National Union Fire Ins. Co. v. Glenview Park Dist.

• Decision Date: 02 June 1992
• Docket Number: Nos. 1-90-3505,1-90-3509,s. 1-90-3505
• Citation: 171 Ill.Dec. 780,594 N.E.2d 1300,230 Ill.App.3d 578
• Parties: , 171 Ill.Dec. 780 NATIONAL UNION FIRE INSURANCE COMPANY, Plaintiff-Appellee, v. GLENVIEW PARK DISTRICT, Defendant-Appellant (National Surety Corporation, Plaintiff; Patricia A. Claussen, Individually and as Guardian of the Estate of Frederick E. Claussen, Defendant). NATIONAL SURETY CORPORATION, Plaintiff-Appellant, v. GLENVIEW PARK DISTRICT, Defendant-Appellee (National Union Fire Insurance Company, Plaintiff; Patricia A. Claussen, Individually and as Guardian of the Estate of Frederick E. Claussen, Defendant).
• Court: United States Appellate Court of Illinois

Page 1300

594 N.E.2d 1300

230 Ill.App.3d 578, 171 Ill.Dec. 780

NATIONAL UNION FIRE INSURANCE COMPANY, Plaintiff-Appellee, v. GLENVIEW PARK DISTRICT, Defendant-Appellant (National Surety

Corporation, Plaintiff; Patricia A. Claussen,

Individually and as Guardian of the

Estate of Frederick E.

Claussen, Defendant).

NATIONAL SURETY CORPORATION, Plaintiff-Appellant, v. GLENVIEW PARK DISTRICT, Defendant-Appellee (National Union

Fire Insurance Company, Plaintiff; Patricia A.

Claussen, Individually and as Guardian

of the Estate of Frederick E.

Claussen, Defendant).

Nos. 1-90-3505, 1-90-3509.

Appellate Court of Illinois First District, Second Division.

June 2, 1992.

Ancel, Glink, Diamond & Cope, P.C. (Thomas G. DiCianni and Jennifer A. Pritz, of counsel), Chicago, for appellant.

Pretzel & Stouffer, Chartered (Robert Marc Chemers and Andrew G. Witik, of counsel), Chicago, for appellee.

JUSTICE HARTMAN delivered the opinion of the court:

This consolidated appeal emanates from the same civil suit. In No. 1-90-3505, Glenview Park District (Glenview) appeals the grant of summary judgment in favor of National Union Fire Insurance Company (National Union) and the denial of its cross-motion for summary judgment. In No. 1-90-3509, National Surety Corporation (National Surety) appeals the denial of its motion for summary judgment against Glenview and the granting of summary judgment in favor of Glenview on Glenview's cross-motion. The issues presented on appeal are whether (1) the provision in National Union's primary policy excluding coverage for negligence of an additional insured was void and unenforceable; (2) the omission of the negligence exclusion in the certificate of insurance precluded its application; (3) the negligence exclusion denied coverage to the additional insured for a violation of the Illinois Structural Work Act (Act) ( Ill.Rev.Stat.1987, ch. 48, par. 60 et seq.); (4) Glenview was an "insured" under National Surety's excess and umbrella liability policy; and (5) National Surety's policy "dropped down" to provide coverage to Glenview in the absence of primary coverage.

On March 11, 1988, National Decorating Service, Inc. (National Decorating) entered into a written contract with Glenview to refurbish an ice rink. The contract required that National Decorating maintain a policy of public liability insurance with limits of not less than $1,000,000 per person and per occurrence and which specifically named Glenview as an additional insured.

National Union issued an insurance policy to National Decorating as the named insured, which provided for comprehensive general liability insurance on a primary basis with effective dates from August 31, 1987, to August 31, 1988. The limits of liability were $1,000,000 per occurrence and in the aggregate.

National Surety also issued an insurance policy to National Decorating as the named insured which purportedly provided excess and umbrella liability coverage for the same period. National Surety's policy specified a limit of $2,000,000 per occurrence and in the aggregate.

On May 24, 1988, Frederick Claussen, an employee of National Decorating, fell from the scaffold upon which he was working and sustained injuries. Patricia Claussen (Claussen) was appointed as his legal guardian and filed suit in the circuit court of Cook County against Glenview seeking recovery for his injuries (Claussen action). The three-count complaint alleged a violation of the Act and negligence.

On April 26, 1989, National Union filed a declaratory judgment action against Glenview and Claussen seeking a determination that it was not obligated to defend or indemnify Glenview under its primary policy. National Union alleged that the terms of the primary policy excluded coverage for damages arising from the negligence of Glenview, an "additional insured." Subsequently, on motion, the complaint was amended to include National Surety as an additional plaintiff. National Surety alleged that it also had no duty to indemnify because Glenview was not an "insured" as defined by its excess and umbrella liability policy.

On July 19, 1990, National Surety and National Union filed a joint motion for summary judgment and supporting memoranda. On July 24, 1990, Glenview filed a motion to stay the declaratory judgment proceedings pending a decision in the Claussen action and later filed a cross-motion for summary judgment against National Union and National Surety.

