American States Insurance Co. v. Liberty Mutual Insurance Co.

                                             Fourth Division
                                             July 10, 1997







No. 1-96-1669

AMERICAN STATES INSURANCE COMPANY,      )    APPEAL FROM THE
                                        )    CIRCUIT COURT OF
               Plaintiff-Appellant,     )    COOK COUNTY.
                                        )
     v.                                 )    
                                        )
LIBERTY MUTUAL INSURANCE COMPANY,       )
TURNER CONSTRUCTION COMPANY,            )    
                                        )
               Defendants-Appellees,    )
                                        )
JAMIE NAVARRETE, and LETICIA            )
NAVARRETE,                              )    HONORABLE
                                        )    EDWIN M. BERMAN,
               Defendants.              )    JUDGE PRESIDING.



     PRESIDING JUSTICE WOLFSON delivered the opinion of the 

court:

     American States sued Liberty Mutual, seeking contribution of
defense costs arising from an underlying suit.  Liberty Mutual
moved for summary judgment, claiming that it did not have a duty
to defend the underlying action.  The trial court granted Liberty
Mutual's motion for summary judgment.  American States appeals. 
We affirm.
FACTS
     The plaintiff-appellant in this case is American States
Insurance Company (American States).  The defendants below were
Liberty Mutual Insurance Company (Liberty Mutual), Turner
Construction Company (Turner), Jamie Navarrete (Jamie), and
Leticia Navarrete (Leticia) (collectively the Navarretes).  The
Navarretes are married.  Liberty Mutual and Turner are the
defendants-appellees, collectively "Liberty Mutual."
     Turner was the general contractor for the construction of a
building at 1725 West Harrison in Chicago, Illinois.  The
building is part of the Rush-Presbyterian-St. Luke's medical
center.  Fisher, Albright and Masters (Fisher) was a
subcontractor on the project.  Jamie Navarrete was one of
Fisher's employees.
     On June 27, 1991, Jamie was injured at the job site.  The
Navarretes sued Turner in the Law Division of the Circuit Court
of Cook County on September 8, 1992.  According to the complaint,
Jamie hurt his back while lifting heavy supplies through a fourth
floor window.  Allegedly, there had been no other way to get
those supplies to that part of the site.
     Jamie claimed that he was injured because Turner had
violated the Structural Work Act and because Turner had been
negligent.  Leticia claimed loss of consortium.
     American States issued a policy to Fisher (American policy). 
That policy contained a clause which read:
     "WHO IS AN INSURED (Section II) is amended to include
     as an insured the person or organization shown in the
     Schedule [Turner] but only with respect to liability
     arising out of 'your work' for that insured by or for
     you."
          Under the policy, "your work" is:
     "a.  Work or operations performed by you or on your
     behalf; and
     b. Materials, parts or equipment furnished in
     connection with such work or operations."
          The American policy included this provision:
     "4.  Other Insurance
     If other valid and collectible insurance is available
     to the insured for a loss we cover under Coverages A or
     B of this Coverage Part, our obligations are limited as
     follows:
     a.  Primary Insurance
     This Insurance is primary except [when certain
     conditions apply].  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 ***
     below."
          The Liberty Mutual policy (Liberty policy) contains an
identical "other insurance" provision.
     The Liberty policy contains an additional paragraph,
endorsement number seven:
     "It is agreed that this policy does not apply to that
     portion of the loss for which the Insured has other
     valid and collectable insurance, as an Additional
     Insured on a Liability Insurance policy issued to a
     subcontractor of the Named Insured whether such policy
     is on a primary, excess or contingent basis."
          American States agreed to undertake Turner's defense of the
Navarrete suit pursuant to a reservation of rights.  American
States claimed that Liberty Mutual had a duty to share the
defense costs for the Navarrete suit.  American States sued
Liberty Mutual.
     Liberty Mutual moved for summary judgement, arguing that it
did not have a duty to defend the Navarrete suit.  The trial
court granted Liberty Mutual's motion.
