                                          2016 IL App (1st) 140862

                                                                                 THIRD DIVISION
                                                                                 July 20, 2016

                                                No. 1-14-0862



                                              IN THE

                                   APPELLATE COURT OF ILLINOIS

                                     FIRST JUDICIAL DISTRICT



WESTFIELD INSURANCE COMPANY,                                          )   Appeal from the
                                                                      )   Circuit Court of
                  Plaintiff and Counterdefendant-Appellee,            )   Cook County.
                                                                      )
                          v.                                          )
                                                                      )
WEST VAN BUREN, LLC, an Illinois Limited Liability                    )
Company, and 933 VAN BUREN CONDOMINIUM                                )   No. 12 CH 2654
ASSOCIATION, an Illinois Not-For-Profit Corporation,                  )
                                                                      )
                  Defendants                                          )
                                                                      )
(West Van Buren, LLC, an Illinois Limited Liability                   )
Company, Defendant and Counterplaintiff-Appellant).                   )   The Honorable
                                                                      )   Rodolfo Garcia,
                                                                      )   Judge Presiding.
                                                                      )

       JUSTICE LAVIN delivered the judgment of the court, with opinion. *
       Presiding Justice Mason concurred in the judgment and opinion.
       Justice Pucinski dissented from the judgment, with opinion.

                                                  OPINION


¶1     This case involves an insurance coverage dispute. The insurance company filed a 


declaratory judgment action seeking a determination that it had no duty to defend the additional


insured in an underlying lawsuit. The parties filed cross-motions for summary judgment, and the


trial court ultimately ruled in favor of the insurance company. The additional insured now

       *
           This case was reassigned to Justice Lavin in mid-March 2016.
No. 1-14-0862


appeals contending the insurance company had a duty to defend it in the underlying lawsuit. We

disagree and therefore affirm the trial court’s judgment in favor of the insurance company.

¶2                                      BACKGROUND

¶3      In 2002, West Van Buren LLC (Developer) constructed a condominium development at

933 W. Van Buren Street, Chicago, Illinois. The Developer subcontracted installation of the roof

to Total Roofing and Construction Services, Inc. (Total Roofing). The subcontract provided that

Total Roofing would insure and indemnify the Developer against liability for Total Roofing’s

work. Total Roofing, which constructed the roof in 2002, obtained a commercial general liability

policy through Westfield Insurance Company for occurrence-based coverage (between February

6, 2001, and February 15, 2005). 1 The policy offered coverage for “occurrences,” defined as

accidents, and also for “property damage.” In addition, the policies also provided for a duty to

defend in the event of a lawsuit. Consistent with the subcontract, the relevant policies listed the

Developer as an additional insured.

¶4      About a year after construction, the 933 Van Buren Condominium Association (Condo

Association) took charge of the building. Shortly thereafter, the Condo Association claimed

construction defects in the roof caused water to infiltrate into the building and individual

condominium units and also caused damage to personal and other property in the condominium

units. The Condo Association demanded that the Developer reconstruct the roof. The Developer

refused, and the Condo Association then paid for the repair work that cost in excess of $309,000.




        1
         West Van Buren concedes that the first and fourth policies are not implicated in this case. The
second policy was in effect during Total Roofing’s construction of the roof at the development. The third
policy was in effect during the date of loss assigned by Westfield Insurance. The parties have not made
clear which policy applies. It is of no moment because the policies both define “property damage” and
“occurrence” in the same manner, and those definitions are at the heart of this appeal. For the sake of
simplicity, we refer to these two policies as the “policy” unless otherwise indicated.

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No. 1-14-0862


¶5      The Condo Association subsequently sought reimbursement for those expenses. In

October 2010, the Developer received a mediation request for the aforementioned alleged repair

work. The Developer, claiming it was an additional insured under the policy, notified Westfield

Insurance and requested a defense for the mediation. Westfield Insurance declined to offer a

defense, citing a number of reasons under the policy.

¶6      The mediation fell through, and on August 8, 2011, the Condo Association sued the

Developer and Total Roofing, 2 among others, in a multi-count complaint 3 for breach of

warranty, violating the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1

et seq. (West [Insert Year])), fraud, and breach of the implied warranty of habitability. The

complaint asserted that water infiltrated the common elements and individual units. It noted that

each condominium purchase agreement provided by the Developer warranted against any defects

in material and workmanship in the common elements of the building. Yet, when these units

were sold, they allegedly “contained a number of hidden and latent defects that West Van Buren

[the Developer] intentionally failed to disclose, including but not limited to: a) defects in the

roofing system and the individual roofing components so as to allow water infiltration into the

