Archive for January 2012

Estoppel Doctrine Applied Only Where Insurer Breached its Duty to Defend

January 12, 2012

In its latest insight regarding insurer’s obligations to additional insureds, the First District Appellate Court has determined additional insured status is not conferred to a party who is not identified as such in a certificate of insurance.

In Owners Ins. Co. v. Seamless Gutter Corp., N0. 1-08-2924 (Ill. App. Ct. Nov. 14, 2011), defendant Westfield Homes of Illinois (“Westfield”) was the general contractor and defendant Seamless Gutter Corporation (“Seamless”) was a subcontractor on a construction project in Algonquin, Illinois (“Algonquin site”).  Westfield and Seamless’ contract included an obligation that Seamless obtain commercial liability insurance.  A certificate of insurance was issued by Seamless’ insurance agent that listed Seamless as the insured and Westfield as the certificate holder, but with no reference to Westfield as an additional insured.  Later that year, Westfield was dissolved and DRH Cambridge Homes (“Cambridge”) acquired Westfield’s assets, including the Algonquin site.  Further, Cambridge was added as an additional insured pursuant to an endorsement to plaintiff Owners Insurance Company (“Owners”).  Lastly, plaintiff Auto-Owners Insurance Company (“Auto-Owners”) issued a commercial umbrella insurance policy to Seamless.

A subsequent personal injury suit was filed based on injuries sustained at the Algonquin site.  Seamless filed a third-party complaint against Cambridge, who in turn, along with Westfield, tendered their defenses to Owners.  Owners declined coverage.  The circuit court granted summary judgment in favor of Westfield and Cambridge, finding that Owners and Auto-Owners had the duty to defend and indemnify Westfield and Cambridge.  Further, the insurers were estopped from raising coverage defenses.  This appeal followed.

The threshold inquiry on appeal became whether a certificate of insurance was separate from the policy itself.  The court reviewed the decision in United Stationers Supply Co. v. Zurich American Ins. Co., 386 Ill. App. 3d 88 (2008) where the plaintiff was issued a certificate of insurance containing a disclaimer that the coverage was governed by the policy itself.  The United Stationers court held that where the certificate refers to the policy and expressly disclaims any coverage other than that contained in the policy, the policy governs the extent and the terms of coverage.

Unlike United Stationers, on appeal the Owners court held that Westfield was not listed as an additional insured in the certificate.  The court stated the absence of a reference to Westfield as an additional insured in the certificate should have signaled to Westfield that there was some question to its additional-insured status.  Furthermore, there was no evidence that Westfield ever requested to view the CGL policy to verify its status as an additional insured.  The court held Westfield was not an additional insured and therefore Owners had no duty to defend.

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