2019 IL App (1st) 190517
Ill. App. Ct.2020Background
- Metropolitan Builders was general contractor on renovation of contiguous Chicago properties; alleged faulty work led to collapse and City-ordered demolition. AIG (insurer/subrogee) paid over $1.8M and sued Metropolitan (Underlying Complaint) for contract and tort claims, alleging damage to the owner’s real and personal property.
- Metropolitan tendered defense to its CGL insurer, Certain Underwriters at Lloyd’s London (Lloyd’s); Lloyd’s denied coverage and filed a declaratory-judgment action seeking a ruling that it had no duty to defend.
- Lloyd’s moved for summary judgment arguing the Underlying Complaint alleged neither an "occurrence" nor "property damage" under the Policy; the trial court found property damage pleaded but no occurrence and granted Lloyd’s summary judgment.
- On appeal the court considered whether the Underlying Complaint alleged (1) an "occurrence" and (2) "property damage" under the Policy definitions, and also addressed Lloyd’s cross-appeal procedurally.
- The appellate court held the complaint potentially alleged an occurrence and property damage as to the owner’s personal property (but not as to the real/property-that-was-the-project), reversed summary judgment, remanded for further proceedings, and dismissed Lloyd’s cross-appeal for lack of jurisdiction.
Issues
| Issue | Plaintiff's Argument (Lloyd’s) | Defendant's Argument (Metropolitan) | Held |
|---|---|---|---|
| Whether the Underlying Complaint pleads an "occurrence" under the Policy | Collapse and resulting harm were the natural, expected consequence of Metropolitan’s defective workmanship, so not an "accident/occurrence." | The collapse and damage to property beyond the contractor’s work were unexpected and thus an "accident/occurrence." | The collapse of the project itself was not an occurrence, but allegations of damage to the owner’s personal property (outside the project) were sufficient to potentially plead an occurrence. |
| Whether the Underlying Complaint pleads "property damage" under the Policy | Alleged losses are economic loss/repair of the contract work (noncovered). | Complaint alleges damage to owner’s personal property (distinct from the contracted work), which constitutes covered "property damage." | Damage to real property (the project) is noncovered economic loss; however allegations of damage to owner’s personal property are sufficient to allege "property damage." |
| Validity of Lloyd’s cross-appeal from trial court’s favorable judgment | Sought to challenge trial court’s finding that property damage was alleged (alternative ground for affirmance). | Cross-appeal improper because Lloyd’s obtained the relief it sought below. | Cross-appeal dismissed for lack of jurisdiction; appellate court nonetheless considered Lloyd’s alternative argument on the merits. |
| Scope of insurer’s duty to defend if any claim is potentially covered | (Implicit) If only some claims are covered, duty limited to those. | If at least one underlying claim is potentially covered, insurer must defend entire underlying suit. | Insurer must defend the entire action if any count is potentially covered; here duty to defend is triggered by allegations of personal-property damage. |
Key Cases Cited
- Travelers Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill. 2d 278 (Ill. 2001) (CGL policies protect against liability to others, not performance bonds)
- United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill. 2d 64 (Ill. 1991) (insurer must defend if underlying complaint alleges facts potentially within coverage)
- Pekin Insurance Co. v. Richard Marker Associates, Inc., 289 Ill. App. 3d 819 (Ill. App. Ct. 1997) (faulty workmanship alone is not an "accident" unless it causes an accident)
- Stoneridge Development Co. v. Essex Insurance Co., 382 Ill. App. 3d 731 (Ill. App. Ct. 2008) (damage that is natural consequence of defective workmanship is not an occurrence)
- Viking Construction Management, Inc. v. Liberty Mutual Insurance Co., 358 Ill. App. 3d 34 (Ill. App. Ct. 2005) (CGL does not cover repair/replacement of the contractor’s defective work)
- Monticello Insurance Co. v. Wil-Freds Construction, Inc., 277 Ill. App. 3d 697 (Ill. App. Ct. 1996) (damage to the same project under contractor’s responsibility is not an occurrence)
- Ohio Casualty Insurance Co. v. Bazzi Construction Co., 815 F.2d 1146 (7th Cir. 1987) (damage to property distinct from the contractor’s work can constitute an occurrence)
- State Farm Fire & Casualty Co. v. Tillerson, 334 Ill. App. 3d 404 (Ill. App. Ct. 2002) (liberal construction of underlying pleadings; economic loss distinction)
- Indiana Insurance Co. v. Hydra Corp., 245 Ill. App. 3d 926 (Ill. App. Ct. 1993) (natural consequences of an act do not constitute an accident)
- Material Service Corp. v. Department of Revenue, 98 Ill. 2d 382 (Ill. 1983) (party that obtained the relief below may not cross-appeal)