Pekin Ins. Co. v. Lexington Station, LLC

• Decision Date: 14 August 2017
• Docket Number: No. 1-16-3284.,1-16-3284.
• Parties: PEKIN INSURANCE COMPANY, Plaintiff–Appellant, v. LEXINGTON STATION, LLC, an Illinois Limited Liability Company; and Marcos Botello, Defendants–Appellees.
• Court: United States Appellate Court of Illinois

2017 IL App (1st) 163284

84 N.E.3d 554

PEKIN INSURANCE COMPANY, Plaintiff–Appellant,

v.LEXINGTON STATION, LLC, an Illinois Limited Liability Company; and Marcos Botello, Defendants–Appellees.

No. 1-16-3284.

Appellate Court of Illinois, First District, FIRST DIVISION.

August 14, 2017

Robert Marc Chemers, Heather E. Plunkett, and Paula K. Villela, of Pretzel & Stouffer, Chtrd., of Chicago, for appellant.

Christopher J. Pickett and Amy E. Johnson, of Rappaport & Postel, LLC, of Chicago, for appellees.

OPINION

JUSTICE MIKVA delivered the judgment of the court, with opinion.

¶ 1 This is a declaratory judgment action filed by plaintiff Pekin Insurance Company, seeking a declaration that it owes defendant Lexington Station, LLC, no duty to defend in a personal injury lawsuit filed by Marcos Botello against Lexington. Pekin issued a commercial general liability (CGL) policy to ACC, Inc. Defendant Marcos Botello was injured during the effective policy period, while working as an employee of ACC, on a development project owned by Lexington. Mr. Botello filed a personal injury lawsuit against Lexington. Lexington tendered defense of that action to Pekin. Pekin refused the tender, then filed this action, arguing it had no duty to defend Lexington as an additional insured under the policy issued to ACC.

¶ 2 Westfield Insurance Company, as Lexington's own CGL insurer, intervened in the declaratory action and argued, along with Lexington, that Pekin did owe a duty to defend. The circuit court denied Pekin's motion for summary judgment and granted Lexington and Westfield's cross-motion for judgment on the pleadings, finding that Pekin had a duty to defend Lexington.

¶ 3 On appeal, Pekin argues that the court's entry of judgment in favor of Lexington and Westfield was in error because (1) Mr. Botello's complaint did not contain allegations that created a potential for a claim of vicarious liability against Lexington and (2) the circuit court improperly considered a third-party complaint in coming to its conclusion. For the following reasons, we affirm the judgment of the circuit court.

¶ 4 BACKGROUND

¶ 5 A. The ACC Construction Agreement

¶ 6 In September 2014, Lexington, as the "Owner," entered into a contract with ACC, as the "Contractor" (ACC construction agreement), for carpentry services in connection with the development of a property in Morton Grove, Illinois. The ACC construction agreement, which was attached to the complaint for declaratory judgment, provided that ACC was an independent contractor and required ACC to "perform and pay for all" of the contract work. The ACC construction agreement defined that contract work to include a broad scope of carpentry work on the Morton Grove development. The ACC construction agreement included the requirement that ACC supply and install a broad range of equipment to do that work, specifically including "[h]oisting and erection equipment." The ACC construction agreement also provided:

"A. Contractor shall initiate, maintain and supervise all safety and hazard communication precautions and programs (collectively, the ‘Programs'). * * * The programs shall cover specifically and Contractor and each subcontractor shall take all reasonable precautions for the safety of and shall provide all reasonable protection to prevent damage, injury or loss to the following:

(1) All employees performing all or any portion of the Work and all other persons who may be affected thereby;

* * *

B. Contractor shall erect and maintain, as required by existing conditions and progress of the Work, all reasonable, necessary or appropriate safeguards for safety and protection * * *.

* * *

H. Notwithstanding anything in the Contract Documents to the contrary, Owner shall have no responsibility or obligation in connection with safety or the construction means, methods, techniques or procedures in connection with the Work or the acts or omissions of Contractor * * *."

The construction agreement further provided that all "material and workmanship * * * shall be subject to inspection, examination and testing by Owner at any and all times."

¶ 7 B. The Pekin Policy

¶ 8 The ACC construction agreement provided that ACC, "at its own expense, shall carry at all times prior to completion of the work and acceptance by the Owner of the work, the Insurance as set forth in the Schedule of Insurance attached hereto and make a part thereof as Exhibit ‘D.’ " Exhibit D provided that ACC's insurance policy "must include" an "additional insured" endorsement, naming Lexington as its additional insured.

