THIRD DIVISION
March 28, 2007
No. 1-06-2216
CINCINNATI INSURANCE COMPANY, ) Appeal from the
as Subrogee of Harbour Contractors, Inc., ) Circuit Court of
BAKER CONCRETE CONSTRUCTION, and ) Cook County.
NICHOLAS NOWICKI, )
)
Plaintiffs, )
)
v. )
) Nos. 95 CH 10953,
GATEWAY CONSTRUCTION COMPANY, INC.,) 95 CH 6802,
) 97 CH 1126
Defendant and Counterplaintiff-Appellant )
)
)
(Lexington Insurance Company, ) The Honorable
) David R. Donnersberger,
Defendant and Counterdefendant-Appellee). ) Judge Presiding.
PRESIDING JUSTICE THEIS delivered the opinion of the court:
This appeal arises from an order of the circuit court granting summary judgment in favor
of defendant Lexington Insurance Company (Lexington) against plaintiff Cincinnati Insurance
Company (Cincinnati)1 and defendant, counterplaintiff Gateway Construction Company, Inc.
(Gateway). On appeal, the dispute concerns whether certain parties were covered as additional
insureds under the terms of Gateway’s excess liability policy issued by Lexington. Gateway
contends that the trial court erred in erroneously interpreting the underlying policy endorsement
language, arguing that an oral promise to name someone as an additional insured, memorialized
1
Cincinnati is not a party to this appeal.
1-06-2216
in writing after the injury for which coverage is sought, is sufficient to create additional insured
status under the policy. For the following reasons, we disagree and affirm the judgment of the
circuit court.
BACKGROUND
Harbour Contractors, Inc. (Harbour), a general contractor, entered into an agreement with
Willowbrook Center Associates to construct a Mark Shale Warehouse facility designed by
architect Nicholas Nowicki. Harbour also entered into an agreement with Baker Concrete
Construction (Baker), a subcontractor, under which Baker was responsible for the concrete work
on the project. Baker, in turn, entered into an informal, unwritten agreement with subcontractor
Gateway to install certain concrete reinforcements for the project, which agreement was later
memorialized in writing and executed by Baker on June 4, 1990. On January 10, 1990, prior to
the execution of the written agreement, Thomas Scully, a metal worker employed by Gateway,
was injured on the jobsite.
On the date of the injury, Baker was insured under a comprehensive general liability
(CGL) policy issued by Liberty Mutual Insurance Company (Liberty) and under an excess
liability policy issued by Cincinnati. Harbour and Nowicki were covered as additional insureds
under Baker’s policies. Gateway was insured under a CGL policy issued by National Union
Insurance Company (National) and under an excess liability policy issued by Lexington. It is
alleged, for purposes of summary judgment, that Gateway’s representative had orally agreed to
name Baker, Harbour and Nowicki as additional insureds under its policy with National. The
Baker/Gateway written agreement was drafted on January 26, 1990, after the injury. The original
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agreement did not contain any additional insured requirements. Subsequently, an addendum to
the agreement, dated February 7, 1990, included an additional insured provision and that contract
was executed by Baker five months after the accident on June 4, 1990. A certificate of insurance
naming Baker, Harbour and Nowicki as additional insureds was issued two months after the
accident, on March 15, 1990.
In 1991, Scully brought suit against Harbour, Baker and Nowicki to recover for his
injuries. Harbour, Baker and Nowicki tendered the defense of the suit to National. National
denied its duty to defend, maintaining that Harbour, Baker and Nowicki were not additional
insureds under its policy with Gateway because a written agreement to add them had not been
executed at the time of Scully’s accident. As a result, the defense was taken over by Liberty,
Baker’s primary insurer. In 1996, Scully’s suit settled for $2.5 million. Liberty paid its policy
limit, and Cincinnati, Baker’s excess insurer, paid the remainder of the settlement. Liberty then
assigned its right to seek recovery of its portion of the settlement to Cincinnati.
Meanwhile, in 1995, Harbour, Baker and Nowicki filed suit against National seeking a
declaration that National had a duty to defend and indemnify them in Scully’s underlying suit.
They argued that they were additional insureds under National’s policy with Gateway by virtue of
Gateway’s oral promise to make them additional insureds. Cincinnati, as the subrogee of
Harbour, Baker and Nowicki, was substituted as the plaintiff in that suit. Cincinnati and
National filed cross-motions for summary judgment. After the circuit court denied those
motions, Cincinnati and National subsequently settled their dispute for the limits of the National
policy.
