                                                                     FOURTH DIVISION
                                                                     DECEMBER 28, 2006




No. 1-05-1881


HARTFORD FIRE INSURANCE COMPANY,                              )      Appeal from the
     Plaintiff-Appellee,                                      )      Circuit Court of
                                                              )      Cook County.
                v.                                            )
                                                              )
EVEREST INDEMNITY INSURANCE COMPANY,                          )      No. 04 CH 12241
     Defendant-Appellant                                      )
                                                              )
                                                              )
(U.S. Equities Asset Management, LLC, and                     )
69 W. Washington Management Co., LLC.,                        )      Honorable
                                                              )      Richard J. Billik,
       Defendants-Appellees).                                 )      Judge Presiding.


        JUSTICE CAMPBELL delivered the opinion of the court:

       Defendant Everest Indemnity Insurance Co. (Everest) appeals an order of the circuit court

of Cook County, granting partial summary judgment in favor of plaintiff Hartford Fire Insurance

Co. (Hartford) in a declaratory judgment action relating to a series of underlying lawsuits filed

against defendants East Lake Management and Development Corp.,1 U.S. Equities Asset

Management, LLC, and 69 W. Washington Management Co., LLC, following an October 17,

2003, fire at the building located at 69 W. Washington Street in Chicago, Illinois.




       1
           East Lake Management and Development Corp. was dismissed from the underlying

lawsuits prior to the filing of the motion for summary judgment at issue here, but the trial court's

ruling addresses its defense obligations.
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       The record on appeal discloses that Hartford issued a special multiflex policy to U.S.

Equities for the policy period from February 28, 2003, to February 28, 2004. U.S. Equities, 69

W. Washington and East Lake qualify as insureds under this policy, which provides for a $1

million per-occurrence limit and a general aggregate limit of $2 million.

       Endorsement CG 22 70 11 85 of the Hartford policy provides in relevant part as follows:

               "With respect to your liability arising out of your management of

               property for which you are acting as a real estate manager this

               insurance is excess over any other valid and collectible insurance

               available to you."

The Hartford policy also contains the following language:

               "4. Other Insurance

               ***

                      b. Excess Insurance

                              This insurance is excess over:

                              ***

                              (2) Any other primary insurance available to the

                              insured covering liability for damages arising out of

                              the premises or operations for which the insured has

                              been added as an additional insured by attachment or

                              an endorsement."

       Everest issued a policy to Aargus Security Services, Inc. (Aargus), for the policy period

from December 1, 2002, to December 1, 2003. The Everest policy provides commercial general



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liability coverage with limits similar to those of the Hartford policy. By endorsement, the Everest

policy provides the following additional insured coverage:

       "BLANKET WHERE REQUIRED BY CONTRACT

               A. Section II – Who is An Insured is amended to include as an

               insured the person or organization shown in the Schedule, but only

               with respect to liability arising out of your ongoing operations

               performed for that insured."

The schedule refers back to the declarations, which name U.S. Equities, 69 W. Washington and

East Lake as additional insureds.

       The Everest policy also provides as follows:

       A. Paragraph a. Primary Insurance of No. 4 Other Insurance of SECTION IV

       COMMERCIAL GENERAL LIABILITY CONDITIONS is replaced by the following:

               a. Primary Insurance

                      Insurance is primary except when b. below applies. If this

                      insurance is primary, our obligations are not affected unless

                      any of the other insurance is also primary. Then, we will

                      share with all that other insurance by the method described

                      in c. below, except that we will not seek contribution from

                      any party with whom you have agreed in a written contract

                      or agreement that this insurance will be primary and non-

                      contributory, if the contract was made prior to the subject

                      'occurrence' or offense."



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       On April 1, 2002, Aargus entered into a security contract with 69 W. Washington

(Security Contract), which included labor, supervision and management services to help protect

the building and its tenants against fire, theft, damage and trespassing. The Security Contract

provides in part as follows:

               "5. Insurance:

                       a. Service Contractor [Aargus] shall be required to satisfy

                       such insurance requirements as are set forth in Exhibit D,

                       which is attached hereto and incorporated by reference

                       herein. Without limiting the generality of the foregoing,

                       Contractor [Aargus] shall deliver Certificates of Insurance

                       reflecting the existence of insurance coverages as set forth

                       in Exhibit D and naming Manager [69 W. Washington] as

                       an additional insured as set forth in Exhibit D.

