Title: John Burns Construction Co. v. Indiana Insurance Co.
Citation: N/A
Docket Number: 86552
State: Illinois
Issuer: Illinois Supreme Court
Date: January 21, 2000

Opinion filed January 21, 2000.
JUSTICE MILLER delivered the opinion of the court:
The plaintiffs, John Burns Construction Company and Royal Insurance Company, 
brought the present action in the circuit court of Cook County seeking a 
determination of coverage under an insurance policy issued by defendant Indiana 
Insurance Company. The trial judge ruled in favor of Indiana, and Burns and 
Royal appealed. The appellate court affirmed the circuit court. 299 Ill. App. 3d 
169. We allowed Burns and Royal's petition for leave to appeal (177 Ill. 2d R. 
315(a)), and we now reverse the judgments of the courts below.
The procedural history of this case is uncomplicated and requires only a 
brief recitation here. John Burns Construction Company entered into a 
subcontract in October 1993 with Sal Barba Asphalt Paving, Inc., for Barba to 
pave a parking lot at a commuter railroad station in Harvard, Illinois. The 
agreement required Barba to maintain liability insurance for Burns. Pursuant to 
the contract, Barba arranged for Burns to be added to Barba's policy with 
defendant Indiana Insurance Company by way of an endorsement naming Burns as an 
additional insured. Burns' coverage under the Indiana policy took effect on July 
5, 1994. In December 1994, following completion of the construction work, a 
person using the rail station, Sidney Gault, slipped and fell in the parking lot 
that Barba had paved. Gault subsequently sued Burns and several other defendants 
for his injuries, alleging, among other things, that the lot had been improperly 
paved; Barba was not named a defendant in the case.
By letter dated September 20, 1995, Burns informed Barba of Gault's suit and 
asked that Indiana defend and indemnify Burns in the action. Burns stated in the 
letter that it looked solely to Indiana for defense and indemnification. Burns 
further explained that, although it had notified its own insurer, Royal 
Insurance Company, of the action, Burns did not want Royal to become involved in 
the suit. Burns sent Royal a copy of this letter.
Indiana initially refused to defend Burns in the Gault action. In a letter to 
Burns dated October 25, 1995, Indiana maintained that it did not have a duty to 
defend Burns because Gault's injuries were not sustained during the period of 
the contract for the paving work. In the wake of Indiana's refusal, Burns sought 
defense from Royal with regard to the Gault litigation.
Burns and Royal later filed the present action for a declaratory judgment in 
the circuit court of Cook County, seeking a declaration that Indiana alone had 
the duty to defend and indemnify Burns in the Gault action. Indiana, in its 
answer, said that it had "come to accept as plausible" Burns' contention that 
Indiana's obligations to Burns were controlled by the terms of the additional 
insured endorsement, rather than by the terms of the subcontract between Burns 
and Barba. In a counterclaim for declaratory judgment, filed with the answer, 
Indiana admitted that Burns was an additional insured under Barba's policy and 
allowed that it did have a duty to defend and indemnify Burns in the Gault 
litigation. Indiana asserted, however, that Royal was required to share the 
defense and indemnity duties, for the Indiana policy contained an "other 
insurance" provision. Indiana requested in the counterclaim that the court 
require Royal to contribute equally to Burns' defense and indemnification in the 
Gault matter.
Indiana later filed a motion for judgment on the pleadings, repeating its 
contention that Indiana and Royal should share equally the costs of defending 
and indemnifying Burns in the Gault litigation. Burns and Royal filed a motion 
for summary judgment, arguing that Burns was entitled to select which of the two 
insurers would bear the duties of defense and indemnity and that in this case 
Burns had chosen Indiana alone for those tasks. Following a hearing, the trial 
judge granted Indiana's motion for judgment on the pleadings and denied Burns 
and Royal's motion for summary judgment. The judge held that the two insurance 
companies were required to contribute equally to Burns' defense and 
indemnification in the Gault litigation. The trial judge concluded that Royal's 
duty to defend was triggered when Burns tendered the case to it, after Indiana 
had initially refused to undertake Burns' defense.
