Secura Insurance v. Phillips 66 Co.

2022 IL App (1st) 210069
No. 1-21-0069
Opinion filed February 22, 2022
First Division

IN THE

APPELLATE COURT OF ILLINOIS

FIRST DISTRICT

SECURA INSURANCE, )
)
Plaintiff-Appellee, ) Appeal from the Circuit Court
) of Cook County.
v. )
)
PHILLIPS 66 COMPANY; PREMIER ) No. 19 CH 10805
INSULATION, LLC; CHARLES CROWDER; )
and DONNA CROWDER, )
) The Honorable
Defendants ) Moshe Jacobius,
) Judge, presiding.
(Phillips 66 Company, Defendant-Appellant). )

PRESIDING JUSTICE HYMAN delivered the judgment of the court, with opinion.
Justices Walker and Coghlan concurred in the judgment and opinion.

OPINION

¶1 Premier Insulation, LLC (Premier), entered into a master service agreement (MSA) with

ConocoPhillips Company (ConocoPhillips) to perform work at its Wood River Refinery.

Premier was insured by plaintiff, Secura Insurance (Secura). Under the policy, “additional

insureds” included persons or organizations that Premier added through a written agreement.

ConocoPhillips spun off its refining business to defendant Phillips 66 Company (Phillips 66)

and assigned Phillips 66 its MSA with Premier.
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¶2 After a Premier employee sued Phillips 66 for injuries sustained at the Wood River

Refinery, Phillips 66 tendered defense to Secura, claiming additional insured status as an

assignee of the MSA. After agreeing to defend Phillips 66 under a reservation of rights, Secura

sought a declaration that it had no duty to defend, given that (i) Premier and Phillips 66 had no

written agreement that required naming Phillips 66 as an additional insured and (ii) the policy

limited coverage to injuries caused “in whole or in part” by Premier or those acting on its

behalf and Premier was not a named defendant in the underlying litigation.

¶3 The parties filed cross-motions for summary judgment. The trial court entered summary

judgment for Secura. The trial court held that ConocoPhillips’s assignment of the MSA to

Phillips 66 “does not amount to a written agreement between Premier Insulation and Phillips

66, such that Premier Insulation agreed to add Phillips 66 as an additional insured.” The court

stated that, under the policy, Secura would need to consent to an assignment and nothing

indicated “Secura was ever informed of the assignment from ConocoPhillips to Phillips 66 and

certainly [there was] no evidence that it ever consented.” Finding no written agreement

between Premier and Phillips 66, the trial court did not address whether the decision by the

underlying litigation plaintiffs, Charles and Donna Crowder, to not name Premier as a

defendant there precluded coverage.

¶4 Phillips 66 appeals, contending (i) ConocoPhillips’s assignment of the MSA to Phillips 66

satisfies the written agreement provision of the additional insured endorsement or,

alternatively, the endorsement is ambiguous and should be construed favoring coverage;

(ii) the insurance policy’s anti-assignment provision is irrelevant and the trial court’s reliance

on it constitutes reversible error; and (iii) whether the underlying complaint alleged Premier

“in whole or in part” caused the injuries is irrelevant. Neither party argues the policy’s anti-

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assignment provision provides a basis to deny coverage under the policy’s additional insured

endorsement.

¶5 We reverse. The assignment of the MSA satisfies the written agreement requirement

between Premier and Phillips 66, obligating Secura to defend Phillips 66 as an additional

insured. Further, given Premier’s tort immunity under the Workers’ Compensation Act (820

ILCS 305/1 et seq. (West 2020)), it need not be named as a defendant in the underlying

litigation to trigger coverage. Accordingly, we remand to the trial court to enter summary

judgment for Phillips 66 on the issue of coverage under the policy.

¶6 Background

¶7 The parties stipulated to the facts. On July 20, 2011, ConocoPhillips Company entered into

a master service agreement with Premier, which went into effect on August 1, 2011. Under the

MSA, Premier would perform work on downstream operations or projects of ConocoPhillips

and its affiliates.