Exhibit D to the Security Contract provides in part as follows:

                                "INSURANCE REQUIREMENTS

               A. Service Contractor [Aargus] shall purchase and maintain the

               following insurance coverages and limits of liability:

               ***

                       2. Commercial General Liability Insurance with a limit of

                       liability of not less that $1 million each occurrence in

                       aggregated combined single limit for bodily injury and

                       property damage. The policy shall include Broad Form

                       Blanket Liability Coverage, Personal Injury Coverage,

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                   Independent Contractors Coverage, Broad Form Property

                   Damage (including 'Completed Operations'), Blanket

                   Explosion, Collapse and Underground Hazards Coverage,

                   and Products – Completed Operations Coverage, which

                   must be maintained for two (2) years after Final acceptance

                   of the Work.

            If the 1986 (or later) ISO Commercial General Liability Form is

            used, a per project annual aggregate is required.

                                             ***

            B. The insurance coverages described above shall be in the name of

            the Service Contractors [Aargus]; provided, however, the policies

            described in Items 1-4 above shall name as additional insureds each

            Owner and Manager and their respective officers, employers,

            agents and other such parties in interest as Owner may require.

            Such entities are as follows:

            Additional Insured Entities: 4

            1. County of Cook, its Commissioners, employees and agents,

            individually and collectively

            2. 69 W. Washington Management Co., L.L.C.

            3. U.S. Equities Asset Management, L.L.C.

            4. East Lake Management & Development Corp.

            It is further understood that any insurance carried independently by

            the additional insured shall be excess, and non-contributory for any

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               liability arising directly or indirectly from the project. It is further

               agreed that the coverage afforded to an additional insured shall not

               apply to the sole negligence of the Additional Insured."

        Following the October 17, 2003, fire at the building located at 69 W. Washington Street,

21 lawsuits were filed naming Aargus, U.S. Equities, 69 W. Washington and East Lake as

defendants (underlying lawsuits). The underlying lawsuits allege both direct and derivative

liability on the part of U.S. Equities, 69 W. Washington and East Lake.

        On October 31, 2003, U.S. Equities, 69 W. Washington and East Lake tendered the

underlying lawsuits to both Hartford and Everest, seeking defense and indemnity. On March 10,

2004, Everest accepted the defense of U.S. Equities and 69 W. Washington, subject to a reserva-

tion rights, stating that if the facts ultimately proved show that the liability of U.S. Equities and

69 W. Washington did not arise out of the ongoing operations of Aargus, Everest had no

coverage obligation under its policy. Everest later acknowledged a defense obligation to East

Lake.

        On July 29, 2004, Hartford filed this declaratory judgment action, seeking a declaration

that Everest had the primary duty to defend against the underlying lawsuits, and pay all sums

associated with their defense of the underlying lawsuits. Hartford also sought a declaration that

its policy was excess to the Everest policy and thus owed no duty to defend or indemnify until the

Everest policy was exhausted. Hartford further sought reimbursement of sums it already paid to

defend the additional insureds.

        On October 14, 2004, Hartford moved for partial summary judgment on the above issues.

On November 16, 2004, Everest filed its opposition to partial summary judgment, arguing that:

the claims alleged against U.S. Equities, 69 W. Washington and East Lake based on their sole

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negligence trigger only the Hartford policy; the claims of derivative liability are the only claims

requiring an analysis of the "other insurance" language in the Hartford and Everest policies; and

where two carriers each owe a complete defense to the insureds, the defense should be shared.

On February 2, 2005, the circuit court granted Hartford partial summary judgment. On May 3,

2005, the trial court granted Everest's motion for a finding that there was no reason to delay

enforcement or appeal of the prior order under Illinois Supreme Court Rule 304(a) (210 Ill. 2d R.

304(a)). This appeal followed.

                                                 I

       We begin by addressing the applicable standard of review. Summary judgment is

appropriate only where the pleadings, depositions, admissions, and affidavits on file show that

there is no genuine issue of material fact and that the moving party is entitled to judgment as a

matter of law. 735 ILCS 5/2-1005(c) (West 2004). In making this determination, the evidence

must be construed strictly against the moving party and liberally in favor of the nonmoving party.

