                                                                           Digitally signed by
                                                                           Reporter of Decisions
                           Illinois Official Reports                       Reason: I attest to the
                                                                           accuracy and
                                                                           integrity of this
                                                                           document
                                   Appellate Court                         Date: 2017.09.18
                                                                           08:59:47 -05'00'




  Pekin Insurance Co. v. AAA-1 Masonry & Tuckpointing, Inc., 2017 IL App (1st) 160200



Appellate Court       PEKIN INSURANCE COMPANY Plaintiff-Appellant, v. AAA-1
Caption               MASONRY & TUCKPOINTING, INC., and EMIL PIEKUTOWSKI,
                      Defendants (Scottsdale Insurance Company, Intervenor-Appellee).



District & No.        First District, Fifth Division
                      Docket No. 1-16-0200



Filed                 May 19, 2017



Decision Under        Appeal from the Circuit Court of Cook County, No. 14-CH-1303; the
Review                Hon. Moshe Jacobius, Judge, presiding.



Judgment              Affirmed.


Counsel on            Robert Marc Chemers and Richard M. Burgland, of Pretzel & Stouffer
Appeal                Chtrd., of Chicago, for appellant.

                      Jonathan L. Schwartz and Colin B. Willmott, of Goldberg Segalla, of
                      Chicago, for appellee.



Panel                 JUSTICE HALL delivered the judgment of the court with opinion.
                      Presiding Justice Gordon and Justice Lampkin concurred in the
                      judgment and opinion.
                                             OPINION

¶1       This appeal arises out of an insurance coverage dispute involving a personal injury action
     (Underlying Suit) filed on September 16, 2013, by Emil Piekutowski against defendants
     AAA-1 Masonry & Tuckpointing, Inc. (AAA), Chicago Scaffolding, Inc. (CSI), Lakeshore
     Land Ventures LLC, Hilco Management, Inc., and Hilco Realty Management, Inc.
     Piekutowski v. AAA-1 Masonry & Tuckpointing, No. 13-L-10341 (Cir. Ct. Cook Co.).
     Plaintiff, Pekin Insurance Company (Pekin) filed its initial declaratory action against AAA
     seeking a declaration that it owed no duty to defend AAA in the Underlying Suit.
     Subsequently, intervenor, Scottsdale Insurance Company (Scottsdale), intervened in the
     declaratory action and filed a counterclaim seeking a declaration from the circuit court that (1)
     Pekin has a duty to defend AAA in the Underlying Suit pursuant to the policy entered into
     between Pekin and its named insured Alpha 1 Construction Inc. (Alpha), whereby AAA was
     named an additional insured and (2) that Pekin owed Scottsdale reimbursement for costs
     incurred defending AAA. The parties submitted cross-motions for summary judgment, and the
     circuit court entered judgment in favor of Scottsdale on both counts on December 22, 2015. On
     January 21, 2016, the circuit court granted Pekin’s motion for a finding pursuant to Rule 304(a)
     of the Illinois Supreme Court Rules (Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010)). As a result,
     Pekin filed its timely notice of appeal on January 21, 2016.

¶2                                         BACKGROUND
¶3                                        A. The Pekin Policy
¶4        AAA and Alpha entered into an agreement for construction services and labor on August 6,
     2007 (Subcontract). In the Subcontract, Alpha agreed to name AAA as an additional insured
     on its commercial general liability insurance policy. The Subcontract stated that Alpha was an
     independent contractor of AAA and that Alpha was to maintain full control over its respective
     crews, employees, assistants, helpers, and workers. The Subcontract further provided that the
     work was to be performed solely by Alpha and not by AAA.
¶5        Pekin issued a policy of insurance to Alpha as named insured for the effective policy period
     of June 1, 2012, to June 1, 2013. The policy contained an “additional insured” endorsement,
     which provided that an additional insured was “any person or organization for whom you are
     performing operations, when you and such person or organization have agreed in a written
     contract effective during the policy period *** that you must add that person or organization as
     an additional insured on a policy of liability insurance.” The endorsement further provided that
     additional insureds were covered “only with respect to vicarious liability for ‘bodily injury’ or
     ‘property damage’ imputed from [the named insured] to the Additional Insured as a proximate
     result of your ongoing operations performed for that Additional Insured during the Policy
     Period.” The endorsement specifically excluded liability “arising out of or in any way
     attributable to the claimed negligence or statutory violation of the Additional Insured, other
     than vicarious liability which is imputed to the Additional Insured solely by virtue of the acts
     or omissions of the Named Insured.”




