Clarendon America Insurance Co. v. Aargus Security Systems, Inc.

• Court: Appellate Court of Illinois
• Decided: June 18, 2007
• Docket: 1-06-2121 Rel
• Status: Published

Opinion

First Division June 18, 2007

No. 1-06-2121

CLARENDON AMERICA INSURANCE COMPANY, a ) Appeal from the Circuit Court of New Jersey Corporation, ) Cook County ) Plaintiff-Appellee, ) ) v. ) ) AARGUS SECURITY SYSTEMS, INC., an Illinois ) Corporation, ) ) Defendant-Appellant ) 04 CH 10575 ) ) (Scottsdale Insurance Company, ) Intervenor-Appellee; ) ) B.G.K. Security Services, Inc., an Illinois Corporation, 69 ) West Washington Management LLC, an Illinois Limited ) Liability Corporation, and County of Cook, a Body Politic ) Honorable and Corporation, ) Julia Nowicki, Defendants). ) Judge Presiding.

PRESIDING JUSTICE McBRIDE delivered the opinion of the court:

Plaintiff Clarendon America Insurance Co. (Clarendon) filed a declaratory judgment

action seeking a determination that it owed no duty to defend or indemnify defendant Aargus

Security Systems, Inc. (Aargus), in several underlying lawsuits arising out of the October 17,

2003, fire that occurred at a building owned by defendant County of Cook (Cook) and managed

by defendant 69 West Washington Management, LLC (69 West), located at 69 West Washington

Street in Chicago. Clarendon issued a commercial general liability (CGL) policy to defendant

B.G.K. Security Services, Inc. (BGK), from which Aargus sought coverage as an “additional

insured.” Intervenor Scottsdale Insurance Company (Scottsdale) issued an excess insurance 1-06-2121

policy to BGK and intervened in this action also seeking a declaration that it had no duty to

defend Aargus. Clarendon filed a motion for summary judgment in the trial court. Scottsdale

filed a brief in support of Clarendon’s summary judgment motion. The court granted

Clarendon’s summary judgment motion against Aargus.1

Aargus appeals, arguing that: (1) the trial court erred in holding that the relevant contract,

insurance provisions, and certificates of insurance were insufficient to demonstrate a potential for

additional insured coverage for Aargus; and (2) in the alternative, the trial court incorrectly

granted summary judgment in favor of Clarendon and Scottsdale because a genuine issue of

material fact existed.

On April 1, 2002, Aargus entered into a contract, entitled “Agreement with Service

Contractor” (hereafter, 69 West/Aargus Contract), with 69 West, acting as the manager and agent

of Cook, to provide security guard service to the commercial high-rise building located at 69

West Washington Street in Chicago.

On June 17, 2002, Aargus and BGK entered into a contract entitled “Joint Venture

Agreement, 69 West Washington Management Company, L.L.C., 69 West Washington, Chicago,

IL 60602” (hereafter, Aargus/BGK Agreement) in which the parties agreed to jointly provide

security guard service at the 69 West Washington building. The Aargus/BGK Agreement stated

that “B.G.K. Security Services, Inc. shall serve as Aargus’ exclusive subcontractor under the

Contract.” Paragraph 16 of the Aargus/BGK Agreement provided: “All insurance that may from

1 In the same written order, the trial court granted summary judgment in favor of 69 West and Cook and against Clarendon. Clarendon appealed that order in case No. 1-06-1864.

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time to time be required shall be obtained in such manner as the parties hereto agree.”

BGK obtained a CGL policy from Clarendon, effective January 21, 2003, to January 21,

2004. The Clarendon policy provided $1 million of liability coverage per occurrence with a $5

million general aggregate limit. The Clarendon policy contains a “Blanket Additional Insured

Endorsement” (additional insured endorsement), which states, in relevant part:

“WHO IS AN INSURED (Section II) provision of the Policy is

amended to include as an insured any person or organization

(called ‘additional insured’) to whom you are obligated by valid

written contract to provide such coverage, but only with respect to

liability for ‘bodily injury’ or ‘property damage’ arising solely out

of ‘your work’ on behalf of said additional insured for which

coverage is provided by this policy.”

Scottsdale issued an excess liability policy to BGK, effective August 1, 2003, to January

21, 2004. The Scottsdale policy “is excess of and follows form to the Clarendon policy.”

In March and May 2003, Mack & Parker, Inc., an agent of BGK, issued two certificates

of insurance to Aargus. The first certificate identified Aargus as “an Additional Insured as

respects work performed” by BGK, and the second said that Aargus “is an Additional Insured as

regards General Liability for operations performed” by BGK.