¶8 Section 18.1.2, an indemnification provision, provided:

“Personnel of Contractor and Subcontractors. CONTRACTOR SHALL INDEMNIFY

EACH OF THE COMPANY INDEMNITEES FROM AND AGAINST ANY AND

ALL CLAIMS ARISING OUT OF OR RELATED IN ANY WAY TO PERSONAL

INJURY OF THE EMPLOYEES OR OFFICERS OF THE CONTRACTOR

INDEMNITEES ARISING OUT OF OR OCCURRING IN CONNECTION WITH A

SERVICE-ORDER, REGARDLESS OF THE TIMING OR NATURE OR STYLE OF

SUCH CLAIMS AND REGARDLESS OF THE IDENTITY OF THE CLAIMANT

INCLUDING, BUT NOT LIMITED TO, THE EMPLOYEE OR OFFICER HIMSELF

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AND THEIR RESPECTIVE REPRESENTATIVES, AGENTS, HEIRS,

BENEFICIARIES, ASSIGNS AND FAMILY MEMBERS.”

¶9 The MSA also included an insurance requirements provision: “[Premier] agrees to maintain

insurance of the types and with limits of liability not less than those set forth below, at its

expense, from insurers reasonably acceptable to Company covering items, risks and operations

required to fulfill the Agreement and the Service-Orders.”

¶ 10 As to naming an additional insured, the MSA provided: “The policies under Articles 19.1.3

through 19.1.17 above shall show each of the Company Indemnitees as additional insureds to

the extent of the risks and liabilities assumed by Contractor under this Agreement and/or any

Service Order ***.”

¶ 11 The assignment provision of the MSA stated in relevant part:

“Contractor [(Premier)] shall not assign this Agreement, in whole or in part, without

the prior written consent of Company [(ConocoPhillips)]. Any such assignment

without the prior written consent of [ConocoPhillips] shall be void and of no force and

effect. This Agreement shall inure to and be binding upon the respective successors

and permitted assigns of the parties hereto.”

¶ 12 Nothing in the MSA required Premier’s prior consent before an assignment.

¶ 13 On July 14, 2011, less than a month before the MSA went into effect, ConocoPhillips

announced that its refining and marketing business and exploration and production business

would become two separate, stand-alone entities. After the spin-off, Phillips 66 would operate

the refining and marketing business and own ConocoPhillips’s downstream assets. On January

11, 2012, ConocoPhillips sent a letter to Premier informing it of the upcoming spin-off and its

assignment of the MSA to Phillips 66. After the assignment, Premier performed work for

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Phillips 66 at the Wood River Refinery. A written compensation agreement, which Phillips 66

and Premier amended several times, referenced and incorporated the MSA.

¶ 14 Secura’s Insurance Policy

¶ 15 Premier had a commercial general liability insurance policy with Secura Insurance,

effective July 1, 2015, to July 1, 2016. The policy included a “General Liability Wrap”:

“ADDITIONAL INSURED BY CONTRACT

1. SECTION II—WHO IS AN INSURED is amended to include as an additional

insured any person or organization for whom you are performing operations when you

and such person or organization have agreed in writing in a contract or agreement that

such person or organization be added as an additional insured on your policy. Such

person or organization is an additional insured only with respect to liability for ‘bodily

injury’, ‘property damage’ or ‘personal and advertising injury’ caused, in whole or in

part, by:

a. Your acts or omissions; or

b. The acts or omission of those acting on your behalf;

in the performance of the ongoing operations for the additional insured.

A person’s or organization’s status as an additional insured under this provision

ends when your operations for that additional insured are completed.”

¶ 16 The policy included an “Additional Insured Wrap” endorsement, which states in part:

“A. Additional Insured When Required By Written Construction Contract

1. Operations Performed for An Additional Insured

WHO IS AN INSURED is amended to include as an additional insured any person or

organization for whom you are performing operations when you and such person or

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organization have agreed in a written contract or written agreement prior to a loss, that

such person or organization be added as an additional insured on your policy. Such

person or organization is an additional insured only with respect to liability for ‘bodily

injury’, ‘property damage’ or ‘personal and advertising injury’ caused, in whole or in

part, by:

a. Your acts or omissions; or

b. The acts or omissions of those acting on your behalf;

in the performance of your ongoing operations for the additional insured.

