SECONDDIVISI ON April 13, 2010

No. 1-09-2135
JA ME S M CH UGH CO NS TRU CTI ON CO. , an Illin ois Corporation, Plaintiff-Appellant,
v. ZURICH A MERIC

AN INS URANCECOMPANY, an Illinoi s Corporation,

Defendant-Appellee. ) ) ) ) ) ) ) ) ) ) ) Appeal from the Circuit Court of Cook County

Hon ora ble Peter A. Flynn, Judge Presiding.

JUSTICE KARNE ZIS delivered the opinion of the court: This appeal arises from an order of the circuit court granting judgm ent on the pleadi ngs pursuant to secti on 2-615 of the Il lino is Code of Civi l Procedure (735 ILCS 5/2-615 (W est 2008)) (the Code) to def endant Zurich Am erican Insurance Com pany (Zurich) in plai ntiff Jam es McHugh Construction Co.’s(McHugh) dec laratory judgm ent action and denying McHugh’ s cross-m otion for judgm ent on the pleadings. McH ugh
was an a dditional insured under two insurance policies issued by Zurich to two of McHugh’s

subcontractors. I n separate suits, the subcontractors filed third-party contribut ion actionsagainst M cHugh after t wo M cHugh em ployees f iled persona l injury lawsuits against the subco ntractors. Zurich refused to defen d McHugh in the1-09-2135

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contribution actions. The court agreed, finding the em ployee exclusion in the policies relieved Zurich of any duty to defend Mc Hugh in the contribution actions. McH ugh appeals, arguing the court erred in finding that the term “the insured” in the em ployee exclusions unam biguously excludes coverage for the contribution claims w here the
un de rl yi ng i nj ur i es wer e t o M cH ug h’ s e mpl oy ee s. W e a ff i rm. Background McHugh is a general contrac tor. When overseeing a construction project, McHugh su bcontracts portions of the w ork to assorted subcontractors. In 2005, McHugh w

as the general contractor on a construction projec t at a building called The Chandler, in Chicago (Chandler project). A s part of the Chandler proj ect, it entered into an agreem ent with JM S Electric, Inc. (JM S), calling for JMS to des ign and build an electrical system. JMS held a general liability poli cy with Zurich. P ursuant to its agreemen t with M cHugh, JM S added Mc Hugh as an additional insured under the Zurich policy. In 2008, McHugh employee Thomas Searle fi led a perso nal in jury action agai nst JMS. He asserted he w as injured w hile working on the Chandler proj ect jobs ite when, due to JMS ’s negligence, he fell into a ditch put in place by JMS for t he purpose of installi ng electrical components. JMS filed a third-party complaint for contribution against McHugh alleging McHugh’ s negligence contributed to cause Searle’s inj uries. Mc Hug h te nde red its def ens e toZur ich, req ues ting Zur ich d efe nd a nd in dem nify it against JMS’ s com plaint. Zurich denied coverage pursuant to the em ployer’s liabil ity1-09-2135

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exclusion contained in the policy which provided that t he insurance did not apply to bodily injury to “[a]n ‘em ployee’ of the insured arising out of and in the course of: (a) Em ploym ent by the insure d; or (b) Perf orm ing duties re lated to t he cond uct of the insure d’s bu siness. ” Zurich similarly denied coverage for a claim against M cHugh filed by Stevenson Crane Service ( Stevenson). In 2007, McHugh had subcontracted por tions of a pro ject it was overseeing at t he Chicago Transit Authority’s How ard Red Line rail station (Howard proj ect) to Perdel Contracting Corporation (P erdel). Perdel, in turn, had subcontracted with Steven son Crane Service (Stevenson) for the use of Stevenson’s crane on the How

ard project. As part of its agreem ent with M cHugh, Perdel had added McHugh asan additional insured to the general liabi lity insurance policy it had with Zurich. McHugh’s

em ployee Paul Novovesky c laimed to have been injured w hile working on the Howard project in 2007. He filed a personal injury action against Stevenson and Perdel, alleging his i njury occ urred when a s torage box being m oved by a crane hit a sign and thesign fell on h im . H e alle ged thecra ne w as p rov ided by St eve nso n in furtherance of its responsibilities under the subcontract w ith Perdel. Stevenson filed a third- party complaint for contribut ion agai nst McHugh, alle ging McHugh’s negl igence and om issions were a contributing cause in Novovesky’s acc ident. McHugh te ndered its defense to Zurich, a sserting th at the injury to Novovesky aro se as result of Perd el’s1-09-2135