Condo Building *** and b) West Van Buren’s failure to construct the Condo Building in

substantial conformity with the plans and specifications.” (Emphasis added.) The complaint also

asserted the Developer fraudulently covered up hidden and latent defects, also alleging:


        2
          The initial complaint named “Total Roofing Control” as a defendant. In an amended complaint
the Condo Association corrected the named party as “Total Roofing & Construction Services, Inc.” For
the sake of simplicity, we refer to the initial complaint, as the two are identical. See Cincinnati Cos. v.
West American Insurance Co., 183 Ill. 2d 317, 329 (1998) (generally, an insurer’s duty to defend is
triggered by actual notice of the underlying suit). Moreover, both parties on appeal rely on the initial
complaint in determining whether a duty to defend arose. We note that the Condo Association also filed a
second-amended complaint on October 11, 2012, adding a negligence count against only a roof consulting
firm.
        3
          The complaint actually included five counts. Count III, however, was for breach of fiduciary
duty only against three members of the Developer’s board.

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No. 1-14-0862


“Moreover, individual unit owners experienced damage to personal and other property as a result

of the water infiltration.” The complaint asserted that the defendants were responsible for

$300,000 in damages and that had the unit owners been aware of the concealed defects, they

would not have purchased their units or at least would have negotiated a better purchase price.

¶7     Within days of this lawsuit, the Developer notified Westfield Insurance and tendered the

defense, but Westfield declined to undertake it. Westfield Insurance nonetheless agreed to defend

Total Roofing under a reservation of rights. Westfield Insurance subsequently filed the present

declaratory action for a determination that it owed no duty to defend or indemnify the Developer

as the additional insured in the underlying case. 4 The Developer, in turn, filed a counterclaim

alleging a duty to defend because the underlying complaint contained allegations of personal

property damage that were within the policy’s coverage, and based on estoppel. Westfield

Insurance denied that the underlying complaint alleged a covered occurrence.

¶8     The parties filed cross-motions for summary judgment in the declaratory judgment

action. 5 At the hearing on the motions, Westfield Insurance acknowledged the underlying

complaint alleged personal property damage but argued that the Condo Association lacked

standing to assert such claims on behalf of individual unit owners.

¶9     The circuit court initially granted summary judgment for this declaratory action to the

Developer, but upon a motion to reconsider by Westfield Insurance, the court subsequently

vacated its judgment and granted summary judgment to Westfield Insurance. The court

concluded that since there was no duty to defend, then there was no duty to indemnify. The

Developer filed this timely appeal.

       4
           Westfield Insurance filed the present declaratory action against the Developer on January 25,
2012. More than a year later, on September 10, 2013, Westfield Insurance also filed a declaratory
judgment action against Total Roofing claiming it owed no duty to defend or indemnify its insured.
         5
           The Condo Association filed a response that adopted the Developer’s arguments and requested
that the court grant the Developer’s summary judgment motion.

                                                   4

No. 1-14-0862


¶ 10                                     ANALYSIS

¶ 11    Summary judgment is properly granted when the pleadings, depositions, and admissions

on file, together with the affidavits, if any, show that there is no genuine issue of material fact

and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West

2014). Where parties file cross-motions for summary judgment, they agree the case presents only

questions of law, and they invite the trial court to decide these legal questions on the basis of the

record. Pielet v. Pielet, 2012 IL 112064, ¶ 28. Our standard of review is de novo, and we may

affirm on any basis in the record regardless of whether the trial court relied on that basis or its

reasoning was correct. Id. ¶ 30; Chicago Title Insurance Co. v. Bass, 2015 IL App (1st) 140948,

¶ 13. The construction of an insurance policy, which presents a question of law, is likewise

subject to de novo review. Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 223 Ill. 2d

352, 360 (2006).

¶ 12    The Developer argues in the main that Westfield Insurance had a duty to defend the

Developer in the underlying action 6 and the trial court therefore erred in granting summary

judgment in favor of Westfield Insurance. An insurance company’s obligation to represent its

insured depends on the allegations of the underlying complaint and the provisions of the

insurance policy. Diamond State Insurance Co. v. Chester-Jensen Co., 243 Ill. App. 3d 471, 476

(1993). The complaint must be liberally construed and all doubts resolved in favor of coverage



        6
         Westfield Insurance notes in its statement of facts that the underlying lawsuit was dismissed on
October 20, 2014. We have reviewed the Cook County circuit court clerk’s records, of which we may
take judicial notice (see In re Application of the County Treasurer and ex officio county collector, 356 Ill.
App. 3d 1102, 1111 (2005)), but they do not make clear what happened between the multiple parties in
the underlying lawsuit. Nonetheless, our records show there is currently a case pending in the appellate
court between the Developer (the appellant and cross-appellee) and Total Roofing (the appellee and cross-
appellant), arising from cross-claims filed in the underlying litigation. According to their briefs, the
underlying lawsuit by the Condo Association is currently no longer being actively litigated. The Condo
Association claims were dismissed, some with prejudice and some without.

