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Pekin Insurance Co. v. Centex Homes

Court of Appeals of Illinois, First District, First Division

February 21, 2017

CENTEX HOMES, a Nevada Partnership; and CENTEX REAL ESTATE CORPORATION, Defendants-Appellants.

         Appeal from the Circuit Court of Cook County, No. 13 CH 14633 Honorable Neil H. Cohen, Judge Presiding.

          JUSTICE MIKVA delivered the judgment of the court, with opinion. Justices Harris and Simon concurred in the judgment and opinion.



         ¶ 1 The issue presented in this case is the scope of an insurer's duty to defend an additional insured in a construction accident personal injury case. Pekin Insurance Company issued a commercial general liability policy to McGreal Construction Company. During the effective policy period, Scott Nowak, an employee of McGreal, was injured while working on the construction of a building owned by defendants Centex Homes and Centex Real Estate Corporation. Mr. Nowak filed the underlying personal injury lawsuit against defendants who then tendered the defense of the underlying lawsuit to Pekin. Pekin refused to accept the tender and filed this case, seeking a declaration that defendants are not additional insureds under the Pekin policy and that, even if they are, Pekin has no duty to defend the underlying lawsuit because that underlying suit does not allege vicarious liability, a prerequisite to coverage under the policy. The circuit court granted Pekin's motion for summary judgment and denied defendants' cross-motion for summary judgment. For the following reasons, we agree with the circuit court that Centex Homes, but not Centex Real Estate, is an additional insured under the policy, but find that Pekin does have a duty to defend Centex Homes in the underlying lawsuit. Accordingly, we reverse in part the circuit court's entry of summary judgment in favor of Pekin and remand with directions to enter summary judgment in favor of Centex Homes.

         ¶ 2 BACKGROUND

         ¶ 3 A. The McGreal Contract

         ¶ 4 In June 2009, Centex Homes, as the "Owner, " entered into a contract with McGreal, as the "Contractor" (McGreal contract), which provided that "Contractor shall maintain insurance with the minimum coverage, terms and limits provided in Exhibit A attached hereto." Exhibit A provided, in pertinent part, that McGreal's insurance would include:

"At no expense to Owner, Additional Insured Endorsement approved by Owner naming as additional insureds with respect to both on-going and completed operations, Centex Homes *** [and] Centex Real Estate Corporation."

         The contract also provided:

"PURCHASE ORDER. If Owner elects to authorize Contractor to perform this Work, Owner will issue to Contractor one or more documents for individual lots or parcels labeled either Purchase Order or in some instances Work Order. *** Contractor's beginning of the Work is deemed Contractor's acceptance of the Contract Price and all other terms specified in the Purchase Order. Contractor has no authority to provide materials or perform work not described in the Purchase Order. Owner will not pay for any materials or work that it did not order by issuance of a Purchase Order."

         The contract was signed by both the "Owner" and the "Contractor." Centex Homes was listed as the Owner, and the contract indicated that the signature for Centex Homes was "By: Centex Real Estate Corporation, a Nevada Corporation, Its Managing Partner." The president of McGreal signed for the Contractor.

         ¶ 5 B. The Pekin Policy

         ¶ 6 Pekin issued a commercial general liability policy to McGreal effective September 30, 2009, through September 30, 2010 (Pekin policy). The policy contained an "additional insured" endorsement, which provided that an additional insured was "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 *** that you must add that person or organization as an additional insured on a policy of liability insurance." The endorsement further provided that additional insureds were covered "only with respect to vicarious liability for 'bodily injury' or 'property damage' imputed from [the named insured] to the Additional Insured." The endorsement specifically excluded liability "arising out of or in any way attributable to the claimed negligence or statutory violation of the Additional Insured, other than vicarious liability which is imputed to the Additional Insured solely by virtue of the acts or omissions of the Named Insured."

         ¶ 7 C. The Underlying Complaint

         ¶ 8 In March 2013, Mr. Nowak filed his second amended complaint against defendants in this case (underlying complaint or Nowak complaint). McGreal, which is Mr. Nowak's direct employer, is not a defendant in the underlying complaint. In his complaint, Mr. Nowak alleged that, on March 9, 2010, as a carpenter employed by McGreal, he was working on a building owned by defendants in Elgin, Illinois, for which defendants were also in charge of the erection and construction.

         ¶ 9 Mr. Nowak claimed that he was injured when he was working "on or around a balloon wall and wall bracing" and the "framed wall and its supports were caused to fall striking [Mr. Nowak]." Mr. Nowak further alleged:

"3. That *** the Defendants, individually and through their agents, servants and/or employees, were present during the course of such erection and construction. The Defendants participated in coordinating the work being done and designated various work methods, maintained and checked work progress and participated in scheduling of the work and the inspection of the work. In addition thereto, at that time and place, the Defendants had the authority to stop the work, refuse the work and materials and order changes in the work.
4. That it was, therefore, the duty of the Defendants to operate, manage, supervise and control the said construction site and activities thereon, in a reasonably safe and proper manner for workmen engaged thereon, in particular, the Plaintiff.
* * *
7. Notwithstanding their duty, at said time and place, the Defendants, by and through their agents, servants and employees, then and there committed of [sic] one or more of the following careless and negligent acts and/or omissions:
(a) Failed to make a reasonable inspection of the premises and the work being done thereon, when the Defendant(s) 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 and work, so that as a direct and proximate result thereof, the Plaintiff was injured;
(c) Failed to provide the Plaintiff with a safe place within which to work;
(d) Failed to warn the Plaintiff of the dangerous conditions then and there existing when the Defendant(s) knew, or in the exercise of ordinary care should have known, that said warning was necessary to prevent injury to the Plaintiff;
(e) Failed to provide adequate safeguards to prevent the Plaintiff from injury while lawfully upon said premises, to wit: failed to provide or require that proper equipment and man ...

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