                                                 -2-
¶6                                     B. Piekutowski Complaint
¶7         In the Underlying Suit, Alpha is not named as a defendant; however, Piekutowski alleges
       that on September 20, 2011, prior to and at the time of his injury, the defendants “individually
       and by and through agents, servants and employees,” owned and/or were in charge of the
       construction of a building located at 2930 North Commonwealth Avenue in Chicago. On that
       date, Alpha and AAA were operating under the Subcontract regarding the construction, and
       Piekutowski was employed by Alpha and performing work at the construction site when he fell
       from a scaffold and sustained permanent injuries.
¶8         Piekutowski alleged that defendants, individually and through agents, servants and
       employees, “participated in coordinating work being done and designated various work
       methods, maintained and checked work progress and participated in the scheduling of the work
       and the inspection of the work,” and were responsible for complying with standards
       promulgated by the Occupational Safety and Health Administration (OSHA). The complaint
       further alleges that defendants had the authority to stop the work, refuse the work and
       materials, and order changes in the work in the event the work was being performed in a
       dangerous manner or for any other reason. Piekutowski goes on to allege numerous “careless
       and negligent acts and/or omissions” on the part of the named defendants of which he claims
       one or more was a proximate cause of his injuries.

¶9                                    C. CSI Third-Party Complaint
¶ 10       On September 18, 2014, CSI filed a third-party complaint against Alpha seeking
       contribution. CSI alleged that AAA “rented equipment, including a swing stage and supporting
       equipment from [CSI],” and that Piekutowski was using the swing stage and supporting
       equipment in furtherance of his work when he was injured. The CSI complaint goes on to
       allege a number of negligent acts or omissions on the part of Alpha, that Alpha had a duty to
       Piekutowski to supervise and provide a safe work environment, that Alpha was responsible for
       the work being performed pursuant to OSHA standards, and that “the alleged damages
       suffered by [Piekutowski] were directly and proximately caused by the negligent and careless
       acts of [Alpha].”

¶ 11                              D. Pekin Declaratory Judgment Action
¶ 12       On August 17, 2012, Scottsdale, AAA’s general liability insurance provider, tendered
       AAA’s defense of the Underlying Suit to Pekin pursuant to the terms of the Pekin policy; that
       same day, Scottsdale also tendered CSI’s defense to Pekin on behalf of CSI. XL Insurance
       Company is CSI’s general liability insurance provider and it tendered CSI’s defense to
       Scottsdale. Scottsdale maintained the position that it had no duty to defend CSI in the
       Underlying Suit.1
¶ 13       On November 7, 2012, Pekin rejected Scottsdale’s tender of AAA’s defense on the
       grounds that it did not believe its duty to defend AAA was triggered where AAA was not sued
       for damages stemming from Alpha’s acts or omissions. On January 23, 2014, Pekin filed its

           1
            The matter of Scottsdale’s duty to defend CSI was the subject of a separate declaratory action in
       federal court where the district court held that Scottsdale did in fact have a duty to defend CSI in the
       Underlying Suit. Scottsdale Insurance Co. v. Chicago Scaffolding, Inc., No. 14 C 4268, 2015 WL
       4751136 (N.D. Ill. Aug. 11, 2015), appeal dismissed, No. 15-2975 (7th Cir. Apr. 26, 2016).

