Jokich v. Union Oil Co. of California

• Decision Date: 30 May 1991
• Docket Number: No. 1-89-2915,1-89-2915
• Citation: 158 Ill.Dec. 420,574 N.E.2d 214,214 Ill.App.3d 906
• Court: United States Appellate Court of Illinois
• Parties: , 158 Ill.Dec. 420 Samuel JOKICH, Plaintiff, v. UNION OIL COMPANY OF CALIFORNIA, Defendant/Third Party Plaintiff-Appellee (J & V Mechanical Services, Inc., Third Party Defendant-Appellant; Joseph R. Zborowski, Planet Insurance Company, Reliance Insurance Company, Savill-Schnieders-Kuehr Insurance Agency, a partnership, a/k/a Savill, Schnieders & Kuehr, Third-Party Defendants).

Page 214

574 N.E.2d 214

214 Ill.App.3d 906, 158 Ill.Dec. 420

Samuel JOKICH, Plaintiff, v. UNION OIL COMPANY OF CALIFORNIA, Defendant/Third Party

Plaintiff-Appellee (J & V Mechanical Services, Inc., Third

Party Defendant-Appellant; Joseph R. Zborowski, Planet

Insurance Company, Reliance Insurance Company,

Savill-Schnieders-Kuehr Insurance Agency, a partnership,

a/k/a Savill, Schnieders & Kuehr, Third-Party Defendants).

No. 1-89-2915.

Appellate Court of Illinois,

First District, Fourth Division.

May 30, 1991.

Judge & Knight, Ltd. (Jay S. Judge and Martin D. Hoke, of counsel), Park Ridge, for third party defendant-appellant.

Eric Samore of Querrey & Harrow, Ltd., Chicago, for defendant/third party plaintiff-appellee.

[214 Ill.App.3d 907] [158 Ill.Dec. 421] Justice McMORROW delivered the opinion of the court:

Third-Party defendant, J & V Mechanical Services, Inc. (J & V) appeals from the entry of summary judgment for defendant/third-party plaintiff Union Oil Company (Union Oil) on count IV of Union Oil's complaint alleging the breach of a provision in a construction contract requiring J & V to procure insurance in which Union Oil is named as an additional insured. J & V contends that the trial court erred in entering summary judgment for Union Oil because the insurance clause at issue is void and unenforceable as being contrary to Illinois public policy.

In 1982, the parties entered into an agreement pursuant to which J & V was to repair an overhead crane owned by Union Oil located at its Lemont, Illinois refinery. In the course of making the repairs, Samuel Jokich, a J & V employee, sustained serious injuries when a temporary staircase, provided and owned by Union Oil, collapsed. Jokich filed a complaint against Union Oil charging it with various violations of the Structural Work Act (Ill.Rev.Stat.1983, ch. 48, par. 60 et seq.). Union Oil filed its answer in which it denied all the material allegations of Jokich's complaint.

Thereafter, Union Oil also filed a third-party complaint against J & V for, inter alia, contribution (count III) and breach of contract for J & V's failure to procure insurance covering Union Oil's liability to Jokich (count IV). The record reveals that in its answers to interrogatories, J & V admitted that it directed its insurance broker to add Union Oil as an additional insured on J & V's comprehensive general liability (CGL) policy. The broker issued to Union Oil a signed "Certificate of Insurance for Contractors" showing Union Oil to be an additional insured under J & V's CGL policy. However, through some oversight or error, the policy itself did not name Union Oil as an insured. ¹

Union Oil also filed a motion for partial summary judgment on count IV, asserting that no genuine issue of fact existed as to J & V's contractual duty to obtain CGL insurance protecting Union Oil as an additional insured. J & V opposed the motion, asserting that under Illinois public policy, the insurance provision in the construction contract was void and unenforceable because it did not clearly and unequivocally state an intention by J & V to insure Union Oil against Union Oil's own negligence.

Following a hearing, the trial court granted Union Oil's motion for partial summary judgment on the breach of contract count. Subsequently, the court entered an order requiring J & V to defend Union Oil and to pay any judgment, up to $500,000, entered in the underlying action. The Jokich claim was settled, and pursuant to the court's order, judgment was entered against J & V in the amount of $220,278, which represented the amount Union Oil had paid in settlement of the claim and its defense costs. This appeal followed.

OPINION

The construction contract clause on which Union Oil based its claim against J & V is contained in paragraph 18 (Insurance). That paragraph provides in pertinent part:

"With respect to the operations performed under or incident to this Agreement, [J & V] further agrees to obtain and maintain insurance acceptable to [Union Oil] which is primary as to any other existing, valid and collectible insurance and except for workers' compensation, employer's liability and contractual liability names [Union Oil] as an additional insured * * *. Such insurance shall include:

(a) Comprehensive General Liability Insurance covering subcontractors contingent liability, completed operations liability and products liability * * *.

