PEKIN Ins. Co. v. PULTE HOME Corp.

• Decision Date: 25 August 2010
• Docket Number: No. 1-09-1708.,1-09-1708.
• Citation: 935 N.E.2d 1058,343 Ill.Dec. 830,404 Ill.App.3d 336
• Parties: PEKIN INSURANCE COMPANY, Plaintiff-Appellant, v. PULTE HOME CORPORATION, an Illinois Corporation, Jim Kunde Construction, Inc., an Illinois Corporation, and Kenneth J. Kaiser, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

404 Ill.App.3d 336

935 N.E.2d 1058

343 Ill.Dec. 830

PEKIN INSURANCE COMPANY, Plaintiff-Appellant,

v.PULTE HOME CORPORATION, an Illinois Corporation, Jim Kunde Construction, Inc., an Illinois Corporation, and Kenneth J. Kaiser, Defendants-Appellees.

No. 1-09-1708.

Appellate Court of Illinois,First District, Third Division.

Aug. 25, 2010.

Pretzel & Stouffer, Chartered, Chicago (Robert Marc Chemers and Scott L. Howie, of counsel), for Appellant.

Belgrade and O'Donnell, P.C., Chicago (Steven B. Belgrade, John A. O'Donnell and James Saranteas, of counsel), for Appellee.

Justice QUINN delivered the opinion of the court:

Defendant Kenneth Kaiser filed a lawsuit against defendants Pulte Home Corporation (Pulte), a homebuilding company, and Jim Kunde Construction, Inc. (Kunde Construction), Pulte's sewer subcontractor alleging that he suffered severe and permanent injuries when he fell into an unguarded sewer manhole in the backyard of a home under construction. Pulte tendered its defense of Kaiser's complaint to plaintiff Pekin Insurance Company (Pekin), which had issued an insurance policy to Kunde Construction, naming Pulte as an additional insured. Pekin denied the tender and filed this declaratory judgment action. Pekin and Pulte filed cross-motions for summary judgment, and after a hearing, the trial court denied Pekin's motion and granted Pulte's motion, finding that Pekin owned Pulte a defense in the underlying litigation. For the reasons set forth below, we affirm the trial court.

I. BACKGROUND

The facts giving rise to this litigation are not in dispute. Kenneth Kaiser, an employee of Commonwealth Edison/Exelon, filed a two-count complaint in the circuit court of Cook County on August 15, 2007, and a nearly identical first amended complaint on January 17, 2008, alleging that he sustained severe and permanent injuries when he fell into an unguarded sewer manhole while walking in the backyard of a home under construction in Carpentersville, Illinois. Kaiser named several parties that were involved with the construction project as defendants, including Pulte, the developer, and Kunde Construction, the sewer and water subcontractor. Count I of the complaint raised a negligence claim and count II asserted a premises liability claim. In the negligence count, Kaiser alleged that defendants “owned, controlled and/or were in charge of the erection, construction, repairs, alteration, removal and/or painting” of the home and “individually and through their agents, servants and employees, [were] present during the course of such erection, construction, repairs, alteration, removal and/or painting,” “participated in coordinating the work being done and designated various work method, maintained and checked work progress and participated in the scheduling of the work and the inspection of the work,” and “had authority to stop the work, refuse the work and materials and order changes in the work.” Further, Kaiser alleged that defendants, “by and through their agents, servants and employees, were * * * guilty of one or more of the following careless and negligent acts and/or omissions:”

“(a) Failed to make a reasonable inspection of the premises and the work being done thereon, when the Defendants knew, or in the exercise of ordinary care should have known, that said inspection was necessary to prevent injury to the Plaintiff.

(b) Improperly operated, managed, maintained and controlled the aforesaid premises, so that as a direct and proximate result thereof, the Plaintiff was injured.

(c) Failed to provide the Plaintiff with a safe place within which to work.

(d) Failed to warn the Plaintiff of the dangerous conditions then and there existing, when the Defendants knew, or in the exercise of ordinary care should have known, that said warning was necessary to prevent injury to the Plaintiff.

(e) Failed to barricade or cover a drain/sewer opening in the ground.

(f) Allowed men to work around an uncovered and unbarricaded drain/sewer opening in the ground.

(g) Permitted a drain/sewer opening in the ground to be uncovered or unbarricaded.”

Kaiser further alleged “[t]hat as a direct and proximate result of one or more of the aforesaid careless and negligent acts and/or omissions of the Defendants,” he fell and suffered severe and permanent injuries.

