Contesting Insurance Coverage Based on Employee Exculsion
In United National Insurance Company v. 200 North Dearborn Partnership, Marian Gal, a janitorial worker, died due to an elevator malfunction at a building located at 200 North Dearborn Parkway in Chicago. The accident occurred on July 19, 2001. A complaint was filed on or about August 21, 2001. The fifth amended complaint, was filed on June 22, 2006, the named defendants were 200 North Dearborn Partnership, Aargus Security Systems, Inc., Schindler Elevator Corporation, Baird & Warner, Inc., Baird & Warner Management Group, Inc., B & W Management Group, Inc., Elzie Higgenbottom, Kenilworth, Inc., and Warner Investment Company, Inc., f/k/a Kenilworth, Inc. The suit was ultimately settled in November, 2006. Aargus Security contracted with 200 North Dearborn in a continuing services agreement (Agreement) to provide certain services with respect to the property located at 200 North Dearborn Parkway in Chicago. The Agreement provided that Aargus would name Baird & Warner, Inc. and the “owner” as “additional insureds.” “Owner” was defined as “200 North Dearborn Partnership.”
United National issued a commercial general liability policy to Aargus, which covered the time period when Gal’s accident occurred. The “additional insured” endorsement did not specifically name who was an additional insured; rather, it stated “blanket where required by contract.” The “additional insured” endorsement contained two limitations. First, the insurance would not apply to an additional insured’s own acts or omissions. Second, if liability was to be imposed on the additional insured because of its acts or omissions and those of the named insured, the insurance would serve as “coinsurance with any other insurance available to the additional insured, in proportion to the limits of liability of all involved policies.” The policy also contained an employer’s liability exclusion, which excluded coverage for bodily injury to an employee of the insured arising out of and in the course of employment by the insured. United National initially denied coverage to 200 North Dearborn and Baird & Warner; however, United National later provided a defense under a reservation of rights.
200 North Dearborn was also insured by Hartford Casualty Insurance Company. Hartford issued a commercial general liability insurance policy to 200 North Dearborn, which covered the relevant time period when Gal’s accident occurred. United National acknowledged that it had agreed under a reservation of rights to defend 200 North Dearborn and Baird & Warner, pursuant to the “additional insured” endorsement in its policy with Aargus.
The issue before the court is first whether United National was not estopped from contending coverage. The court finds that United National was not estopped from contesting coverage, because United National defended 200 North Dearborn and Baird & Warner under a reservation of rights and also filed a declaratory judgment action which sought a determination of its rights to defend the “non-identified defendants” (Kenilworth, Warner and Higgenbottom). The record indicated that 200 North Dearborn first tendered its defense to United National on September 27, 2002. On February 12, 2003, Baird & Warner also tendered its defense to United National. Both 200 North Dearborn and Baird & Warner were targeting tender to United National and wanted United National to exclusively defend them rather than their own insurance provider, Hartford. United National’s declaratory judgment suit was filed within a reasonable amount of time so as to preclude estoppel. 200 North Dearborn and Baird and Warner tendered their defense to United National in 2002 and 2003, and United National agreed to defend them under a reservation of rights in 2005. United National only learned the “non-identified defendants” were seeking coverage under United National’s “additional insured” endorsement sometime in 2005 or 2006. Therefore, its filing of the declaratory judgment suit in August 2006 was not so delayed or unreasonable to apply estoppel. United National defended 200 North Dearborn and Baird & Warner under a reservation of rights and subsequently filed a declaratory judgment action shortly after learning the “non-identified defendants” claimed coverage under its policy.
The second issue before the court is whether the employee liability exclusion in United National’s policy excluded coverage by Gal because he was the insured’s employee. The court found that Gal was the insured’s employee. As such, the employee liability exclusion in the policy precluded indemnification.
On Cross- appeal the issues before the court was whether the “non-identified defendant” were additional insureds under the “additional insured” endorsement in the policy. The court however finds that there is no such language in the policy excluding any past or present partners of 200 North Dearborn. The court declined to adopt United National’s interpretation that as “owner,” “200 North Dearborn Partnership” did not include the partners within the partnership. Therefore, United National had a duty to defend the “non-identified defendants” under the “additional insured” endorsement. United National was obligated to provide for all of defendants’ defense costs, up to the policy limits.
200 North Dearborn and Baird & Warner sought coverage under United National’s “additional insured” endorsement in 2003 and informed United National that they would not invoke any coverage from their insurer, Hartford. However, when United National initially refused to defend 200 North Dearborn and Baird & Warner, they turned to Hartford to provide a defense. Subsequently, United National defended 200 North Dearborn and Baird & Warner under a reservation of rights, but only reimbursed Hartford 50% of the defense costs, since it believed its policy only acted as coinsurance. However, an insured who is covered under more than one policy may choose which insurer would be required to defend and indemnify it, and the insurer may not seek contribution from another insurer notwithstanding an “other insurance” clause in the policy. Therefore, United National should have provided 100% of the defense. Since 200 North Dearborn and Baird & Warner targeted their defense to United National, there was no other “available” insurance for United National’s policy to as act as coinsurance.
The court held that United National had a duty to defend the “non-identified defendants” under the “additional insured” endorsement since they were partners of 200 North Dearborn. The court also determined that defendants had targeted tender to United National rather than to Hartford, and United National was required to reimburse Hartford for all sums paid in defense and settlement of the underlying lawsuit.
United National Insurance Company v. 200 North Dearborn Partnership, 979 N.E.2d 920( Ill. App. 1st Dist. 2012).