A person’s or organization’s status as an additional insured under this provision

ends at the earlier of when your operations for that additional insured are completed;

or the end of the policy period.”

¶ 17 Underlying Complaint

¶ 18 Charles Crowder, a Premier employee, was injured when he fell from a scaffold at Phillips

66’s Wood River Refinery. Crowder and his wife sued Phillips 66 and several other entities

that were members of “The Projects Group,” which supervised and monitored safety issues at

the Wood River Refinery. Premier was a member of the Projects Group, but the Crowders did

not name it as a defendant. Phillips 66 tendered to Secura the defense and indemnification.

Secura agreed to defend Phillips 66 under a reservation of rights. Secura contended Phillips 66

was not an additional insured because Premier and Phillips 66 lacked a written agreement

naming Phillips 66 as an additional insured. Secura also asserted that the additional insured

endorsement limited coverage to injuries caused “in whole or in part” by Premier’s acts or

omissions and that Premier was neither a defendant nor alleged to have caused the injuries.

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Secura then filed this action for a declaration that it had no duty to defend or indemnify Phillips

66 for the same reasons stated in its reservation of rights letter.

¶ 19 Secura and Phillips 66 filed cross-motions for summary judgment. Secura primarily relied

on a case that it conceded as factually different, Westfield Insurance Co. v. FCL Builders, Inc.,

407 Ill. App. 3d 730 (2011). There, an additional insured provision identical to the one here

“unambiguously limits Westfield’s obligations to only [the subcontractor] and those entities

with whom [the subcontractor] directly contracts in writing for additional coverage.” Id. at

735. Secura added that it “believes that Illinois law will not consider an assignment of a

contract to be equivalent of a contract between the two original signatories to the contract.”

¶ 20 Conversely, Phillips 66 argued Illinois courts would likely follow cases involving an

assignment, which, though from other jurisdictions, share the vital presence of an assignment.

Holbrook Realty, LLC v. Peerless Insurance Co., No. 18-CV-1005 (JMA)(SIL), 2019 WL

4862073 (E.D.N.Y. Aug. 5, 2019); Travelers Property Casualty Co. of America v. Burlington

Insurance Co., 120 N.Y.S.3d 25 (App. Div. 2020); Duke Energy Field Services Assets, L.L.C.

v. National Union Fire Insurance Co., 68 S.W.3d 848 (Tex. App. 2002).

¶ 21 After a hearing, the trial court issued a memorandum opinion and order granting Secura’s

motion and denying Phillips 66’s motion. The trial court found no Illinois cases addressing

whether an assignment satisfies the written contract requirement, relying instead on Westfield

and distinguishing cases cited by Phillips 66. The trial court stated:

“Premier Insulation had [a] written agreement with ConocoPhillips. Even though

ConocoPhillips assigned the MSA to Phillips 66, *** [t]here is no indication Secura

was ever informed of the assignment from ConocoPhillips to Phillips 66 and certainly

no evidence that it ever consented. As Phillips 66 is an independent company without

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any overlap with ConocoPhillips and not a successor in interest, a separate written

contract or agreement between Premier Insulation and Phillips 66 was required for

Phillips 66 to be an additional insured under the Policy.”

¶ 22 The trial court also rejected Premier and Phillips 66’s compensation agreement, which

referenced and incorporated the MSA, as satisfying the writing provision: “The fact the

Compensation Agreement and subsequent amendments reference the MSA is insufficient to

afford Phillips 66 coverage as an additional insured under the plain language of the Policy.”

¶ 23 The court did not address Secura’s argument that Premier, as a nonparty in the underlying

litigation, precluded Phillips 66 from status as an additional insured.

¶ 24 We must decide (i) whether assignment of the MSA constitutes a written agreement for

purposes of the additional insured endorsement and (ii) whether the absence of Premier as a

defendant in the underlying litigation means the Crowders’ injuries were not caused “in whole

or in part” by Premier. The parties agree no Illinois case has decided the former issue.

¶ 25 Analysis

¶ 26 Standard of Review

¶ 27 A court may grant summary judgment whenever the pleadings, depositions, admissions,

and affidavits, viewed in the light most favorable to the nonmovant, show that (i) no genuine

issue of material fact exists and (ii) the moving party is entitled to judgment as a matter of law.

