W. Bend Mut. Ins. Co. v. Trapani Constr. Co.

• Decision Date: 19 October 2020
• Docket Number: No. 1-19-1772,1-19-1772
• Citation: 2020 IL App (1st) 19 -1772-U
• Parties: WEST BEND MUTUAL INSURANCE COMPANY, Plaintiff-Appellant, v. TRAPANI CONSTRUCTION COMPANY, INC., Defendant-Appellee. NATIONAL FIRE INSURANCE COMPANY OF HARTFORD, Third-Party Plaintiff-Appellee, v. WEST BEND MUTUAL INSURANCE COMPANY, Third-Party Defendant-Appellant.
• Court: United States Appellate Court of Illinois

2020 IL App (1st) 19-1772-U

WEST BEND MUTUAL INSURANCE COMPANY, Plaintiff-Appellant, v. TRAPANI CONSTRUCTION COMPANY, INC., Defendant-Appellee.

NATIONAL FIRE INSURANCE COMPANY OF HARTFORD, Third-Party Plaintiff-Appellee, v. WEST BEND MUTUAL INSURANCE COMPANY, Third-Party Defendant-Appellant.

No. 1-19-1772

APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT FIRST DISTRICT FIRST DIVISION

October 19, 2020

NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).

Appeal from the Circuit Court of Cook County

No. 14 CH 00949

Honorable Sophia H. Hall, Judge Presiding.

JUSTICE COGHLAN delivered the judgment of the court.

Presiding Justice Walker and Justice Pierce concurred in the judgment.

ORDER

¶ 1 Held: Insurer had a duty to defend against claims asserting "property damage caused by an occurrence" and a duty to indemnify for a "covered loss made in reasonable anticipation of litigation." Prejudgment interest properly awarded.

¶ 2 In this insurance coverage case, defendant West Bend Mutual Insurance Company (West Bend) appeals the trial court's finding that it had a duty to defend and indemnify plaintiff Trapani Construction Company, Inc. (Trapani Construction) and third-party plaintiff National Fire Insurance Company of Hartford (National Fire) for damages caused by construction defects under a commercial general liability policy (CGL). On appeal, West Bend argues there was no duty to defend because there was no "property damage caused by an occurrence." West Bend also claims it had no duty to indemnify for amounts paid to settle the underlying litigation, arguing that the settlement did not relate to a "covered loss made in reasonable anticipation of litigation." West Bend further disputes that Trapani Construction and National Fire were entitled to prejudgment interest because prejudgment interest was not requested in the complaint and the amount of defense costs incurred could not be easily calculated. For the following reasons, we affirm.

¶ 3 BACKGROUND

¶ 4 The Wing Street of Arlington Heights Condominium ("Condominium") is a 9-story residential condominium complex, consisting of 71 residential units. Trapani Construction was the Condominium's general contractor. Gregory Trapani was a manager of Village Green, LLC, which was the developer and seller of the condominium units. Subcontractor A.L.L. Masonry Construction Company (A.L.L. Masonry) provided masonry work and subcontractor ATMI Dynacore, LLC (ATMI) installed balcony decks and wall panels at the Condominium. The Wing Street of Arlington Heights Condominium Association ("Association") was the governing body of the Condominium. On April 12, 2005, the Board of Directors of the Wing Street of Arlington Heights Condominium Association (Board) gained control of the Association after the Condominium's completion. The Board was the governing body for the Association.

¶ 5 National Fire issued a CGL policy to Village Green as the named insured. West Bend issueda CGL policy to A.L.L. Masonry and ATMI. The West Bend policy included an "ADDITIONAL INSURED - CONTRACTOR'S BLANKET" endorsement, stating that an insured includes "any person or organization (called an additional insured) whom you are required to add as an additional insured on this policy under a written contract or written agreement."¹ The insurance provided to the additional insured included coverage for liability arising out of A.L.L. Masonry or ATMI's work for that additional insured or the additional insured's general supervision of A.L.L. Masonry and ATMI's work.

¶ 6 The West Bend policy included the following standard CGL provisions:

"We will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages. However, we will have no duty to defend the insured against any 'suit' seeking damages for 'bodily injury' or 'property damage' to which this insurance does not apply. We may, at our discretion, investigate any 'occurrence' and settle any claim or 'suit' that may result.

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(b) This insurance applies to 'bodily injury' and 'property damage' only if:

(1) The 'bodily injury' or 'property damage' is caused by an 'occurrence' that takes place in the 'coverage territory'; and

(2) The 'bodily injury' or 'property damage' occurs during the policy period."