                                                     5

No. 1-14-0862


for the insured. Id. A duty to defend will arise when the allegations of the underlying complaint

may potentially come within the coverage of the policy. Id. at 476-77.

¶ 13   Thus, in order to address this matter, we turn to both the underlying complaint and the

language of the insurance policy itself. The general rules governing the interpretation of

contracts also govern the interpretation of insurance policies. Standard Mutual Insurance Co. v.

Lay, 2013 IL 114617, ¶ 24. As such, a court’s primary objective in analyzing an insurance policy

is to ascertain and give effect to the parties’ intentions as expressed by the policy language,

which we construe in its plain and ordinary meaning. Swiderski Electronics, Inc., 223 Ill. 2d at

362-63. We view the policy as a whole so as to give effect to every provision if possible. Id. at

362. As a result, if the policy language is unambiguous, generally the policy will be applied as

written. Lay, 2013 IL 114617, ¶ 24.

¶ 14   At the outset, we observe that throughout its brief, the Developer cites a copy of the

underlying complaint attached to the appendix. Rules 341(h)(6) and (7), however, require that an

appellant cite the record. See Ill. S. Ct. R. 341(h)(6), (7) (eff. eff. Jan. 1, 2016). The Illinois

Supreme Court Rules are not suggestions; they have the force of law and must be complied with.

Estate of Prather v. Sherman Hospital Systems, 2015 IL App (2d) 140723, ¶ 32. Where a brief

has failed to comply with the rules, we may strike portions of the brief or dismiss the appeal

should the circumstances warrant. Id. Given the force that the underlying complaint carries in

this case, it would behoove the Developer to accurately cite it in the record on appeal.

Nonetheless, we conclude the location of the complaint is easily ascertainable and thus we

proceed in our review.

¶ 15   We also must note that it is questionable whether the appellant was even an additional

insured under the policy. The policy stated, “To the extent of the Named Insured’s ongoing



                                                6

No. 1-14-0862


operations, the coverage afforded to the Additional Insured which may be imputed to the

Additional Insured.” This sentence is unclear. We find the only reasonable construction is that

the policy provided that the additional insured would be covered “to the extent of the Named

Insured’s ongoing operations.” Here, according to the underlying complaint, the Condo

Association discovered the water infiltration and leaking in 2003, which was about one year after

the roofing was installed. The fact that the roof was seemingly complete at the time of the

discovered leak would mean the subcontractor’s “operations” had ended and so too had the

Developer’s status as an additional insured. This has been perhaps left unexplored because

discovery was stayed during the declaratory action. We proceed in our review because even

assuming the Developer was an additional insured, we conclude the complaint and policy

unequivocally authorize the trial court’s result.

¶ 16   Here, the policy at issue defined “occurrence” as “an accident, including continuous or

repeated exposure to substantially the same general harmful conditions.” The policy also defined

“property damage” as “a. Physical injury to tangible property, including all resulting loss of use

of that property. All such loss of use shall be deemed to occur at the time of the physical injury

that caused it; or b. Loss of use of tangible property that is not physically injured. All such loss

of use shall be deemed to occur at the time of the ‘occurrence’ that caused it.”

¶ 17   As stated, the complaint alleges the Developer breached contractual warranties and also

committed fraud in selling the condo units because it intentionally concealed hidden defects in

the roofing system and the individual roofing components “so as to allow water infiltration into

the Condo Building.” See Stoneridge Development Co. v. Essex Insurance Co., 382 Ill. App. 3d

731, 747 (2008) (implied warranty of habitability is contractual in character). In other words,

according to the complaint, the Developer failed to properly install the roof system and failed to



                                                    7

No. 1-14-0862


correct the defect. The allegation of intentional conduct was incorporated in all counts of the

complaint, and general negligence of the Developer was not alleged.

