United Fire & Casualty Compan v. Prate Roofing & Installations
7f4th573
| 7th Cir. | 2021Background
- SparrowHawk hired All Seasons (named insured) to inspect/repair warehouse roofs; All Seasons, lacking an Illinois roofing license, engaged Prate Roofing (an Illinois-licensed contractor) as general contractor and then subcontracted work to 21st Century Roofing.
- United Fire insured All Seasons and issued an additional‑insured endorsement naming Prate, but the endorsement limited Prate’s coverage to liability imputed to it arising from All Seasons’ acts or omissions (vicarious‑liability only; no coverage for Prate’s own direct negligence).
- A roofer employed by 21st Century fell through a skylight and died; his estate sued multiple defendants including Prate, alleging negligence with boilerplate language that Prate acted “individually and through its agents.”
- Prate tendered defense to United Fire; United Fire declined and filed for a declaratory judgment denying a duty to defend. The district court granted summary judgment for Prate; United Fire appealed.
- The district court and the panel majority held United Fire had a duty to defend because the estate’s complaint potentially alleged facts within the vicarious‑liability endorsement; after United Fire settled with All Seasons for policy limits and obtained a release, the panel modified the judgment to hold that United Fire’s duty to defend ended upon that settlement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether United Fire owed a duty to defend Prate (an additional insured covered only for vicarious liability) | Estate’s broad allegations could potentially impose vicarious liability on Prate, so United Fire must defend under the eight‑corners rule | United Fire: All Seasons was an independent contractor so Prate could not be vicariously liable; no risk within policy, so no duty to defend | Duty to defend exists if the complaint potentially alleges covered vicarious liability; insurer must defend regardless of the underlying claim’s merits or likelihood of success |
| Effect of Prate’s discovery admissions and cross‑claims | Admissions do not bind the estate or the court in the underlying action; the complaint still permits a potential vicarious theory | Admissions and cross‑claims show Prate treated All Seasons as independent or as joint tortfeasor, precluding imputed liability | Judicial admissions are binding on Prate but do not eliminate the potential for vicarious liability under the estate’s pleadings for duty‑to‑defend purposes |
| Effect of United Fire’s settlement with All Seasons for policy limits | (Prate/estate) Initially: duty exists based on pleadings; after settlement: settlement extinguishes the agent’s liability so no remaining risk to impute | United Fire: settlement (and policy exhaustion) removed any possibility of imputed liability and thus ended the duty to defend | Settlement with All Seasons extinguished any potential imputed liability; United Fire’s duty to defend ended upon consummation of that settlement |
| Whether United Fire’s coverage was excess (no duty to defend) | Prate: not properly raised below; duty question should be decided on pleadings | United Fire: its policy was excess to Prate’s Nationwide policy and thus no defense duty | Excess‑coverage argument was forfeited below and not considered; district court did not abuse discretion in treating it as forfeited |
Key Cases Cited
- Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90 (Ill. 1992) (duty to defend is broader than duty to indemnify; apply eight‑corners rule)
- General Agents Ins. Co. v. Midwest Sporting Goods Co., 215 Ill. 2d 146 (Ill. 2005) (insurer must defend even hopeless or groundless suits if pleadings arguably fall within coverage)
- U.S. Fidelity & Guar. Co. v. Wilkin Insulation Co., 144 Ill. 2d 64 (Ill. 1991) (allegations that potentially fall within coverage trigger duty to defend)
- Pekin Ins. Co. v. Centex Homes, 72 N.E.3d 831 (Ill. App. Ct. 2017) (additional insured covered for vicarious liability entitled to defense where complaint could impute named‑insured’s acts)
- Pekin Ins. Co. v. Lexington Station, LLC, 84 N.E.3d 554 (Ill. App. Ct. 2017) (same as Centex; appellate precedent finding duty to defend additional insureds under similar pleadings)
- Conway v. Country Cas. Ins. Co., 92 Ill. 2d 388 (Ill. 1982) (discusses when settlement/payment exhausts insurer’s duties; distinguished on facts where no settlement/release existed)
- Carney v. Union Pac. R.R. Co., 77 N.E.3d 1 (Ill. 2016) (clarifies boundaries between direct negligence, §414 supervision liability, and true vicarious imputed liability)
- American Nat’l Bank & Trust Co. v. Columbus‑Cuneo‑Cabrini Med. Ctr., 154 Ill. 2d 347 (Ill. 1992) (settlement between agent and plaintiff extinguishes principal’s vicarious liability)