In United Fire & Casualty Co. v. Prate Roofing & Installations, LLC, No. 19-3043 (7th Cir. July 30, 2021) the central question was whether a liability insurer for a roofing contractor owed a duty to defend another roofing contractor that was an “additional insured” under its policy. The Seventh Circuit found that District Court did not err in granting the defendant-general contractor/additional insured’s motion for summary judgment in a declaratory judgment action brought by the plaintiff-insurance company seeking a declaration that it did not owe duty to defend the defendant in the underlying lawsuit involving a fatal on-the-job accident on a commercial roofing project where the injured worker was employed by the insured-subcontractor at construction site.
The relevant policy provided an additional insured such as defendant with liability coverage, but only with respect to that defendant’s liability for bodily injuries that may be imputed to the defendant arising out of the primary insured’s acts or omissions. Moreover, underlying lawsuit against the defendant contained allegations of both direct liability and imputed liability for bodily injuries arising out of the subcontractor’s actions.
As such, the Seventh Circuit determined that the defendant remained potentially liable under the allegations of underlying lawsuit so as to require the plaintiff insurer to defend defendant in underlying lawsuit. The Court rejected plaintiff’s reasoning that there was no duty to defend, where Illinois law would not impose liability on a defendant for imputed liability in underlying lawsuit, since Court found that an insurer’s duty to defend applies, where underlying complaint contained allegations that potentially fell within scope of coverage, and also where duty to defend applied even to hopeless lawsuits, whether they are unfounded, false or fraudulent.
However, the duty to defend defendant ended when plaintiff settled with injured worker in underlying lawsuit on behalf of insured-subcontractor, where settlement extinguished any imputed liability of defendant.