1 McHugh also filed a breach of contract count against Zurich for its failure to honor its obligations to McHugh as an additional insured under the tw o policies but that count is not at issue here. 4 use of a crane i t rented from Stevenson and, as an addi tional insured un der Perdel ’s policy with Zurich, McHugh w as entitled to defense and indem nification from Zurich. Zurich denied coverage pursuant to the em ployer’s exclusion in the policy, w hich is the
sam e as that in the Zurich-JMSpolicy. It asserted that both Novovesky’ s com plaint and Stevenson’sthird-party com plaint all ege Novovesky was an e mployee of McHugh and his injuries arose out of his em ployment with McHugh and the exclusion, therefore, applied. McHugh filed a declaratory j udgme nt action in chancery court requesting the court to declare the rights of the parties under bo th the Zurich-JMS policy and the Zur ich -Per del pol icy and c ompel Zur ich to de fend and i nde mnify Mc Hugh in t he JMS action and the Stevens on action. 1 Zurich filed a motion for j udgme nt on the pleadings pursuant to sect ion 2-615, arguing that, althou gh McHugh was “an insured” un der each pol icy, the employer’s liabil ity exclusion in the policies defeated any coverage for M cHugh because the plaintiffs in the underlying cases were McH ugh em ployees seeking dam ages for injuries arising from their em ployment with McHugh. M cHugh filed a cross-m otion for judgm ent on the pleadings pursuant to section 2-615(e) arguing the em ployer’s liabil ity exclusion1-09-2135

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did not apply to McHugh. McHugh as serted the exclusion barred coverage for injuries to em ployees of “the insured”; McH ugh was “an insured” under the policy but was not “the insur ed”; the subcontr actors were “the insu red” under their resp ective pol icies; and, therefore, there w as coverage for the c laims by M cHugh’s em ployees. On July 16, 2009, the court granted Zurich’s m otion for judgm ent on the pleadings and denied McHugh’s c ross-m otion, finding that Zurich’s duty to defend McH ugh did not

arise because th e factu al bases underlying b oth com plaints con cern thebod ily in

j urie s s uff

ere d by tw o M cH ugh em ployeesin t he f urt her ance of the ir employment w ith McHugh and McHugh was “the insur ed” under thi s particul ar fact situation. McHugh tim ely appealed. An alys is McHugh argues the court er red in gr anting judgment on the plead ings to Zur ich and denying McHugh’ s judgm ent on the pleadings. A sect ion 2- 615( e) judgm ent on the pleadings is proper where the pleadings disclose no genuine issue of m aterial fact and the m ovant is entitled to judgm ent as a m atter of law. Intersport, Inc. v. National Collegi ate Athleti

c Ass'n, 381 Ill. A pp. 3d 3 12, 318 (2008). W e review a circuit court's order granting judgm ent on the pleadings de novo. Intersport, Inc., 381 Ill. App. 3d at 318. The court determ ined Zurich had no duty to defend M cHugh in the contribution actions. To determ ine whether an insurer has a du ty to defend and provide coverage for its insured, the court m ust look to the allegations in the underlying complaint and
com pare those allegations to the relevant provisions of the insurance policy. Outboa rd1-09-2135

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Marine Corp. v. Libert

y Mutual Insurance C

o. , 15 4 Ill. 2d 9 0, 1 07- 08 ( 199 2). It is uncontested that M cHugh is an additional insured under the Zurich-JMS and ZurichPerdel policies. Accordingly, Zurich’s duty to defend M cHugh would arise if the facts alleg ed in theund erly ing S ear le an d Novovesk y c om plain ts f

all w ithin , or

potent ially within, the policy's coverage. "Refusal to defend is unj ustifiable unless it is clear from theface of

theund erly ing com plain t th at t he f acts all ege d donot

fall potent ially

w ithin the policy's coverage." Outboard Marine , 154 Ill. 2d at 108. The policies exclude coverage for bodily injury to an employee of “the insured” arising out of and in the course of em ployment by “the insured” or in performing duties rela ted to t he cond uct

of “ theinsu red ’s ” bu sine ss. Thepar tiesagr ee t hat Mc Hug h is “an insured” under the policies and that bodily injury claims by McHugh em ployees underli e the contri bution acti ons for which McHugh seeks coverage . The questi on is, however, whether McHugh is “the insured” under the exclusion such t hat the exclusion applies to bar coverage of the contribution actions based on those bodily injury claims