On October 17, 2003, a fire occurred at the 69 West Washington building. As a result of

the deaths and injuries that occurred in the fire, 22 lawsuits were filed in the circuit court of Cook

County and were consolidated under case No. 03 L 12520 (underlying lawsuits). Aargus, 69

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West, Cook, and BGK were named as defendants, third-party defendants, and/or counter-

defendants in the underlying lawsuits.

Aargus, 69 West, Cook, and BGK tendered the defense in the underlying lawsuits to

Clarendon. In July 2004, Clarendon filed this declaratory judgment action seeking a

determination that the Clarendon policy issued to BGK did not provide coverage to Aargus as an

additional insured. Scottsdale was granted leave to intervene in the circuit court and filed its own

complaint for declaratory judgment. In January 2006, Clarendon filed a motion for summary

judgment. Scottsdale filed a brief in support of Clarendon’s motion. In April 2006, the trial

court granted Clarendon’s motion. In June 2006, the trial court found that pursuant to Supreme

Court Rule 304(a) (155 Ill. 2d R. 304(a)), there was no just reason to delay enforcement or appeal

of the April 2006 order. This appeal followed.

On appeal, Aargus contends that the trial court erred in finding that the Aargus/BGK

Agreement, the Clarendon policy and the certificates of insurance were insufficient to provide

coverage to Aargus as an additional insured. In the alternative, Aargus asserts that a question of

material fact exists regarding insurance coverage because of the Aargus/BGK Agreement and the

certificates of insurances.

“The construction of an insurance policy and a determination of the rights and obligations

thereunder are questions of law for the court which are appropriate subjects for disposition by

way of summary judgment.” Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill.

2d 384, 391 (1993). Summary judgment is appropriate where the pleadings, depositions, and

admissions on file, together with any affidavits and exhibits, when viewed in the light most

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favorable to the nonmoving party, indicate that there is no genuine issue of material fact and the

moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2004). We

review cases involving summary judgment de novo. Ragan v. Columbia Mutual Insurance Co.,

183 Ill. 2d 342, 349 (1998).

“When construing the language of an insurance policy, a court's primary objective is to

ascertain and give effect to the intentions of the parties as expressed by the words of the policy.”

Central Illinois Light Co. v. Home Insurance Co., 213 Ill. 2d 141, 153 (2004). “An insurance

contract *** is to be construed as a whole, giving effect to every provision *** because it must

be assumed that every provision was intended to serve a purpose.” Central Illinois Light Co.,

213 Ill. 2d at 153. “If the words used in the policy are clear and unambiguous, they must be

given their plain, ordinary, and popular meaning.” Central Illinois Light Co., 213 Ill. 2d at 153.

Aargus raises two theories for it to qualify as an additional insured under BGK’s policies

with Clarendon and Scottsdale. First, Aargus contends that the additional insured endorsement

only requires an obligation to provide insurance from a valid written contract and that paragraph

16 satisfies that obligation. Second, if the certificates of insurance are considered alongside the

Aargus/BGK Agreement, then an unambiguous intent for coverage is shown. Clarendon and

Scottsdale maintain that paragraph 16 of the Aargus/BGK Agreement did not obligate BGK to

provide insurance coverage for Aargus. Clarendon and Scottsdale further respond that the

certificates of insurance do not satisfy the requirement of a valid written contract because the

certificates plainly state that they do not confer any rights under the policy without an

endorsement from the insurer.

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Aargus relies on Yoder v. Rock Island Bank, 47 Ill. App. 3d 486 (1977), for its position

that the decision by the parties “to leave open for future completion the details of additional

insured coverage for Aargus does not invalidate the contractual obligation to do so that was

assumed by BGK.” We find Aargus’ reliance on Yoder to be misplaced. Yoder involved

whether a letter from an attorney in a foreclosure case was an offer subject to acceptance by

specific performance by the other side. Yoder, 47 Ill. App. 3d at 490. Here, no one is arguing

that the Aargus/BGK Agreement is not a valid contract. Rather, the issue is whether the

Aargus/BGK Agreement contained an obligation undertaken by BGK to provide insurance

coverage for Aargus.

