StarNet Insurance Co. v. Ruprecht, No. 20-1192 (7th Cir. 2021)
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Deerfield. the general contractor, subcontracted with P.S. Demolition, which agreed to indemnify and hold Deerfield harmless from all claims caused in whole or in part by P.S. P.S. employees were working at the site when an unsecured capstone fell, killing one and injuring another. The Illinois Workers’ Compensation Act limited P.S.’s liability to $5,993.91 and $25,229.15. The state court held that P.S. had waived the Kotecki cap that would ordinarily apply those limits to a third party (Deerfield) suing for contribution for its pro-rata share of common liability for a workplace injury. A bankruptcy court determined that P.S. had no assets; the state court determined that P.S.’s liability was limited to its available insurance coverage. Deerfield settled with the plaintiffs for substantially more than $75,000 plus an assignment of Deerfield’s contribution claim against P.S.
StarNet, P.S.’s employer liability insurer, entered into a settlement with the plaintiffs, reserving its defenses to insurance coverage. The plaintiffs dismissed their negligence claims against P.S. The workers’ compensation and employers' liability policy issued to P.S. provides that StarNet will pay damages for which P.S. is liable to indemnify third parties, excluding “liability assumed under a contract, including any agreement to waive your right to limit your liability for contribution to the amount of benefits payable under the Workers Compensation Act ... This exclusion does not apply to a warranty that your work will be done in a workmanlike manner.
The Seventh Circuit affirmed a declaratory judgment that StarNet owes P.S. no coverage for the employees’ injuries beyond the amounts specified by the Illinois Workers’ Compensation Act and the Kotecki cap. The court rejected arguments that P.S.’s liability in the personal injury action arose in part from P.S.’s failure to conduct the demolition in a workmanlike manner so that the exception applies.
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