Burns and Royal appealed. The appellate court affirmed the circuit court but 
relied on a different rationale. 299 Ill. App. 3d 169. The appellate court 
concluded that the initial tender by Burns to Indiana was sufficient to trigger 
the "other insurance" provision in the Indiana policy, which in turn activated 
Royal's duty to defend its insured. We allowed Burns and Royal's petition for 
leave to appeal (177 Ill. 2d R. 315(a)), and we now reverse the judgments of the 
courts below. We granted leave to W.E. O'Neil Construction Company to file an 
amicus brief in behalf of Burns. 155 Ill. 2d R. 345.
The policy language contained in Indiana's "other insurance" provision 
states, in pertinent part:
The question before us in this appeal is whether an insurer to whom 
litigation is tendered and whose policy contains an "other insurance" clause 
like the one above may seek contribution from another insurer whose policy is in 
existence but whose coverage the insured has refused to invoke.
In the present case, Burns was covered by two insurance policies: its own, 
issued by Royal, and Barba's, issued by Indiana. Burns tendered the defense of 
the Gault litigation to Indiana and expressly directed its own insurer, Royal, 
not to become involved in the matter. Indiana should have defended and 
indemnified the claim, as it later acknowledged, but instead chose initially to 
deny coverage. Burns was then forced to tender defense of the claim to its own 
insurer, Royal. Burns and Royal contend that Burns was entitled to elect which 
insurer it wished to defend and indemnify the claim by tendering the defense to 
one insurer and not the other. Burns and Royal further assert that once Burns 
chose to submit the claim to Indiana alone, Indiana was precluded from obtaining 
contribution from Royal. Although Indiana now agrees that it has a duty to 
defend and indemnify Burns, it argues, in support of the appellate court 
judgment, that the "other insurance" provision contained in its policy allows it 
to seek contribution from Royal, without regard to Burns' election of coverage. 
Indiana maintains that its policy contemplates that more than one insurer might 
face exposure and that the policy provides a formula for sharing the costs of 
defending and indemnifying the claim.
We agree with Burns and Royal that Burns had the right to choose which 
insurer would be required to defend and indemnify it in Gault's action for 
personal injuries, and that nothing in the Indiana policy limited Burns' right 
to select which insurer would be required to do this. In Cincinnati Cos. v. 
West American Insurance Co., 183 Ill. 2d 317 (1998), this court considered 
what is necessary to trigger an insurer's duty to defend, and held that the duty 
arises with actual notice of a claim against an insured, regardless of the 
insured's level of sophistication. In reaching that result, the court 
acknowledged the line of authority that granted an insured the right to elect 
which of its insurers will defend a particular case. The court stated:
The court thus concluded that "an insured may knowingly forgo the insurer's 
assistance by instructing the insurer not to involve itself in the litigation. 
The insurer would then be relieved of its obligation to the insured with regard 
to that claim." Cincinnati Cos., 183 Ill. 2d  at 326.
The court in Cincinnati Cos. cited with favor Institute of 
London Underwriters v. Hartford Fire Insurance Co., 234 Ill. App. 3d 70 
(1992), an appellate court decision that presented circumstances similar to 
those of the case at bar. The Institute court addressed the issue 
whether an insured may elect which of two insurers will be required to defend 
and indemnify a claim when two insurance policies potentially apply. The 
appellate court held that an insured has the right to choose which policy will 
apply. In that case, the Institute of London Underwriters provided coverage to 
an injured party's employer as a named insured and to the employer's general 
contractor as an additional insured. A suit was filed against the general 
contractor by the estate of a fatally injured employee, and Institute accepted 
tender of this claim from the general contractor. The contractor informed its 
insurer, Hartford, of the pending claim but instructed Hartford not to 
contribute to the defense or indemnification of the action. Institute later sued 
Hartford, seeking equitable contribution. Both the circuit court and the 
appellate court concluded that the claim for equitable contribution was defeated 
by the contractor's instructions to Hartford not to defend or indemnify the 
action. Institute of London Underwriters, 234 Ill. App. 3d at 73.