We find the decision in Liberty Mutual Fire Insurance Co. v. St Paul Fire and Marine

Insurance Co., 363 Ill. App. 3d 335 (2005), to be instructive. In that case, the Central Illinois

Public Service Company (CIPS) and Dover Elevator Company (Dover) entered into two service

contracts for Dover’s work to modernize and upgrade two elevators in a CIPS facility. Dover

obtained a CGL insurance policy through Liberty Mutual Fire Insurance Company (Liberty). An

elevator accident occurred at the CIPS facility and a personal injury lawsuit followed. Liberty

filed a declaratory judgment action seeking a determination that it did not have to defend CIPS

under Dover’s policies, and CIPS’ insurer, St. Paul Fire and Marine Insurance Co. (St. Paul),

filed a counterclaim requesting the trial court to find that Liberty had a duty to defend CIPS. On

summary judgment, the trial court ruled in favor of Liberty. Liberty Mutual Fire Insurance Co.,

363 Ill. App. 3d at 337-38.

On appeal, St. Paul argued that CIPS was made an additional insured under Dover’s CGL

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policy with Liberty. The additional insured endorsement in Liberty’s policy amended an insured

to include “any person, organization, state or other political subdivision, trustee or estate for

whom you have agreed in writing to provide liability insurance.” Liberty Mutual Fire Insurance

Co., 363 Ill. App. 3d at 341. St. Paul contended that the two service contracts between CIPS and

Dover constituted a written agreement, as defined in the additional insured endorsement. The

insurance provision in both service contracts stated, in relevant part:

“ ‘It is expressly understood and agreed by and between the parties

hereto that no Work of any kind is authorized nor shall any Work

be begun under this Contract until the Contractor shall have

provided and delivered to the Owner satisfactory and acceptable

evidence of insurance which is in full compliance with the

Insurance Specifications attached hereto and incorporated by

reference herein.’ ” Liberty Mutual Fire Insurance Co., 363 Ill.

App. 3d at 341.

The insurance specifications provided that “contractors such as Dover ‘will secure,

maintain and provide evidence’ of ‘Comprehensive General Liability insurance for all claims for

personal injury, bodily injury, including death, and property damage which may arise from the

operations under this contract.’ ” Liberty Mutual Fire Insurance Co., 363 Ill. App. 3d at 341. St.

Paul asserted that this language shows that Dover obtained the CGL policy for CIPS’ benefit.

The reviewing court disagreed and found that the insurance provision only required Dover to

secure insurance to cover its own negligence. Liberty Mutual Fire Insurance Co., 363 Ill. App.

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3d at 342. The court went on to state that “there was no language in the insurance provision or

insurance specifications section that obligated Dover to add CIPS as an additional insured on the

CGL policy.” Liberty Mutual Fire Insurance Co., 363 Ill. App. 3d at 342.

Similarly, under the additional insured endorsement in the instant case, “an insured” is

amended to include those that the named insured is “obligated by valid written contract to

provide such coverage.” The only valid written contract between BGK and Aargus is the

Aargus/BGK Agreement from June 2002. However, the language of paragraph 16 (“All

insurance that may from time to time be required shall be obtained in such manner as the parties

hereto agree”) does not discuss any obligation undertaken by either BGK or Aargus to provide

insurance. When interpreting the provisions of a contract, the court must ascertain and give

effect to the intent of the parties; and the language of the contract is the best indication of the

parties' intent. Liberty Mutual Fire Insurance Co., 363 Ill. App. 3d at 341. “A contract term is

ambiguous if it can reasonably be interpreted in more than one way due to the indefiniteness of

the language or due to it having a double or multiple meaning.” William Blair & Co., LLC v. FI

Liquidation Corp., 358 Ill. App. 3d 324, 334 (2005). “A contract is not ambiguous, however, if a

court can ascertain its meaning from the general contract language.” William Blair, 358 Ill. App.

3d at 334. “[T]he mere fact that the parties disagree as to the meaning of a term does not make

that term ambiguous.” William Blair, 358 Ill. App. 3d at 334.

We disagree with Aargus’ assertion that paragraph 16 creates an obligation for insurance

coverage to satisfy the requirements under the additional insured endorsement. Rather, we

conclude that paragraph 16 leaves the insurance obligations of both contracting parties

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undecided. As in Liberty Mutual, paragraph 16 does not indicate what insurance is required by

either party and we decline to read paragraph 16 to create any coverage obligations. Based on the

language of paragraph 16, we find that Aargus was not an additional insured under BGK’s

policies with Clarendon and Scottsdale.

Aargus also contends that the certificates of insurance along with the Aargus/BGK

Agreement show BGK’s intent to provide additional insured coverage to Aargus. According to

Aargus, “when the certificates are considered, it is clear that BGK unambiguously intended by

the Aargus/BGK Contract to assume an obligation to provide additional insured coverage for

Aargus.” Clarendon and Scottsdale respond that the certificates of insurance do not satisfy the

additional insured endorsement because a certificate of insurance does not constitute a contract

between the parties. See Lezak & Levy Wholesale Meats, Inc. v. Illinois Employers Insurance

Co. of Wausau, 121 Ill. App. 3d 954, 957 (1984). In reply, Aargus restates its position, in that, it

is not claiming that the certificates of insurance qualify as a valid written contract under the

additional insured endorsement, but instead, the certificates serve as “documentary confirmation

that BGK agreed to provide coverage for Aargus.”