See 735 ILCS 5/2-1005(c) (West 2020). “The construction of an insurance policy and a

determination of the rights and obligations thereunder are questions of law for the court which

are appropriate subjects for disposition by way of summary judgment.” Crum & Forster

Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384, 391 (1993). Summary judgment in

favor of an entity seeking coverage as an additional insured is appropriate where the undisputed

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facts demonstrate that a policy’s requirements for additional insured coverage have been

satisfied. See, e.g., Pekin Insurance Co. v. Pulte Home Corp., 404 Ill. App. 3d 336, 349 (2010).

We review an order granting summary judgment de novo. See Schultz v. Illinois Farmers

Insurance Co., 237 Ill. 2d 391, 399-400 (2010).

¶ 28 Written Agreement Between Premier and Phillips 66

¶ 29 Phillips 66 contends the assignment between it and ConocoPhillips satisfies the written

agreement requirement of the additional insured endorsement, relying on out-of-state cases

holding that an assignment is a contract for purposes of an additional insured endorsement.

¶ 30 As in the trial court, Secura primarily relies on Westfield. While acknowledging that the

facts in Westfield are not analogous, Secura contends the case still precludes Phillips 66 from

coverage in the absence of a written agreement between Phillips 66 and Premier to name it as

an additional insured.

¶ 31 In Westfield, the general contractor, FCL Builders, Inc. (FCL), subcontracted out steel

fabrication and erection work to Suburban Ironworks, Inc. (Suburban). Westfield, 407 Ill. App.

3d at 731. Suburban was required to name FCL as an additional insured and have all sub-

subcontractors name FCL as an additional insured. Id. Suburban subcontracted out the steel

erection work to JAK Iron Works, Inc. (JAK), and purchased an insurance policy from

Westfield Insurance Company (Westfield) covering itself, Suburban, and FCL. Id. at 731-32.

JAK’s policy included an additional insured endorsement identical to the endorsement in the

Secura policy. See id. at 732. When a JAK’s employee sustained an injury, FCL tendered the

defense and indemnification to Westfield, which denied coverage, asserting FCL was not an

additional insured under the policy because JAK and FCL did not have a written contract. Id.

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¶ 32 Westfield sought a declaration that it was not obligated to defend or indemnify FCL in the

underlying litigation. Id. The trial court granted summary judgment to Westfield, holding that

the policy required “ ‘direct priv[i]ty in order for an entity to qualify as an additional insured.’ ”

Id. at 733. The appellate court affirmed that the policy “explicitly and unambiguously requires

a direct, written agreement.” Id. at 734. But because no written agreement ever existed between

FCL and JAK, “Westfield is not obligated to furnish FCL with a defense or indemnification”

in the underlying lawsuit. Id.

¶ 33 FCL offered three arguments for coverage. First, the Suburban-JAK contract required JAK

to include FCL as an additional insured, and this obligation satisfied the additional insured

provision. Id. The appellate court disagreed, noting the plain language of the additional insured

endorsement required a writing between JAK and the person or organization to be added as an

additional insured, and there was none. Id. FCL also contended that, because JAK was

contractually obligated to Suburban to list FCL as an additional insured and JAK later bought

a CGL policy from Westfield, FCL must necessarily be an additional insured under that

policy. Id. The appellate court rejected this argument, finding

“[r]egardless of whether JAK and Suburban had agreed that FCL should be an additional

insured, JAK and FCL did not agree in writing that FCL was an additional insured. The

terms of the FCL-Suburban contract and the Suburban-JAK contract are consequently

irrelevant to whether Westfield is obligated to cover FCL as an additional insured under

this particular policy provision.” Id. at 735.

¶ 34 Finally, FCL pointed to deposition testimony of Suburban’s owner and JAK’s

superintendent showing Suburban and JAK intended for FCL to be an additional insured under

the policy. Id. at 736. But the appellate court concluded that the provision was unambiguous,

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so it would be “inappropriate” to consider extrinsic evidence such as the deposition testimony.

Id. And even if the court considered the extrinsic evidence, the deposition testimony refers

only to what Suburban and JAK intended regarding their respective obligations under the

Suburban–JAK contract, not what they intended for their respective obligations under the

Westfield insurance contract. Id.

