Core Construction Services of Illinois Inc. v. Zurich American Insurance Co.

2019 IL App (4th) 180411
NO. 4-18-0411 FILED
April 12, 2019
IN THE APPELLATE COURT Carla Bender
4th District Appellate
OF ILLINOIS Court, IL
FOURTH DISTRICT
CORE CONSTRUCTION SERVICES OF ILLINOIS, ) Appeal from the
INC., a corporation, ) Circuit Court of
Plaintiff-Appellant, ) McLean County
v. ) No. 17MR417
ZURICH AMERICAN INSURANCE COMPANY, )
SCHINDLER ELEVATOR CORPORATION, and ) The Honorable
MICHAEL DINEEN, ) Paul G. Lawrence,
Defendants-Appellees. ) Judge Presiding.
JUSTICE STEIGMANN delivered the judgment of the court, with opinion.
Justices Turner and Cavanagh concurred in the judgment and opinion.
OPINION
¶1 State Farm is an insurance company with offices in Bloomington, Illinois. Core
Construction Services of Illinois (Core) is a construction company. Schindler Elevator Corpora-
tion (Schindler) manufactures, installs, and modernizes elevators and escalators. Zurich Ameri-
can Insurance Company (Zurich) is an insurance provider for Schindler.
¶2 Core was the general contractor for a construction project at a State Farm facility
in Bloomington, Illinois. Core hired Schindler as a subcontractor to perform work on escalators.
Michael Dineen was an employee of Schindler. The subcontract agreement required that
Schindler name Core and State Farm as additional insureds under its insurance policy. Ultimate-
ly, Dineen was injured on the job, and he sued Core and State Farm. Core tendered the claim to
Zurich, but Zurich denied coverage.
¶3 In June 2017, Core filed a complaint for declaratory judgment, arguing that Zur-
ich was obligated to defend and indemnify it as an additional insured. Core included Schindler as
a defendant, arguing that Schindler may have breached the subcontract agreement by failing to
purchase adequate insurance. In November 2017, Zurich and Schindler (defendants) filed a mo-
tion for judgment on the pleadings, arguing that Core was not owed a defense because “there is
not one word within the [underlying complaint] against CORE that alleges any negligent act or
omission by Schindler.” Core filed a response in which it argued “Dineen’s resulting bodily inju-
ries were caused in whole or in part by his employment and therefore in whole or in part by the
acts and omissions of his employer, Schindler.” The trial court granted defendants’ motion for
judgment on the pleadings and later denied Core’s motion to reconsider.
¶4 Core appeals, raising numerous arguments. However, the only relevant issue on
appeal is whether the trial court erred by granting defendants’ motion for judgment on the plead-
ings. We conclude that defendants were not entitled to judgment on the pleadings because the
allegations in the underlying complaint must be read within the context of the Workers’ Com-
pensation Act (Act) (820 ILCS 305/1 et seq. (West 2016)), meaning that silence in an underlying
complaint as to an employer’s possible negligence must be understood as the possible result of
tort immunity for employers. Accordingly, we reverse and remand for further proceedings.
¶5 I. BACKGROUND
¶6 A. Core’s Complaint for Declaratory Judgment
¶7 In June 2017, Core filed a complaint for declaratory judgment, arguing that Zur-
ich was obligated to defend and indemnify it as an additional insured. The following information
derives from this complaint and its attachments.
¶8 1. The Subcontract Agreement and Insurance Policy
¶9 Core was the general contractor for a construction project at a State Farm facility
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in Bloomington, Illinois. In March 2015, Core hired Schindler as a subcontractor to work on
State Farm’s escalators. Their agreement provided that Schindler was responsible for the safety
and supervision of its employees.
¶ 10 The subcontract agreement also required Schindler to name Core and State Farm
as additional insureds under its insurance policy. As additional insureds, Core and State Farm
would be insured against the acts or omissions of Schindler. However, Core and State Farm
would not be insured for their own negligent acts or omissions. Schindler’s insurance policy, in
relevant part, provided as follows:
“A. Section II -Who Is An Insured is amended to include [Core and State Farm] as
an additional insured *** but only with respect to liability for ‘bodily injury’,
‘property damage’ or ‘personal and advertising injury’ caused, in whole or in part,
by:
1. [Schindler’s] acts or omissions; or
2. The acts or omissions of those acting on [Schindler’s] behalf;
in the performance of [Schindler’s] ongoing operations for the additional in-
sured(s) at the location(s) designated above.”