¶ 18   Analyzing the complaint in light of the policy, we conclude Westfield Insurance had no

duty to defend the Developer in the Condo Association’s underlying action for the following

three reasons. First, the policy essentially requires an accidental event to trigger coverage, yet

there is nothing accidental alleged in the complaint. The complaint either focuses on the

intentional bad acts of the Developer or nonfortuitous events, like the resulting damage to the

condo building due to shoddy workmanship, of which the Developer was allegedly aware. See

Viking Construction Management, Inc. v. Liberty Mutual Insurance Co., 358 Ill. App. 3d 34, 42,

54 (2005) (there is no occurrence when a subcontractor’s defective workmanship necessitates

removing and repairing work and where the damages claimed are the natural and ordinary

consequences of defective workmanship); see also Stoneridge Development Co., 382 Ill. App. 3d

at 752 (same); Crawford Laboratories, Inc. v. St. Paul Insurance Co. of Illinois, 306 Ill. App. 3d

538, 544 (1999) (an accident by its very nature contemplates an event that is unforeseen and

neither intended nor expected). Although the dissent states the failure to do something (like

properly construct a roof) can constitute an accident, this is not supported by the bulk of case

law. See Viking Construction Management, Inc. v. Liberty Mutual Insurance Co., 358 Ill. App.

3d 34, 42, 54 (2005) (there is no occurrence when a subcontractor’s defective workmanship

necessitates removing and repairing work and where the damages claimed are the natural and

ordinary consequences of defective workmanship); see also Stoneridge Development Co., 382 Ill.

App. 3d at 752 (same); Crawford Laboratories, Inc. v. St. Paul Insurance Co. of Illinois, 306 Ill.

App. 3d 538, 544 (1999) (an accident by its very nature contemplates an event that is unforeseen

and neither intended nor expected); but see Milwaukee Mutual Insurance Co. v. Larsen, 2011 IL



                                                8

No. 1-14-0862


App (1st) 101316, ¶ 28 (faulty window system that allegedly damaged personal property deemed

possible occurrence, in part due to negligence). Any alleged damage to the common or personal

property was not an accident and therefore not the result of any occurrence. Thus, those

allegations in the underlying complaint do not potentially fall within the policy coverage. See

State Farm Fire & Casualty Co. v. Tillerson, 334 Ill. App. 3d 404, 409 (2002).

¶ 19   Second, the allegations of the complaint likewise do not fall within the definition of

property damage under the policy’s plain language. In the seminal case, Traveler’s Insurance

Co. v. Eljer Manufacturing, Inc., 197 Ill. 2d 278, 308 (2001), our Illinois Supreme Court held

that “physical” injury occurs when property is altered in appearance, shape, color or in other

material dimension, and does not take place when an economic injury occurs, such as the

diminution in value. Yet, the allegations in the Condo Association’s underlying complaint sought

only to hold the Developer responsible for the shoddy workmanship of its roofing subcontractor.

The complaint sought damages of some $300,000 for repair and remediation of the roof and also

alleged that had the unit owners known of the defects, they either would not have purchased the

condo units or would have negotiated the price. As such, these damages and the allegations

related only to diminished value and economic harm. However, as the court in Eljer observed,

where the language of an insurance policy explicitly requires physical injury, it cannot be

construed to provide coverage on the basis of loss or diminished use simply resulting from the

failure of a component to perform as promised. Id. at 311. Defective work and products are

purely economic losses. Id. at 314; see also CMK Development Corp. v. West Bend Mutual

Insurance Co., 395 Ill. App. 3d 830, 841 (2009) (no coverage for homeowners pursuing a breach

of contract claim for loss due to repair or replacement of defective work or diminished home

value); Viking Construction Management, Inc., 358 Ill. App. 3d at 54-56 (no property damage



                                               9

No. 1-14-0862


where allegations in underlying complaint point to repair and replacement of defective product

or construction). Otherwise, the policy would function as a performance bond. Eljer

Manufacturing, Inc., 197 Ill. 2d at 311.

¶ 20   Third, in reaching the above-stated conclusions, we must reject the Developer’s argument

that the underlying complaint triggered a duty to defend because the complaint alleged actual

physical harm to personal property. While construction defects that damage something other than

the project itself can constitute an occurrence and property damage (see Stoneridge Development

Co., 382 Ill. App. 3d at 752-53), they do not in this case. We agree with the trial court that these

allegations were meant to simply bolster the contention that water infiltration generally occurred

and caused damages. They do not trigger potential coverage under the policy. The individual

condo unit owners themselves were not parties to the complaint, and the Condo Association did

not purport to act on behalf of any individual condo unit owners. See 765 ILCS 605/9.1(b) (West

2002) (condo board can act in representative capacity as to matters involving “the common

elements or more than one unit”). Contrary to the dissent’s assertion, the complaint did not seek

damages for any personal property damage. In addition, we note that while we confine our

analysis to the allegations in the initial complaint, we find it instructive that even the second-

amended complaint (and third complaint filed) did not add as parties the individual condo unit

owners or identify these owners and their specific claims for damages. As Westfield Insurance

notes, “factual allegations certainly are important to a coverage determination, but only if those

allegations are directed to a theory of recovery.” ISMIE Mutual Insurance Co. v. Michaelis

Jackson & Associates, LLC, 397 Ill. App. 3d 964, 971 (2009). Moreover, we cannot read into the

complaint something that is not there, but rather we are confined to what was actually alleged.