. If McHugh can be consider ed “the insu red” mentioned i n the exclusion, then Zuri ch need not provide coverage for or defen d against the contribution actions. There is no question that McH ugh is “an insured.” The parties agree that, pursuant to the definition of “an insured” in the policies, “an insured” applies to both named insureds and additional insureds and McHugh is “an insured” under the policy. The parti es disagre e, however, about whether “the i nsured” as used i n the employer’s liabil ity exclusion is a sim ilarly al l-encompass ing term. The term “the insured” is not1-09-2135

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defined in the policies. Mc Hug h ar

gue s th e te rm “th e ins ure d” in theexclus ion is am bigu ousbecaus e it is not def

ined in the p olicy and can be co nstrued to apply either to ( 1) anyinsured seeking coverage, i.e. , to JMSor Perdel under its respective policy and any additional insured under those policies, such as Mc Hugh; or (2) only the nam ed insured, i.e. , on ly to JMs or P erdel under its respective policy. McHugh ass erts that, because an ambiguous term in an ex clusion must beheld against the drafter of the policy and construed to give the broadest coverage, the em ployer’s liabil ity exclusion m ust, therefore, be construed to limit the exc lusion to apply only to bodily injury claims filed by em ployees of a nam ed insured not of an additional insured. Zurich responds that “the insured” is clear and refers to the insured party seeking coverage for a particular claim, no m atter wheth er that insured is a nam ed insured or an additional insured, i.e. , anyi ns ur ed pa rt y s ee ki ng co ve ra ge fo r t ha t c l ai m. An insurance po licy i s a contract and subject to the gene ral rul es of contract construction. Hobbs v. Hartford Insurance Co. of the Midwest , 214 Ill. 2d 11, 17 (2005). The constructi on of an insur ance poli cy and its provi sions is a question of l aw, which
we r ev ie w de novo

. Outboard Marine , 154 Ill. 2d at 108. A court mu st determ ine the intent of the parties when it i s construing the poli cy. Outboard Mari ne , 154 Ill. 2d at 108. "To determ ine 'the meaning of the policy's words and the intent of the parties, the court must construe the poli cy as a whole [citati ons], with due regar d to the risk undertaken, th e subject m atter that i s insured an d the purposes of the entire cont ract1-09-2135

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[citations].' " Lapham-Hick ey Steel Corp. v. Protecti on Mutual Insurance Co. , 166 Ill. 2d 520, 529 (1995), quoting Outboard Marine , 154 Ill . 2d at 108. If the words in a pol icy are clear and unam biguous, the court m ust give them their "plain, ordinary, and popular
m eaning." ( Em phasis om itted.) Outboard Marine , 154 Ill. 2d at 108. On the other han d, if thew ord s in a po licy

aresus cep tibleto m ore tha n on e re aso nab le inte rpreta tion , th e co urt m ust con side r th em am bigu ousand con str ue t hem str ictl y against the insurer that drafted the policy and in favor of th e insured. Outboard Marine , 154 Ill. 2d at 108-09. A contrac t is not rendered am biguous just because the parties disagree on its mean ing. Central Illi nois Li ght Co. v. Home Insurance Co. , 213 Ill. 2d 141, 153-54 (2004). Nor is it considered unam biguous just because each party insists that the language unam biguously supports its position. Central Ill inoi s Light Co., 213 Ill. 2d at 154. Instead , the determ ination of whether a contrac t is ambiguous is a que stion of la w, whi ch we r ev ie w de novo. Central Illi nois Li ght , 213 Ill. 2d at 153-54. Courts
mus t not distort the language of the policy to create ambiguities in order to rewrite the poli cy. Butera v. Attorneys’ Title Guaranty Fun d, Inc. , 321 Ill. App. 3d 601, 604 (2001). Provisions that limit or, as here, exclude coverage are interpreted liberall y in favor of the insure d and ag ainst theinsurer. Peki n Insurance Co. v

. Estate of R

obin M. Gob en , 303 Ill. Ap p. 3d 63 9, 642 (1 999). The court stated the question correctly: co uld a reaso nable per son read these policies and conclude “the insured” must m ean, as McH ugh asserts, the “nam ed insu red ” be cau se o the rw ise t he p olici es w ould have sa id “a n ins ure d”? Theansw er is1-09-2135

