Pekin Insurance Company v. CSR Roofing Contractors, Inc.
41 N.E.3d 559
Ill. App. Ct.2015Background
- CSR was general roofing contractor on a project and subcontracted roofing work to Zamastil; Zamastil carried a Pekin CGL policy naming additional insureds by endorsement.
- The MSA between CSR and Zamastil required Zamastil to name CSR as an additional insured, provide primary/noncontributory coverage including CG2010/CG2037 or equivalents, and stated coverage "must NOT be limited to vicarious liability."
- Pekin’s CGL additional-insured endorsement limited additional-insured coverage to "vicarious liability" imputed from the named insured (Zamastil) and expressly excluded liability arising from the additional insured’s own negligence, except vicarious liability.
- Employee Jordan Lake (Zamastil employee) fell from a roof and sued CSR alleging negligence, premises liability, OSHA violations, and that CSR failed to require/compliance and supervise subcontractor safety—allegations that included both direct negligence theories and facts that could implicate subcontractor conduct.
- Pekin denied CSR’s tender and sued for declaratory relief; the trial court held the policy unambiguous (no incorporation of the MSA) and granted judgment for Pekin, finding no duty to defend because the complaint alleged only CSR’s direct liability.
- On appeal the court considered whether the MSA could be used when assessing (1) whether the MSA created an ambiguity in the policy and (2) whether Pekin had a duty to defend CSR as an additional insured.
Issues
| Issue | Plaintiff's Argument (Pekin) | Defendant's Argument (CSR) | Held |
|---|---|---|---|
| Whether the MSA can be used to create ambiguity in the CGL policy or to expand coverage beyond the policy text | Policy language is clear and unambiguous; the insurer did not incorporate the MSA and a generic reference to a "written contract" does not incorporate or alter policy terms | The MSA’s requirement that coverage not be limited to vicarious liability creates an ambiguity when read with the endorsement limiting coverage to vicarious liability | Court held the policy language was clear; the MSA was not incorporated into the policy and cannot be used to render an unambiguous policy ambiguous (reversed trial court only on duty to defend issue) |
| Whether the additional-insured endorsement covers only vicarious liability or broader liability as required by the MSA | The endorsement explicitly limits additional-insured coverage to vicarious liability imputed from the named insured | The MSA required broader coverage (not limited to vicarious liability), and the written subcontract is relevant to the parties’ intent and duty to defend | Court held endorsement unambiguous: coverage is limited to vicarious liability imputed from Zamastil; the MSA does not alter that scope because it was not incorporated into the policy |
| Whether Pekin owed a duty to defend CSR in the underlying Lake action based on the complaint and related documents | Duty to defend is determined by the underlying complaint compared to the policy; the complaint alleges CSR’s direct negligence and does not assert vicarious liability based on Zamastil’s acts | Even though the complaint pleads direct liability, the complaint plus the MSA and other relevant pleadings could reasonably give rise to vicarious liability (so the duty to defend is triggered) | Court held Pekin owed a duty to defend: when complaint and MSA are considered together, it is possible CSR could be held vicariously liable for Zamastil’s acts, so duty to defend was triggered; trial court’s judgment on the pleadings for Pekin was reversed and remanded for judgment in favor of CSR |
| Whether courts may consider documents beyond the complaint (e.g., subcontract, counterclaims, third-party complaints) in deciding duty to defend | Court should look only to the complaint when clear | Courts may consider extrinsic pleadings or agreements in declaratory actions when they bear on whether liability could be imputed and do not decide merits of the underlying case | Court confirmed courts can consider the MSA and related pleadings in assessing duty to defend (consistent with Wilson, Pulte, Waukegan Steel), and did so here to find a potential for vicarious liability |
Key Cases Cited
- Pekin Ins. Co. v. Pulte Home Corp., 404 Ill. App. 3d 336 (Ill. App. Ct. 2010) (considered subcontract when assessing whether duty to defend could be triggered by potential vicarious liability)
- Pekin Ins. Co. v. Hallmark Homes, L.L.C., 392 Ill. App. 3d 589 (Ill. App. Ct. 2009) (additional-insured issues under CGL endorsements)
- Wilson v. Pekin Ins. Co., 237 Ill. 2d 446 (Ill. 2010) (courts may consider insured’s counterclaim or other pleadings in declaratory actions when relevant to duty-to-defend inquiry)
- Koloms v. American States Ins. Co., 177 Ill. 2d 473 (Ill. 1997) (policy construction principles: unambiguous language given plain meaning; ambiguities construed against insurer)
- Clarendon Am. Ins. Co. v. 69 W. Wash. Mgmt., LLC, 374 Ill. App. 3d 580 (Ill. App. Ct. 2007) (refused to read separate contracts together where no intent to incorporate existed)
- Bieda v. Carson Int’l, 278 Ill. App. 3d 510 (Ill. App. Ct. 1996) (policy language that expressly incorporates a written agreement controls additional-insured scope)
- Elson v. State Farm Fire & Cas. Co., 295 Ill. App. 3d 1 (Ill. App. Ct. 1998) (clear policy terms must be enforced as written)
- Envirodyne Engineers, Inc. v. Fidelity & Cas. Co. of N.Y., 122 Ill. App. 3d 301 (Ill. App. Ct. 1984) (in declaratory actions insurer may introduce extrinsic evidence to show policy exclusions apply, unless that evidence decides an issue critical to the underlying suit)