Court Opinion

ID: 9709082
Source: CourtListenerOpinion
Date Created: 2023-08-26 03:39:45.035063+00
Date Added: 2024-06-11T18:22:45.917653
License: Public Domain

PRESIDING JUSTICE JIGANTI, dissenting: Northbrook insured Great West, an architectural firm, on professional liability for any acts, errors or omissions. The policy covered the period from October 23, 1976, to October 23, 1977. This is a “claims made” or “discovery” policy. (See Graman v. Continental Casualty Co. (1980), 87 Ill. App. 3d 896, 900, 409 N.E.2d 387, 390.) Under this type of policy, Great West was covered for any claims made by any third party against the architectural firm for professional liability during this period. Consequently, even professional liability that may have arisen prior to the inception of this contract would be covered. However, to protect itself in an event such as that, the policy does not cover Great West for liability to third persons if Great West had “knowledge of such act, error or omission on the effective date of this policy.” The factual pattern here is unusual. Ordinarily in these controversies the event that gives rise to the claim occurs prior to the inception of the policy but the claim is made during the policy period. In this case, however, the roof collapse which is the underlying cause of action by General Motors against Great West occurred on January 2, 1977, during the course of the policy, and the claim was made within the policy period. Northbrook successfully defended itself in the trial court on the basis that the act, error or omission giving rise to Great West’s liability to the third-party plaintiff occurred prior to the inception of the policy and Great West had “knowledge” of this potential claim. Great West’s knowledge, according to Northbrook and the finding of the trial court, arose because on February 2, 1976, 11 months before this collapse, and seven months before the inception of the policy, another portion of this same roof collapsed. Great West’s knowledge of the earlier roof collapse forms the factual basis for the majority’s finding that the ruling of the trial court was against the manifest weight of the evidence. I respectfully dissent. I do not believe that Great West raises the issue of manifest weight. Even if it does I believe that salient facts were omitted by the majority. In addition, I do not believe that Great West’s only contention on appeal, that is that Northbrook is estopped from raising these defenses, is well-founded. The estoppel issue will be considered first. Because Northbrook did not defend the lawsuits filed against Great West arising out of the roof collapse on January 2, 1977, Great West contends that Northbrook is estopped to deny Great West’s action here for money damages for the amount paid by Great West in the defense and settlement of that lawsuit. Great West relies on the proposition of the law that when an insurer fails to defend a claim potentially within the coverage of the policy, the insurer is estopped from raising any defenses that it has against the insured under the policy. (Murphy v. Urso (1981), 88 Ill. 2d 444, 451, 430 N.E.2d 1079, 1082.) Although the proposition of law espoused by Great West has been often stated, this proposition needs examination. Estoppel arises when the insurer breaches its duty to defend under the poficy. (Thornton v. Paul (1978), 74 Ill. 2d 132, 145, 384 N.E.2d 335, 340.) The duty to defend is a very broad duty that is separate and distinct from the duty to indemnify. (Conway v. Country Casualty Insurance Co. (1982), 92 Ill. 2d 388, 394, 442 N.E.2d 245, 247.) Moreover, it has been frequently stated that this duty to defend is broader than the duty to indemnify. (Murphy v. Urso (1981), 88 Ill. 2d 444, 451, 430 N.E.2d 1079, 1082.) The breadth of this duty is exemplified by the defense provision in this policy which states that the insurer has the duty to defend even if the claim is “groundless, false, or fraudulent.” The duty to defend, however, is not boundless. Even if the plaintiff in the underlying action against the insured alleges facts that would make the insured liable it does not necessarily mean there is a duty to defend. The duty to defend is correlative with its duty to indemnify. (7C Appelman, Insurance Law & Practice sec. 4684, at 73 (Berdal ed. 1979); see Allstate Insurance Co. v. Gleason (1964), 50 Ill. App. 2d 207, 214, 200 N.E.2d 383, 387.) The insurer is only bound to defend if it would be bound to indemnify the insured assuming the allegation of the plaintiff’s complaint were proved. (Brodeck v. Indemnity Insurance Co. of North America (1937), 292 Ill. App. 363, 384-85, 11 N.E.2d 228, 237; Annot., 50 A.L.R.2d 458 (1956).) Stated differently, the claim is not potentially within the coverage of the policy. Applying that test to the instant case, even if General Motors and the other plaintiffs in the underlying action against Great West were to prove their claims that Great West was responsible for any acts, errors or omissions that caused the roof collapse on January 2, 1977, that does not resolve the question of whether Northbrook must indemnify and consequently defend Great West. This is so because Northbrook’s affirmative defense is that there is no duty to defend because there is no coverage under the policy. Specifically, the policy was contingent upon the fact that Great West had no knowledge of any possible claim. Northbrook claimed and the trial court found that they did in fact have knowledge of a possible claim. Consequently, even if General Motors proved all of the allegations in their complaint against Great West, Northbrook would not have to indemnify because there is no coverage. (See Allstate Insurance Co. v. Gleason (1964), 50 Ill. App. 2d 207, 214, 200 N.E.2d 383, 387.) Illinois has followed the rule that there is no duty to defend where the claim is beyond the scope of coverage in numerous cases: Schneider v. Autoist Mutual Insurance Co. (1931), 346 Ill. 137, 139-40, 178 N.E.2d 466, 467-68 (insurer had no duty to defend where coverage was contingent upon the insured’s cooperation with the insurer); Stiefel v. Illinois Union Insurance Co. (1983), 116 Ill. App. 3d 352, 357, 452 N.E.2d 73, 76 (insurer was under no duty to defend since the policy coverage did not extent to acts, errors or omissions of which the insured had knowledge of or could reasonably have foreseen would result in a claim); Graman v. Continental Casualty Co. (1980), 87 Ill. App. 3d 896, 902, 409 N.E.2d 387, 392 (insured’s noncompliance with the insuring agreement resulted in no policy coverage for the claims against the insured and thus the insurer had no duty to defend); Chambers Gasket & Manufacturing Co. v. General Insurance Co. of America (1975), 29 Ill. App. 3d 998, 1002, 331 N.E.2d 203, 206 (insurer had no duty to defend action brought by customer against insured gasket manufacturer because the policy did not cover the damages sought by the customer); Mann v. Mann (1971), 133 Ill. App. 2d 552, 558, 273 N.E.2d 40, 45 (insurer’s failure to defend did not invoke the estoppel doctrine as the claims against the insured were beyond the policy coverage); Midwest Contractors Equipment Co. v. Bituminous Casualty Corp. (1969), 112 Ill. App. 2d 134, 140-41, 251 N.E.2d 349, 352 (insurer may decline to defend where the policy coverage does not extent to the claimant); Meyer v. Aetna Casualty Insurance Co. (1964), 46 Ill. App. 2d 184, 190, 196 N.E.2d 707, 710 (insurer was not obligated to defend suit against the insured arising out of an auto accident in which the insured’s son was driving as the policy coverage applied only to accidents occurring while the insured was driving); Brodeck v. Indemnity Insurance Co. of America (1937), 292 Ill. App. 363, 382-84, 11 N.E.2d 228, 236-37 (where the policy provided coverage against suits arising out of accidental injuries the insurer was not obligated to defend a suit based upon an occupational disease). To reiterate the legal propositions to be applied in this case, estop-pel arises when the insurer breaches its duty to defend. There is no duty to defend if there is no duty to indemnify. The duty to indemnify, in turn, exists only when the claim against the insured is within the scope of the policy coverage. In this case, because Great West had knowledge of the design defects in the roof on the effective date of the policy, the claims against Great West were beyond the coverage of the policy. Consequently, Northbrook had no duty to defend those claims. The second basis for my dissent is that I do not believe the issue of manifest weight of the evidence was raised in this appeal. At only one portion of Great West’s brief was manifest weight even suggested, and, at that point, it was not specifically argued. It was mentioned in the brief concerning answers to questions 19A and B which form the issues of the cross-appeal. It is next mentioned in its conclusion again without any specific argument on the subject. Since the majority opinion rests on the issue, I will address it. Under the pleadings the insurer, Northbrook, had to prove as part of its affirmative defense that on the effective date of the policy the insurer had knowledge of an act, error or omission. The trial court of course found that Great West did have knowledge. The majority in its opinion finds that the trial court’s finding was against the manifest weight of the evidence. The majority states that a thorough review of the evidence presented below shows that Northbrook failed to sustain its burden. The majority noted that experts in the field of structural engineering who investigated the second roof collapse discovered certain aspects of the roof’s design which precipitated the collapse and that these features had not previously been uncovered as causes of the first roof incident. The facts to support that contention as I see it, are not stated in the opinion. Apparently what the court is referring to is the fact that the general contractor of the GM building where the roof collapsed retained C. C. Parker & Associates to investigate the first collapse. Parker concluded that the cause of the first roof collapse was a workmanship problem specifically “resulting from a faulty weld.” However, Parker found that there were “a number of areas of overstress” in the roof especially in the area of the false roof feature, caused principally by Great West’s failure to comply with the National Building Code. C. C. Parker’s report was mailed to Great West and it was reviewed by several Great West executives. Ellis-Don, the general contractor, continued to allege errors in Great West’s design of the GM warehouse. In a letter dated March 30, 1976, Parker in answer to some representatives of Great West’s contention that there were no design defects reiterated that the requirements of the building code provide a minimum standard of safety and that Great West’s design provided “a standard of safety less than the minimum required by the code notwithstanding the claims made by Great West still regarding its adequacy in previous success enjoyed by them in its use.” In a letter dated October 6, 1976, Ellis-Don advised Great West that the design defects identified by C. C. Parker, including those in the areas behind the false roof, had not been corrected. Ellis-Don stressed the seriousness of those defects in view of the fact that the snowfall season was rapidly approaching. Ellis-Don demanded that the remedial work be started “forthwith, and, in all events, before winter conditions prevail.” Five days before the policy took effect, on October 18, 1976, two representatives of Great West met with two representatives of Ellis-Don to discuss the remedial work to be done on the roof. At that meeting, Great West agreed with Ellis-Don that the area of "the roof behind the false roof feature was un-derdesigned and that remedial work was required to be performed by Great West. The majority opinion states that Great West “never actually and affirmatively agreed” following the first collapse that that collapse was caused by a design defect. That however is not the issue in the case. The issue is whether Great West had knowledge of an act, error or omission on the effective date of the policy. Whether they wished to accept the fact or not, Great West had knowledge of the fact that certain experts believed that there was a design defect. The majority noted that an outside structural engineering firm, apparently C. C. Parker, reached its conclusion because it adhered to a different design philosophy. Because of that, the majority apparently concludes that C. C. Parker’s opinion should be held for naught. The design philosophy held by C. C. Parker was that espoused in the Canadian Building Code. It does not seem to me that it may be completely disregarded. For the above reasons I believe that the majority was in error in concluding that the finding of the trial court was against the manifest weight of the evidence. I would affirm the judgment of the trial court.