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no. Asthecirc uit cour

t no ted , “t he” cre ate s an am bigu ity only if t her e is som e ba sis in thepolic y tocon clud e th at “ the ” re fer s tosom eon e sp ecif

ic ot her tha n M cH ugh in t his instanc e. T her

e is no s uch bas is he re. The re isno la ngu agein t he p olici es t hat w ould lead one to think “the insured” refers only to the nam ed insured. The term “the insured” is not defined in the policies. However, the introductory section of the com merc ial general liabi lity form (CGL f orm) prov ides that “[t]he w ord ‘insured’ m eans any person or organization qualifying as such under Section II - Who is An Insured.” The parties agree “an i nsured” refe rs to both the named insure ds and any addi tional insured, such as McHugh . W hy then should “the insured” be interpreted any differently from“an insured,” barring evidence to the contrary? We think the obvious reading of “the insured” is “the insured seeking coverage,” wh ich, depending on the circum stances of each particular claim, could be a nam ed insured or an additional insured. Interpreting “the insured” to m ean “the insured seeking coverage” m eans that both the nam ed insured and the additional insured are equally subject to the ex clusion, that the additional insured’s coverage is limited to the sam e extent a s the nam ed insured’s. If “ the insure d” referre d only to the na med insured, as McHugh suggests, then the additional insured would receive m ore protection under the policy because the
em ployer’ s lia bility

exclus ion could never a pply to i t. Rea ding theexclus ion n arr ow ly might be th e correct interpretation if we cons idered “the insured” to be am biguous but, as stated above, w

e do not. In this case, “the insured seeking coverage” is Mc Hugh, which is seeking coverage f or the contribution claims. B ecause those claim s are for1-09-2135

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bodil y injuries to McHugh’s employees al legedl y suffered in furtherance ofMcHugh’s projects, Zurich need not provide coverage for those claims. This determination is reinforced when we look at “S ection I - Coverages” of the CGL form . Section 1(1)(a) provides, in part, that “[Zurich] w ill pay those sums t hat the insured becom es legally obli gated to pay as dam ages because of ‘ bodily injury’ or ‘property dam age’ to w hich this insurance applies. [Zurich] will have the right and duty to defend the insured against any ‘suit’ seeking thos e dam ages.” (Em phasis added.) If we read “the insur ed” to mean only the named insured , then under thi s section, Zur ich would never have to provide coverage to an additional insured for bodily injury or property dam age claims or defend an additional insured against such claims. What would be the point of adding M cHugh as an additional insured to the policy if McHugh would receive essential ly no coverag e under the pol icy? W e cannot inte rpret a pol icy to reach such an illogical result. In support of their respective positions, both parties presen t extens ive argument regardi ng tort law pri ncipl es, the peculi ariti es of Ill inoi s constructio n industry an d case law inte rpretin g ins ura ncepolic ies i n w hich thepolic ies d efin e “t he in sur ed. ” We w ill not belabor these argum ents. This is not a tort case b ut a contract law case, brought to determ ine the rights of the parties pursuant to their w ritten agreements , pursuant to the agreemen ts they m ade versus the agreem ents they should have m ade. There m ay be cases discussi ng the diffe rence between “an i nsured” and “ the insure d” in i nsurance policies where “the insured” is defined. But that is not t his case and we cannot, as the1-09-2135

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circuit court correctly found, im port language into the policies that was not put there by the parti es. To paraphr ase the circui t court, our job is not to de termine what the policy should be but what

it is. It is what Zurich saysit is. The court did not err in granting Zurich’s mo tion for judgm ent on the pleadings and denying McH ugh’s j udgme nt on the pleadi ngs. For the reasons stated above, we af firm the j udgme nt of the circuit court. Affirme d. CUNN INGHA M, P .J., a nd THE IS, J ., conc ur.1-09-2135

12 REPORTER OF DECISIONS - ILLINOIS APP ELLATE COURT

(Front Sheet to be A

ttached to Eac h case)
JAME S MCH UGH CONS TRUCTION CO. , an Illinois Corporation,

Plaintiff-Appellant,
v. ZURICH A MERIC

AN INS URANCECOMPANY, an Illinoi s Corporation, Defendant-Appellee.
No. 1-09-2135

Ap pella te C our

t of Illin ois First District, Second Division April 13, 2010
JUSTICE KARNE ZIS delivered the opinion of the court. CUNN INGHA M, P .J., a nd THE IS, J ., conc ur. Appeal from the Circui t Court of Cook County. The Honorable Peter A. Flynn, Judg e Presiding.
For APPE LLANT: Donnelly, Lipinski & Harris, LLC, of C hicago (Scott O. Ree d, of cou nse l) For APPE LLEE: Crem er, Spina, Shaughness y, Jansen & Siegert, LLC, of Chicago (Br ian A . Ga llagh er a nd L anaJ. Zare tsk y, of co uns el)