Court Stretches to Find Fabricator Owed Coverage as an Additional Insured

Attorneys: Schoumacher, Bruce H.

Winter 2014
In a recent case, the Illinois appellate court confirmed the power of the courts to go beyond the allegations of the complaint to determine whether an insurer owed a duty to defend an additional insured in a construction accident case. There, the court held that it could look at the allegations of third-party complaints filed against the additional insured to see if the insurer had to defend an additional insured. See Illinois Emcasco Insurance Co. v. Waukegan Steel Sales, Inc., 2013 IL App (1st) 120735.
In Emcasco, a steel fabricator hired a steel erector to erect steel at a job site. The subcontract stated that the steel erector was “solely responsible for the means, methods and safety of its employees.” Under the subcontract, the erector also had to cover the fabricator as an additional insured under the erector’s insurance policy. 
An employee of the erector was injured at the job site when he fell. The worker sued the fabricator alleging that the fabricator did not provide a safe place to work or proper fall protection. 
The fabricator tendered its defense in the lawsuit to the erector’s insurer, pursuant to the additional insured provision of the policy. The insurer denied coverage because the additional insured provision of the policy stated that the fabricator would only be covered for its vicarious liability arising as a direct result of the erector’s conduct. The insurer pointed out that the injured worker alleged that the fabricator’s negligence caused his injuries. Accordingly, any liability of the fabricator arose from the fabricator’s negligence and not any negligence of the erector. Under such circumstances, the insurer reasoned that the fabricator would not be vicariously liable for the negligence of the erector. Accordingly, the insurer concluded that the policy did not cover the claims made against the fabricator in the lawsuit filed by the worker because the additional insured provision only covered the fabricator for its vicarious liability due to the acts of the erector and not for “any act or omission” of the fabricator. 
The court noted, however, that two third-party complaints had been filed against the fabricator by defendant-contractors in the case. In both of the third-party complaints, those contractors claimed that the direct negligence of the erector caused the employee’s injuries. The court reviewed the third-party complaints to determine if the insurer owed a duty to defend the fabricator, relying on a recent Illinois case which held that the court could look beyond the four corners of the complaint to determine if an additional insured may be covered by an insurance policy for the claims alleged in the complaint. 
The court found that the third-party complaints alleged in part that the erector was acting as the agent, servant or employee of the fabricator. Hence, the court reasoned that the claims made against the fabricator may be covered under the erector’s insurance policy. The court reasoned that there was a possibility that the fabricator could be found vicariously liable for the negligence of the erector, if the trial court found that the fabricator was the employer or principal of the erector. Accordingly, the court held that the erector’s insurer had to defend the fabricator in the injured worker’s lawsuit.
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