Allied Property & Casualty Insurance Co. v. Metro North Condominium Ass'n
2017 U.S. App. LEXIS 4107
7th Cir.2017Background
- Metro North Condominium Association sued after defective window installation by subcontractor CSC caused extensive water damage in 2006; unit owners also suffered personal-property loss.
- Metro North added a breach of implied warranty of habitability claim against CSC (negligence claim was previously dismissed as time-barred).
- In 2015 Metro North and CSC settled: CSC assigned to Metro North any right to up to $700,000 of insurance proceeds from CSC’s insurers, and the settlement related only to claims asserted in the underlying Illinois action (primarily the implied warranty claim).
- Allied (and AMCO) had issued CGL coverage to CSC for March 2006–2007; the policy covered certain property-damage liabilities but excluded damage to the insured’s own work ("your work" exclusions) and contractually assumed liabilities where liability would not exist absent the contract (Exclusion 2.b).
- Allied sued for a declaratory judgment that it had no duty to indemnify Metro North for the settlement; the district court granted summary judgment for Allied and the Seventh Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Allied must indemnify CSC/Metro North for settlement damages arising from breach of implied warranty of habitability | Metro North: settlement assigns CSC’s insurance rights; damages include water damage to building and owners’ property, which fall within CGL coverage | Allied: implied-warranty damages are repair costs for CSC’s defective work (windows) or arise from contract and are excluded by policy terms | Held: No duty to indemnify — implied-warranty recovery is for repairing defective work, which is excluded under the policy |
| Whether the “your work” exclusions bar coverage for repair/replacement of defective windows | Metro North: settlement sought damage to parts of the building and owners’ property beyond the windows | Allied: policy excludes cost to repair insured’s defective work; plaintiff’s recovery for the windows is not covered | Held: Exclusions apply; cost to remedy CSC’s defective work is not covered by CGL policy |
| Whether Exclusion 2.b (contractual-liability) precludes coverage for liabilities arising from the settlement | Metro North: settlement created a covered obligation, not barred by contractual exclusion | Allied: any liability for building parts beyond windows would arise from the settlement/contract and be excluded if CSC wouldn’t be liable absent the agreement | Held: Exclusion 2.b bars coverage for liabilities that arise from assumption of contractual liability (and negligence theory was unavailable) |
| Whether Metro North has standing to recover personal-property losses of individual unit owners under the settlement assignment | Metro North: assigned rights include unit owners’ personal-property losses caused by CSC | Allied: condominium association lacks representative authority to recover individual owners’ personal-property losses under Illinois law | Held: Metro North lacks standing to recover owners’ individual personal-property losses; association may only act for common elements or matters affecting multiple units |
Key Cases Cited
- Traveler’s Ins. Co. v. Eljer Mfg., Inc., 757 N.E.2d 481 (Ill. 2001) (duty to indemnify depends on whether insured’s liability falls within policy coverage)
- Ohio Cas. Ins. Co. v. Bazzi Constr. Co., 815 F.2d 1146 (7th Cir. 1987) (CGL policies generally do not cover costs to repair insured’s defective work)
- Pekin Ins. Co. v. Richard Marker Assocs., Inc., 682 N.E.2d 362 (Ill. App. Ct. 1997) (CGL policies not intended to pay costs to repair insured’s defective work or products)
- Del Monte Fresh Produce N.A., Inc. v. Transp. Ins. Co., 500 F.3d 640 (7th Cir. 2007) (coverage analysis looks to the actual complaint/viable legal theories at time of settlement)
- Nat’l Am. Ins. Co. v. Artisan & Truckers Cas. Co., 796 F.3d 717 (7th Cir. 2015) (standard for reviewing summary judgment and construing facts against movant)