Monticello Ins. Co. v. Wil-Freds Const., Inc., WIL-FREDS

CourtUnited States Appellate Court of Illinois
Citation214 Ill.Dec. 597,277 Ill.App.3d 697,661 N.E.2d 451
Docket NumberNo. 2-95-0466,WIL-FREDS,2-95-0466
Parties, 214 Ill.Dec. 597 MONTICELLO INSURANCE COMPANY, Plaintiff-Appellee, v.CONSTRUCTION, INC., f/k/a Wil-Freds, Inc., Defendant-Appellant (Fujikawa Johnson and Associates, Inc., et al., Defendants).
Decision Date01 February 1996

Paul T. Lively, Michael Resis, Chicago, for Wil-Freds Construction, Inc.

James K. Horstman, Williams & Montgomery, Ltd., Chicago, for Monticello Insurance Company.

Justice BOWMAN delivered the opinion of the court:

Defendant, Wil-Freds Construction, Inc. (Wil-Freds), appeals a summary judgment entered in favor of plaintiff, Monticello Insurance Company (Monticello), in a declaratory judgment action to determine whether Monticello is required to defend or indemnify Wil-Freds under a comprehensive general liability insurance policy. We affirm.

I. Background

The following summary of the facts and procedural history are taken from the record on appeal. On April 27, 1989, the City of Naperville (Naperville) and Wil-Freds entered into an agreement for the construction of a three-story municipal building and an adjoining 400-car parking garage (the project). The contract between Wil-Freds and Naperville provided, inter alia, that Wil-Freds was solely responsible for all construction methods, techniques, and procedures; that Wil-Freds was responsible for the acts and omissions of subcontractors; that Wil-Freds warranted the work to be of good quality, free from defects, and in conformance with the contract documents; and that Wil-Freds would furnish a performance bond in an amount equal to the contract sum.

On October 1, 1992, following the construction of the project, Naperville filed a two-count complaint against Wil-Freds and the project's architect, Fujikawa Johnson & Associates, Inc. (Fujikawa). Count II of the complaint, which pertained to Wil-Freds, was entitled "Breach of Contract Against Wil-Freds Construction, Inc." It alleged a multitude of construction defects, including:

"abnormal voids and cracks in the concrete walls and columns in the parking garage; honeycombed concrete; incompletely consolidated concrete; abnormal cracking at the Southwest stairwell; exposure of rebar at column G6; insufficient support for anchor bolts at column G6; leaking in the parking garage below the decorative fountain; water damage to the lobby of the office building and basement underneath the lobby; interior water damage caused by water penetration of the roof; an unbalanced, defective HVAC system; defective, unsightly granite; cracked terrazzo floors and stairwells; defective doors; and numerous miscellaneous construction defects."

Wil-Freds tendered the defense of Naperville's action to Monticello, which insured Wil-Freds under a comprehensive general liability (CGL) policy. In response, on August 9, 1993, Monticello filed a complaint for declaratory judgment against Wil-Freds, Naperville, and Fujikawa, seeking a determination of its obligation to defend or indemnify Wil-Freds in connection with Naperville's action.

The policy at issue is a standard CGL policy and provides:

"The company [Monticello] will pay on behalf of the insured [Wil-Freds] all sums which the insured shall become legally obligated to pay as damages because of

A. bodily injury or

B. property damage

to which this insurance applies, caused by an occurrence[.]"

The policy defines "occurrence" as: "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured."

The policy also contains a number of exclusions, including the following:

"This insurance does not apply:

(n) to property damage to the named insured's products arising out of such products or any part of such products;

(o) to property damage to work performed by or on behalf of the named insured arising out of the work or any portion thereof, or out of materials, parts or equipment furnished in connection therewith[.]"

The policy defines "named insured's products" as:

"goods or products manufactured, sold, handled or distributed by the named insured or by others trading under his name, including any container thereof (other than a vehicle), but 'named insured's products' shall not include a vending machine or any property other than such container, rented to or located for use of others but not sold[.]"

Additionally, the CGL policy was modified by a broad form property damage endorsement (BFPD endorsement). The BFPD endorsement replaced exclusions (o) and (k) (not relevant to the present case) of the CGL policy with different exclusionary language, but did not replace or alter exclusion (n).

Monticello and Wil-Freds filed cross-motions for summary judgment in the declaratory judgment action. In support of its motion for summary judgment, Monticello relied upon the CGL policy's definition of "occurrence," arguing that, because Naperville sought to recover for property damage to the project itself resulting from a breach of contract, there was no occurrence as the term is defined in the CGL policy. Monticello also relied upon numerous policy exclusions, including exclusion (n). In its summary judgment motion, Wil-Freds argued that Naperville's complaint did allege an "occurrence" because true but unpleaded facts showed that the allegedly defective construction had caused damage to property other than the project itself. Wil-Freds also argued that, based upon the BFPD endorsement, coverage existed for defects which resulted from the work of subcontractors rather than from the work of Wil-Freds itself.