Indiana attempts to distinguish Institute by noting that the policy 
issued by Institute did not contain an "other insurance" provision and, 
therefore, Institute did not have a contractual right to involve Hartford. It 
was irrelevant that the Institute policy did not contain an "other insurance" 
clause, however. As the appellate court noted in Institute, the purpose 
of an "other insurance" clause is not to trigger coverage but to provide a 
method of apportioning coverage that would be triggered otherwise. Institute 
of London Underwriters, 234 Ill. App. 3d at 77 ("if the policy is never 
triggered, the issue of liability under the 'other insurance' clause does not 
arise").
In addition, two more recent cases involving "other insurance" clauses, 
decided since this court's decision in Cincinnati Cos., have reached 
the same conclusion. In Bituminous Casualty Corp. v. Royal Insurance Co. of 
America, 301 Ill. App. 3d 720 (1998), a general contractor hired a 
subcontractor to perform work in the construction of a grocery store. The 
subcontract agreement required the subcontractor to name the general contractor 
as an additional insured under the subcontractor's liability insurance policy. 
An employee of the subcontractor was injured during the project and sued the 
general contractor, which tendered defense of the claim to the subcontractor's 
insurer, Bituminous Casualty Corp. Bituminous asked the general contractor's 
insurer, Royal Insurance Company, to participate in the defense, but Royal 
declined to do so. After the underlying action was settled, Bituminous sought a 
declaratory judgment, asking the court to order Royal to pay one half of the 
costs of the action. The trial court agreed with Bituminous, but the appellate 
court reached the opposite conclusion. Citing Institute of London 
Underwriters and Cincinnati Cos., the appellate court ruled that 
the general contractor was entitled to select one of the insurance companies to 
defend the action alone. The appellate court further rejected Bituminous' 
argument that, regardless of the general contractor's election, the presence of 
"other insurance" provisions in the two companies' policies entitled Bituminous 
to recover half the costs of the defense from the other insurer, Royal. The 
appellate court noted that the decision in Institute of London Underwriters 
did not turn on the presence or absence of an "other insurance" clause. The 
appellate court explained:
The same result was reached under similar circumstances in Alcan United, 
Inc. v. West Bend Mutual Insurance Co., 303 Ill. App. 3d 72 (1999). As the 
appellate court in Alcan United explained:
We agree with that interpretation and conclude that Indiana may not take 
advantage of the other insurance provision in its policy. The insurance provided 
to Burns by Royal was not "available," in the language of the other insurance 
provision, for Burns had expressly declined to invoke that coverage. Moreover, 
we do not believe that the presence of the "other insurance" provision in the 
Indiana policy serves by itself to trigger the coverage afforded by Royal's 
policy. An "other insurance" provision does not in itself overcome the right of 
an insured to tender defense of an action to one insurer alone.
As a final matter, Indiana asserts that Royal's policy was triggered when 
Burns notified Royal of the pending action. In support of this argument, Indiana 
cites Cincinnati Cos. for the proposition that actual notice to an 
insured is enough to trigger coverage of a claim. We believe that Indiana 
misreads our ruling in Cincinnati Cos. regarding notice. The court in 
that case established that when an insured has not knowingly decided against a 
particular insurer's involvement, that insurer's duty to defend is triggered by 
actual notice of a claim against its insured regardless of the level of the 
insured's sophistication. In the present case, however, Burns made clear that it 
did not want Royal to become involved in the matter and that the defense was 
being tendered solely to Indiana. Therefore, Indiana was foreclosed from seeking 
equitable contribution from Royal. When Burns tendered defense of the claim to 
Royal, it did so only after Indiana declined to represent Burns. Indiana cannot 
now take advantage of its own breach.
For the reasons stated, the judgments of the appellate court and circuit 
court are reversed.
Judgments reversed.