The West Bend CGL policy defined "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." "Property damage" was definedas: "a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it."

¶ 7 After the Board gained control of the Association, it began noticing water infiltration and damage to the interior of the building's common areas and owner units. On April 20, 2010, the Board² filed a multiple count complaint alleging construction defects against Village Green, Trapani Construction, Greg Trapani, A.L.L. Masonry, and others (Wing Street litigation).³ The Board alleged that construction defects caused damage to the common areas of the Condominium. The Board amended its complaint numerous times and added allegations of property damage to the personal property of unit owners in the seventh amended complaint. On November 24, 2015, the Board filed an eighth and final amended complaint,⁴ which pled the following in relevant part:

"ALLEGATIONS COMMON TO ALL COUNTS

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6. The Plaintiff, the Board of Directors of the Wing Street of Arlington Heights Condominium Association, *** is a proper party for and on behalf of the unit owners and THE ASSOCIATION to institute the instant proceedings.

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COUNT VII

BREACH OF IMPLIED WARRANTY OF HABITABILITY

(VILLAGE GREEN, LLC, [ ] GREGORY B. TRAPANI)

62. The Board, in its representative capacity on behalf of unit owners, asserts a claim for breach of implied [sic] warranty of habitability against Village Green, LLC concerning the construction deficiencies in the common elements as set forth herein.

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67. The defects *** resulted in leaks that have caused substantial damages to common elements *** . The defects have also caused damage to interior drywall in Units, garage walls and ceilings, the garage ventilation system, the wall furnishings inside Units including but not limited to paint and wallpaper, window treatments inside Units, flooring inside of Units including but not limited to carpeting and wood floors, personal property inside Units, and interior furnishings of the Units.

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WHEREFORE, the Plaintiffs request that judgment be awarded in their favor and against Village Green LLC and that the Court pierce the corporate veil⁵ and that judgment be awarded against *** Gregory B. Trapani, as follows:

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d. Damages in an amount equal to the full value of the personal property inside of Units damaged by these defects."

The same allegations of damage to the owners' units and requested relief for "damages in an amount equal to the full value of the personal property inside of Units damaged by these defects" raised in count VII against Village Green mirrors count XXV against Trapani Construction.

¶ 8 In November of 2009, the Association retained the engineering company of Wiss, Janney,Elstner Associates, Inc. (WJE) to investigate the cause of the water infiltration problems at the Condominium. WJE conducted its investigation between November 2009 and September 2015. After its investigation, WJE issued a report dated April 6, 2016, identifying numerous construction defects to the building's façade, common areas, and individual units, along with identifying the party responsible for the construction defects.

¶ 9 In June 2017, the Board settled the Wing Street litigation in return for $500,000, of which Trapani Construction paid $100,000 and National Fire paid $45,000 on behalf of its insureds, Village Green and Greg Trapani. In the "Settlement Agreement and Release" ("Settlement"), the Board released all claims related to the alleged construction defects that caused damage to "1) the common elements of the Building, 2) individual units in the Building, 3) to other property, and/or 4) personal items beyond the construction work itself."

¶ 10 As to insurance coverage, West Bend defended its named insureds against the counts raised in the Wing Street litigation. National Fire defended Village Green and Greg Trapani (as a member of Village Green) under a reservation of rights. Trapani Construction, Village Green, and Greg Trapani tendered the Wing Street litigation to West Bend, seeking a defense and indemnity as an additional insured on the CGL policy issued to subcontractor A.L.L. Masonry.⁶

¶ 11 West Bend filed a declaratory judgment action, which it later amended multiple times, asserting there was no coverage for the construction defects alleged against Village Green and Trapani Construction in the Wing Street litigation, because the allegations in the complaint did not allege "property damage" or an "occurrence" as defined by the policy. The trial court allowed National Fire to intervene in West Bend's declaratory judgment action, seeking contractualsubrogation, equitable subrogation, and equitable contribution for the amounts it paid on behalf of Village Green and Greg Trapani to defend the Wing Street litigation. The parties filed cross-motions for summary judgment addressing whether the Wing Street complaint alleged "property damage caused by an occurrence" under the West Bend CGL policy. The trial court ruled that West Bend had a duty to defend Village Green and Trapani Construction, because the Wing Street litigation alleged "property damage caused by an occurrence," namely, damage to the unit owners' personal property.

¶ 12 The parties also filed ...