Wil-Freds supported its summary judgment motion with the affidavit of William Guinea, Wil-Freds' project manager for the Naperville project. Guinea stated that many of the construction defects alleged in Naperville's complaint were attributable to the work of subcontractors engaged by Wil-Freds rather than to Wil-Freds' own work. Also attached to Wil-Freds' motion was the affidavit of Wil-Freds' president, William Luxion. Luxion stated that many of the alleged defects involved items which Wil-Freds did not supply or install. Luxion estimated the total cost of repairs needed to correct the defects at $1,538,824.

Finally, Wil-Freds attached to its summary judgment motion excerpts from the deposition of Jonathan Craig Blomquist, Naperville's assistant city manager, taken in the underlying action. In his deposition, Blomquist stated that water leakage in the parking garage damaged several Naperville-owned fleet vehicles and one privately owned vehicle. Blomquist stated, however, that Naperville "choose[s] not to fix the vehicles until the problem is cured."

After full briefing and argument by the parties, the trial court granted Monticello's motion, denied Wil-Freds' motion, and entered summary judgment for Monticello. Wil-Freds then filed this timely appeal.

II. Discussion

Wil-Freds contends on appeal that the trial court erred in denying its motion for summary judgment and in entering summary judgment for Monticello. In support of this contention, Wil-Freds argues (1) Naperville's complaint alleges an "occurrence," triggering coverage under the CGL policy; (2) exclusion (n) does not bar coverage; and (3) the BFPD endorsement provides coverage for construction defects attributable to the work of subcontractors.

It appears from the record that the trial court's entry of summary judgment for Monticello was based solely upon exclusion (n) of the CGL policy. However, because we may affirm a summary judgment on any basis found in the record, we consider all provisions of the CGL policy to determine if summary judgment for Monticello was appropriate. (See Bank of Hillside v. Laurel Motors, Inc. (1994), 259 Ill.App.3d 362, 364-65, 198 Ill.Dec. 124, 632 N.E.2d 183.) We review the trial court's entry of summary judgment de novo. Outboard Marine Corp. v. Liberty Mutual Insurance Co. (1992), 154 Ill.2d 90, 102, 180 Ill.Dec. 691, 607 N.E.2d 1204.

A. Duty-To-Defend Standard

To determine an insurer's duty to defend its insured, the court must look to the allegations of the underlying complaint and compare those allegations to the relevant coverage provisions of the insurance policy. (Crum & Forster Managers Corp. v. Resolution Trust Corp. (1993), 156 Ill.2d 384, 393, 189 Ill.Dec. 756, 620 N.E.2d 1073; Economy Preferred Insurance Co. v. Grandadam (1995), 275 Ill.App.3d 866, 869, 212 Ill.Dec. 190, 656 N.E.2d 787.) Additionally, we may consider "true but unpleaded facts, which, when taken together with the complaint's allegations, indicate that the claim is within or potentially within the policy's coverage." (Associated Indemnity Co. v. Insurance Co. of North America (1979), 68 Ill.App.3d 807, 816, 25 Ill.Dec. 258, 386 N.E.2d 529.) If the underlying complaint alleges facts within or potentially within the policy's coverage provisions, the insurer has a duty to defend even if the allegations are groundless, false, or fraudulent. United States Fidelity & Guaranty Co. v. Wilkin Insulation Co. (1991), 144 Ill.2d 64, 73, 161 Ill.Dec. 280, 578 N.E.2d 926 (USF & G); see also National Union Fire Insurance Co. v. Glenview Park District (1994), 158 Ill.2d 116, 124, 198 Ill.Dec. 428, 632 N.E.2d 1039.

An insurer may not refuse to defend an action against its insured unless it is clear from the face of the underlying complaint that the allegations fail to state facts which bring the case potentially within the policy's coverage. (Dixon Distributing Co. v. Hanover Insurance Co. (1994), 161 Ill.2d 433, 438-39, 204 Ill.Dec. 171, 641 N.E.2d 395; Conway v. Country Casualty Insurance Co. (1982), 92 Ill.2d 388, 393, 65 Ill.Dec. 934, 442 N.E.2d 245.) If the underlying complaint alleges several theories of recovery against the insured, the insurer must defend the insured even if only one such theory is potentially within the coverage of the policy. USF & G, 144...

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