Acuity Ins. Co. v. 950 W. Huron Condo. Ass'n, Belgravia Grp., Ltd.
| Decision Date | 29 March 2019 |
| Docket Number | No. 1-18-0743,1-18-0743 |
| Citation | 138 N.E.3d 189,2019 IL App (1st) 180743,435 Ill.Dec. 1 |
| Parties | ACUITY INSURANCE COMPANY, Plaintiff and Third-Party Defendant-Appellee, v. 950 WEST HURON CONDOMINIUM ASSOCIATION, Belgravia Group, Ltd., Belgravia Construction Corporation, Masonry Systems, and Denk & Roche, Ltd., Defendants (Cincinnati Insurance Company, Third-Party Plaintiff and Intervenor-Appellant). |
| Court | United States Appellate Court of Illinois |
Brian M. Reid and Nicholas D. Butovich, of Litchfield Cavo LLP, of Chicago, for appellant.
Patti M. Deuel, of Leahy, Eisenberg & Fraenkel, Ltd., of Chicago, for appellee.
¶ 1 This case raises the issue of when a complaint filed against a subcontractor on a construction project is sufficient to trigger a duty to defend under a commercial general liability policy. The two insurers who are before us and provided coverage to the same carpentry subcontractor saw this issue quite differently.
¶ 2 Acuity Insurance Company (Acuity) filed an action seeking a declaration that it owed its insured, carpentry subcontractor Denk & Roche Builders, Inc. (Denk & Roche), no duty to defend it in a construction lawsuit. Cincinnati Insurance Company (Cincinnati)—which also insured Denk & Roche, did defend it, and ultimately settled all claims against it—intervened to seek equitable contribution from Acuity. The trial court agreed with Acuity that there was no duty to defend and ruled in its favor and against Cincinnati on cross-motions for summary judgment. For the reasons that follow, we reverse and remand for further proceedings.
¶ 4 The condominium association for the building located at 950 West Huron Street in Chicago, Illinois (Association), sued its general contractor and construction manager Belgravia Group, Ltd., and Belgravia Construction Corporation (collectively Belgravia). The Association sought to recover for alleged defects from Belgravia's unworkmanlike construction of the building envelope that allowed water to infiltrate and cause damage. Belgravia, in turn, filed a third-party complaint against its subcontractors that worked on the building, including the carpentry subcontractor Denk & Roche. Denk & Roche held commercial general liability (CGL) insurance policies with two insurers during the relevant period—one with Cincinnati that was effective January 1, 2000, through June 1, 2007, and another with Acuity effective June 1, 2007, through December 31, 2007, with Acuity renewal policies covering through December 31, 2013.
¶ 5 Denk & Roche tendered its defense to both insurers. Cincinnati agreed to defend and represented Denk & Roche to a settlement of the construction claims. Acuity denied from the outset that the allegations against Denk & Roche triggered a duty to defend under its CGL policy and filed this suit seeking a declaration to that effect, naming as defendants Denk & Roche, another subcontractor, Belgravia, and the Association. Cincinnati intervened in this case and filed a third-party counterclaim against Acuity, seeking declarations that Acuity owed Denk & Roche a defense and that Acuity therefore owes Cincinnati equitable contribution. The relevant details draw from the two insurers' cross-motions for summary judgment and various attachments in support of those motions.
¶ 7 In the Association's operative second amended verified complaint (Association complaint), it alleged that "[o]n or about June 28, 2002, [after the Association took] possession, but prior to the completion of the construction, Belgravia * * * became aware of numerous conditions and defects with the building, including extensive water infiltration of the building." After raising the issues with Belgravia, the Association alleged that Belgravia "retained contractors * * * to provide cosmetic ‘fixes’ which did not address the aforementioned design and construction defects and problems." A "forensic analysis which required openings and penetrations in the building envelope" in September 2011 and May 2012 revealed to the Association the full extent of the construction and design defects allegedly caused by Belgravia. The Association enumerated several categories of defects attributable to Belgravia or its agents, including improper seals at various doors, masonry problems, improperly installed flashings at doors and windows, and a host of other construction issues. These issues allegedly led to water damage, thus "interfering with the habitation and usage of the common elements and individual condominium units within the building." The Association alleged that it "has spent substantial sums of money to identify, correct and remediate" these damages and "will incur substantial sums relating to the cost of future repairs."