¶ 11 2. The Underlying Complaint
¶ 12 In November 2016, Dineen sued Core and State Farm for injuries he sustained
while at the construction site. Dineen did not allege that Schindler was responsible for the acci-
dent. Schindler was not named as a defendant in the case.
¶ 13 Dineen noted that during August 2015, he was “an employee of Schindler *** and
was working at the State Farm facility located in Bloomington, Illinois.” Dineen alleged that
while he was working on an escalator, Core and State Farm “permitted unfettered and unre-
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strained access to the worksite, and permitted unskilled workers to suddenly approach and en-
gage heavy equipment, unannounced and without any training, thus causing [Dineen] to come
into contact with 1,700 pounds of equipment and resulting in serious injury *** .” Dineen al-
leged that Core and State Farm were negligent in one or more of the following respects:
“a. failed to provide a safe, suitable and proper work site;
b. failed to properly plan and organize the escalator replacement project so
as to prevent non-essential and untrained staff from running through the project
site;
c. failed to properly schedule and staff the construction project prior to
permitting untrained staff to assist in the movement of heavy equipment;
d. failed to inform Plaintiff and Schindler that untrained staff would be
permitted access to the escalator renovation in a hazardous manner;
e. failed to hold proper safety meetings concerning the safety precautions
required prior to performance of work;
f. permitted its employees, agents, designees, invitees, contractors and
subcontractors to work in proximity to the escalator repair site and its heavy
equipment without providing or distributing notice or warning, when Defend-
ant[s] knew, or should [have] known, such provision and distribution would have
eliminated and/or minimized accidental and/or inadvertent operation and/or injury
resulting from careless conduct by unskilled or untrained persons; and
g. failed to use reasonable care in the exercise of control over the construc-
tion work related to the escalators.”
¶ 14 3. The Denial of Coverage
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¶ 15 In January 2017, Core tendered Dineen’s claim to Zurich. In March 2017, Zurich
declined to defend or indemnify Core as an additional insured because “coverage would not be
triggered under the additional insured endorsements as the injury did not arise solely out of
Schindler’s negligent acts, errors or omissions or liability caused in whole or in part by
Schindler.”
¶ 16 B. The Procedural History of This Case
¶ 17 In June 2017, Core filed a complaint for declaratory judgment, arguing that Zur-
ich was obligated to defend and indemnify it as an additional insured. Core included Schindler as
a defendant, arguing that Schindler may have breached the subcontract agreement by failing to
purchase adequate insurance. In November 2017, defendants, Zurich and Schindler, filed a mo-
tion for judgment on the pleadings. Defendants argued that the policy only provided coverage to
Core when Core was vicariously liable for the acts or omissions of Schindler. To that point, de-
fendants noted that “there is not one word within the [underlying complaint] against CORE that
alleges any negligent act or omission by Schindler.”
¶ 18 In January 2018, Core filed a response in which it argued “it must be presumed
that the accident and Dineen’s resulting bodily injuries were caused in whole or in part by [his]
employment and therefore in whole or in part by the acts and omissions of his employer,
Schindler.” Core also discussed State Farm’s third-party complaint for contribution against
Schindler in which State Farm alleged that Schindler was partially responsible for Dineen’s inju-
ries. The trial court took judicial notice of this third-party complaint.
¶ 19 In March 2018, the trial court granted defendants’ motion for judgment on the
pleadings. In May 2018, the court denied Core’s motion to reconsider. The trial court did not
provide a written explanation of either of its rulings, and the record does not include transcripts
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of the proceedings below.
¶ 20 This appeal followed.
¶ 21 II. ANALYSIS
¶ 22 Core appeals, raising numerous arguments. However, the only relevant issue on
appeal is whether the trial court erred by granting defendants’ motion for judgment on the plead-
ings. We conclude that defendants were not entitled to judgment on the pleadings because the
allegations in the underlying complaint must be read within the context of the Workers’ Com-
pensation Act, meaning that silence in an underlying complaint as to an employer’s possible neg-
ligence must be understood as the possible result of tort immunity for employers. Accordingly,
we reverse and remand for further proceedings.
¶ 23 A. The Applicable Law
¶ 24 “Any party may seasonably move for judgment on the pleadings.” 735 ILCS 5/2-
615(e) (West 2016). Judgment on the pleadings is proper when (1) the pleadings disclose no
genuine issue of material fact and (2) the moving party is entitled to judgment as a matter of law.