¶ 35 Secura argues that, like the carrier in Westfield, it had no duty under Premier’s policy

because Phillips 66 and Premier do not have a written contract requiring Premier to name

Phillips 66 as an additional insured. In short, Secura contends, privity between the parties arises

only under the ConocoPhillips’s assignment to Phillips 66. And, while Premier continued to

perform work for Phillips 66 and followed the terms of the contract, nothing indicates Premier

agreed to name Phillips 66 on an insurance policy.

¶ 36 Westfield does not control this case because the facts differ in a crucial particular. In

Westfield, the party seeking coverage as an additional insured, FCL, the general contractor,

had no contractual relationship with JAK, the sub-subcontractor policyholder. Here, Phillips

66 and Premier have a contractual relationship through the assignment of the MSA. An

assignment is a contract between the assignor and the assignee. Amalgamated Transit Worker’s

Union, Local 241 v. Pace Suburban Bus Division, 407 Ill. App. 3d 55, 60 (2011) (citing 6 Am.

Jur. 2d Assignments § 1 (2008)). And it transfers to the assignee all identifiable property,

claims, interests, and rights of the assignor. See Apollo Real Estate Investment Fund, IV, L.P.

v. Gelber, 398 Ill. App. 3d 773, 779 (2009). This puts the assignee squarely in the shoes of the

assignor. Id. The MSA provided that Premier would indemnify the “Company,” which became

Phillips 66 when it stepped into ConocoPhillips’s shoes following the assignment.

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¶ 37 Other jurisdictions have ruled contrary to Westfield in matters involving an assignment.

Phillips 66 principally relies on Holbrook, 2019 WL 4862073, where for purposes of an

additional insured endorsement, the assignment of a written contract constituted a written

contract.

¶ 38 In Holbrook, landlord Route 347 Corporation leased space to Vero & Vero Ronkonkoma,

Inc. (Vero). Id. at *1-2. Reynold Blum purchased the premises following a forfeiture. Vero

assigned its tenancy interest to O.K. Yogurt, Inc., which later assigned it to A&R Yogurt, Inc.

(A&R). Id. at *2. Meanwhile, Blum transferred his rights in the lease to Holbrook Realty, LLC

(Holbrook), resulting in a landlord-tenant relationship between Holbrook and A&R. Id.

¶ 39 A&R obtained insurance from Peerless Insurance Company (Peerless). Id. at *3. The policy

was amended to include as an additional insured “ ‘any person or organization when [A&R]

and such person or organization have agreed in writing in a contract or agreement that such

person or organization be added as an additional insured’ ” on the policy. (Emphasis omitted.)

Id. at *3. After an injury on the premises, Holbrook sought coverage as an additional insured.

Peerless denied coverage, arguing Holbrook did not qualify as an additional insured under

Peerless’s policy, as Holbrook lacked privity in contract with A&R. Id. at *4-5.

¶ 40 The court rejected Peerless’s argument, finding it “misses the mark.” Id. at *10. On the

contrary, “Holbrook and A&R were in direct privity with each other by virtue of the

assignments and assumptions obligating them to be bound by the same Lease.” Id. at *8. The

court concluded that “the text of the Lease and Peerless Policy leaves no doubt that Holbrook

is deemed an additional insured by virtue of its role as landlord.” Id. The court found the policy

automatically includes as an additional insured “ ‘any *** organization when [A&R] and such

*** organization have agreed in writing in a contract or agreement that such *** organization

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be added as an additional insured ***.’ ” Id. Moreover, the lease required A&R to “ ‘name the

Landlord as an additional first party insured’ ” on its liability insurance policy. Id.

¶ 41 Phillips 66 also cites two cases that came to the same conclusion as Holbrook: Travelers

Property Casualty Co. of America, 120 N.Y.S.3d 25, and Duke Energy, 68 S.W.3d 848. The

state court in Travelers followed the holding in Holbrook: an assignment of a written

agreement constitutes a written agreement for an additional insured endorsement. Travelers

Property Casualty Co. of America, 120 N.Y.S.3d at 25 (“ ‘[B]y virtue of the assignments and

assumptions obligating [Sal Vio and Plaza] to be bound by the same [subcontract],’

[Burlington] may be obligated to insure [Plaza].” (quoting Holbrook, 2019 WL 4862073, at

*8)). Similarly, in Duke Energy, the appellate court acknowledged that an assignment of the

written contract would satisfy the “written contract” requirement and trigger additional insured

coverage. Duke Energy, 68 S.W.3d at 852.

