Insurer Wins in Coverage Case of Injured Construction Worker

Victoria Metal Processor Co. bought an insurance policy from Nautilus Insurance Co. to provide insurance coverage to Vivify Construction for accidents involving negligence by Victoria for a construction project in which Vivify was the general contractor.

Nautilus refused to cover a lawsuit filed by a Victoria Metal Processor employee, Pablo Vieyra, who fell from a second-story scaffold because of the alleged negligent supervision by Vivify.

There were two “injury to employee” exclusions in the body of the Nautilus Insurance policy that said it didn’t apply to tort claims by the employees of any subcontractors. Vivify appealed from a judgment that concluded that Nautilus Insurance was not obligated to defend Vivify, the general contractor.  It was argued on appeal that the trial court judge erred in choosing not to consider the terms of the subcontract between Vivify and Victoria.

Vivify also contended that it was entitled to coverage based on the policy’s “separation of insureds” provision. That clause said that the insurance policy applied “separately to each insured against whom a claim is made or ‘suit’ is brought.”

The Illinois Appellate Court for the 1st District affirmed the trial court’s decision rejecting the notion that it could rely on the terms of the Victoria-Vivify subcontract when interpreting the unambiguous “injury to employee” exclusion.

Although several Illinois appellate opinions concluded that a “separation of insureds” provision “precluded application of a coverage exclusion,” they didn’t apply because “none of those cases involved the policies containing the broad exclusionary language at issue here.”

According to the opinion, which was written by Justice Terrence J. Lavin, an insurer cannot justifiably refuse to defend an action against its insured unless the face of the underlying complaint clearly shows that the allegations therein failed to bring the case potentially within the policy’s coverage. Where the underlying complaint against an insured raises several theories, only one of which is potentially within the policy’s coverage, the insurer nonetheless has the duty to defend.

Continuing, the court stated that under certain circumstances, the court may look beyond the underlying complaint. Specifically, a court can examine the other pleadings in the underlying case and the contract that led one party to procure insurance for another. Before the court can determine whether the circumstances of the underlying case potentially come within the policy’s coverage, the court must interpret the policy to determine what coverage it provides.

Where an ambiguity exists, the court strictly construes the policy against the insured that drafted it and liberally construe it in favor of the insured.

It is well settled that courts cannot consider parol evidence to interpret a facially unambiguous policy. Lee v. Allstate, 361 Ill.App.3d 970 (2005); Bonnie Owen Realty v. Cincinnati Insurance, 283 Ill.App.3d 812 (1996).

In this case, Vivify was not able to explain how the subcontract has any bearing on Nautilus’ intent in entering into the insurance policy, as Nautilus was not a party to the subcontract. Whether Vivify may or may not have potential recourse against Victoria for choosing not to procure the requisite insurance constitutes a separate legal matter that was not before the appellate court. Moreover, that issue involves a party that is not before us: Victoria.

Having considered the Nautilus policy in its entirety, the appellate court agreed with the trial court’s determination that the policy excludes a duty to defend Vivify in the underlying action. The employee exclusion’s second subsection precludes coverage for claims of bodily injury sustained by “any insured’s contractors’, subcontractors’ or independent contractors’ employees.” Thus, the second subsection of the employee agreement unambiguously precludes coverage where an insured is sued for bodily injury sustained by the employee of one of its contractors or subcontractors, regardless of whether the latter entity is an insured or not. For these reasons, the trial court’s decision to deny insurance coverage to Vivify Construction, LLC was affirmed.

Vivify Construction, LLC v. Nautilus Insurance Co., 2017 IL App (1st) 170192 (Dec. 20, 2017).  

Kreisman Law Offices has been successfully handling construction accident lawsuits, wrongful death cases, forklift injury lawsuits, truck accident cases, car accident cases and catastrophic injury cases for individuals, families and the loved ones who have been injured, harmed or killed by the negligence of another for more than 40 years, in and around Chicago, Cook County and its surrounding areas, including Highwood, Evergreen Park, Country Club Hills, Riverside, Evanston, Olympia Fields, Tinley Park, Orland Park, La Grange Park, Chicago (Ashburn, Austin, Canaryville, Bridgeport, Roscoe Village, Beverly, Sauganash), Naperville, New Lenox, Lansing and Lemont, Ill.

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