Illinois Court Holds Insurer Has No Duty to Defend Additional Insured
Insurance Law Update
In Pekin Insurance Company v. United Parcel Service, Inc., ---N.E.2d---, 2008 WL 642598 (Ill. App. Ct. March 7, 2008), the Appellate Court of Illinois, First District, held that Pekin Insurance Company owed no duty to defend its additional insured, United Parcel Service, Inc. (UPS), because the policy’s additional insured endorsement only provided coverage for liability arising solely out of the acts or omissions of the named insured, and the underlying complaint alleged direct negligence by UPS.
An employee of an independent contractor was injured when he fell from a ladder while working at a UPS facility. The employee filed suit against UPS and the ladder manufacturer. The complaint asserted a sole cause of action for negligence against UPS, alleging that UPS provided the employee with an unsafe ladder from which to work.
Pekin issued an insurance policy to the independent contractor, and UPS was added as an additional insured. The additional insured endorsement provided, in part, that “[s]uch person or organization is an additional insured only with respect to liability incurred solely as a result of some act or omission of the named insured and not for its own independent negligence or statutory violation.”
UPS tendered the underlying action to Pekin, and Pekin denied the tender, contending that the additional insured endorsement at issue only provided coverage for liability arising solely from the named insured’s acts or omissions. Pekin filed a complaint for declaratory relief, and the trial court granted summary judgment for UPS.
The appellate court reversed, entering summary judgment for Pekin. The court examined two previous Illinois appellate cases involving similar additional insured endorsements, where the insurers were found to have no duty to defend additional insureds because the underlying allegations were not based solely on the acts of the named insureds but also on the acts of the additional insureds. Agreeing with these decisions, the court found that there was no potential for coverage in the instant case. Specifically, the court concluded that nothing in the underlying complaint suggested that the employee’s injuries were solely the result of the independent contractor’s acts or omissions. Rather, the complaint directly alleged negligence against UPS.
UPS argued that Pekin had a duty to defend because there was a possibility that UPS could be found vicariously liable based on the independent contractor’s acts or omissions, which would amount to liability incurred solely as a result of some act on the part of the independent contractor. The court rejected this argument, finding that nothing in the underlying complaint suggested that UPS could be held vicariously liable for the acts of the independent contractor.
UPS also argued that, in determining the duty to defend, the court should consider the allegations contained in third-party complaints filed by UPS and the ladder manufacturer against the independent contractor. The court, however, stated that even if it were to consider the allegations in those complaints, they would not change the result in the instant case because they did not raise the potential of vicarious liability.