Pekin Insurance Company v. Designed Equipment Acquisition Corporation
2016 IL App (1st) 151689
| Ill. App. Ct. | 2016Background
- Designed Equipment leased scaffolding to Abel Building & Restoration under a written rental/lease with an indemnity clause requiring Abel to indemnify and defend Designed for claims "caused... in whole or in part by the equipment" and to name Designed as an additional insured.
- Abel held a commercial general liability policy from Pekin with two endorsements: a "Contractors Additional Insured" endorsement (covers persons for whom the named insured is "performing operations") and an "Additional Insured—Lessor of Leased Equipment" endorsement (lists specific lessors and covers liability caused by the named insured’s maintenance, operation or use of leased equipment).
- Worker Heron Salgado was injured while working on a jobsite where Abel used Designed’s scaffold and sued Designed for its own alleged negligence (design, erection, maintenance of scaffold); Designed tendered defense to Pekin, which refused.
- Pekin sued for a declaratory judgment that it had no duty to defend: (1) Designed was not an additional insured under the contractors endorsement, (2) the endorsement excludes coverage for an additional insured’s own negligence, and (3) the lease—if an insured contract—was void under Illinois’ Anti‑Indemnity Act.
- The trial court granted Pekin’s summary-judgment motion: it found the contractors endorsement did not cover the facts (no subcontractor/"performing operations" relationship), determined the lease was an insured contract but that the Anti‑Indemnity Act voided the indemnity, and denied Designed’s cross-motion. Designed appealed.
Issues
| Issue | Plaintiff's Argument (Pekin) | Defendant's Argument (Designed) | Held |
|---|---|---|---|
| Whether Designed is an additional insured under the contractors endorsement | Abel was not "performing operations for" Designed; endorsement covers classic subcontract relationships, not rental/lease | The endorsement should cover Designed as an additional insured despite lease; summary judgment inappropriate | Court: Not an additional insured under the contractors endorsement (no "performing operations" relationship) |
| Whether policy covers Designed for its own negligence under the contractors endorsement | Even if additional insured, endorsement excludes coverage for the additional insured’s own negligence (only vicarious liability) | Designed argued coverage should apply | Court: endorsement excludes coverage for Designed’s own negligence (counts subsumed in analysis) |
| Whether the lease’s indemnity clause is an "insured contract" under the policy (contractual-liability exception) | The indemnity does not clearly express intent to indemnify Designed for Designed’s own negligence (relies on Hankins) | Lease language explicitly requires Abel to indemnify Designed for claims caused by Designed, satisfying the insured-contract definition | Court: Lease is an insured contract (language clearly indemnifies Designed for its own negligence) |
| Whether the Anti‑Indemnity Act voids the lease indemnity | The lease involves scaffolding supplied to a building‑restoration jobsite and thus falls within the Act’s coverage; indemnity for another’s negligence is void | The lease is a simple equipment rental, not a construction contract; the Act should not apply | Court: Act applies—lease involves "other work dealing with construction" (scaffolding to a building‑restoration site) and the indemnity is void; Pekin has no duty to defend |
Key Cases Cited
- Folkers v. Drott Manufacturing Co., 152 Ill. App. 3d 58 (1987) (rental indemnity for crane used in construction fell within Anti‑Indemnity Act)
- Hankins v. Pekin Insurance Co., 305 Ill. App. 3d 1088 (1999) (hold‑harmless language that only indemnified for the indemnitee’s liability caused by the indemnitor did not create an "insured contract")
- Buenz v. Frontline Transportation Co., 227 Ill. 2d 302 (2008) (indemnity contracts are governed by contract‑interpretation rules and strictly construed)
- Liberty Mutual Fire Ins. Co. v. St. Paul Fire & Marine Ins. Co., 363 Ill. App. 3d 335 (2005) (construction/interpretation of insurance policies is a legal question appropriate for summary judgment)