Empress Casino Joliet Corp. v. W.E. O'Neil Constr. Co.

• Decision Date: 16 November 2016
• Docket Number: Nos. 1–15–1166,1–15–1184.,s. 1–15–1166
• Citation: 68 N.E.3d 856,2016 IL App (1st) 151166
• Parties: EMPRESS CASINO JOLIET CORPORATION, Plaintiff–Appellant, v. W.E. O'NEIL CONSTRUCTION CO., an Illinois Corporation, Linden Group, Inc., an Illinois Corporation, R.L. Millies & Associates, Inc., an Indiana Corporation, Global Fire Protection Company, an Illinois Corporation, Jameson Sheet Metal, Inc., an Illinois Corporation, and Averus, Inc., f/k/a Facilitec Central, Inc., a Wisconsin Corporation, Defendants–Appellees. National Fire and Marine Insurance Company, a Nebraska Corporation, Lloyd's Syndicate 1414 (Ascot), a British Underwriting Syndicate, and Axis Insurance Company, an Illinois Corporation, as Subrogees of Empress Casino Joliet Corporation, an Illinois Corporation, Plaintiffs–Appellants, v. W.E. O'Neil Construction Co., an Illinois Corporation, Linden Group, Inc., an Illinois Corporation, R.L. Millies & Associates, Inc., an Indiana Corporation, Global Fire Protection Company, an Illinois corporation, Jameson Sheet Metal, Inc., an Illinois Corporation, and Averus, Inc., f/k/a Facilitec Central, Inc., a Wisconsin Corporation, Defendants–Appellees.
• Court: United States Appellate Court of Illinois

2016 IL App (1st) 151166

68 N.E.3d 856

EMPRESS CASINO JOLIET CORPORATION, Plaintiff–Appellant,

v.W.E. O'NEIL CONSTRUCTION CO., an Illinois Corporation, Linden Group, Inc., an Illinois Corporation, R.L. Millies & Associates, Inc., an Indiana Corporation, Global Fire Protection Company, an Illinois Corporation, Jameson Sheet Metal, Inc., an Illinois Corporation, and Averus, Inc., f/k/a Facilitec Central, Inc., a Wisconsin Corporation, Defendants–Appellees.

National Fire and Marine Insurance Company, a Nebraska Corporation, Lloyd's Syndicate 1414 (Ascot), a British Underwriting Syndicate, and Axis Insurance Company, an Illinois Corporation, as Subrogees of Empress Casino Joliet Corporation, an Illinois Corporation, Plaintiffs–Appellants,

v.W.E. O'Neil Construction Co., an Illinois Corporation, Linden Group, Inc., an Illinois Corporation, R.L. Millies & Associates, Inc., an Indiana Corporation, Global Fire Protection Company, an Illinois corporation, Jameson Sheet Metal, Inc., an Illinois Corporation, and Averus, Inc., f/k/a Facilitec Central, Inc., a Wisconsin Corporation, Defendants–Appellees.

Nos. 1–15–1166

1–15–1184.

Appellate Court of Illinois, First District, Third Division.

Nov. 16, 2016.

Rehearing Denied Dec. 21, 2016.

Mark A. Rabinowitz and Kevin P. Caraher, of Cozen O‘Connor, PC, and David E. Walker and Douglas Walker, of Walker Wilcox Matousek LLP, both of Chicago, for appellantsEmpress Casino Joliet Corp., National Fire and Marine Insurance Co., and Lloyd's Syndicate 1414 (Ascot).

Randy Green, of Dugan Brinkmann, Maginnis & Pace, and Thomas A. McDonald, of McDonald Law Firm, both of Chicago, for appellantAxis Insurance Co.

Robert J. Franco and Christopher M. Cano, of Franco & Moroney, LLC, of Chicago, for appelleeW.E. O‘Neil Construction Co.

Robert Marc Chemers, Richard M. Waris, and Donald Patrick Eckler, of Pretzel & Stouffer, Chtrd., of Chicago, for appelleeJameson Sheet Metal, Inc.

William P. Pistorious and Mark J. Sobczak, of Clausen Miller, of Chicago, for appelleeGlobal Fire Protection Co.

Ryan T. Johnson and Clare J. Quish, of Schuyler, Roche & Crisham, P.C., of Chicago, for appelleeLinden Group, Inc.

Dan L. Boho and Steven R. Swofford, both of Hinshaw & Culbertson, LLP, of Chicago, for appelleeAverus, Inc.

James W. Ozog and David J. O'Connell, of Golberg Segalla LLP, of Chicago, for appelleeR.L. Millies & Associates, Inc.

OPINION

Presiding Justice FITZGERALDSMITHdelivered the judgment of the court, with opinion.

¶ 1 This cause of action arises from a fire that occurred during an extensive renovation project, at Empress Casino Joliet (hereinafter the casino) on March 20, 2009.As a result of the fire, the casino, which is owned by the insured plaintiff, Empress Casino Joliet Corporation(hereinafter Empress), sustained extensive damages.Empress received $81,150,000 in insurance payments from three separate insurers—Axis Insurance Company(hereinafter Axis), National Fire and Marine Insurance Company(hereinafter National Fire), and Lloyd's Syndicate 1414 (Ascot)(hereinafter Lloyd's)—under three separate insurance policies.The Axis policy was a "builder's risk" policy specific to the renovation project, while the National Fire and Lloyd's policies provided general property coverage for the casino.At issue in this appeal are the subrogation rights of the three insurers.

