Excess Clauses in Conflict Cancel Each Other Out
In West Bend Mutual Ins. v. Home and Garden Supply Inc., Barbara Meisel filed suit against Homa & Garden, Target, and Waldschmidt & Associates, Inc. She alleged that she was injured when she slipped and fell on snow and ice in Target’s parking lot. Waldschmidt provided snow plowing services for Home & Garden and Target. At the time of Meisel’s accident, Waldschmidt had a contract with Home & Garden to provide snow removal services for Target. The terms of the contract provided that snow removal services would commence at “freezing rain and ice conditions and/or snow level of 1.5 inches.” Waldschmidt was required to maintain an “ice/snow free environment.” The contract contained an indemnification provision in which Waldschmidt agreed to assume responsibility for all injuries or damages arising out of its performance or failure to perform and agreed to defend, indemnify and hold harmless Home & Garden against any and all claims arising out of Waldschmidt’s performance. Further, the contract required Waldschmidt to include Home & Garden and Target as additional insureds on a commercial general liability policy it was required to maintain. Home & Garden and Target tendered their defense to West Bend, alleging they were additional insureds under Waldschmidt’s policy. West Bend refused the tender and filed this declaratory judgment action. Ohio Casualty defended Home & Garden and Target and ultimately settled the underlying suit with Meisel on May 5, 2010. Ohio Casualty subsequently intervened in the declaratory judgment action seeking equitable subrogation and contribution against West Bend.
West Bend issued a commercial general liability policy to Waldschmidt that was in effect at the time of Meisel’s accident. The policy contained an additional insured endorsement that included as an additional insured “any person or organization whom you are required to add as an additional insured on this policy under a written contract or written agreement.” It is not contested that Home & Garden and Target were additional insureds under the policy. The additional insured endorsement contained an exception, which the parties refer to as the “completed operations” exception, which provided that it did not apply to bodily injury occurring after: (1) ” all work on the project (other than service maintenance or repairs) to be performed by or on behalf of the additional insured at the site of the covered operations has been completed,” or (2) “that portion of ‘your work’ out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing operations for a principal as part of the same project .” West Bend argued that the “completed operations” exclusions precluded coverage for Home & Garden and Target because when Waldschmidt finished plowing the parking lot, its operations for the day was completed and the parking lot had been put in its intended use.
The first issue that the court addressed is whether the “completed operations” exception in the policy applied. However, here, as provided in Waldschmidt’s contract with Home & Garden, Waldschmidt was required to maintain an “ice/snow free (i.e. bare pavement) environment.” The contract specifically included the term “bare pavement,” and the parties mutually assented to the use of that term. Waldschmidt’s snow removal duties were not complete until the condition of the parking lot was “bare pavement.” When Waldschmidt left the parking lot, a dusting of snow had begun to accumulate. Meisel fell at about 10 a.m. where new snow had covered an icy surface. Since the parking lot had not been cleared to “bare pavement,” Waldschmidt had not completed its operations when he left. Therefore, the court concluded that the “completed operations” exclusion in West Bend’s policy with Waldschmidt does not preclude coverage.
The court next addressed the issue of whether West Bend’s insurance policy was excess over any other insurance and whether the targeted tender rule could be utilized to require West Bend to provide a defense. Both the West Bend and Ohio policies contained “other insurance” provisions, which provided that they were excess over any other insurance. Primary policies and excess policies are clearly distinct and serve different purposes. A “true” excess policy exists as part of an overall insurance package and provides a secondary level of coverage to protect the insured where a judgment or settlement exceeds the primary policy’s limits of liability. An excess policy will not be triggered until the limits of the primary insurance coverage are exhausted. The West Bend and Ohio policies are not “true” excess policies. They are primary policies with “other insurance” provisions that contain “excess” clauses. Both “excess” clauses intend to apply over and above or after any other available insurance. West Bend and Ohio Casualty policies contain “other insurance” provisions with “excess” clauses. The “excess” clauses are not identical but similar in that each clause provides that when any other insurance is available, the policy applies as excess. Since the two clauses are mutually repugnant and incompatible, they must cancel each other out. Given that the excess clauses cancel each other out, both the West Bend and Ohio Casualty policies would share the costs of defending and indemnifying the underlying lawsuit if not for the target tender rule. The target tender rule allows an insured covered by multiple concurrent insurance policies the right to select which insurer will defend and indemnify it regarding the specific claim. Here, Home & Garden and Target targeted tender to West Bend. West Bend was solely obligated to defend and indemnify Home & Garden and Target in the underlying lawsuit.
Lastly, the court addressed the issue of whether Ohio Casualty waived its right to seek reimbursement from West Bend. The court found no waiver. Home & Garden, Target, and Ohio Casualty consistently took the position that West Bend was obligated to defend and indemnify them in the underlying lawsuit. There was neither an intentional relinquishment of a known right, nor any conduct inconsistent with their position.
The court held that: (1) “completed operations” exclusion did not preclude coverage; (2) both insured’s “excess clauses” cancelled each other out and the targeted tender rule applied; and (3) insured had not waived right to reimbursement.
West Bend Mutual Ins. v. Home and Garden Supply Inc. 2012 WL 6963009 (Ill.App. 1 Dist.) (This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).).