The circuit court granted National Union's motion for summary judgment, finding that the primary policy did not provide Glenview, as the additional insured, coverage for any damage. Further, the court found that National Surety's policy "dropped down" to provide coverage to Glenview and, therefore, National Surety's motion for summary judgment was denied. Glenview and National Surety each appeal the denial of their respective motions for summary judgment and the grant of summary judgment to their opponents.

I.

In case No. 1-90-3505, Glenview identifies circuit court error in granting summary judgment to National Union because the policy's negligence exclusion was void and unenforceable. The provision at issue reads:

"The Persons Insured provision of this policy is amended to include as an Insured any Persons or organization whom the Named Insured has agreed by contract, either oral or written, prior to loss, to include as an Insured with respect to operations performed by or on behalf of the Named Insured. Such Insureds included by contract shall hereinafter be referred to as Additional Insureds, and the insurance afforded in paragraph A above shall not apply to damages arising out of the negligence of the Additional Insured(s) * * *." (Emphasis added.)

In interpreting an insurance policy, the court's primary concern is to effectuate the intent of the parties as expressed by the contract. (State Farm Fire & Casualty Co. v. Moore (1981), 103 Ill.App.3d 250, 255, 58 Ill.Dec. 609, 430 N.E.2d 641.) An insured's potential liability, for purposes of defense and indemnity coverage, is measured by the allegations of the underlying complaint; a liability insurer is obligated to defend an action brought against a putative insured if the complaint sets forth allegations that bring the claim within or potentially within the coverage of the policy. (Maryland Casualty Co. v. Chicago & North Western Transportation Co. (1984), 126 Ill.App.3d 150, 152-53, 81 Ill.Dec. 289, 466 N.E.2d 1091 (Maryland Casualty); Casualty Insurance Co. v. Northbrook Property & Casualty Insurance Co. (1986), 150 Ill.App.3d 472, 474, 103 Ill.Dec. 495, 501 N.E.2d 812 (Casualty Insurance).) When attempting to limit liability, the insurer must show that the claim falls within the exclusion; exclusionary provisions, therefore, are applied only if their terms are clear, definite, and explicit. Maryland Casualty, 126 Ill.App.3d at 153, 81 Ill.Dec. 289, 466 N.E.2d 1091; Moore 103 Ill.App.3d at 255-56, 58 Ill.Dec. 609, 430 N.E.2d 641.

Although the negligence exclusion refers to "paragraph A above," there is no designated "paragraph A" within the relevant endorsement or anywhere else in the policy. In construing the policy as a whole, however, the faulty designation is not fatal to the provision's effect, but logically, albeit awkwardly, refers to the immediately preceding paragraph.

Glenview urges this court to follow the reasoning and holding of Casualty Insurance. There, a subcontractor in a construction project obtained a general liability policy from Casualty Insurance which named the general contractor as an additional insured. The subcontractor's employee, injured at the job site, brought suit against the general contractor and others, alleging violations of the Act. The policy provided that the general contractor was an additional insured "but only with respect to liability arising out of operations performed for the additional insured by the named insured." (Casualty Insurance, 150 Ill.App.3d at 474, 103 Ill.Dec. 495, 501 N.E.2d 812.) This court held that the language employed in the policy required Casualty Insurance to defend and indemnify the general contractor, since there was no specific reference in the endorsement necessitating the fault of the subcontractor, which Casualty Insurance could have done easily had it so intended. Casualty Insurance, 150 Ill.App.3d at 476, 103 Ill.Dec. 495, 501 N.E.2d 812.

More analogous is Consolidation Coal Co. v. Liberty Mutual Insurance Co. (W.D.Pa.1976), 406 F.Supp. 1292 (Consolidation Coal ), which was distinguished in Casualty Insurance. In that case, the additional insured endorsement provided that Consolidation Coal was an additional insured, "but only with respect to acts or omissions of the named insured in connection with the named insured's operations at the applicable location * * *." (Consolidation Coal, 406 F.Supp. at 1296.) Consolidation Coal was held to be an additional insured under the policy only when the negligent acts or omissions of the named insured directly caused Consolidation Coal's loss. Consolidation Coal, 406 F.Supp. at 1299.

Similarly, the endorsement in this case specifically limited Glenview's coverage to those situations in which the negligent acts or omissions of National Decorating had been established. The provision did not render the policy meaningless as to Glenview, but merely qualified the circumstances of its application. (See, e.g., Harbor Insurance Co. v. Lewis (E.D.Pa.1983), 562 F.Supp. 800, 802-06; First Insurance Co. v. State (1983), 66 Haw. 413, 423-25, 665 P.2d 648.) The language of the negligence exclusion is susceptible to a single reasonable interpretation and is not ambiguous, as Glenview argues. Contract terms are not ambiguous simply because parties do not agree on their meaning. (Hanover Insurance Co. v. Showalter (1990), 204 Ill.App.3d 263, 266, 149 Ill.Dec. 534, 561 N.E.2d 1230.) When the language of an insurance policy is clear and unambiguous, it will be applied as...