     American States appeals.  We affirm.
DECISION
     American States admits that it has a duty to defend Turner
in the underlying action.  It argues that Liberty Mutual has an
obligation to share that duty.
     Courts compare the allegations of the underlying complaint
to the policy to determine when an insurer's duty to defend
arises.  Outboard Marine Corp. v. Liberty Mutual Insurance Co.,
154 Ill. 2d 90, 125, 607 N.E.2d 1204 (1992).  The insurer has a
duty to defend if the allegations of the complaint fall within,
or potentially within, the policy's coverage.  Outboard Marine,
154 Ill. 2d  at 125.
     Insurers which issue excess policies, however, are not
liable to pay defense costs before the conclusion of the
underlying suit.  Instead, insurers which issue primary policies
have the primary duty to pay defense costs.  See Automobile
Underwriters, Inc. v. Hardware Mutual Casualty Co., 49 Ill. 2d 108, 112, 273 N.E.2d 360 (1971); Home Indemnity Co. v. General
Accident Insurance Co. of America, 213 Ill. App. 3d 319, 321-22,
572 N.E.2d 962 (1991); Fireman's Fund Indemnity Co. v. Freeport
Insurance Co., 30 Ill. App. 2d 69, 76, 173 N.E.2d 543 (1961).
     The Liberty Mutual policy contains an endorsement seven:
     "It is agreed that this policy does not apply to that
     portion of the loss for which the Insured has other
     valid and collectable insurance, as an Additional
     Insured on a Liability Insurance policy issued to a
     subcontractor of the Named Insured whether such policy
     is on a primary, excess or contingent basis." 
     (Emphasis added.)
          Because of this endorsement, the trial court found that the
Liberty Mutual policy was an excess policy, not a primary policy. 
It found that Liberty Mutual did not have a duty to defend
Turner.
     American States argues that endorsement seven cannot be an
excess clause.  Its position rests in its reading of Home
Insurance Co. v. Liberty Mutual Insurance Co., 266 Ill. App. 3d
1049, 641 N.E.2d 855 (1994).  
     In Home Insurance, the Liberty Mutual policy contained an
identical endorsement.  This court found that this endorsement
was not an excess clause.  Liberty was required to share defense
costs in an underlying suit.
          The reason Liberty Mutual was liable for defense costs in
Home Insurance was that the Home policy contained very specific
exclusions.  The Home policy did not cover the Structural Work
Act cause of action described in the underlying complaint.  It
did cover the negligent failure to supervise count.  The Liberty
policy did cover the Structural Work Act action.  This court
found that Liberty Mutual was a primary insurer.  It held that
Liberty Mutual had an obligation to share the defense costs pro
rata.
     American States contends that the same reasoning should
apply to this case.  It says its policy does not cover all the
allegations made in the Navarrete suit.  It claims that Liberty
Mutual should share the defense costs because Liberty's policy
will cover those aspects of the underlying suit that American
States' policy does not cover.
     In this case, there is no obvious exclusion in the American
State's policy.  Unlike Home, American States cannot argue that
its policy clearly excludes a specific cause of action described
in the Navarrete complaint.   
     In Home Insurance, this court suggested that the result
might have been different had the Home policy not contained a
specific exclusion.  Liberty argued that in Transamerica
Insurance Group v. Turner Construction Co., 33 Mass. App. Ct.
446, 601 N.E.2d 473 (1992), the same endorsement had been found
to render Liberty's coverage excess. 
     We considered Transamerica, and found:
     "The case does involve Turner and Liberty, and the
     Liberty endorsement is the same as the Liberty
     endorsement in this case; but there is one glaring
     distinction between that case and the case before us. 
     The subcontractor in that case agreed to indemnify
     Turner 'for all claims arising out of or occurring in
     connection with the execution of the Work.'"  Home, 266
     Ill. App. 3d at 1055 (emphasis in original).
          In the case before us, the American policy contains a
similar provision: 
     "WHO IS AN INSURED (Section II) is amended to include
     as an insured the person or organization shown in the
     Schedule [Turner] but only with respect to liability
     arising out of 'your work' for that insured by or for
     you."
          American States claims that the clause in Transamerica is
different than the clause in this case.  The policy in
