Westfield Insurance Co. v. West Van Buren, L.L.C.
2016 IL App (1st) 140862
| Ill. App. Ct. | 2016Background
- In 2002 Developer (West Van Buren, LLC) hired Total Roofing to install the roof and required Total Roofing to insure and indemnify Developer; Total Roofing had occurrence-based CGL policies from Westfield listing Developer as an additional insured.
- Within a year water infiltration was discovered; the Condominium Association repaired the roof at >$309,000 and later sued Developer and Total Roofing alleging breach of warranty, consumer fraud, fraud, and breach of implied warranty of habitability based on concealed roofing defects causing water damage to the building and to personal property in units.
- Developer tendered defense to Westfield; Westfield declined to defend Developer (but defended Total Roofing under reservation of rights) and filed a declaratory-judgment action seeking a ruling of no duty to defend or indemnify Developer.
- The trial court initially granted summary judgment to Developer, then on reconsideration granted summary judgment to Westfield; Developer appealed arguing Westfield owed a duty to defend.
- The insurer’s duty to defend turns on the allegations of the underlying complaint read against the policy language (definitions of “occurrence” and “property damage”); the central factual/legal dispute was whether the complaint alleged an accidental occurrence and compensable physical property damage rather than purely economic loss or intentional/expected conduct.
Issues
| Issue | Plaintiff's Argument (Developer) | Defendant's Argument (Westfield) | Held |
|---|---|---|---|
| Whether Westfield had a duty to defend Developer in the Association suit | Complaint alleged water infiltration and damage to personal property — a possible "occurrence" and property damage triggering duty to defend | The complaint alleges intentional concealment/defective workmanship and economic loss/diminished value, not an accidental occurrence or physical property damage within policy | No duty to defend — allegations do not potentially fall within policy coverage |
| Whether the alleged damages constitute "property damage" under the policy | Allegations include damage to personal and other property in units, so physical injury is claimed | Damages are economic losses/repair costs for defective work and diminished value, which are not "physical injury" under policy language and Eljer line of cases | Not property damage under the policy; policy requires physical injury, not economic loss |
| Whether continuous or repeated exposure language could make defects an "occurrence" | Failures leading to water infiltration over time qualify as "continuous or repeated exposure" and thus an ‘‘accident’’ | The acts alleged reflect nonfortuitous, intended or expected defective workmanship — not accidental occurrences | Majority: no occurrence; defective workmanship and alleged intentional concealment are not accidental so do not trigger coverage |
| Whether the Condominium Association’s allegations of unit owners’ personal-property damage trigger coverage or standing prevents recovery | Developer: Association alleged personal-property damage and could represent unit owners under statute, so those allegations can trigger duty to defend | Westfield: Association lacked standing to assert individual unit owners’ claims and any mention of personal-property damage was tangential to economic-loss claim | Court: Association’s references to personal-property damage were tangential and not pleaded as a theory of recovery on behalf of unit owners; standing/representation not pleaded to trigger coverage |
Key Cases Cited
- Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90 (Illinois duty-to-defend is broader than duty-to-indemnify)
- Travelers Ins. Co. v. Eljer Mfg., Inc., 197 Ill. 2d 278 (economic loss from defective work is not "physical" property injury for coverage)
- Stoneridge Dev. Co. v. Essex Ins. Co., 382 Ill. App. 3d 731 (defective construction that damages other property can be covered; distinguishes pure economic loss)
- Diamond State Ins. Co. v. Chester-Jensen Co., 243 Ill. App. 3d 471 (underlying complaint framed core claim as economic loss; tangential allegations of bodily injury do not create coverage)
- Viking Constr. Mgmt., Inc. v. Liberty Mut. Ins. Co., 358 Ill. App. 3d 34 (no "occurrence" where defective workmanship causes repair and replacement)
- Crawford Labs., Inc. v. St. Paul Ins. Co. of Ill., 306 Ill. App. 3d 538 (an ‘‘accident’’ implies an unforeseen, unintended event)