favor of defendant and that the lease constituted an "insured contract, " which would provide defendant with insurance coverage. For the reasons set forth below, we affirm.

         ¶ 2 I. BACKGROUND

         ¶ 3 On May 20, 2010, Abel Building & Restoration (Abel) entered into a rental agreement with defendant, Designed Equipment Acquisition Corporation (Designed), whereby Designed leased Abel scaffolding materials. The lease agreement was signed by representatives from Abel and Designed. The lease agreement stated that the rented materials would be delivered to Abel's jobsite at 500 East 51st Street, Chicago, Illinois. The lease agreement also contained various clauses and provisions, including, inter alia, an indemnification provision that read:

"15.INDEMNIFICATION: LESSEE SHALL INDEMNIFY AND DEFEND LESSOR AGAINST AND HOLD LESSOR HARMLESS FROM ANY AND ALL CLAIMS, ACTIONS, SUITS, PROCEEDINGS, COSTS, EXPENSES, DAMAGES AND LIABILITIES, INCLUDING REASONABLE ATTORNEY'S FEES, WHICH: (A) RELATE TO INJURY OR TO DESTRUCTION OF PROPERTY, OR BODILY INJURY, ILLNESS, SICKNESS, DISEASE OR DEATH OF ANY PERSON (INCLUDING EMPLOYEES OF LESSEE); AND (B) ARE CAUSED OR CLAIMED TO BE CAUSED, IN WHOLE OR IN PART BY THE EQUIPMENT LEASED HEREIN OR BY THE LIABILITY OR CONDUCT (INCLUDING ACTIVE, PASSIVE, PRIMARY OR SECONDARY) OF LESSOR, ITS AGENTS OR EMPLOYEES, OR ANYONE FROM WHOSE ACTS ANY OF THEM MAY BE LIABLE. THE PARTIES AGREE THAT LESSOR SHALL ONLY BE LIABLE OR RESPONSIBLE FOR ACTIONS OF WILFUL MISCONDUCT. LESSEE SHALL AT ITS OWN COST AND EXPENSE, DEFEND LESSOR AGAINST ALL SUITS OR PROCEEDINGS COMMENCED BY ANYONE IN WHICH LESSOR IS A NAMED PARTY FOR WHICH LESSOR IS ALLEGED TO BE LIABLE OR RESPONSIBLE AS A RESULT OF OR ARISING OUT OF THE EQUIPMENT, OR ANY ALLEDGED [sic] ACT OR OMISSION BY LESSOR AND LESSEE SHALL BE LIABLE AND RESPONSIBLE FOR ALL COSTS, EXPENSES AND REASONABLE ATTORNEY'S FEES INCURRED IN SUCH DEFENSE AND/OR SETTLEMENT, JUDGMENT OR OTHER RESOLUTION OF THE CLAIM IN THE EVENT THAT SUCH ACTION IS COMMENCED NAMING LESSOR AS A PARTY, LESSOR MAY ELECT TO DEFEND SAID ACTION ON ITS OWN BEHALF AND LESSEE AGREES THAT IT SHALL BE LIABLE FOR ALL COSTS, EXPENSES AND REASONABLE ATTORNEY'S FEES INCURRED BY LESSOR IN SUCH DEFENSE.
PURPOSE OF THIS CLAUSE: IT IS THE PURPOSE OF THIS CLAUSE TO SHIFT THE RISK OF ALL CLAIMS RELATING TO THE LEASED PROPERTY TO THE LESSEE DURING THE ENTIRE TERM OF THIS LEASE.
* * *
23. INSURANCE: Lessee shall keep the equipment insured against all risks of loss or damage from every cause whatsoever for not less than the full replacement value thereof and shall carry commercial general public liability and property damage insurance with full contractual liability to cover this lease. Lessee's failure to have such insurance shall be a breach hereof and subject to termination as provided in Paragraph 10.
Lessee shall also designate Lessor, its agents, employees, officers, and directors as additional insured parties under all policies of insurance by Lessee as their interests may appear and shall furnish evidence thereof to Lessor. See Exhibit A."

         ¶ 4 In September 2010, Abel procured a commercial lines insurance policy from plaintiff, Pekin Insurance Company (Pekin), for the period of September 22, 2010, to September 22, 2011. The policy provided for commercial general liability coverage protection and listed Abel as the named insured. The policy contained an additional insured endorsement titled "Contractors Additional Insured/ Waiver of Rights of Recovery Extension Endorsement" (contractors endorsement). In relevant part, the contractors endorsement stated:

"1. Additional Insured - When Required By Written Construction Contract For Ongoing Operations Performed By You For An Additional Insured and/or Your Completed Operations
A. With respect to coverage afforded under this section of the endorsement, Section II - Who Is An Insured is amended to include as an insured any person or organization for whom you are performing operations, when you and such person or organization have agreed in a written contract effective during the policy period stated on the Declarations Page (hereinafter referred to as the 'Policy Period') and executed prior to the 'bodily injury' or 'property damage' for which coverage is sought, that you must add that person or organization as an additional insured on a policy of liability insurance (hereinafter referred to as the 'Additional Insured').
The Additional Insured is covered only with respect to vicarious liability for 'bodily injury' or 'property damage' imputed from You to the Additional Insured as a proximate result of:
(1)Your ongoing operations performed for that Additional Insured during the Policy Period; or
(2) 'Your work' performed for the Additional Insured during the Policy Period, but only for 'bodily injury' or 'property damage' within the 'products -completed operations hazard.'
B. It is further understood that the designation of any person or organization as an Additional Insured:
(1) does not increase the scope or limits of coverage afforded by this policy; and
(2)does not apply if the person or organization is specifically named as an additional insured under any other provision of this policy.
C. With respect to the coverage afforded to the Additional Insured, the following additional exclusions apply:
This insurance does not apply to:
(1) Liability for 'bodily injury' or 'property damage' arising out of the rendering of, or the failure to render, any professional services, including, but not limited to:
(a) The preparing, approving, or failing to prepare or approve, maps, shop drawings, opinions, reports, surveys, field orders, change orders or ...

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