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Cincinnati then filed suit against Lexington and Gateway, alleging that Harbour, Baker
and Nowicki were additional insureds under Gateway’s policies with both National and
Lexington, and, therefore, were entitled to excess coverage from Lexington. Alternatively,
Cincinnati alleged that Gateway breached its oral contract with Baker when it failed to obtain
insurance for Baker, Harbour and Nowicki. Gateway filed a counterclaim against Lexington
alleging that it had breached its contract with Gateway in denying excess coverage to Harbour,
Baker and Nowicki.
Thereafter, Gateway filed a motion for summary judgment on Cincinnati’s claims against
it, and also filed a motion for summary judgment with respect to its claims against Lexington.
Lexington then filed a motion for summary judgment on Cincinnati’s and Gateway’s claims
against it. The court found that the threshold issue was whether the alleged oral agreement
between Gateway and Baker would be sufficient to provide additional insured coverage under the
National and Lexington policies. The court held that the terms of National’s policy were
unambiguous and that pursuant to the language of the policy, a mere oral promise was
insufficient to grant coverage. Accordingly, the circuit court denied Gateway’s motions and
granted summary judgment in favor of Lexington. Gateway filed its timely appeal.
ANALYSIS
A motion for summary judgment is properly granted when the pleadings, depositions,
admissions, and affidavits on file, taken in the light most favorable to the nonmoving party,
establish that no genuine issue of material fact exists and the moving party is entitled to judgment
as a matter of law. 735 ILCS 5/2-1005(c) (West 2004). The standard of review of an order
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granting summary judgment is de novo. Chatham Foot Specialists, P.C. v. Health Care Service
Corp., 216 Ill. 2d 366, 376, 837 N.E.2d 48, 54-55 (2005).
The threshold issue raised by Gateway is whether the alleged oral agreement between
Baker and Gateway to procure additional insured coverage is sufficient to provide coverage
under the language of National’s policy. In interpreting the language of the policy, we must
consider that an insurance policy is a contract and, thus, the rules governing the construction of
other types of contracts also apply to insurance policies. Nicor, Inc. v. Associated Electric & Gas
Insurance Services Ltd., 223 Ill. 2d 407, 416, 860 N.E.2d 280, 285 (2006). The primary
objective is to ascertain and give effect to the intent of the parties as expressed in the agreement.
Nicor, Inc., 223 Ill. 2d at 416, 860 N.E.2d at 286. In reaching that objective, the court construes
the policy as a whole, taking into account the type of insurance, the nature of the risks, and the
overall purpose of the contract. Nicor, Inc., 223 Ill. 2d at 416, 860 N.E.2d at 286.
Where the provisions of the policy are clear and unambiguous, they will generally be
applied as written, unless it contravenes public policy. Nicor, Inc., 223 Ill. 2d at 417, 860 N.E.2d
at 286. Nevertheless, a term is not ambiguous merely because it is not defined or “because the
parties can suggest creative possibilities for its meaning.” Nicor, Inc., 223 Ill. 2d at 417, 860
N.E.2d at 286. Rather, it is only ambiguous “if the term is susceptible to more than one
reasonable interpretation.” Nicor, Inc., 223 Ill. 2d at 417, 860 N.E.2d at 286. Whether a contract
is ambiguous is a question of law, subject to de novo review. Nicor, Inc., 223 Ill. 2d at 416, 860
N.E.2d at 285.
National’s policy endorsement provides, in pertinent part as follows:
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“[T]he following are Additional Insureds under this policy:
All corporations, partnership[s] and or/[sic] affiliated individuals
promised to be added as additional insured[s] under a written
contract with the Named Insured.”
Gateway initially contends that the clear and unambiguous language of the policy merely requires
an oral promise to name someone as an additional insured in a written contract at a later date.
Alternatively, Gateway argues that the language could be construed to mean that the insured must
promise, in writing, to add the additional insured, and as a result of that ambiguity, it must be
construed in favor of coverage for Gateway.
The only reasonable interpretation of National’s endorsement is that a promise in writing
is required to grant an additional insured coverage under the policy. To hold otherwise would
effectively nullify the import of the words “under a written contract” in the endorsement. A
policy must not be interpreted in a manner that renders provisions of the policy meaningless.