See Pekin Insurance Co. v. Roszak/ADC, LLC, 402 Ill. App. 3d 1055, 1063 (2010). We do not



                                                10

No. 1-14-0862


believe a free-standing reference to a fact, that is not attached to any particular theory of

recovery or particular party in the complaint, can trigger a duty to defend. See Acuity v. Lenny

Szarek, Inc., 128 F. Supp. 3d 1053, 1059-62 (2015) (analogous facts and finding same); cf.

Larsen, 2011 IL App (1st) 101316, ¶ 20-21 (duty to defend in defective construction even

though complaint did not expressly describe damages to personal property).

¶ 21   This case is similar to Diamond State. There, the State’s underlying complaint against

Chester-Jensen (a refrigeration and heating manufacturer) sought damages for Chester-Jensen’s

role in a failed air-conditioning system installed in the Thompson Center building. The State’s

complaint alleged breaches of contract and warranty, claiming economic damages and that the

defective system injured the employees who became ill or otherwise lost time from work because

of the excessive heat in the building. In affirming that there was no duty to defend and in

analyzing the aforementioned allegations under the policy provision on bodily injury, the

appellate court stated:

                “[Chester-Jensen’s] proposed interpretation would distort the meaning of this

       provision and extend its reach so as to provide coverage for any liability where bodily

       injury is a tangential factor. It is manifest that the core of the State’s claim for damages

       against Chester-Jensen is a claim for its economic losses. The fact that the State’s claim

       for its economic losses as a result of diminished productivity may have been occasioned

       in part by the illness of its employees does not transmute its economic claim for which it

       seeks recovery from Chester-Jensen into one for ‘bodily injury.’ ” Diamond State, 243 Ill.

       App. at 477-78.

This court noted the State did not bring the action on behalf of the employees or seek recovery

for them on account of their illness or bodily injury and held there was no property damage



                                               11

No. 1-14-0862


either. See also Bituminous Casualty Corp. v. Gust K. Newberg Construction Co., 218 Ill. App.

3d 956, 964 (1991) (finding same, and that allegations regarding injured employees not offered

for recovery but as evidence of failed air system).

¶ 22   Likewise, in this case the Condo Association’s allegations of personal property damage

were not offered for the purposes of recovery. These allegations were purely tangential to the

Condo Association’s claim for damages for repair and remediation of the roof. Further, even if

the Condo Association sought to recover amounts attributed to property damage sustained by

individual unit owners, 7 such amounts, vis-a-vis the Condo Association, are economic losses and

not property damage. As a result, the trial court properly disregarded these allegations in

determining Westfield Insurance’s duty to defend. See also id. For the reasons stated, the

underlying complaint, even liberally construed in the Developer’s favor, does not offer

allegations towards a theory of recovery that fits within the potential coverage of the policy. In

affirming that there was no potential coverage, we find no need to examine the exclusions in this

case. See id. at 966.

¶ 23   In an effort to save itself, the Developer appears to argue that Westfield Insurance should

have raised the issue of “standing” as an affirmative defense in the underlying lawsuit by the

Condo Association. Had there been a duty to defend, the Developer’s argument might make

sense. See Express Valet, Inc. v. City of Chicago, 373 Ill. App. 3d 838, 855 (2007) (a reviewing

court is entitled to have the issues on appeal clearly defined and cohesive legal argument

presented). As there was no duty to defend, we must disregard this circular argument. Moreover,

the analysis above makes clear that the issue does not necessarily involve standing but the more

nuanced consideration of whether the underlying complaint sufficiently raised a theory of

recovery together with supporting facts that trigger potential coverage under the insurance
       7
        Tellingly, counsel for the Condo Association refused to answer the trial court’s question on this point.

                                                      12

No. 1-14-0862


policy. While the Condo Association might have had the capacity to represent the individual unit

owners, nowhere in the complaint did it purport to do so.

¶ 24   Therefore, we must also reject the Developer’s related argument that our determination

about “standing” has a preclusive effect as to the underlying lawsuit. The Developer cites legal

principles from Maryland Casualty Co. v. Peppers, 64 Ill. 2d 187 (1976), which was also a duty

to defend case in which an underlying lawsuit alleged alternative counts of intentional and

negligent conduct. The court for the declaratory action in Peppers had concluded the injury at

issue was intentionally inflicted, but the supreme court determined this finding on an “ultimate

fact” was premature and might preclude recovery under other theories in the underlying lawsuit.