¶ 8 In Belgravia's operative second amended third-party complaint (Belgravia complaint), Belgravia incorporated the Association complaint by reference and briefly mentioned photographs not included in the record on appeal that show "alleged property damage to carpet, wood floors, and other items allegedly resulting from water damage." The Belgravia complaint contained 23 counts of breach of contract and negligence against Denk & Roche and five other subcontractors. Almost every count contains a nearly identical list of masonry, construction, fixture installation, and sealant defects that collectively are alleged to have contributed to the building's water infiltration issue. The first four counts were leveled against Denk & Roche, based on breach of its carpentry subcontract with Belgravia, breach of implied warranty, breach of indemnity, and negligent construction. Belgravia alleged that if it was found "liable to the [Association] in any amount whatsoever," then its liability was "because of the defective work performed by [Denk & Roche]." As with the counts against the other subcontractors, Belgravia's claims against Denk & Roche described the particular services for which Belgravia retained the carpentry firm, including for "[a]ll rough and finish carpentry," "[c]aulking of all items to be installed," "except for windows and glass patio doors," and installation of doors, frames, and "[w]indows and sliding and swinging glass doors" in the Association's building. In the breach of contract counts, Belgravia alleged Denk & Roche breached its contractual duty to provide workmanlike construction services and, in the negligence count, alleged it has "personally sustained and will continue to sustain costs [for] investigation, inspection, evaluation and repair of the Building, consulting fees, engineering fees, attorneys fees and other losses" as a proximate result of Denk & Roche's poor workmanship.
¶ 10 Acuity issued a CGL policy to Denk & Roche that obliged Acuity to "pay those sums that the insured becomes legally obligated to pay as damages because of * * * property damage * * * to which this insurance applies." It further provided that Acuity "w[ould] have the right and duty to defend the insured against any suit seeking those damages." Coverage applies under the policy to property damage that "is caused by an occurrence that takes place in the coverage territory" and "occurs during the policy period." The policy defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions," but does not define "accident." It defines "property damage" to mean "[p]hysical injury to tangible property, including all resulting loss of use of that property," as well as "[l]oss of use of tangible property that is not physically injured."
¶ 12 Acuity filed this suit for declaratory judgment on October 10, 2013, naming as defendants the Association, Belgravia, the subcontractor Masonry Systems, and Denk & Roche. On July 14, 2015, Acuity moved for partial summary judgment for a declaration that it owed no duty to defend Belgravia or any of its subcontractors—including Denk & Roche—as named insureds under the CGL policies it issued.
¶ 13 Cincinnati petitioned to intervene on April 26, 2016, and the trial court later allowed it to intervene, over Acuity's objections. On April 26, 2016, Cincinnati also filed its two-count third-party complaint for declaratory judgment against Acuity. In count I, Cincinnati asked for a declaration that Acuity "owe[d] a duty to defend Denk & Roche with respect to" the underlying case; in count II, it sought reimbursement under equitable contribution "for the proportionate share of defense fees and costs paid by Cincinnati which should have been paid by Acuity."
¶ 14 At various points in March through July 2017, counts against other defendants were dismissed, until the sole remaining issue in the case was Cincinnati's claim against Acuity "for reimbursement of defense costs."
¶ 15 On March 8, 2017, Acuity moved to dismiss Cincinnati's third-party complaint, arguing that Cincinnati lacked standing to seek a declaration regarding Acuity's policy obligations to its insureds and that Cincinnati's complaint failed to state a cause of action for equitable contribution because the policies are consecutive, rather than concurrent, "and hence do not cover the same risks." After hearing argument on Acuity's fully briefed motion to dismiss, the trial court granted dismissal of count I (for a duty to defend declaration) but denied dismissal of count II (for equitable contribution) on July 18, 2017.
¶ 16 On December 20, 2017, Acuity moved for summary judgment on the remaining count II in Cincinnati's complaint, arguing that it had no obligation to contribute to Cincinnati because it had no duty to defend Denk & Roche. Acuity also claimed that, even if it had a duty to defend, Cincinnati had no right to equitable contribution because the two insurers did not insure the same risk. Cincinnati filed a cross-motion for summary judgment and opposition...
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