Illinois Court Finds Subcontractor’s Insurer Must Defend Contractor Following Workplace Incident
An Illinois court yesterday confronted an insurer’s duty to defend an additional insured under the terms of a commercial general liability policy issued to a third party following a workplace incident. In 2012, a subcontractor’s employee fell off a roof, sustained serious injuries, and brought a personal injury action against the project’s general contractor. The subcontractor’s insurer then filed a declaratory judgment suit asking the court to declare it had no duty to defend the general contractor in the underlying personal injury suit.
The general contractor and subcontractor had entered into a Master Services Agreement (“MSA”) that required the subcontractor maintain certain insurance coverage, including a commercial general liability policy on a “primary/non-contributory” basis that named the general contractor as an additional insured. The MSA indicated that the subcontractor’s coverage for the general contractor as an additional insured could not be limited to vicarious liability. The subcontractor’s procured insurance policy, however, did in fact limit coverage for the additional insured to vicarious liability imputed to the additional insured by the subcontractor’s acts or omissions.
An Illinois appellate court determined that the insurance policy’s language was open to only one meaning: that the general contractor was entitled to coverage under the policy only if, at the time of the accident, the subcontractor’s acts or omissions occurred as an agent of the general contractor and were within the scope of its authority as the general contractor’s agent. The court explained that even though the MSA’s requirements were in conflict with the actual policy procured by the subcontractor, there was no basis for reading the MSA and the policy together to determine the scope of the policy’s coverage: “the [ ] policy does not explicitly show that [the insurer] and [subcontractor] intended to incorporate the MSA into the policy. Moreover, the [ ] policy and the MSA did not involve the same contracting parties and were not executed as part of the same transaction.”
With respect to the duty to defend, however, the court concluded that the even though the underlying personal injury complaint asserted a theory of direct liability against the general contractor, the allegations of the complaint suggest that the general contractor could be subject to vicarious liability. The heart of the complaint centered on the allegation that the worker, while the subcontractor’s employee, did not have appropriate safety devices in violation of OSHA regulations. The court explained, “On the surface, the [worker and his wife] are alleging that [the general contractor] failed to properly supervise its subcontractor; at the core, however, they are alleging that [the subcontractor] is the party that failed to be ‘competent’ and failed to comply with OSHA regulations, leading to the accident in question.” Therefore, the subcontractor’s insurer has a duty to defend the general contractor in the underlying suit.
