Illinois Appellate Courts Issue Conflicting Additional Insured Decisions

Recently two different appellate courts in Illinois examined the issue of whether a subcontractor’s insurer is obliged to defend a general contractor as an additional insured. 

In Pekin Ins. Co. v. United Contr. Midwest, Inc., 2013 IL App 3d 120803, an employee of a Durdel & Sons Tree Service and Landscaping Inc. was injured when machinery that he was operating struck overhead power lines and electrocuted him. At the time, Durdel was operating as a subcontractor under Cullinan & Son, Inc., the general contractor. The injured employee filed suit against Cullinan for construction negligence and general negligence. Cullinan, in turn, filed a third party complaint alleging negligence against Durdel. Under the insurance policy issued to Durdel by Pekin Insurance Co., Cullinan was an additional insured, but only for vicarious liability as a result of Durdel’s work. Pekin denied coverage claiming the policy covered Cullinan for vicarious liability only and did not cover negligence resulting from Cullinan’s own actions. The trial court found in favor of coverage and Pekin appealed.

In Ill. Emasco Ins. Co. v. Waukegan Steel Sales, Inc., 2013 IL App (1st) 120735, an employee of I-Maxx Metal Works, Inc. was injured when a cable protection failed and caused him to fall. I-Maxx was a subcontractor of Waukegan Steel Sales, the general contractor. The employee brought suit against Waukegan and two other subcontractors for negligence. Those subcontractors then brought a third-party claim against I-Maxx, asserting contributory negligence. Under I-Maxx’s policy, issued by Emasco, Waukegan was named as an additional insured. Similar to the facts in Pekin, Emasco’s additional insured coverage was limited to vicarious liability. Emasco denied coverage stating that the allegations against Waukegan were for its own negligence. The trial court found that Emasco had a duty defend Waukegan as it could be found vicariously liable for the employee’s injuries.

Despite the relatively similar set of facts in these two cases, the courts arrived at different outcomes. In Pekin, the appellate court in the Third District refused to consider the third-party complaint filed by the putative additional insured. The opinion noted thatthe employee’s complaint against Cullinan did not allege direct negligence against the employer, and as a result, there could be no theory of vicarious liability against Cullinan. While the trial court looked beyond the underlying complaint to Cullinan’s third-party complaint, the appellate court refused to extend their analysis to Cullinan’s “potentially self-serving, third party complaint.”

The appellate court in the First District, however, did extend their analysis to the third-party complaints, reasoning that those claims were not brought by the putative additional insureds solely to bolster their demands for coverage. The court agreed that looking only to the employee’s complaint, there would be no additional insured coverage for vicarious liability under the Emasco policy. Extending the analysis beyond the underlying complaint, however, the court concluded that both of the third party complaints alleged negligence on the part of I-Maxx, for which Waukegan would potentially be vicariously liable. The court therefore held that Emasco had a duty to defend based on that potential.