Pekin Insurance Company v. Lexington Station, LLC
2017 IL App (1st) 163284
| Ill. App. Ct. | 2017Background
- Pekin issued a CGL policy to ACC (July 1, 2014–July 1, 2015) that named Lexington Station, LLC as an additional insured by written contract; the endorsement covered only vicarious liability imputed from ACC, and excluded direct negligence of the additional insured.
- Lexington contracted with ACC for carpentry work; the contract labeled ACC an independent contractor, required ACC to supply hoisting/erection equipment, and placed responsibility for safety programs and employee protection on ACC.
- While employed by ACC, Marcos Botello fell from a ladder on the project and sued Lexington for construction negligence, premises liability, and direct negligence; ACC (his employer) was not named in the complaint.
- Pekin refused Lexington’s tender and sued for declaratory judgment, arguing no duty to defend because Lexington was sued for its own negligence (excluded by the endorsement).
- Lexington and its insurer Westfield moved for judgment on the pleadings; they relied on the complaint’s allegations that Lexington controlled/coordinated work and could be vicariously liable for ACC’s conduct, and attached a third‑party complaint Lexington later filed against ACC seeking contribution.
- The trial court found Pekin had a duty to defend; Pekin appealed. The appellate court affirmed, finding the complaint — read with the preexisting construction contract — created a potential that ACC was the negligent actor and that Lexington could be vicariously liable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Pekin owes a duty to defend Lexington as an additional insured | Botello's complaint alleges Lexington's own negligence, not vicarious liability; no potential that Lexington would be held vicariously liable for ACC | Underlying complaint alleges control/coordination and, read with the construction contract, creates a potential that ACC was negligent and Lexington could be vicariously liable | Duty to defend exists because complaint plus contract create a potential for vicarious liability (affirmed) |
| Whether the court may consider documents beyond the underlying complaint (construction contract / third‑party complaint) when deciding duty to defend | Court should not consider Lexington’s third‑party complaint (self‑serving) and should limit review to the underlying complaint | Court may consider preexisting documents (e.g., construction contract); third‑party complaint may be considered as evidence but is not necessary | Court may consider the construction contract; the ruling did not rely on the third‑party complaint and duty to defend is supported without it |
| Effect of independent‑contractor designation in the contract on additional‑insured coverage | Labeling ACC an independent contractor precludes agency/vicarious liability and therefore coverage for Lexington | Despite the label, facts may establish agency; the independent‑contractor label is not dispositive at the duty‑to‑defend stage | Independent‑contractor label is not conclusive; possible facts could support agency and vicarious liability, triggering duty to defend |
Key Cases Cited
- General Agents Ins. Co. of Am. v. Midwest Sporting Goods Co., 215 Ill. 2d 146 (2005) (insurer must defend if underlying complaint potentially falls within coverage; allegations liberally construed for insured)
- Steadfast Ins. Co. v. Caremark Rx, Inc., 359 Ill. App. 3d 749 (2005) (substance of alleged conduct, not labels, controls duty‑to‑defend analysis)
- Wilson v. Pekin Ins. Co., 237 Ill. 2d 446 (2010) (courts may consider extrinsic documents in duty‑to‑defend analysis when underlying complaint would not plausibly include facts exempting coverage)
- Carney v. Union Pacific R.R. Co., 2016 IL 118984 (2016) (discusses limits of Restatement §414 and distinction between direct and vicarious liability)