Id. at 197. The Developer appears to draw an analogy here as to “standing.” We repeat that the

issue in this case is more nuanced than the Developer acknowledges, and determining whether a

complaint triggers a duty to defend with its allegations is far different from drawing a conclusion

on an issue of fact. This argument is also questionable given that the underlying complaint is no

longer being actively litigated. Regardless, “standing” is not a factual issue but a legal one, and

thus the Peppers principle cited by the Developer is demonstrably inapplicable.

¶ 25   Based on the foregoing, we also conclude the trial court did not err in granting Westfield

Insurance’s motion to reconsider the trial court’s initial judgment in favor of the Developer. The

Developer argues the trial court granted the motion to reconsider on a basis not raised in the

motion. We disagree. The motion to reconsider raised a number of issues, but significantly

incorporated Westfield Insurance’s legal memorandum supporting summary judgment. The

initial trial court judgment in favor of the Developer clearly was the product of a misapplication

of the law, and the trial court also expressed on the record that it did not fully analyze the present

case when it granted the initial summary judgment, thus warranting correction. Stevens v. Village



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No. 1-14-0862


of Oak Brook, 2013 IL App (2d) 120456, ¶ 37 (a court has the inherent authority to reconsider

and correct its rulings, and this power extends to interlocutory rulings as well as to final

judgments); Pence v. Northeast Illinois Regional Commuter R.R. Corp., 398 Ill. App. 3d 13, 16

(2010) (noting standards for motions to reconsider, and further that a trial court may deny a

motion for summary judgment and later change its position and grant the same motion).

¶ 26   Having determined there was no duty to defend the Developer in the underlying action,

we also affirm the trial court’s determination that there was no duty to indemnify. See Gust K.

Newberg Construction Co., 218 Ill. App. 3d at 966. We disregard the Developer’s request to stay

the indemnity issue. The Developer offered no legal citation to support its request, thus waiving

it. See Ill. S. Ct. R. 341(h)(7) (eff. Jan. 1, 2016) (points not argued are waived). Furthermore,

although a court should refrain from adjudicating issues of fact in an insurance declaratory action

that will have a preclusive effect in the underlying case (see United States Fidelity & Guaranty

Insurance Co. v. Jiffy Cab Co., 265 Ill. App. 3d 533, 537 (1994) (citing Murphy v. Urso, 88 Ill.

2d 444, 455 (1981))), nothing in the trial court’s determination that the Condo Association’s

complaint did not allege “property damage” within the meaning of the policy foreclosed the

litigation of any issue of fact relevant to the Developer’s liability for faulty workmanship. And,

in any event, because the Condo Association’s claims are no longer pending, the request is moot.

¶ 27                                  CONCLUSION

¶ 28   We affirm the judgment of the circuit court granting summary judgment in favor of

Westfield Insurance.

¶ 29   Affirmed.

¶ 30   JUSTICE PUCINSKI, dissenting.




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No. 1-14-0862


¶ 31   Regretfully, I cannot join in the majority’s decision, as the majority’s rationale and

holding are against several well-established principles and rules of law in the area of insurance

defense.

¶ 32   First, the majority analyzes the underlying complaint and the policies to determine

whether there is in fact coverage, which is appropriate only at a later stage when determining

indemnity. In reviewing the threshold matter whether there is a duty to defend, we examine the

underlying complaint and the insurance policies to determine whether there is the possibility of

recovery under the policies, not whether in fact there is indeed coverage. As has been long

established, the duty to defend is much broader than the duty to indemnify. Outboard Marine

Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 125 (1992). The duty-to-defend threshold

is “minimal”; the complaint need present only “a possibility,” not probability, of recovery under

the policy. Bituminous Casualty Corp. v. Gust K. Newberg Construction Co., 218 Ill. App. 3d

956, 960 (1991). “The duty to defend is much broader than the duty to indemnify because the

duty to defend is triggered if the complaint potentially falls within a policy’s coverage, whereas

the duty to indemnify is triggered only when the resulting loss or damage actually comes within

a policy’s coverage.” (Emphases omitted.) Country Mutual Insurance Co. v. Bible Pork, Inc.,

2015 IL App (5th) 140211, ¶ 16 (citing Stoneridge Development Co. v. Essex Insurance Co., 382

Ill. App. 3d 731, 741 (2008)).

¶ 33   The majority closely parses the underlying complaint and construes the insurance policy

not only narrowly but also against the insured to conclude there is no duty to defend. The correct

analysis actually is to do the opposite.