¶ 2 Specifically, in this appeal Empress and the three insurers appeal the trial court's grant of summary judgment against them in two underlying consolidated actions against numerous defendants that they claim were responsible for the fire.The first cause of action (case No. 2012 L 012077) was filed by Empress against W.E. O'Neil Construction Co.(hereinafter W.E. O'Neil), Global Fire Protection Company(hereinafter Global), Jameson Sheet Metal Inc.(hereinafter Jameson), the Linden Group, Inc.(hereinafter Linden), R. L. Millies & Associates, Inc.(hereinafter Millies) and Averus, Inc.(hereinafter Averus) and asserted claims for $83,700,00 in damages to cover: (1) the $2,550,000 deductibles that Empress incurred as a result of the fire; and (2) the $81,150,000 in payments that the three insurers made for Empress's covered losses and for which they should have been subrogated.The second action (case No. 2014 L 003223) was filed by the three insurers (Axis, National Fire and Lloyd's) against the same defendants and asserted their subrogation claims.Both actions alleged claims of negligence and willful and wanton misconduct against all of the defendants, and claims for breach of contract against all of the defendants, except for Averus.

¶ 3 After the two cases were consolidated, the circuit court granted summary judgment in favor of all the defendants, on all claims, holding that a waiver of subrogation clause contained in the construction contract for the casino renovation project prevented all the plaintiffs from asserting their respective subrogation claims.The plaintiffs now appeal.

¶ 4 On appeal, all of the plaintiffs(Empress, Axis, National Fire and Lloyd's) argue that the trial court erred when it found that the waiver of subrogation clause in the renovation construction contract applied to the defendant, Averus, since Averus operated under a separate pre-existing oral contract and was not involved in the renovation project.All of the plaintiffs also assert that the trial court erred when it found that the waiver of subrogation clause prevented them from proceeding with their willful and wanton misconduct claims because public policy should bar enforcement of such exculpatory clauses where heighted misconduct is alleged.

¶ 5 In addition, Empress, National Fire, and Lloyd's argue that the waiver of subrogation clause is limited to Axis's builders risk policy and does not apply to Empress's general property insurance policies with National Fire and Lloyd's.In the alternative, Empress, National Fire, and Lloyd's argue that to the extent that waiver of subrogation might apply, it is limited to those losses related to the work (i.e., the renovation project), as it is defined in the construction contract.In addition, Empress, National Fire and Lloyd's argue that the defendants' material breaches of the construction contract should bar enforcement of the waiver of subrogation clause.Finally, Empress asserts that it never waived its right to recover its deductibles under its general property insurance policies with National Fire and Lloyd's.For the reasons that follow, we affirm in part and reverse in part.

¶ 6 I. BACKGROUND

¶ 7 The record below us is voluminous.For purposes of clarity, we will set forth only those facts and procedural history relevant for this appeal.

¶ 8 A. The Parties

¶ 9 In 2008, Empress, which owned and operated the casino complex located in Joliet, Illinois, began performing extensive renovations to its property.For this purpose, Empress entered into a construction contract with O'Neil as the general contractor.O'Neil then hired, inter alia, subcontractors Jameson (for HVAC and sheet metal work) and Global (for sprinkler installment).Linden was the architect and Millies the mechanical, electrical, and plumbing engineer (responsible for inter alia, the fire sprinkler and mechanical systems) for the renovation project.The parties do not dispute that prior to the renovation project, Empress had entered into a separate contract with Averus, for Averus periodically to perform cleaning and maintenance services at the casino, including the cleaning and removal of cooking grease and other combustible residue from ductwork in and above the kitchen.Averus continued to perform these services for Empress during the renovation project.

¶ 10 B. The Renovation Project Construction Contract

¶ 11The parties agree that on September 15, 2008, Empress entered into a construction contract with O'Neil for the renovation project.That contract was comprised of, inter alia:(1) the American Institute of Architects (AIA) Standard Form of Agreement Between Owner and Contractor (AIA Document A111–1997), and (2) the General Conditions of the Contract for Construction (AIAA21–1997)(hereinafter the construction contract).Relevant to the issues in this appeal, as to insurance coverage, the construction contract required Empress as the "Owner" to maintain both liability (section 11.2) and property (section 11.4) insurance.With respect to property insurance section 11.4 provides in pertinent part:

"§ 11.4.1 Unless otherwise provided, the Owner shall purchase and maintain, in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located, property insurance written on a builder's risk "all-risk" or equivalent policy form in the amount of the initial GMP, plus value of subsequent Contract modifications and cost of material supplied or installed by others, comprising total value for the entire Project at the site on a replacement cost basis without optional deductibles.Such property insurance shall be maintained, unless otherwise provided in the Contract Documents or otherwise agreed in writing by all persons and entities who are beneficiaries of such insurance, until final payment has been made as provided in Section 9.10 or until no person or entity other than the Owner has an insurable interest in the property required by this Section 11.4 to be covered, whichever is later.This insurance shall include interest of the Owner, the Contractor, Subcontractors, and Sub-subcontractors in the Project."

¶ 12Section 11.4.1.1 further provides that the property insurance shall be on "an ‘all risk’ or equivalent policy form, and must include, "without limitation, insurance against the perils of fire (with extended coverage) and physical loss or damage, including * * * [inter alia ], theft, vandalism, malicious mischief, collapse, earthquake, flood, windstorm, falsework, testing and startup."The property insurance also must cover " reasonable compensation" for services and expenses incurred by...