¶ 9 Pekin issued a CGL policy to ACC effective July 1, 2014, to July 1, 2015. The policy contained an "additional insured" endorsement that defined an additional insured as "any person or organization for whom you are performing operations, when you and such person or organization have agreed in a written contract effective during the policy period * * * that you must add that person or organization as an additional insured on a policy of liability insurance." The endorsement stated that the additional insured was covered by the policy "only with respect to vicarious liability for ‘bodily injury’ * * * imputed from [the named insured] to the Additional Insured." The endorsement specifically excluded coverage for liability "arising out of or in any way attributable to the claimed negligence * * * of the Additional Insured, other than vicarious liability which is imputed to the Additional Insured solely by virtue of the acts or omissions of the Named Insured."

¶ 10 C. The Underlying Complaint

¶ 11 Mr. Botello filed his first amended complaint against Lexington (underlying complaint or Botello complaint) in August 2015, alleging claims of construction negligence, premises liability, and direct negligence. ACC, Mr. Botello's employer, was not named as a defendant in the action. In his complaint, Mr. Botello alleged that in March 2015, Lexington owned the Morton Grove property; was in charge of the property's "erection, construction, repairs, and maintenance"; and controlled the property "both directly and indirectly, individually and through its agents, servants and employees." Mr. Botello alleged that Lexington had entered into an agreement with ACC for carpentry work to be performed on a construction project at the property. The complaint alleged that Mr. Botello was employed as a carpenter by ACC and that Lexington, "individually and by and through its agents, servants and employees" was guilty of a variety of careless and negligent acts, including a failure to "provide proper equipment" and "to erect, construct place or operate" or cause to be erected, constructed, or operated "a safe, suitable and proper hoist, lift, ladder, stand, scaffold or tie off to facilitate and be used in the said erection, construction repair, alteration, removal and/or painting."

¶ 12 Mr. Botello alleged:

"[Lexington] participated in coordinating the work being done and designated various work methods, maintained and checked work progress and participated in scheduling of the work and inspection of the work. In addition, at the time and place, [Lexington] had the authority to stop the work, refuse the work and materials and order changes in the work, in the event the work was being performed in a dangerous manner or for any other reason."

Mr. Botello also alleged that Lexington, "through its agents," "[i]mproperly operated, managed, maintained and controlled the premises," and "[f]ailed to supervise the work being done."

¶ 13 Mr. Botello alleged that, on March 24, 2015, he was standing on a ladder, working "at heights in excess of 20 feet" "without tie-off, without a proper lift, hoist, ladder, scaffold, or stand, when he fell a significant distance to the ground below" from the ladder, causing his injury. According to Mr. Botello, "as a direct and proximate result of one or more of the aforesaid careless and negligent acts [or] omissions of [Lexington], [Mr. Botello] sustained severe and permanent injuries, both externally and internally."

¶ 14 D. The Declaratory Judgment Action

¶ 15 Pekin filed this complaint for declaratory judgment on November 12, 2015, against both Lexington and Mr. Botello, seeking a declaration that it had no duty to defend Lexington in the Botello action. Pekin alleged that it owed Lexington no such duty because Lexington was being sued for its own negligence, and direct negligence of the additional insured was specifically excluded by the policy.

¶ 16 On May 10, 2016, Lexington and Westfield filed a motion for judgment on the pleadings pursuant to section 2–615(e) of the Code of Civil Procedure ( 735 ILCS 5/2–615(e) (West 2016)). Lexington and Westfield argued that Pekin owed a duty to defend Lexington in the Botello action because, "under the controlling law set forth in Pekin Insurance Co. v. CSR Roofing Contractors, Inc. , 2015 IL App (1st) 142473, 397 Ill.Dec. 148, 41 N.E.3d 559, [the Botello] complaint does create a potential that [Lexington] will be held vicariously liable for ACC's conduct." (Emphasis in original.) Lexington and Westfield also attached a third-party complaint filed by Lexington in the Botello action, alleging that ACC's negligent acts and omissions were the cause of Mr. Botello's injuries and seeking contribution from ACC on that basis. Lexington and Westfield argued that the circuit court could consider the third-party complaint as "further evidence" that Mr. Botello's allegations—referring to Lexington acting "by and through its agents"—were actually referring to acts or omissions of ACC and that, therefore, there was a potential to find Lexington vicariously liable for ACC's negligence, bringing Lexington within the Pekin policy's coverage.

¶ 17 On June 8, 2016, Pekin filed a cross-motion for summary judgment against Lexington and Westfield pursuant to section 2–1005(a) of the Code of Civil Procedure ( 735 ILCS 5/2–1005(a) (2016) ). Pekin argued that there was "no possibility based on the underlying allegations that Lexington w[...