GTE North, Inc. v. Henkels & McCoy, Inc.

• Decision Date: 06 May 1993
• Docket Number: No. 4-92-0839,4-92-0839
• Citation: 184 Ill.Dec. 215,612 N.E.2d 1375,245 Ill.App.3d 322
• Parties: , 184 Ill.Dec. 215 GTE NORTH, INCORPORATED, an Illinois Corporation, a/k/a General Telephone Company of Illinois, Plaintiff-Appellant, v. HENKELS & McCOY, INC., a Pennsylvania Corporation, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 1375

612 N.E.2d 1375

245 Ill.App.3d 322, 184 Ill.Dec. 215

GTE NORTH, INCORPORATED, an Illinois Corporation, a/k/a General Telephone Company of Illinois, Plaintiff-Appellant, v. HENKELS & McCOY, INC., a Pennsylvania Corporation, Defendant-Appellee.

No. 4-92-0839.

Appellate Court of Illinois Fourth District.

Argued March 23, 1993.

Decided May 6, 1993.

Alfred B. LaBarre (argued), Heckenkamp, Simhauser & LaBarre, P.C., Springfield, for plaintiff-appellant.

Karen L. Kendall, Bradley S. McMillan (argued), Heyl, Royster, Voelker & Allen, Peoria, Frederick P. Velde, Kurt M. Koepke, Heyl, Royster, Voelker & Allen, Springfield, for defendant-appellee.

Justice GREEN delivered the opinion of the court:

This case involves the operation of the Construction Contract Indemnification for Negligence Act (Act) (see Ill.Rev.Stat.1991, ch. 29, par. 60.90 et seq.), sections 1 and 3 of which, respectively, state as follows:

"With respect to contracts or agreements, either public or private, for the construction, alteration, repair or maintenance of a building, structure, highway bridge, viaducts or other work dealing with construction, or for any moving, demolition or excavation connected therewith, every covenant, promise or agreement to indemnify or hold harmless another person from that person's own negligence is void as against public policy and wholly unenforceable." Ill.Rev.Stat.1991, ch. 29, par. 61.

"This Act does not apply to construction bonds or insurance contracts or agreements." Ill.Rev.Stat.1991, ch. 29, par. 63.

On December 9, 1991, plaintiff GTE North, Inc., a/k/a General Telephone Company of Illinois (Owner), filed suit in the circuit court of Morgan County against defendant Henkels & McCoy, Inc. (Contractor). Owner sought a declaration that an agreement under which Contractor was constructing a building for Owner required Contractor to defend Owner in a pending case. In that suit William H. Byus, an employee of Contractor, was suing Owner to recover damages for injuries Byus received while working on the project which was the subject matter of the agreement between Contractor and Owner. Negligence was charged. On September 11, 1992, the circuit court entered a summary judgment for Contractor, declaring that Contractor was required neither required to defend Owner in the foregoing suit nor to indemnify Owner for any liability incurred from the suit. Owner appeals. We affirm.

Summary judgment is properly granted when "the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Ill.Rev.Stat.1991, ch. 110, par. 2-1005(c); see also Purtill v. Hess (1986), 111 Ill.2d 229, 240, 95 Ill.Dec. 305, 309, 489 N.E.2d 867, 871; Wright v. St. John's Hospital of the Hospital Sisters of the Third Order of St. Francis (1992), 229 Ill.App.3d 680, 682, 171 Ill.Dec. 250, 252, 593 N.E.2d 1070, 1072.) As summary judgment is appropriate only when a party is shown to be entitled to the judgment as a matter of law, no deference can be given on review to the decision of the trial court. Outboard Marine Corp. v. Liberty Mutual Insurance Co. (1992), 154 Ill.2d 90, 102, 180 Ill.Dec. 691, 696, 607 N.E.2d 1204, 1209.

This case turns upon the effect the Act has upon the agreement between Owner and Contractor. The record shows Owner requested a defense and Contractor refused to provide it. The parties agree that their agreement is a construction contract within the meaning of section 1 of the Act.

The significant portions of the agreement are paragraphs 14 and 15, the pertinent provisions of which state as follows:

"14. INDEMNIFICATION

14.1. Contractor agrees to indemnify and save harmless [Owner], its agents or employees, from and against all damages, claims[,] or liabilities without limiting the generality of the foregoing arising out of or related to this Agreement and the performance of any work thereunder, and from all claims, liens, or suits for labor and materials furnished contractor or any subcontractor, and all claims and suits for damages to persons, including [Owner's] employees not specifically exempt herein except only such loss, claims or damage as shall have been proven, determined and found by a court of competent jurisdiction to have been proximately caused by the sole negligence of [Owner]. Contractor, with respect to this Indemnification, agrees to defend and will defend on behalf of [Owner] any suits brought jointly against [Owner] and Contractor or against [Owner] alone, for or arising out of any or all of the aforesaid causes, and will reimburse [Owner] for attorney's fees and other expenses incurred by [Owner] in defending any such suits.

