Pekin Insurance Company v. Illinois Cement Company, LLC
2016 IL App (3d) 140469
Ill. App. Ct.2016Background
- Perino (a contractor) obtained a Pekin commercial liability policy naming Illinois Cement Company, LLC (ICC), the property owner, as an additional insured for liability vicariously imputed from Perino to ICC; the endorsement expressly excluded coverage for ICC’s direct negligence.
- Hanson, an employee of Perino, was injured on ICC’s premises while installing a trash pump; he sued ICC for premises/direct negligence (original complaint and a later first amended complaint pled only ICC’s direct negligence).
- ICC filed a third-party complaint against Perino in the Hanson suit alleging breach of contract and that Perino’s negligence or inadequate supervision contributed to Hanson’s injuries. ICC tendered defense to Pekin; Pekin denied coverage and sued for declaratory judgment that it had no duty to defend ICC.
- The trial court initially denied summary judgment but, after reconsideration and relying on this court’s United Contractors decision, refused to consider ICC’s self-serving third-party complaint to supply missing allegations of Perino’s negligence and granted summary judgment for Pekin (no duty to defend ICC for direct-negligence claims).
- On appeal ICC argued the underlying pleadings (including claims of derivative/derivative duties) and ICC’s third-party complaint sufficiently raised a potential for vicarious liability; Pekin argued the eight-corners rule and the policy exclusion controlled and United Contractors barred reliance on ICC’s third-party pleading.
- The appellate court affirmed: the insurance endorsement covered only vicarious liability imputable from Perino, the underlying complaint alleged only ICC’s direct negligence, and ICC could not bootstrap coverage by its own third-party complaint filed after Pekin’s denial.
Issues
| Issue | Pekin's Argument | ICC's Argument | Held |
|---|---|---|---|
| Whether Pekin had a duty to defend ICC as an additional insured under Perino’s policy | No duty: underlying complaint alleges only ICC’s direct negligence; policy covers only vicarious liability imputed from Perino and expressly excludes ICC’s direct negligence | Duty exists: pleadings (amended complaint alleging derivative duties) and ICC’s third-party complaint alleging Perino’s negligence create potential for vicarious liability | Held for Pekin: no duty to defend because underlying complaint alleges only ICC’s direct negligence and policy excludes such claims |
| Whether the court may consider ICC’s third-party complaint (filed by the putative additional insured) to manufacture coverage | Third-party complaint is self-serving and cannot be used to fill missing allegations in the underlying complaint to create coverage | The third-party complaint properly alleges Perino’s negligence and should be considered to show potential vicarious liability | Held for Pekin: court should not rely on ICC’s self-serving third-party complaint to create a duty to defend (following United Contractors and similar precedents) |
| Whether the Certificate of Insurance conferred independent rights to ICC | Certificate disclaims creating rights beyond the policy and is subject to policy terms; thus it does not expand coverage | Certificate naming ICC as additional insured creates coverage rights for ICC | Held for Pekin: certificate did not confer additional rights beyond the policy; policy terms govern |
Key Cases Cited
- Wilson v. Pekin Insurance Co., 237 Ill. 2d 446 (addresses eight-corners rule and exceptions for considering pleadings beyond the complaint)
- Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90 (governs declaratory judgment and insurer’s duty to defend analysis)
- United Stationers Supply Co. v. Zurich American Insurance Co., 386 Ill. App. 3d 88 (certificates of insurance do not expand coverage beyond the underlying policy)
- DePaul University v. American Economy Insurance Co., 383 Ill. App. 3d 172 (refusing to allow an additional insured to bootstrap coverage via its own third-party complaint)
- National Fire Insurance of Hartford v. Walsh Construction Co., 392 Ill. App. 3d 312 (similar refusal to consider post-filing third-party pleadings to create coverage)