In re Appointment of Special Prosecutor, 2019 IL 122949, ¶ 52; Allstate Property & Casualty
Insurance Co. v. Trujillo, 2014 IL App (1st) 123419, ¶ 15, 7 N.E.3d 110. For purposes of resolv-
ing the motion, a court should consider as admitted all well-pleaded facts as set forth in the
pleadings of the nonmoving party and any fair inferences drawn therefrom. State Bank of Cherry
v. CGB Enterprises, Inc., 2013 IL 113836, ¶ 65, 984 N.E.2d 449. The grant of a motion for
judgment on the pleadings is reviewed de novo. State Building Venture v. O’Donnell, 239 Ill. 2d
151, 157, 940 N.E.2d 1122, 1126 (2010).
¶ 25 In a declaratory judgment action when the issue is whether the insurer has a duty
to defend, courts first look to the allegations in the underlying complaint and compare those alle-
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gations to the relevant provisions of the insurance policy. Pekin Insurance Co. v. Wilson, 237 Ill.
2d 446, 455, 930 N.E.2d 1011, 1016-17 (2010). The interpretation of an insurance policy is a
question of law reviewed de novo. Id. The insurer has a duty to defend if the facts alleged in the
underlying complaint fall within, or potentially within, the policy’s coverage. Illinois State Bar
Ass’n Mutual Insurance Co. v. Leighton Legal Group, LLC, 2018 IL App (4th) 170548, ¶ 35,
103 N.E.3d 1087. An insurer may not refuse to defend an action against its insured unless it is
clear from the face of the underlying complaint that the allegations fail to state facts that bring
the case within, or potentially within, the insured’s policy coverage. Pekin Insurance Co. v. Cen-
tex Homes, 2017 IL App (1st) 153601, ¶ 34, 72 N.E.3d 831. In making this determination, the
allegations in the underlying complaint must be liberally construed in favor of the insured. Id.
When the alleged facts support multiple theories of recovery, the insurer has a duty to defend if
any one of those theories potentially falls within the policy’s coverage. Id. “As the threshold for
pleading a duty to defend is low, any doubt with regard to such duty is to be resolved in favor of
the insured.” United Services Automobile Ass’n v. Dare, 357 Ill. App. 3d 955, 963, 830 N.E.2d
670, 678 (2005).
¶ 26 When determining whether an insurer owes a duty to defend, “a trial court may
consider evidence beyond the underlying complaint if in doing so the trial court does not deter-
mine an issue critical to the underlying action.” American Economy Insurance Co. v. Holabird &
Root, 382 Ill. App. 3d 1017, 1031, 886 N.E.2d 1166, 1178 (2008) (cited with approval in Wilson,
237 Ill. 2d at 459-61). In the context of an insurer’s duty to defend, the trial court may look be-
yond the underlying complaint and consider (1) the contract between the named insured and an
additional insured, (2) counterclaims against the named insured, and (3) third-party complaints
against the named insured. Centex Homes, 2017 IL App (1st) 153601, ¶ 35; Illinois Emcasco In-
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surance Co. v. Waukegan Steel Sales Inc., 2013 IL App (1st) 120735, ¶ 15, 996 N.E.2d 247; see
also Wilson, 237 Ill. 2d at 468.
¶ 27 When an employer is not alleged to have been negligent, the trial court must con-
strue the underlying complaint within the context of the immunity provided by the Workers’
Compensation Act. Centex Homes, 2017 IL App (1st) 153601, ¶ 36. The Act provides financial
protection to workers for accidental injuries arising out of and in the course of their employment.