                                                      -3-
       complaint for declaratory judgment against AAA and Piekutowski, seeking a declaration that
       Pekin had no duty to defend AAA in the Underlying Suit. Pekin alleged, inter alia, that it had
       no duty to defend AAA as an additional insured because Piekutowski sued AAA for its own
       negligence and the additional insured endorsement specifically excludes coverage for the
       negligence of the additional insured.
¶ 14       On May 23, 2014, AAA filed its answer and cross-complaint for declaratory judgment,
       seeking a declaration that Pekin had a duty to defend AAA in the Underlying Suit. On July 11,
       2014, Scottsdale moved to intervene, and on August 5, 2014, the circuit court granted
       Scottsdale’s motion and ordered Scottsdale to file instanter its answer and counterclaim for
       declaratory judgment.
¶ 15       In its counterclaim, Scottsdale alleged that it had undertaken AAA’s defense in the
       Underlying Suit and sought declarations (1) that Pekin had a duty to defend AAA, (2) that
       Pekin has a duty to indemnify AAA, (3) that the Pekin policy is primary and noncontributory,
       and (4) that Scottsdale was entitled to reimbursement of defense costs and expenses in
       connection with providing AAA a defense in the Underlying Suit.
¶ 16       On July 26, 2015, Scottsdale filed its motion for summary judgment which included the
       following attached to it: CSI’s third party complaint for contribution, CSI’s answers to
       interrogatories from the Underlying Suit, the Subcontract, and a note from the Pekin claim file
       dated September 11, 2012. The note stated that:
                   “Alpha loaded masonry bricks mortar and an I beam on the swing stage scaffolding
               and began raising it from ground level to the 6th floor. While the scaffolding was in
               transit to the top level of the building the scaffolding allegedly shifted and apparently
               caused an I beam support rail to come loose and fall forward striking the
               lefthand/foratm [sic].”
¶ 17       On July 28, 2015, Pekin filed a cross-motion for summary judgment. On December 22,
       2015, after hearing oral argument, the circuit court granted Scottsdale’s motion for summary
       judgment and denied Pekin’s cross-motion. The circuit court found that AAA was entitled to a
       defense from Pekin because the facts pleaded in Piekutowski’s complaint, taken together with
       the facts in CSI’s third-party complaint, created the potential that AAA could be found liable
       based on Alpha’s negligent acts or omissions. In response, Pekin timely appealed that
       judgment.

¶ 18                                             ANALYSIS
¶ 19       The dispositive issue on appeal is whether Pekin’s duty to defend AAA as an additional
       insured was triggered. Pekin maintains that the circuit court erred when it determined that it
       had a duty to defend AAA on the grounds that the allegations contained in CSI’s third-party
       complaint and Piekutowski’s complaint raised the potential that liability could be imputed to
       AAA solely from negligent acts or omissions by Alpha. Even assuming arguendo that CSI’s
       third-party complaint was considered in error, we find that other true but unpleaded facts are
       sufficiently present in the instant case to affirm the circuit court’s judgment.

¶ 20                                      A. Standard of Review
¶ 21       On appeal, a reviewing court may affirm the trial court’s ruling for any reason supported by
       the record regardless of the basis relied upon by the trial court. In re Marriage of Loomis, 348


                                                   -4-
       Ill. App. 3d 972, 974 (2004) (citing Scassifero v. Glaser, 333 Ill. App. 3d 846, 860 (2002)). The
       instant case involves the circuit court’s ruling on cross-motions for summary judgment.
       Summary judgment is appropriate where the pleadings, depositions, and admissions on file,
       together with any affidavits and exhibits, when viewed in the light most favorable to the
       nonmoving party, indicate there is no genuine issue of material fact and the moving party is
       entitled to judgment as a matter of law. Pekin Insurance Co. v. United Contractors Midwest,
       Inc., 2013 IL App (3d) 120803, ¶ 22. We review cases involving summary judgment de novo.
       Id.