Travelers Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill. 2d 278, 292, 757 N.E.2d 481

(2001). The construction of an insurance policy provision is a question of law that can be

properly decided on a motion for summary judgment. Crum & Forster Managers Corp. v.

Resolution Trust Corp., 156 Ill. 2d 384, 391, 620 N.E.2d 1073 (1993). We review de novo a

grant of summary judgment. General Casualty Insurance Co. v. Lacey, 199 Ill. 2d 281, 284, 769

N.E.2d 18 (2002).

                                                 II

       On appeal, Everest claims that the trial court erred in applying an analysis of the "other

insurance" language in the two policies to all of the claims in the underlying complaints to

conclude that Everest had the primary duty to defend against all of them. An insurer's duty to

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defend its insured is much broader than its duty to indemnify its insured. Outboard Marine Corp.

v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 125, 607 N.E.2d 1204 (1992). 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 set forth in that complaint fail to state facts that bring the

case within or potentially within the insured's policy coverage. United States Fidelity & Guaranty

Co. v. Wilkin Insulation Co., 144 Ill. 2d 64, 73, 578 N.E.2d 926 (1991). A court must compare

the allegations in the underlying complaint to the policy language in order to determine whether

the insurer's duty to defend has arisen. Outboard Marine, 154 Ill. 2d at 125. If the underlying

complaint alleges facts within or potentially within policy coverage, an insurer is obligated to

defend its insured even if the allegations are groundless, false or fraudulent. Dixon Distributing

Co. v. Hanover Insurance Co., 161 Ill. 2d 433, 438-39, 641 N.E.2d 395 (1994). The allegations

in the underlying complaint must be liberally construed in favor of the insured. Outboard Marine,

154 Ill. 2d at 125. In addition, if several theories of recovery are alleged in the underlying

complaint against the insured, the insurer's duty to defend arises even if only one of several

theories is within the potential coverage of the policy. United States Fidelity & Guaranty Co.,

144 Ill. 2d at 73.

        Everest asserts that the trial court erred in applying an analysis of the "other insurance"

language in the two policies to all of the claims because the underlying complaints contain

allegations of direct negligence by the additional insureds--e.g., the failure to install or retrofit

sprinklers--that Everest asserts fall completely outside of the policy it issued to Aargus, which

covers the additional insureds "only with respect to liability arising out of [Aargus's] ongoing

operations performed for that insured."



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       Initially, it must be noted that Everest cites absolutely no case law supporting its assertion

in the section of its opening brief making the assertion. In a footnote in a later section of its brief,

Everest acknowledges that our supreme court has held in cases like United States Fidelity &

Guaranty Co. that if several theories of recovery are alleged in the underlying complaint against

the insured, the insurer's duty to defend arises even if only one of several theories is within the

potential coverage of the policy, but does so to assert that Hartford has the sole duty to defend.

Yet this was the rule cited in the trial court's order imposing the duty to defend on Everest, and

Everest offered no argument or authority explaining why that rule does not apply to Everest in

this case. Indeed, in Everest's statement of facts, "Everest acknowledges that it has the primary

duty to defend (and that Hartford's policy is essentially excess) with respect to claims covered

under *** both policies, i.e., the claims asserting derivative liability against the Additional

Insureds." Everest has thus conceded that one of the theories is within the potential coverage of

the policy, but it does not explain why the general duty to defend does not arise under well-

established Illinois case law.

       In its reply brief, Everest cites cases addressing additional insured endorsements.

American Country Insurance Co. v. James McHugh Construction Co., 344 Ill. App. 3d 960, 801

N.E.2d 1031 (2003); Village of Hoffman Estates v. Cincinnati Insurance Co., 283 Ill. App. 3d

1011, 670 N.E.2d 874 (1996); American Country Insurance Co. v. Kraemer Brothers, Inc., 298

Ill. App. 3d 805, 699 N.E.2d 1056 (1998); American Country Insurance Co. v. Cline, 309 Ill.

App. 3d 501, 722 N.E.2d 755 (1999). See also National Union Fire Insurance Co. of Pittsburgh

v. R. Olson Construction Contractors, Inc., 329 Ill. App. 3d 228, 769 N.E.2d 977 (2002).