¶ 34   According to the majority, “the policy essentially requires an accidental event to trigger

coverage, yet there is nothing accidental alleged in the complaint,” thus ostensibly arguing that



                                               15

No. 1-14-0862


the allegations of the underlying complaint are not potentially within coverage for an

“occurrence.” Supra ¶ 18. The majority reasons that “[a]ny alleged damage to the common or

personal property was not an accident and therefore not the result of any occurrence.” Actually,

the policies define “occurrence” as “an accident, including continuous or repeated exposure to

substantially the same general harmful conditions.” The second amended complaint in the

underlying Association lawsuit alleges that there were construction defects in the roofing of the

development, which over time resulted in water infiltrating into the building, individual

condominium units, “and other property,” including damage to “personal and other property”

within the condominium units. The Association’s second amended complaint also alleges that

the water infiltration was caused by “the failure to complete the roofing system under the patio

concrete pavers and the failure to coat the top layer of fiberglass with hot asphalt.” As a result of

that failure, “any water that accumulated over the roof membrane for a long period of time

caused water to bleed through the existing roof membrane.” I do not read the word “accident” in

the policy definition of an occurrence as to exclude failures to perform certain acts. Further, the

policy definition of an occurrence explicitly includes “continuous or repeated exposure to

substantially the same general harmful conditions,” which is what is alleged.

¶ 35   The majority also concludes that the allegations of the Association lawsuit “do not fall

within the definition of property damage under the policy’s plain language,” and instead “sought

only to hold the Developer responsible for the shoddy workmanship of its roofing

subcontractor.” Supra ¶ 19. The majority further finds that the Association lawsuit alleged only

economic damages for the repair of the roof, and not property damage. But the Association’s

second amended complaint does allege property damage under the policies. The policy defines

“property damage” as “[p]hysical injury to tangible property, including all resulting loss of use



                                                 16

No. 1-14-0862


of that property. All such loss of use shall be deemed to occur at the time of the physical injury

that caused it.” The second amended complaint in the underlying Association lawsuit alleges that

the construction defects in the roofing resulted in water infiltrating into the building into

individual condominium units, “and other property,” including damage to “personal and other

property” within the condominium units. The complaint thus alleged “[p]hysical injury to

tangible property” that is within primary coverage of Westfield’s policies. I note that at the

hearing on the motions below, Westfield acknowledged that the Association complaint alleged

damage to personal property. Westfield chose to argue instead that the Association did not have

standing to assert these claims for damage to the personal property of the condominium unit

owners.

¶ 36   The majority finds that the allegations in the Association lawsuit “were meant to simply

bolster the contention that water infiltration generally occurred and caused damages,” meanwhile

conceding that allegations of construction defects that damage something other than the project

itself can constitute an occurrence and property damage. The majority minimizes the allegations

of property damage to the personal and other property of the unit owners as “purely tangential”

to the Association’s claim for damages for repair and remediation of the roof. The majority’s

only citation to support this “purely tangential” analysis of the allegations in the underlying

complaint is to Diamond State, but Diamond State did not cite any authority for this lone

statement. See Diamond State, 243 Ill. App. 3d at 477 (“Appellant’s proposed interpretation

would distort the meaning of this provision and extend its reach so as to provide coverage for

any liability where bodily injury is a tangential factor.”). I can find no other reported Illinois case

that has used such an analysis. Also, Diamond State is not even on point because it involved

purely economic losses as a result of the diminished productivity of the insured’s workers under



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a claim for bodily injury. In this case we are presented with a claim for property damage, not

bodily injury, and we are presented with allegations seeking damages for property damage, not

purely economic loss. The fact that monetary damages are sought to also repair the roof does not

transform this case into an economic loss case. The damages alleged are property damages,

which include alleged property damage to the personal and other property of the individual

condominium unit owners.

¶ 37   An insurer’s duty to defend does not hinge on the draftsmanship in the underlying

complaint of the relative amount of damages sought for particular injuries, and clearly alleged

allegations of property damages are not disregarded as “purely tangential” to other allegations.

“ ‘The question of coverage should not hinge on the draftsmanship skills or whims of the

plaintiff in the underlying action.’ ” Illinois Emcasco Insurance Co. v. Northwestern National

Casualty Co., 337 Ill. App. 3d 356, 361 (2003) (quoting International Insurance Co. v. Rollprint

Packaging Products, Inc., 312 Ill. App. 3d 998, 1007 (2000)). “[T]he duty to defend does not

require that the complaint allege or use language affirmatively bringing the claims within the

scope of the policy.” Rollprint Packaging Products, Inc., 312 Ill. App. 3d at 1007. “ ‘The

insurer’s duty to defend does not depend upon a sufficient suggestion of liability raised in the

complaint; instead, the insurer has the duty to defend unless the allegations of the underlying

complaint demonstrate that the plaintiff in the underlying suit will not be able to prove the

insured liable, under any theory supported by the complaint, without also proving facts that show

the loss falls outside the coverage of the insurance policy.’ ” American Economy Insurance Co.

v. Holabird & Root, 382 Ill. App. 3d 1017, 1022 (2008) (quoting Illinois Emcasco Insurance

Co., 337 Ill. App. 3d at 361). See also Farmers Automobile Insurance Ass’n v. Danner, 2012 IL

App (4th) 110461.