¶ 42 The reasoning in Holbrook, Travelers, and Duke Energy is persuasive. More significantly,

their holdings conform to long-standing principles regarding assignments. See infra ¶ 36;

Apollo Real Estate Investment Fund, IV, L.P., 398 Ill. App. 3d at 779. When ConocoPhillips

assigned the MSA to Phillips 66, that satisfied the writing requirement for an additional

insured. Phillips 66 stepped into ConocoPhillips’s proverbial shoes, satisfying the writing

requirement and obligating Secura to defend it in the underlying litigation. Additional evidence

of a contract arises from the Premier-Phillips 66 written compensation agreement, which

referenced and incorporated the MSA.

¶ 43 Injuries Caused “In Whole or In Part” by Premier

¶ 44 After finding in favor of Secura on the written agreement issue, the trial court did not

address Secura’s argument that it had no duty to defend Phillips 66 because the policy requires

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the Crowders’ underlying complaint name Premier as a defendant or allege the injuries were

caused “in whole or in part” by Premier’s negligence. The underlying complaint did neither.

Phillips 66 contends that Premier being a nonparty in the underlying litigation still enables

coverage under the policy. We agree with Phillips 66.

¶ 45 The Workers’ Compensation Act (820 ILCS 305/5(a) (West 2020)) gives tort immunity to

an injured worker’s direct employer, barring the injured worker from bringing a personal injury

complaint against his or her employer. American Country Insurance Co. v. James McHugh

Construction Co., 344 Ill. App. 3d 960, 963 (2003). So, “ ‘[t]he allegations of the underlying

complaint must be read with the understanding that the employer may be the negligent actor

even where the complaint does not include allegations against that employer.’ ” Core

Construction Services of Illinois, Inc. v. Zurich American Insurance Co., 2019 IL App (4th)

180411, ¶ 28 (quoting Pekin Insurance Co. v. Centex Homes, 2017 IL App (1st) 153601, ¶ 36).

Indeed, “ ‘silen[ce] as to any acts or omissions’ by the named insured must be understood as

the possible result of tort immunity for employers under the workers’ compensation laws and

should not be a basis for refusing to defend an additional insured.” Centex Homes, 2017 IL

App (1st) 153601, ¶¶ 36, 38 (quoting Ramara, Inc. v. Westfield Insurance Co., 814 F.3d 660,

677-78 (3d Cir. 2016)).

¶ 46 The Crowders’ complaint alleged that the Projects Group, which included Premier,

committed negligent acts or omissions by breaching the duty to provide a reasonably safe place

to work. Notably, the only member of The Projects Group not named a defendant was Charles

Crowder’s employer, Premier. The absence of Premier as a named defendant follows directly

from its tort immunity and not a concession on its negligence. Core Construction Services of

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Illinois, Inc., 2019 IL App (4th) 180411, ¶ 28. Nor is it a basis for refusing to defend Phillips

66 as an additional insured. Centex Homes, 2017 IL App (1st) 153601, ¶¶ 36, 38.

¶ 47 So, we reverse the order granting Secura’s summary judgment motion and remand with

directions to the trial court to enter an order granting summary judgment for Phillips 66 on the

issue of coverage.

¶ 48 Reversed and remanded with directions.

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No. 1-21-0069

Cite as: Secura Insurance v. Phillips 66 Co., 2022 IL App (1st) 210069

Decision Under Review: Appeal from the Circuit Court of Cook County, No. 19-CH-
10805; the Hon. Moshe Jacobius, Judge, presiding.

Attorneys Andrew M. Barrios and John N. Ellison, of Reed Smith LLP, of
for Chicago, for appellant.
Appellant:

Attorneys Daniel R. Sarther and Steven C. Wolf, of Wolf & Laudicina,
for Ltd., of Chicago, for appellee.
Appellee:

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