15. INSURANCE

15.1 Contractor shall maintain in full force and effect during the performance of the work, the following insurance policies with insurance companies approved by [Owner].

15.1.1 Workmen's Compensation and Occupational Disease * * *. * * *

15.1.2 Comprehensive General Liability insurance * * *. * * * [Not covering liability of Owner.]

15.1.3 Comprehensive Automobile Liability insurance * * *. * * *

15.1.4 The insurance provided pursuant to the foregoing shall include Contractual Liability coverage in accordance with Contractor's obligations under Paragraph 14 above and, if underground work, demolition, blasting, excavation or rigging is involved, the applicable insurance policy exclusions relating thereto shall be deleted." (Emphasis added.)

The most significant parts of the foregoing are the provisions which purport to require the Contractor to (1) indemnify Owner for liability for Owner's negligence in connection with the construction project, (2) defend Owner in a suit arising from the foregoing, and (3) provide contractual liability insurance covering Contractor's promises in regard to items (1) and (2).

Clearly, Contractor's purported obligation to indemnify Owner is voided by the provision of section 1 of the Act. Any agreement of Contractor to defend Owner here would have to arise from paragraph 14.1 of the agreement. That paragraph is entitled "INDEMNIFICATION." The purported agreement to defend is stated in these words: "Contractor, with respect to this Indemnification, agrees to defend * * *." Where a contract for indemnification provides for the indemnitor to defend the indemnitee, that duty is an aspect of the indemnification. Montgomery Ward & Co. v. Wetzel (1981), 98 Ill.App.3d 243, 253, 53 Ill.Dec. 366, 374-75, 423 N.E.2d 1170, 1178-79; Malone v. A.L. Mechling Barge Lines, Inc. (1978), 63 Ill.App.3d 756, 768, 20 Ill.Dec. 519, 528, 380 N.E.2d 497, 506.

The wording of the agreement seems to tie the purported agreement to defend to the indemnification provision of the agreement so closely that it comes within the prohibition of section 1 of the Act. However, Owner contends that section 3 of the Act, which exempts "construction bonds or insurance contracts or agreements" (see Ill.Rev.Stat.1991, ch. 29, par. 63) from the prohibition of section 1 of the Act, justifies the agreement to defend here because paragraph 15 of the agreement requires Contractor to furnish certain types of insurance. This argument would seem to fail because Owner is not seeking to have an insurer furnish a defense but is seeking to require Contractor to do so. Owner is not seeking to sue Contractor for damages for failure to provide a defense.

In any event, no valid provision of the agreement required Contractor to furnish insurance which would provide Owner a defense to the instant suit by Byus. A long series of appellate court decisions concern the situation where, as here, in construction contracts, one party is required to indemnify the other for damages arising from the construction and also to require the indemnitor to furnish insurance. In all cases where the insurance to be provided is to be liability insurance protecting the indemnitee as an insured, that provision of the contract has been upheld against contention that it violates section 1 of the Act. See Jokich v. Union Oil Co. (1991), 214 Ill.App.3d 906, 158 Ill.Dec. 420, 574 N.E.2d 214; St. John v. City of Naperville (1987), 155 Ill.App.3d 919, 108 Ill.Dec. 551, 508 N.E.2d 1128; Bosio v. Branigar Organization, Inc. (1987), 154 Ill.App.3d 611, 107 Ill.Dec. 105, 506 N.E.2d 996; Zettel v. Paschen Contractors, Inc. (1981), 100 Ill.App.3d 614, 56 Ill.Dec. 109, 427 N.E.2d 189.

Here, Contractor did not agree to provide insurance for Owner which would insure Owner for liability arising from the construction project which was the subject of the parties' agreement. Rather, Contractor agreed to provide insurance which would insure Contractor for its contractual liability under its obligations under paragraph 14 of the agreement, which required Contractor to indemnify Owner and, "[in] respect to [that] Indemnification," defend suits against Owner. The situation here was very similar to that in Shaheed v. Chicago Transit Authority (1985), 137 Ill.App.3d 352, 92 Ill.Dec. 27, 484 N.E.2d 542.

In Shaheed, a contractor for a construction project for the Chicago Transit Authority, when sued under the Structural Work Act (Ill.Rev.Stat.1983, ch. 48, par. 60 et seq.), brought a third-party complaint against a subcontractor for breach of the agreement between the contractor and subcontractor. Paragraph three of that agreement provided that the " 'Subcontractor shall maintain insurance in the following limits and cause a so-called contractual liability and/or hold harmless endorsement to be issued by the insurance company or companies insuring all the Subcontractors indemnity obligations under this agreement * * *.' " (Shaheed, 137 Ill.App.3d at 363, 92 Ill.Dec. at 36, 484 N.E.2d at 551.) Paragraph five of the contract, which did not refer to the agreement to insure, provided that the subcontractor agreed to indemnify and hold harmless the contractor...