Atwood v. St. Paul Fire & Marine Insurance Co., 363 Ill. App. 3d 861, 864, 845 N.E.2d 68, 71
(2006). Indeed, Gateway concedes that a written agreement is ultimately necessary under the
language of the endorsement, but contemplates that the written agreement could be made “at a
later time.” Gateway’s interpretation would render the need for a written agreement meaningless
because it would allow the insured to reduce an oral agreement to writing after the loss has
occurred, effectively making coverage retroactive. That construct is inconsistent with the
provisions of the policy that indicate that coverage is triggered at the time of the “bodily injury.”
Alternatively, Gateway’s interpretation is unreasonable if it maintains that coverage is
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triggered at the time of the oral promise. Under that scenario, there may ultimately be no written
agreement to procure additional insured coverage, again rendering the words “under a written
contract” superfluous. If that were the case, the endorsement would merely have been drafted to
provide coverage for any entity the insured promised to add as an additional insured.
Nevertheless, it was not drafted in that limited way. Thus, giving reasonable meaning to each
term, and construing the policy as a whole, it is evident that under the terms of National’s
endorsement, the only reasonable interpretation of the language is that it requires a promise under
a written agreement by the insured, in effect at the time of the claimed loss.
Here, there was no promise under a written agreement at the time of the accident, and no
other documentation confirming additional insured coverage at the time of the accident. Even
the original draft agreement between Baker and Gateway, dated after the accident, did not
provide for additional insured coverage, and the subsequent addendum adding that requirement
was not executed until five months after the Gateway employee was injured. A certificate of
insurance was not issued until March 1990, two months after the accident. Under these
circumstances, there is no coverage. See, e.g., West American Insurance Co. v. J.R.
Construction Co., 334 Ill. App. 3d 75, 80-81, 777 N.E.2d 610, 615 (2002) (although there was no
written agreement as required by the endorsement, there was other evidence establishing a
contractual commitment including a certificate of insurance, a letter from the insurer, and several
internal memoranda from the insurer confirming additional insured status); United States Fire
Insurance Co. v. Hartford Insurance Co., 312 Ill. App. 3d 153, 156-57, 726 N.E.2d 126, 129
(2000) (where insuring agreement requires a written contract, an oral contract alone is
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insufficient).
Additionally, although not alleged here, Gateway’s interpretation to allow the insured to
reduce an oral agreement to writing after the loss has occurred could lead to collusion by the
interested parties to create coverage by manufacturing an oral promise after the injury occurs.
Thus, Gateway’s interpretation of National’s endorsement could lead to a violation of public
policy and would be contrary to the intent of the insuring agreement.
For all of the foregoing reasons, a mere oral promise to add Harbour, Baker and Nowicki
to the National policy as additional insureds was insufficient under the terms of the policy to bind
National to provide them with coverage for the accident. As a result, there is also no coverage
under Lexington’s excess policy as it only covers those additional insureds covered under
National’s policy. We therefore need not address Lexington’s additional contentions.
Accordingly, we affirm the judgment of the circuit court.
Affirmed.
GREIMAN and CUNNINGHAM, JJ., concur.
8
REPORTER OF DECISIONS - ILLINOIS APPELLATE COURT
_________________________________________________________________
CINCINNATI INSURANCE COMPANY, as Subrogee of HARBOUR
CONTRACTORS, INC., BAKER CONTRACTORS, INC., and NICHOLAS
NOWICKI,
Plaintiffs,
v.
GATEWAY CONSTRUCTION COMPANY, INC.,
Defendant - Counter Plaintiff - Appellant,
(Lexington Insurance Company,
Defendant - Counter Defendant - Appellee.)
________________________________________________________________
No. 1-06-2216
Appellate Court of Illinois
First District, Third Division
Filed: March 28, 2007
_________________________________________________________________
PRESIDING JUSTICE THEIS delivered the opinion of the court.
Greiman and Cunningham, JJ., concur.
_________________________________________________________________
Appeal from the Circuit Court of Cook County
Honorable David R. Donnersberger, Judge Presiding
_________________________________________________________________
For DEFENDANTS - William J. McKenna, Jr.
APPELLANTS Michael S. Shapiro
Foley & Lardner LLP
321 N. Clark St.
Chicago, IL 60610
For PLAINTIFF - James P. McCarthy
APPELLEE Patricia M. Kelly
Gunty & McCarthy
150 S. Wacker Dr.
Chicago, IL 60606