¶ 22                                             B. Discussion
¶ 23        It is well established that, in a declaratory judgment action such as the case at bar, where
       the issue is whether the insurer has a contractual duty to defend pursuant to an insurance
       policy, a court ordinarily looks first to the allegations in the underlying complaint and
       compares those allegations to the relevant provisions of the insurance policy. Id. ¶ 21. An
       insurer may not justifiably refuse to defend an action against its insured unless it is clear from
       the face of the underlying complaint that the allegations fail to state facts that bring the case
       within, or potentially within, the policy’s coverage. Id. Therefore, if the facts alleged in the
       underlying complaint fall within, or potentially within, the policy’s coverage, the insurer’s
       duty to defend arises. Id. “ ‘The insurer’s duty to defend is much broader than its duty to
       indemnify its insured.’ ” American Economy Insurance Co. v. DePaul University, 383 Ill. App.
       3d 172, 178 (2008) (quoting Crum & Forster Managers Corp. v. Resolution Trust Corp., 156
       Ill. 2d 384, 393-94 (1993)). The threshold for pleading a duty to defend is low, and any doubt
       with regard to such duty is to be resolved in favor of the insured. United Services Automobile
       Ass’n v. Dare, 357 Ill. App. 3d 955, 963 (2005). “[I]nsurance policies are to be liberally
       construed in favor of coverage, and where an ambiguity exists in the insurance contract, it will
       be resolved in favor of the insured and against the insurer.” Id. at 963-64. “Provisions in an
       insurance policy that limit or exclude coverage are also construed liberally in favor of the
       insured and against the insurer.” Id. at 964.
¶ 24        Although a court ordinarily begins its analysis by examining the underlying complaint, a
       court is not limited to the allegations in the complaint in determining whether an insurer has a
       duty to defend. Pekin Insurance Co. v. Pulte Home Corp., 404 Ill. App. 3d 336, 340 (2010).
       The Illinois Supreme Court declined to “limit the source of an insurer’s duty to defend ‘solely’
       to the content of the underlying complaint in all cases.” Pekin Insurance Co. v. Wilson, 237 Ill.
       2d 446, 458 (2010). Under certain circumstances, it is proper for the court to examine evidence
       beyond that contained in the underlying complaint to determine the insurer’s duty to defend.
       Id. at 462. One such circumstance is where the insurer possesses knowledge of true but
       unpleaded facts that, when taken together with the allegations in the complaint, indicate that
       the claim is within or potentially within the policy coverage. Shriver Insurance Agency v.
       Utica Mutual Insurance Co., 323 Ill. App. 3d 243, 247 (2001) (citing Indiana Insurance Co. v.
       Hydra Corp., 245 Ill. App. 3d 926, 929 (1993)). The only time such evidence should not be
       permitted is when it tends to determine an issue crucial to the determination of the underlying
       lawsuit. Fidelity & Casualty Co. of New York v. Envirodyne Engineers, Inc., 122 Ill. App. 3d
       301, 305 (1983).
¶ 25        In the present case, Scottsdale contends that the true but unpleaded facts doctrine allows
       full consideration of Pekin’s claim note and that, when taken together with the allegations in

                                                   -5-
       the underlying complaint, they trigger Pekin’s duty to defend AAA. Pekin contends that the
       claim note does not trigger its duty to defend because the note does not state or suggest that
       Alpha was negligent. We find Pekin’s argument unpersuasive. The question this court must
       answer is not whether the note taken by itself states or suggests that Alpha was negligent but
       whether the note, when taken together with the allegations in the underlying complaint,
       indicates that the claim is within or potentially within the policy coverage. See Shriver, 323 Ill.
       App. 3d at 247.
¶ 26        Alpha’s insurance policy names AAA as an additional insured and covers circumstances
       where vicarious liability for bodily injury or property damage is imputed from Alpha to AAA
       solely by virtue of Alpha’s acts or omissions. The Subcontract between Alpha and AAA states
       that Alpha, rather than AAA, was solely responsible for performing the work at the
       construction site, and the parties agreed Alpha was to maintain full control over its respective
       crews, employees, assistants, helpers, and workers. The parties do not dispute that Piekutowski
       was employed by Alpha at the time of his injury. According to Pekin, it was informed that “(1)
       Alpha loaded bricks, mortar and an I-beam onto a swing stage scaffolding; (2) Alpha raised the
       swing stage scaffolding from ground level; (3) and that during transit, the scaffolding shifted,
       causing an I-beam to come loose and fall forward, striking the left hand/forearm of
       Piekutowski.” Piekutowski’s complaint alleged that his injuries were proximately caused by
       careless or negligent acts, which included in pertinent part: failing to safely place or operate
       scaffolding, failing to adequately secure the scaffolding, and allowing the scaffolding to be
       inadequately secured. Piekutowski raised his allegations solely against the named defendants;
       however, when read in conjunction with Pekin’s claim note and the terms of the Subcontract,
       they create the possibility that AAA could be found liable for Piekutowski’s injuries based on
       Alpha’s careless or negligent operation of the swing stage scaffolding.
¶ 27        On appeal, Pekin attempts to distinguish the reviewing court’s decision in American
       Economy Insurance Co. v. DePaul University, 383 Ill. App. 3d 172 (2008), from the instant
       case; however, we find the rationale utilized in that case to be instructive. In American
       Economy, Caroline Cogtella filed a lawsuit against defendants DePaul University (DePaul),
       L&L Engineers, and Holabird & Root (H&R), alleging that she suffered bodily injury due to
       her exposure to the fluorescent lighting selected and installed in DePaul’s Goldblatt building.
       Id. at 173. Subsequently, DePaul tendered its defense of Cogtella’s complaint to plaintiff
       American Economy Insurance Company (American Economy) because American Economy
       was the insurer of Metrick Electric Company (Metrick). Id. Metrick was the electrical
       subcontractor that was hired to install the lighting at the Goldblatt building, and DePaul was a
       named additional insured on Metrick’s insurance policy. Id. American Economy denied
       coverage and filed a declaratory judgment action as to its duty to defend in the Cogtella
       litigation. The circuit court, in considering cross-motions for summary judgment, held that
       American Economy had an obligation to defend DePaul in the Cogtella litigation. Id. On
       appeal, the reviewing court applied the same rationale utilized in the related declaratory
       judgment action American Economy had against H&R by reiterating “ ‘that in addition to the
       third-party complaint, true but unpleaded facts should have alerted American Economy to the
       possibility that the Cogtella complaint against H&R was potentially within the coverage of
       Metrick’s policy.’ ” Id. at 181 (quoting American Economy Insurance Co. v. Holabird &
       Root, 382 Ill. App. 3d 1017, 1034 (2008)). The reviewing court came to this conclusion after
       reviewing Cogtella’s complaint together with the terms of Metrick’s subcontract. Id. at 182.


