Westfield Ins. Co. v. W. Van Buren, LLC

• Decision Date: 20 July 2016
• Docket Number: No. 1–14–0862.,1–14–0862.
• Citation: 406 Ill.Dec. 99,59 N.E.3d 877
• Parties: WESTFIELD INSURANCE COMPANY, Plaintiff and Counterdefendant–Appellee, v. WEST VAN BUREN, LLC, an Illinois Limited Liability Company, and 933 Van Buren Condominium Association, an Illinois Not–For–Profit Corporation, Defendants (West Van Buren, LLC, an Illinois Limited Liability Company, Defendant and Counterplaintiff–Appellant).
• Court: United States Appellate Court of Illinois

59 N.E.3d 877
406 Ill.Dec. 99

WESTFIELD INSURANCE COMPANY, Plaintiff and Counterdefendant–Appellee,
v.
WEST VAN BUREN, LLC, an Illinois Limited Liability Company, and 933 Van Buren Condominium Association, an Illinois Not–For–Profit Corporation, Defendants (West Van Buren, LLC, an Illinois Limited Liability Company, Defendant and Counterplaintiff–Appellant).

No. 1–14–0862.

Appellate Court of Illinois, First District, Third Division.

July 20, 2016.

59 N.E.3d 879

Ernest Summers III, Trina K. Taylor, and Kevin L. Morrow, all of Faegre Baker Daniels, LLP, of Chicago, for appellant.

David S. Osborne and Justine K. Seigler, both of Lindsay, Rappaport & Postel, LLC, of Chicago, for appellee.

OPINION

Justice LAVIN delivered the judgment

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of the court, with opinion.^*

406 Ill.Dec. 102

¶ 1 This case involves an insurance coverage dispute. The insurance company filed a declaratory judgment action seeking a determination that it had no duty to defend the additional insured in an underlying lawsuit. The parties filed cross-motions for summary judgment, and the trial court ultimately ruled in favor of the insurance company. The additional insured now appeals contending the insurance company had a duty to defend it in the underlying lawsuit. We disagree and therefore affirm the trial court's judgment in favor of the insurance company.

¶ 2 BACKGROUND

¶ 3 In 2002, West Van Buren LLC (Developer) constructed a condominium development at 933 W. Van Buren Street, Chicago, Illinois. The Developer subcontracted installation of the roof to Total Roofing and Construction Services, Inc. (Total Roofing). The subcontract provided that Total Roofing would insure and indemnify the Developer against liability for Total Roofing's work. Total Roofing, which constructed the roof in 2002, obtained a commercial general liability policy through Westfield Insurance Company for occurrence-based coverage (between February 6, 2001, and February 15, 2005).¹ The policy offered coverage for “occurrences,” defined as accidents, and also for “property damage.” In addition, the policies also provided for a duty to defend in the event of a lawsuit. Consistent with the subcontract, the relevant policies listed the Developer as an additional insured.

¶ 4 About a year after construction, the 933 Van Buren Condominium Association (Condo Association) took charge of the building. Shortly thereafter, the Condo Association claimed construction defects in the roof caused water to infiltrate into the building and individual condominium units and also caused damage to personal and other property in the condominium units. The Condo Association demanded that the Developer reconstruct the roof. The Developer refused, and the Condo Association then paid for the repair work that cost in excess of $309,000.

¶ 5 The Condo Association subsequently sought reimbursement for those expenses. In October 2010, the Developer received a mediation request for the aforementioned alleged repair work. The Developer, claiming it was an additional insured under the policy, notified Westfield Insurance and requested a defense for the mediation. Westfield Insurance declined to offer a defense, citing a number of reasons under the policy.