Pulte filed an answer denying the allegations and raising affirmative defenses. Pulte also filed a counterclaim against Kunde Construction for contribution. On March 13, 2009, in response to Pulte's request to admit, Kaiser admitted that his theories at trial included but were not limited to all theories of vicarious liability permitted under section 414 of the Restatement (Second) of Torts. Restatement (Second) of Torts § 414 (1965).

Pulte tendered its defense in the Kaiser lawsuit to Pekin, which had issued an insurance policy to Kunde Construction as the named insured, effective from August 9, 2006, to March 3, 2007. Pulte was named as an additional insured on that policy pursuant to an endorsement that reads, in relevant part, as follows:

Who is an Insured (Section II) is amended to include as an insured any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy. Such person or organization is an additional insured only with respect to liability incurred solely as a result of some act or omission of the named insured and not for its own independent negligence or statutory violation. * * * It is further understood that the designation of an entity as an additional insured does not increase or alter the scope of coverage of this policy.”

Pekin denied the tender on the grounds that the additional insured endorsement does not provide coverage for Pulte's own acts or omissions or those in which Pulte played a role. On January 18, 2008, Pekin filed this declaratory judgment action in the circuit court of Cook County, seeking a determination that it is not liable under the policy to defend Pulte in the Kaiser litigation. In its complaint, Pekin asserted that it had no duty to defend Pulte for one or more of the following reasons: (a) the additional insured endorsement provides no coverage to Pulte for its own negligence; (b) Kaiser sued Pulte based on the alleged negligence of Pulte toward Kaiser; and (c) Kaiser was injured on a construction site where work was in progress, therefore, the extension of coverage to Pulte under the endorsement for completed operations has no application. Pekin and Pulte filed cross-motions for summary judgment. Following a hearing on June 17, 2009, the trial court denied Pekin's motion and granted Pulte's motion, finding that Pekin had a duty to defend Pulte in the Kaiser litigation. This appeal followed.

II. ANALYSIS

On appeal, Pekin argues that the trial court erred in finding that it has a duty to defend Pulte because the underlying complaint in the Kaiser litigation does not allege that Pulte is “solely liable as a result of some act or omission of the named insured.” Pekin contends that Pulte faces only direct liability for its own allegedly negligent acts and not vicarious liability for the allegedly negligent acts of Kunde Construction. Therefore, Pekin argues, by the terms of the additional insured endorsement and the prevailing construction of such endorsements, Pulte is not an additional insured for the liability that Kaiser alleges against it, and therefore, Pekin had no duty to defend it. Pulte contends, however, that because the underlying complaint asserts that defendants “owned, controlled and/or were in charge of” the work site, and Kaiser's injuries arose out of Kunde Construction's failure to cover or barricade the sewer opening, it is possible that Pulte might be found to be vicariously liable for Kunde Construction's acts or omissions and therefore, Pekin has a duty to defend Pulte in the underlying litigation. We find that under the specific facts of this case, the trial court did not err in finding that Pekin had a duty to defend Pulte in the underlying litigation.

[1] “The construction of an insurance policy and a determination of the rights and obligations thereunder are questions of law for the court[,] which are appropriate subjects for disposition by way of summary judgment.” Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill.2d 384, 391, 189 Ill.Dec. 756, 620 N.E.2d 1073 (1993). Summary judgment is appropriate where the pleadings, depositions, and admissions on file, together with any affidavits and exhibits, when viewed in the light most favorable to the nonmoving party, indicate that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2006). We review cases involving summary judgment de novo. Ragan v. Columbia Mutual Insurance Co., 183 Ill.2d 342, 349, 233 Ill.Dec. 643, 701 N.E.2d 493 (1998). As in this case, “where the parties file cross-motions for summary judgment, they invite the court to decide the issues presented as a matter of law.” Liberty Mutual Fire Insurance Co. v. St. Paul Fire & Marine Insurance Co., 363 Ill.App.3d 335, 339, 299 Ill.Dec. 431, 842 N.E.2d 170 (2005).

[2] [3] [4] [5] [6] In determining an insurer's duty to defend its insured, a court must look to the allegations of the underlying complaint. “If the underlying complaints allege facts within or potentially within policy coverage, the insurer is obliged to defend its insured even if the allegations are groundless, false, or fraudulent.” (Emphasis omitted.)

United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill.2d 64, 73, 161 Ill.Dec. 280, 578 N.E.2d 926 (1991). “An insurer may not justifiably refuse to defend an action against its insured unless it is clear from the face of the underlying complaints that the allegations...