No, No, No: No Accident, No Property Damage, No Duty to Defend Under Illinois Law
Westfield Insurance Co. v. West Van Buren, LLC, et al., 2016 IL App (1st) 140862 represents a continuation of Illinois law in the context of an insurer’s duty to defend construction defect claims. As articulated in Westfield, accidental events are required to trigger a duty to defend and shoddy workmanship does not constitute property damage. In addition, since the underlying complaint did not seek damages for any personal property damage, the Illinois Appellate Court held Westfield Insurance Company had no duty to defend or indemnify West Van Buren, LLC (the developer) as an additional insured in the underlying lawsuit.
As background, the developer constructed a condominium building in Chicago and subcontracted with Total Roofing and Construction Services, Inc. to install the roof. Under the subcontract between Developer and Total Roofing, Total Roofing agreed to insure and indemnify Developer against liability for Total Roofing’s work. Total Roofing procured comprehensive general liability insurance through Westfield, listing the developer as an additional insured.
After construction was complete, 933 Van Buren Condominium Association (Condo Association) assumed oversight of the building and spent more than $309,000 to repair the defective roof. After mediation proved unsuccessful, the Condo Association filed suit against the developer and Total Roofing, among others, for monies it paid to repair the roof. Westfield declined the developer’s tender of a defense, but agreed to defend Total Roofing under a reservation of rights.
Subsequently, Westfield filed this declaratory judgment action against the developer, and the developer asserted a counterclaim alleging Westfield owed it a duty to defend. Ultimately, the circuit court granted summary judgment in favor of Westfield. The developer appealed.
The Appellate Court affirmed. According to the Appellate Court, Westfield lacked a duty to defend the developer for three reasons. First, the underlying complaint failed to allege an accident, and in turn, an “occurrence.” Rather, the allegations in the underlying complaint alleged solely that the damage to common or personal property was caused by intentional conduct or nonfortuitous events. Second, the Appellate Court concluded the underlying complaint did not allege “property damage,” as defined under the policy, because it sought to hold the developer responsible for shoddy workmanship and diminution in value (purely economic harm), rather than physical injury. Third, the Appellate Court rejected the developer’s argument that the underlying complaint sought damage for personal property damage. Instead, the complaint sought the cost of repairing damages from generally occurring water infiltration; any allegations of personal property damage were tangential to the Condo Association’s theory of recovery. Further, the Condo Association did not purport to act on behalf of any of the unit owners, and none were parties to the complaint. Accordingly, the Appellate Court concluded Westfield did not have a duty to defend or to indemnify the developer.
Westfield is yet another among the many Illinois decisions addressing an insurer’s duty to defend claims for construction defects. In the end, it will be a useful decision for insurers as it reinforces longstanding principles of Illinois law in this context.