* * * * * *

Further, the insurance to be carried shall be in no way limited by any limitations expressed in numbered [paragraph] 17 above nor any limitation placed on the indemnity therein given as a matter of law.

In addition to the above, if the work or any part of it is to be performed in Illinois, all such insurance shall specifically state that it covers the liability of [Union Oil] under the Illinois Structural Work Act."

Paragraph 17, referred to in paragraph 18, is an indemnification provision. It states, in relevant part:

"[J & V] agrees to protect, indemnify and hold [Union Oil] * * * free and harmless from and against any and all claims, demands, and causes of action of all kinds including without limitation, claims of property, injury or death, arising out of or being in any way connected with [J & V's] performance under this agreement except for matters shown by final judgment to have been caused by the sole negligence of [Union Oil]. The indemnification provided herein shall be effective to the maximum extent permitted by applicable law. [J & V] shall be solely responsible for the defense of any and all claims, demands or suits against [Union Oil] * * * including without limitation, claims by any employee of [J & V] * * * even tho the claimant may allege wilful misconduct or sole negligence on the part of [Union Oil]."

J & V asserts that the injuries sustained by Jokich were caused by the sole negligence of Union Oil, which owned and provided the wooden stairs that collapsed. J & V further argues that under Westinghouse Electric Elevator Co. v. LaSalle Monroe Building Corp. (1946), 395 Ill. 429, 70 N.E.2d 604, a contractual promise to procure insurance to protect another against the protected party's own negligence, similar to an indemnity agreement, is valid and enforceable only if it clearly, specifically and unequivocally expresses the insuring party's intent to provide such coverage. J & V contends that the insurance clause at issue in this case does not clearly, specifically and unequivocally express J & V's intent to procure insurance covering Union Oil's liability for its own negligence, and is, therefore, void and unenforceable as being contrary to public policy.

In Westinghouse, the court established the rule that an indemnity contract will not be construed as indemnifying a party against its own negligence unless such a construction is required by clear and explicit language or such intention is expressed in unequivocal terms in the indemnity agreement. In 1971, the General Assembly enacted "An Act in relation to indemnity in certain contracts" (Ill.Rev.Stat.1971, ch. 29, sec. 61) (the Act). Section 1 of the Act provides:

"[w]ith respect to * * * construction contracts, any 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."

This legislation was aimed at arresting efforts in the construction industry to contractually avoid liability for negligence. The Act was intended to further public policy requiring management in the construction industry to undertake accident prevention measures and to provide safe working conditions on construction sites. Davis v. Commonwealth Edison (1975), 61 Ill.2d 494, 336 N.E.2d 881.

Section 3 of the Act provides, "[t]his Act does not apply to construction bonds or insurance contracts or agreements." (Ill.Rev.Stat.1971, ch. 29, sec. 63.) Section 3, like section 1, serves to "protect the interests of construction workers and members of the general public who may suffer injury through construction or maintenance by preserving supplemental sources of compensation for injured persons, namely insurance and indemnifying and hold-harmless agreements in [insurance contracts] and construction bonds." (Capua v. W.E. O'Neill Construction Co. (1977), 67 Ill.2d 255, 10 Ill.Dec. 216, 367 N.E.2d 669.) Thus construction insurance contracts or construction bonds containing indemnity agreements protecting one against one's own negligence are not void under the Act. Capua.

An agreement in a construction contract to obtain insurance is not an agreement to indemnify prohibited by section 1 of the Act.

"Under an indemnity agreement, the promisor agrees to assume all responsibility and liability for any injuries or damages. Under an agreement to obtain insurance, the promisor merely agrees to procure the insurance and pay the premium on it. Once the insurance is obtained, the promisor bears no responsibility in the event of injury or damages, even if the insurer should breach the insurance agreement through no fault of the promisor." Zettel v. Paschen Construction Contractors, Inc. (1981), 100 Ill.App.3d 614, 617-18, 56 Ill.Dec. 109, 427 N.E.2d 189.

Moreover, an agreement to obtain insurance is not a contract of insurance, to which section 3 of the Act is applicable (Zettel ). The Zettel court noted, however, that the promisor may be required to assume the liabilities of an insurer if the promisor breaches the agreement to obtain insurance. In Zettel, the contractors' entitlement to recover all monies for which they could become liable in the injured parties' underlying suit was not based on the subcontractor's promise to indemnify but, rather, on the basis of the subcontractor's breach of the provision in the contract to obtain insurance. While stating that section 3 of the Act was not directly applicable to...