Falge v. Lindoo Installations, Inc., 2017 IL App (2d) 160242, ¶ 14, 74 N.E.3d 520. Generally
speaking, the Act requires that employers pay for an employee’s medical care, a portion of his or
her lost wages, vocational rehabilitation, and death benefits to surviving family members. See
820 ILCS 305/7, 8 (West 2016). The Act imposes liability without fault upon the employer and,
in return, prohibits common-law suits by employees against the employer. Reichling v. Touchette
Regional Hospital, Inc., 2015 IL App (5th) 140412, ¶ 25, 37 N.E.3d 320. Section 5(a) of the Act
prohibits employees from suing their employers for negligence. Falge, 2017 IL App (2d)
160242, ¶ 14; 820 ILCS 305/5(a) (West 2016). This provision “is part of the quid pro quo, pur-
suant to which the employer assumes a new liability without fault but is relieved of the possibil-
ity of large damage verdicts.” Reichling, 2015 IL App (5th) 140412, ¶ 25; see Dan DeBias,
Comment, Protecting Injured Workers by Eliminating the Use of the American Medical Associa-
tion Guides in the Evaluation of Permanent Partial Disability, 50 J. MARSHALL L. REV. 589,
592-94 (2017) (discussing the history of the Act). In relevant part, the Act states as follows:
“No common law or statutory right to recover damages from the employer *** for
injury or death sustained by any employee while engaged in the line of his duty as
such employee, other than the compensation herein provided, is available to any
employee who is covered by the provisions of this Act[.]” 820 ILCS 305/5(a)
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(West 2016).
¶ 28 In Centex Homes, 2017 IL App (1st) 153601, the First District interpreted the re-
lationship between the Workers’ Compensation Act and an insurer’s duty to defend and reasoned
as follows:
“One fact that is common in almost all of these construction cases is that
the Workers’ Compensation Act (820 ILCS 305/5(a) (West 2000)) gives tort im-
munity to the injured worker’s direct employer, thereby barring the injured work-
er from bringing a personal injury complaint against his or her employer. Ameri-
can Country Insurance Co. v. James McHugh Construction Co., 344 Ill. App. 3d
960, 963 (2003). As a result, the direct employer, who is generally the named in-
sured, is not typically a named defendant in the underlying case. *** [T]he allega-
tions of the underlying complaint must be read with the understanding that the
employer may be the negligent actor even where the complaint does not include
allegations against that employer. [Citation.]
***
*** [T]he underlying complaint need not expressly allege that the named
insured was negligent. [Pekin Insurance Co. v.] CSR Roofing [Contractors, Inc.],
2015 IL App (1st) 142473, ¶ 50. Indeed, as the Third Circuit noted in Ramara,
‘silen[ce] as to any acts or omissions’ by the named insured must be understood
as the possible result of tort immunity for employers under the workers’ compen-
sation laws and should not be a basis for refusing to defend an additional in-
sured.” Id. ¶¶ 36, 38 (quoting Ramara, Inc. v. Westfield Insurance Co., 814 F.3d
660, 677-78 (3d Cir. 2016)).
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¶ 29 In Hastings Mutual Insurance Co. v. Blinderman Construction Co., 2017 IL App
(1st) 162234, ¶ 4, 91 N.E.3d 439, Blinderman was the general contractor for a construction pro-
ject. Blinderman hired a subcontractor, JM Polcurr, Inc., to perform electrical work. Id. The sub-
contract agreement required Polcurr to name Blinderman as an additional insured under its insur-
ance policy. Id. However, the insurance policy excluded coverage for the sole negligence of
Blinderman. Id. ¶ 8.
¶ 30 Eventually, one of Polcurr’s employees was injured on the job. Id. ¶ 1. The estate
of the employee filed a complaint against Blinderman but did not name Polcurr as a defendant.
Id. In fact, the underlying complaint “included no allegations about the acts of Polcurr.” Id.
Blinderman eventually filed a third-party complaint against Polcurr, arguing that it was partially
responsible for the accident. Id. ¶ 9.
¶ 31 Blinderman tendered the claim to Hastings, which was Polcurr’s insurer. Id. ¶ 8.
Hastings rejected the tender, arguing that the underlying complaint arose out of the sole negli-
gence of Blinderman. Id. Hastings then filed a motion for declaratory judgment, arguing that it
owed no duty to defend or indemnify Blinderman in the underlying lawsuit. Id. ¶ 11. Blinderman
and Hastings both filed motions for summary judgment. Id. The trial court granted Hastings’ mo-
tion for summary judgment, concluding that the policy exclusion for liability arising from
Blinderman’s sole negligence established that Hastings had no duty to defend. Id. ¶¶ 13, 17.
