The Illinois Appellate Court for the First District has held that an insurer had a duty to defend an additional insured who was entitled under the policy of insurance to coverage because of vicarious liability even though the underlying complaint against it included no allegations of vicarious liability. CSR Roofing Contractors was the general roofing contractor for a construction project in Lisle, Ill. It hired a subcontractor, Zamastil Exteriors, to perform a portion of the work in accordance with a master subcontract agreement.
The subcontract agreement required Zamastil to obtain additional insurance coverage for CSR that was not limited to vicarious liability. Vicarious liability is a term based on the principles of agency. In accident cases like this, the negligence of an employee or independent contractor can be imputed to the person’s employer when acting within the scope of employment. The legal doctrine of vicarious liability would make an employer liable for the acts of its employee. In other words, if the person is acting on behalf of the employer or master, the employer or the master can be held responsible for negligence caused by that employee.
The agreement between Zamastil and CSR provided that both CSR and Zamastil were responsible for complying with all federal safety regulations.
Zamastil obtained commercial general liability coverage from Pekin Insurance, which issued a policy containing a blanket additional insured endorsement that extended coverage to CSR. The key to this case is that the language of that endorsement expressly limited coverage to the additional insured’s vicarious liability.
A Zamastil employee, Jordan Lake, subsequently brought a lawsuit against CSR for injuries he sustained at the jobsite. Lake’s complaint was limited to claims of direct negligence by CSR. Among the claims, however, were that CSR itself failed to comply with the Occupational Safety and Health Administration (OSHA) regulations and that CSR allowed its subcontractors to ignore compliance with OSHA regulations.
CSR tendered the defense of this case to Pekin Insurance, which denied coverage on the ground that its policy limited coverage for CSR to claims of vicarious liability and the complaint contained no such claim. Pekin also filed a declaratory action seeking to have the court determine insurance coverage.
The parties filed cross-motions for judgment on the pleadings and summary judgment. The trial judge found in favor of Pekin Insurance, determining that it owed no duty to defend CSR. CSR appealed.
In the opinion by the First District Illinois Appellate Court, which reversed that decision, the justice writing the opinion addressed CSR’s argument that the limitation on additional insured coverage in the policy had to be considered and found ambiguous in light of requirements of the master subcontractor agreement which stated that coverage was not to be limited to coverage for vicarious liability.
The opinion rejected that argument observing that the policy limitation itself was not ambiguous and that the master subcontractor agreement could not be used to read an ambiguity into the insurance contract. The appeals panel distinguished another case that contained language suggesting that an underlying subcontract could be used to determine whether a duty to defend had been triggered by the complaint.
The appellate court stated that those cases did not authorize the use of the contract to render otherwise clear language in an insurance policy ambiguous.
At the heart of this case, the appeals panel wrote that the complaint does not preclude the possibility that CSR could be found liable solely as a result of the acts or omissions of Zamastil. In addition, given the allegations of the lack of adequate safety equipment in violation of OSHA rules, liability could exist as a result of the negligence by both CSR and Zamastil. In the Lake lawsuit, it was alleged that he did not have the appropriate safety devices in performance of his work in violation of OSHA regulations. It also alleged that CSR allowed incompetent subcontractors on the job, obviously referring to Zamastil. Based on those allegations, the court determined that it was at least possible for CSR to be found vicariously liable for Zamastil’s failure to ensure compliance with OSHA regulations.
The court concluded that Pekin owed CSR a duty to defend under the initial insured endorsement of the commercial general liability policy. Accordingly, the first district held that the trial judge erred in granting judgment for Pekin.
Kreisman Law Offices has been handling construction site accident cases, work injury cases, catastrophic injury cases, auto accident cases, bicycle accident cases and motorcycle accident cases for individuals and families who have been injured or killed by the negligence of another for more than 38 years, in and around Chicago, Cook County and its surrounding areas including Naperville, Hinsdale, Wheaton, Rosemont, Forest Park, Crestwood, Mount Prospect, Calumet City, South Holland, Blue Island, Chicago (Rogers Park, Wicker Park, Bucktown, Lincoln Square, Chatham, Englewood), Tinley Park and Flossmoor, Ill.
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