                                                    -6-
       The subcontract provided that Metrick was responsible for the construction of the complete
       operating electrical system. Id. The Cogtella complaint against DePaul alleged that she was
       injured because of the selection and installation of fluorescent lighting without UV diffusers.
       Id. The reviewing court found that American Economy knew Metrick installed the fluorescent
       lighting because American Economy represented Metrick in the underlying litigation. Id.
       Consequently, the reviewing court affirmed the circuit court and found the allegations in the
       complaint, taken together with the true but unpleaded facts contained in the record, were
       sufficient to trigger American Economy’s duty to defend. Id.
¶ 28       In the present case, the Subcontract states that Alpha, rather than AAA, is solely
       responsible for the work at the construction site. Piekutowski’s complaint alleges, inter alia,
       that he was injured by careless or negligent acts relating to the operation of the swing stage
       scaffolding. Furthermore, the claim note, taken from Pekin’s claim file and dated September
       11, 2012, states that Piekutowski was injured during Alpha’s operation of the swing stage
       scaffolding. Therefore, prior to November 7, 2012, when Pekin rejected Scottsdale’s tender of
       AAA’s defense, Pekin should have been alerted that Piekutowski’s complaint against AAA
       was potentially within the coverage of Alpha’s policy. See La Rotunda v. Royal Globe
       Insurance Co., 87 Ill. App. 3d 446, 452 (1980) (finding the results of the insurance company’s
       own investigation may be considered as unpleaded facts known to the insurer, which indicate
       that the claim was potentially within the policy’s coverage). “ ‘To hold otherwise would allow
       the insurer to construct a formal fortress of the third party’s pleadings and to retreat behind its
       walls, thereby successfully ignoring true but unpleaded facts within its knowledge that require
       it, under the insurance policy, to conduct the putative insured’s defense.’ ” Id. (quoting
       Associated Indemnity Co. v. Insurance Co. of North America, 68 Ill. App. 3d 807, 816-17
       (1979)).
¶ 29       Based on the foregoing facts, we find that the allegations in Piekutowski’s complaint, when
       taken with the facts in Pekin’s claim note and the terms of the Subcontract, raise the possibility
       that liability could be imputed to AAA as a result of Alpha’s operation of the scaffolding swing
       stage; therefore, Pekin’s duty to defend AAA under the additional insured endorsement was
       triggered. We also note that consideration of these true but unpleaded facts does not determine
       any issue crucial to the Underlying Suit. Accordingly, we find the circuit court properly
       held that Pekin has a duty to defend AAA, and we affirm the decision of the circuit court of
       Cook County.

¶ 30      Affirmed.




                                                    -7-