¶ 32 On appeal, the First District dealt with “the question of whether a subcontractor’s
insurer has a duty to defend the general contractor, an additional insured under its policy, in a
lawsuit brought by an injured employee of the subcontractor.” Id. ¶ 1. The First District noted
that the underlying complaint “included no allegations about the acts of Polcurr.” Id. Nonethe-
less, the First District reversed the trial court because “the absence of allegations about Polcurr in
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the underlying complaint does not suffice to meet Hastings’s burden of proving that the injury
occurred through no fault of Polcurr.” Id. ¶ 2. In reaching this conclusion, the First District con-
cluded that the trial court “ignored the context in which the Estate filed its complaint” because
the Workers’ Compensation Act barred recovery against Polcurr. Id. ¶ 18. To this point, the First
District reasoned as follows:
“The Estate *** did not specifically allege that Polcurr’s acts or omissions
caused the injury. But the Estate did not expect to recover damages from Polcurr
and had no reason to include allegations about the acts or omissions of Polcurr.
The complaint’s silence concerning Polcurr’s acts or omissions does not suffice to
meet Hastings’s burden of showing that Polcurr’s acts or omissions did not con-
tribute to causing the injury.” Id. ¶ 19.
¶ 33 B. This Case
¶ 34 Defendants were not entitled to judgment as a matter of law because the allega-
tions in the underlying complaint must be read within the context of the immunity provided by
the Workers’ Compensation Act. Centex Homes, 2017 IL App (1st) 153601, ¶ 36. Furthermore,
it is not clear from the face of the underlying complaint that the allegations fail to state facts that
bring the case within, or potentially within, the insured’s policy coverage. See Hastings, 2017 IL
App (1st) 162234, ¶ 19 (“The [underlying] complaint’s silence concerning [a subcontractor’s]
acts or omissions does not suffice to meet [an insurer’s] burden of showing that [the subcontrac-
tor’s] acts or omissions did not contribute to causing the injury.”).
¶ 35 In this case, Core was the general contractor and Schindler was a subcontractor.
Pursuant to their agreement, Schindler was subcontracted to work on State Farm’s escalators and
was responsible for the safety and supervision of its employees. Schindler named Core and State
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Farm as additional insureds under its policy for bodily injury caused, in whole or in part, by
Schindler’s acts or omissions.
¶ 36 Dineen, one of Schindler’s employees, was injured at the construction site while
he was working on an escalator. In his underlying complaint, Dineen alleged that Core and State
Farm “permitted unfettered and unrestrained access to the worksite,” which caused him to be in-
jured when he came “into contact with 1,700 pounds of equipment[.]” In pertinent part, Dineen
alleged that State Farm and Core were negligent because they “failed to provide a safe, suitable
and proper work site” and “failed to use reasonable care in the exercise of control over the con-
struction work related to the escalators.” Dineen’s underlying complaint did not allege that
Schindler was negligent.
¶ 37 However, “the allegations of the underlying complaint must be read with the un-
derstanding that the employer may be the negligent actor even where the complaint does not in-
clude allegations against that employer.” Centex Homes, 2017 IL App (1st) 153601, ¶ 36. Silence
as to any acts or omissions of the employer “must be understood as the possible result of tort
immunity for employers under the workers’ compensation laws and should not be a basis for re-
fusing to defend an additional insured.” Id. ¶ 38.
¶ 38 When the allegations in the underlying complaint are liberally construed in favor
of the insured, the potential exists that Schindler’s acts or omissions caused Dineen’s injuries.
For example, Dineen alleged that he was injured while working on an escalator because Core and
State Farm “failed to provide a safe, suitable and proper work site” and “failed to use reasonable
care in the exercise of control over the construction work related to the escalators.” However,
pursuant to the subcontract agreement, Schindler was responsible (1) for the work on the escala-
tor and (2) for the safety and supervision of its employees. As such, it is possible that Schindler
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“failed to provide a safe, suitable and proper work site” and “failed to use reasonable care in the
exercise of control over the construction work related to the escalators.”
¶ 39 Accordingly, Zurich has a duty to defend Core in the underlying lawsuit because
there is the potential that Schindler’s acts or omissions caused Dineen’s injuries. The silence in
the underlying complaint as to Schindler’s possible negligence “must be understood as the possi-
ble result of tort immunity for employers” and is not a basis for Zurich to refuse to defend Core.
Id. Therefore, the trial court erred when it granted defendants’ motion for judgment on the plead-
ings. Because we conclude that the trial court erred, we need not discuss Core’s alternative ar-
guments.
¶ 40 III. CONCLUSION
¶ 41 For the reasons stated, we reverse and remand for further proceedings.
¶ 42 Reversed and remanded.
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