Aargus cites William Blair & Co., LLC v. FI Liquidation Corp., 358 Ill. App. 3d 324, 339

(2005), as a basis for this court to consider the certificates “as extrinsic evidence *** on a

provisional basis for the limited purpose of testing whether [the] contract is ambiguous.” Aargus

does not assert that the Aargus/BGK Agreement is ambiguous or that the certificates vary the

contract terms, but instead the certificates confirm that BGK agreed to provide coverage for

Aargus.

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However, the problem with Aargus’ argument is that the plain language of paragraph 16

does not require BGK to add Aargus as an additional insured under its policies. In the absence of

ambiguity, a court must construe a contract according to its own language, not according to the

parties' subjective constructions. William Blair, 358 Ill. App. 3d at 335. The existence of the

certificates does not change the fact that the Aargus/BGK Agreement does not discuss insurance

requirements for either party. Paragraph 16 left insurance requirements open for future

agreements and we will not look to documents outside of the contract to create an obligation. As

previously pointed out, Aargus does not qualify as an additional insured under the Clarendon

policy and the certificates do not change that holding. Additionally, since the certificates of

insurance are not contracts (see Lezak & Levy Wholesale Meats, Inc., 121 Ill. App. 3d at 957),

they are not sufficient to prove that BGK had an obligation under a valid written contract to

provide coverage for Aargus.

Aargus further contends that the trial court’s reasoning in its ruling against Clarendon and

in favor of 69 West and Cook, which is the subject of a separate appeal in case No. 1-06-1864,

should be extended to Aargus. In that portion of the order, the trial court read the Aargus/BGK

Agreement and the 69 West/Aargus Contract together to “satisfy the written contract requirement

of the Clarendon and Scottsdale policies.” Aargus’ reliance on the trial court’s order as to those

defendants is not persuasive. “Under Illinois law, the decisions of circuit courts have no

precedential value.” Delgado v. Board of Election Commissioners of the City of Chicago, 224

Ill. 2d 481, 488 (2007).

As an alternative argument, Aargus asserts that a genuine issue of material fact exists that

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makes summary judgment inappropriate. Aargus contends that “the certificates, if viewed in the

light most favorable to the non-movant, evince an agreement between Aargus and BGK that

Aargus should be added as an additional insured under Clarendon’s policy.”

“The purpose of summary judgment is not to try a question of fact, but rather to

determine whether a genuine issue of material fact exists.” Adams v. Northern Illinois Gas Co.,

211 Ill. 2d 32, 42-43 (2004). “A triable issue precluding summary judgment exists where the

material facts are disputed, or where, the material facts being undisputed, reasonable persons

might draw different inferences from the undisputed facts.” Adams, 211 Ill. 2d at 43. “Summary

judgment should not be granted unless the right of the moving party is clear and free from

doubt.” Michigan Avenue National Bank v. County of Cook, 191 Ill. 2d 493, 517 (2000).

“However, although the nonmoving party in a summary judgment motion is not required to prove

his or her case, the nonmovant must nonetheless present a factual basis which would arguably

entitle that party to a judgment.” Michigan Avenue National Bank, 191 Ill. 2d at 517-18.

Aargus tries to avoid summary judgment by arguing that summary judgment was

premature. In its view, there is a question of material fact as to whether Aargus and BGK

executed in writing an agreement about insurance. Aargus asserts that it should have had the

opportunity to determine whether such agreement exists. We are not persuaded.

It seems clear that Aargus itself should know if it entered into a subsequent written

agreement with BGK. The fact that no such agreement was produced should not preclude

summary judgment. Here, the additional insured endorsement confers coverage on those that the

named insured is obligated by valid written contract to provide such coverage. The Aargus/BGK

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Agreement is the only written contract between the parties and does not obligate BGK to provide

additional insured coverage for Aargus. The Aargus/BGK Agreement left the insurance

requirements open to a future agreement. This provision is unambiguous. There is no indication

that a subsequent written agreement about insurance exists. Aargus’ reliance on the certificates

of insurance to create a question of material fact is misplaced because the certificates are not

contracts and cannot alter the fact that the written contract does not contain an obligation to

provide for additional insured coverage. There is no question of material fact and summary

judgment in favor of Clarendon and Scottsdale was correct.

Based on the foregoing reasons, we affirm the decision of the circuit court of Cook

County.

Affirmed.

CAHILL and R. GORDON, JJ., concur.