However, in each of those cases, the underlying complaint alleged direct negligence on the part of

the additional insured without including a claim against the named insured; this court found in all

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five instances that an underlying complaint that alleges negligence only on the part of the

additional insured did not trigger a duty to defend or indemnify. See James McHugh

Construction Co., 344 Ill. App. 3d at 972. In this case, the underlying complaints include claims

against the named insured and do not allege negligence only on the part of the additional insured,

rendering these cases inapposite.

       In National Union Fire Insurance Co. of Pittsburgh v. Glenview Park District, 158 Ill. 2d

116, 632 N.E.2d 1039 (1994), our supreme court addressed an exclusion in an insurance

endorsement for "'damages arising out of the negligence' of the additional insured" and held that

the insurer had a duty to defend. Glenview Park District, 158 Ill. 2d at 118. Glenview Park

District (Glenview) entered into a contract with National Decorating Services (NDS) for NDS to

paint portions of an ice center. NDS had a policy with the plaintiff insurer (National Fire

Insurance). The policy included Glenview as an additional insured and an endorsement that

excluded coverage for "damages arising out of negligence of the Additional Insured [Glenview]."

Glenview Park District, 158 Ill. 2d at 120. An employee of NDS was injured on the job and filed

a complaint against Glenview under both the Structural Work Act and common law negligence.

The insurer refused to defend Glenview in the injured worker's action based on the exclusion in

the endorsement. The supreme court found that the term "negligence" in the exclusion clause did

not encompass actions based on alleged violations of the Structural Work Act and, therefore, the

insurer of NDS had a duty to defend the additional insured, Glenview, with respect to the

allegations of Structural Work Act violations. In turn, the supreme court held that since the

insurer had a duty to defend Glenview for the Structural Work Act claim, the insurer also became

obligated to defend Glenview on the remaining counts of the underlying complaint. The supreme



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court observed that "exclusionary provisions such as that found in the instant cause are to be

construed narrowly rather than broadly." Glenview Park District, 158 Ill. 2d at 123.

       Similarly, in this case, where Everest has already conceded it is the primary insurer with

the respect to the derivative claims, it cannot deny the duty to defend against the claims of direct

negligence, even assuming arguendo that such claims are excluded from the policy.

                                                 III

       Everest next contends that Hartford owes a complete defense to the additional insureds

for the claims of direct negligence, which requires Hartford to share the defense costs in this case.

Everest relies in part on Home Insurance Co. v. Liberty Mutual Insurance Co., 266 Ill. App. 3d

1049, 641 N.E.2d 855 (1994). However, in Home Insurance, this court had to determine whether

a certain endorsement was an escape clause or excess clause. Home Insurance, 266 Ill. App. 3d

at 1052 ("[t]he principal argument * * * [is] whether endorsement 21 is an 'escape' clause or

'excess' clause"). After noting the difference between the two types of clauses, this court found

the relevant provision to be an escape, not an excess, clause. Based on the holding that the subject

provision operated as an escape clause, the two insurers were both primary carriers.

       In this case, Everest concedes that the Hartford policy is an excess policy with respect to

the derivative claims, but asserts that Hartford remains the primary insurer as to claims of direct

negligence by the additional insureds. As explained above, this assertion is incorrect and is

contrary to Illinois law.

       Everest also cites Dearborn Insurance Co. v. International Surplus Lines Insurance Co.,

308 Ill. App. 3d 368, 719 N.E.2d 1092 (1999), a tender of defense case. There were no issues of

"other insurance" language addressed in the case. It is completely inapposite to this matter.



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                                                  IV

       Finally, Everest argues that the cases relied on by the trial court are all distinguishable

from this case, based on the fact that the underlying complaints contain allegations of direct

negligence against the additional insureds. Again, Everest ignores the rule applied in cases such

as United States Fidelity & Guaranty Co. and Glenview Park District, extending at least as far

back in time as Maryland Casualty Co. v. Peppers, 64 Ill. 2d 187, 194, 335 N.E.2d 24 (1976) (and

cases cited therein). Thus, the argument fails.

       For all of the aforementioned reasons, the judgment of the circuit court of Cook County is

affirmed.

       Affirmed.

       QUINN, P.J., and NEVILLE, J., concur.




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