¶ 6 The mediation fell through, and on August 8, 2011, the Condo Association sued the Developer and Total Roofing,²

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among others, in a multi-count complaint³ for breach of warranty, violating the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West [Insert Year] )), fraud, and breach of the implied warranty of habitability. The complaint asserted that water infiltrated the common elements and individual units. It noted that each condominium purchase agreement provided by the Developer warranted against any defects in material and workmanship in the common elements of the building. Yet, when these units were sold, they allegedly “contained a number of hidden and latent defects that West Van Buren [the Developer] intentionally failed to disclose, including but not limited to: a) defects in the roofing system and the individual roofing components so as to allow water infiltration into the Condo Building * * * and b) West Van Buren's failure to construct the Condo Building in substantial conformity with the plans and specifications.” (Emphasis added.) The complaint also asserted the Developer fraudulently covered up hidden and latent defects, also alleging: “Moreover, individual unit owners experienced damage to personal and other property as a result of the water infiltration.” The complaint asserted that the defendants were responsible for $300,000 in damages and that had the unit owners been aware of the concealed defects, they would not have purchased their units or at least would have negotiated a better purchase price.

¶ 7 Within days of this lawsuit, the Developer notified Westfield Insurance and tendered the defense, but Westfield declined to undertake it. Westfield Insurance nonetheless agreed to defend Total Roofing under a reservation of rights. Westfield Insurance subsequently filed the present declaratory action for a determination that it owed no duty to defend or indemnify the Developer as the additional insured in the underlying case.⁴ The Developer, in turn, filed a counterclaim alleging a duty to defend because the underlying complaint contained allegations of personal property damage that were within the policy's coverage, and based on estoppel. Westfield Insurance denied that the underlying complaint alleged a covered occurrence.

¶ 8 The parties filed cross-motions for summary judgment in the declaratory judgment action.⁵ At the hearing on the motions, Westfield Insurance acknowledged the underlying complaint alleged personal property damage but argued that the Condo Association lacked standing to assert such claims on behalf of individual unit owners.

¶ 9 The circuit court initially granted summary judgment for this declaratory action to the Developer, but upon a motion to reconsider by Westfield Insurance, the

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59 N.E.3d 882

court subsequently vacated its judgment and granted summary judgment to Westfield Insurance. The court concluded that since there was no duty to defend, then there was no duty to indemnify. The Developer filed this timely appeal.

¶ 10 ANALYSIS

¶ 11 Summary judgment is properly granted when the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2–1005(c) (West 2014). Where parties file cross-motions for summary judgment, they agree the case presents only questions of law, and they invite the trial court to decide these legal questions on the basis of the record. Pielet v. Pielet, 2012 IL 112064, ¶ 28, 365 Ill.Dec. 497, 978 N.E.2d 1000. Our standard of review is de novo, and we may affirm on any basis in the record regardless of whether the trial court relied on that basis or its reasoning was correct. Id. ¶ 30; Chicago Title Insurance Co. v. Bass, 2015 IL App (1st) 140948, ¶ 13, 391 Ill.Dec. 768, 31 N.E.3d 444. The construction of an insurance policy, which presents a question of law, is likewise subject to de novo review. Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 223 Ill.2d 352, 360, 307 Ill.Dec. 653, 860 N.E.2d 307 (2006).

¶ 12 The Developer argues in the main that Westfield Insurance had a duty to defend the Developer in the underlying action⁶ and the trial court therefore erred in granting summary judgment in favor of Westfield Insurance. An insurance company's obligation to represent its insured depends on the allegations of the underlying complaint and the provisions of the insurance policy. Diamond State Insurance Co. v. Chester–Jensen Co., 243 Ill.App.3d 471, 476, 183 Ill.Dec. 435, 611 N.E.2d 1083 (1993). The complaint must be liberally construed and all doubts resolved in favor of coverage for the insured. Id. A duty to defend will arise when the allegations of the underlying complaint may potentially come within the coverage of the policy. Id. at 476–77, 183 Ill.Dec. 435, 611 N.E.2d 1083.

¶ 13 Thus, in order to address this matter, we turn to both the underlying complaint and the language of the insurance policy itself. The general rules governing the interpretation of contracts also govern the interpretation of insurance policies. Standard Mutual Insurance Co. v. Lay, 2013 IL 114617, ¶ 24, 371 Ill.Dec. 1, 989 N.E.2d 591. As such, a court's primary objective in analyzing an insurance policy is to ascertain and give effect to the parties' intentions as expressed by the policy language, which we construe in its plain and ordinary meaning. Swiderski Electronics, Inc., 223 Ill.2d at 362–63, 307 Ill.Dec. 653, 860 N.E.2d 307. We view the policy as a whole so as to give effect to

406 Ill.Dec. 105

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