Vicarious Liability and Additional Insured Coverage: Illinois Appellate Court Clarifies Factual Allegations Sufficient to Trigger Defense Duty
The Appellate Court of Illinois recently considered whether an underlying complaint against an a general contractor (additional insured), filed by the estate of an independent contractor/subcontractor’s employee who was killed in a job site accident, triggered the defense of the general contractor under the subcontractor’s liability policy. The subcontract at issue contained the standard additional insurance requirements. The court first decided that the liability policy’s additional insured endorsement did not protect an additional insured for its own negligence; and the issue was whether a duty to defend was triggered based on the additional insured’s alleged vicarious liability for the named insured’s alleged negligence.
After receiving the underlying complaint alleging the wrongful death, the general contractor tendered the lawsuit to the subcontractor’s insurer. The insurer denied coverage. In the declaratory judgment action that followed, the trial court held the general contractor was properly an additional insured entitled to coverage and that the underlying complaint alleged vicarious liability against the general contractor triggering the insurer’s duty to defend it.
On appeal, the court clarified that because only vicarious liability would trigger a duty to defend, the issues are whether the underlying complaint alleged that the (1) subcontractor was negligent, and (2) general contractor is vicariously liable for such negligence. The parties agreed that the underlying complaint alleged negligence against the subcontractor. Thus, the insurer’s duty to defend the general contractor turned on whether vicarious liability is alleged against the general contractor.
While the court recognized the complaint alleged the general contractor was “vicariously or directly liable to the plaintiff,” it emphasized that what mattered was “the alleged conduct, not the label, that determines whether a duty to defend exists.” The court focused on a series of factual allegations indicating that the general contractor retained significant overall control of the worksite and the work of the subcontractor, despite the subcontractor having purportedly been retained as an” independent contractor.”
The court explained that the failure to exercise proper control over the work of independent contractors is typically a “direct-liability claim,” but that the Supreme Court of Illinois has held that if the control retained by the[general contractor”is such that it gives rise to a master-servant relationship with the subcontractor, thus negating the [party’s] status as an independent contractor,” the general contractor could be vicariously liable for the subcontractor’s negligence. The distinction “depends on the extent of the general contractor’s control.” If the general contractor’s control were limited to “merely directing the order of the work or that it be done safely,” then it is unlikely that the general contractor exercised control sufficient to give rise to vicarious liability.
Here, however, the underlying complaint alleged that the general contractor had the authority to “supervise, stop, change, inspect, and/or coordinate the work” and “retained control of the means and method of the work performed” by the subcontractor. The court readily found that these allegations give rise to vicarious liability for the general contractor because they assert that the general contractor was ostensibly telling the subcontractor “how to do the work” underlying the alleged accident. Since the factual allegations in the complaint alleged the general contractor was vicariously liable and had extensive control over the work, the court found a duty to defend.