Transamerica covered "all claims" arising from the work.  Here,
American States' policy covers "liability" arising from Fisher's
work.  American States cites no decision holding that these
phrases are unlike enough to require a different result in this
case.  The "glaring distinction" we found in Home Insurance is
not present in this case.
     American States contends that some allegations of the
Navarrete complaint are not covered by its policy.  It claims 
there may be aspects of the Navarrete complaint that did not
arise out of Fisher's work.  That is, says American States, there
may be aspects of the Navarrete suit that involve only Turner's
work.  We do not see how.
     Navarrete was working for Fisher at the time of the
 accident.  The underlying complaint specifically claims that
Navarrete was injured while "going about the business of his
employer, [Fisher]."  He was doing an activity in furtherance of
the work Turner hired Fisher to do.  
     In Shell Oil Co. v. AC&S, Inc., 271 Ill. App. 3d 898, 906,
649 N.E.2d 946 (1995), a subcontractor had a contract which
required any relevant insurance policy to "include[] OWNER and
CONTRACTOR as additional insureds as regards their liability
arising out of operations performed for OWNER and CONTRACTOR by
SUBCONTRACTOR under this Subcontract."  (Emphasis in original.) 
Its insurance contract contained similar language.  A
subcontractor's employee was injured on the owner's premises. 
This court found that the insurer was obligated to defend the
action because the underlying plaintiff's injuries "arose out of"
operations performed for the owner and subcontractor.  "The
injuries would not have occurred 'but for' [the underlying
plaintiff's] employment by [the subcontractor and the
subcontractor's] presence on [the owner's] premises."  Shell Oil
Co., 271 Ill. App. 3d at 907.  
     In this case, American claims there are a number of ways
that Turner could have contributed to the accident by itself
without involving "Fisher's work."  The accident occurred,
however, while Jamie was working at the construction site for
Fisher.  We find that "but for" Jamie's employment by Fisher and
Fisher's presence on the job site, Jamie would not have been
injured.  The accident arose from Fisher's work for Turner.  We
see no real possibility of non-coverage by the American policy.
     American States contends that the trial court's finding
should be reversed because it amounts to a de facto finding that
Liberty Mutual will not be liable to indemnify it at the
conclusion of the underlying suit.  It says trial courts should
not make any findings concerning an insurer's right to
indemnification before the underlying suit is completed.  See
National Union Fire Insurance Co. of Pittsburgh, Pennsylvania v.
Glenview Park District, 158 Ill. 2d 116, 632 N.E.2d 1039 (1994).
     The trial court specifically found that American States
could later seek indemnity from Liberty Mutual.  We agree.  Just
because Liberty Mutual is not obligated to pay for defense costs
now does not mean it never will be liable.  The Liberty Mutual
policy states that it will apply to "that portion of the loss for
which the Insured has other valid and collectable insurance[.]" 
     American States has not said that once its policy is
exhausted, the Liberty Mutual policy will not "kick in."  No
party has claimed that, within the limits provided in the Liberty
policy, Liberty Mutual will not have to pay for any portion of
the judgment not covered by American States' policy.  The trial
court's order did not exclude Liberty from all potential
liability.
     American States claims that the Liberty endorsement is
ambiguous.  We do not agree.  The clear intent of the Liberty
endorsement is to avoid obligation for any losses covered by
other insurance.  While the endorsement does not specifically say
that the Liberty policy is an excess policy, it becomes active
only when other insurance policies are exhausted.
     American States claims that the Liberty policy cannot be
excess because Turner paid more for the Liberty policy than
Fisher paid for the American policy.  It cites Illinois Emcasco
Insurance Co. v. Continental Casualty Co., 139 Ill. App. 3d 130,
487 N.E.2d 110 (1985).  That case however, "involved the 'unique
and special coverage' of an umbrella policy.  Home Indemnity Co.,
213 Ill. App. 3d at 324.  We conclude the policy fees do not
establish which policy is primary and which is excess.
                         CONCLUSION
     The trial court's order granting summary judgment to Liberty
Mutual is affirmed.  
     AFFIRMED.
     CERDA and BURKE, JJ., concur.