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¶ 38   Further, “ ‘[a]s the threshold for pleading a duty to defend is low, any doubt with regard

to such duty is to be resolved in favor of the insured.’ ” Holabird & Root, 382 Ill. App. 3d at

1023 (quoting United Services Automobile Ass’n v. Dare, 357 Ill. App. 3d 955, 963 (2005)).

Under Illinois law, even one potentially viable theory of recovery is enough to trigger the duty to

defend. See Pekin Insurance Co. v. XData Solutions, Inc., 2011 IL App (1st) 102769, ¶ 7 (there

is a duty to defend even if only one of several alleged theories of recovery falls within potential

coverage).

¶ 39   I also disagree with the majority’s analysis of the standing issue. The majority dismisses

the Developer’s argument regarding standing as “circular” and contends that the real issue is the

“more nuanced consideration of whether the underlying complaint sufficiently raised a theory of

recovery.” Supra ¶ 23. But the majority makes the same argument as Westfield, that the

individual unit owners were not parties to the Association lawsuit and that the Association did

not purport to act on behalf of the individual unit owners. Whether an individual or entity is a

proper party to assert rights is indeed an issue regarding standing, and the Association did not

have to plead or prove its own standing. See Lebron v. Gottlieb Memorial Hospital, 237 Ill. 2d

217, 252 (2010) (“[L]ack of standing is an affirmative defense, which is the defendant’s burden

to plead and prove.”). Section 9.1(b) of the Illinois Condominium Property Act explicitly

provides that the board of managers of a condominium association “shall have standing and

capacity to act in a representative capacity in relation to matters involving the common elements

or more than one unit, on behalf of the unit owners, as their interests may appear.” 765 ILCS

605/9.1(b) (West 2002). This issue is thus a red herring. While the majority uses the issue of

proper parties and standing as a coverage issue, as Westfield does, it is in fact an affirmative




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defense to be raised in the underlying litigation, and not either an exclusion in the policy or a

basis to decline a tender of defense.

¶ 40   In Milwaukee Mutual Insurance Co. v. J.P. Larsen, Inc., 2011 IL App (1st) 101316, this

court held that the insurer had a duty to defend a construction defect claim based upon

allegations of damage to the personal property of condominium unit owners. Unlike the cases

cited by the majority, Milwaukee Mutual is on all fours with this case and should govern the

outcome here.

¶ 41   There is no ground for an insurer to reject a tender of defense where there is potential

liability on the basis of an affirmative defense available to its insured. The only appropriate

action for an insurer in such a circumstance is to defend its insured and then raise that affirmative

defense on behalf of its insured. See Illinois Emcasco Insurance Co., 2013 IL App (1st) 120735,

¶ 22. In Illinois Emcasco Insurance Co., this court rejected an attempt by the insurer to limit its

insured’s right to a defense based on a defense in the underlying action. The plaintiff insurer

argued in a declaratory judgment action that the court should rule it had no duty to defend its

insured by arguing that the general contractor may not have retained sufficient control so as to be

vicariously liable for the subcontractor’s negligence. This court held, however, that “at this

juncture, the question is not whether Waukegan is vicariously liable. Rather, the issue is whether

Emcasco has a duty to defend Waukegan because it could potentially be found vicariously liable

for Walls’ injuries.” (Emphasis in original.) Illinois Emcasco Insurance Co., 2013 IL App (1st)

120735, ¶ 22. I agree with the Developer that if there is a potentially meritorious defense to the

Association lawsuit, such as standing, Westfield should have defended the claim and raised the

defense.




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¶ 42    Finally, I find it instructive that Westfield chose to defend Total Roofing in the

Association lawsuit, as Westfield must have determined that the complaint triggered its duty to

defend Total Roofing. The circuit court below initially also found this fact instructive in its first

ruling in favor of the Developer, before it granted Westfield’s motion to reconsider and entered

judgment in favor of Westfield. Why Westfield accepted Total Roofing’s tender of defense but

rejected the Developer’s tender of defense is inexplicable, as the same allegations are involved,

in the same complaint, under the same policies, and the Developer was an additional insured

under the same policies. While the majority questions whether the Developer was an additional

insured after the operations were completed, the policy contained an additional insured

endorsement that did not terminate the Developer’s additional insured status upon completed

operations. I believe the circuit court had it right the first time. I would reverse.




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