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Court Error – Duty to Defend

By: Derek Hawkins//July 18, 2017//

Court Error – Duty to Defend

By: Derek Hawkins//July 18, 2017//

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7th Circuit Court of Appeals

Case Name: Westfield Insurance Company v. National Decorating Service, Inc., et al.

Case No.: 16‐1439

Officials: POSNER, ROVNER, and WILLIAMS, Circuit Judges.

Focus: Court Error – Duty to Defend

This is an insurance coverage dispute that resulted after a newly constructed multi‐story con‐ dominium building suffered water damage. The water damage was allegedly caused by the failure of the painting subcontractor, National Decorating Service, to apply an adequate coat of sealant to the exterior of the building.

On appeal, Westfield argues that the district court erred in finding that there was a duty to defend for two reasons. First, we agree with Westfield that the condominium association’s allegations of damage to individual unit owners’ property are not sufficient to trigger the duty because the condominium association, on behalf of its unit owners, lacks standing to pursue these claims.   Second, Westfield contends it owes no duty to defend because the condominium association’s complaint does not allege a covered incident under its policy. Rather, the complaint alleges that the painting contractor failed to apply an adequate amount of paint, which cannot be said to be an “accident.” Absent an “accident,” Westfield asserts that there was not a covered “occurrence” under the policy. Further, Westfield argues that because the damage alleged is to the building itself, which was a new construction and not an existing structure, the condominium association has not demonstrated that there was property damage incurred that is subject to its policy.

Here, we disagree. When the policy defines the term to include the “continuous or repeated exposure to substantially the same harmful conditions,” as it does here, the condominium association’s allegation that the painting subcontractor acted negligently is sufficient under Illinois law to constitute an “occurrence.” Further, because the painting subcontractor’s actions are alleged to have damaged parts of the building that were outside of the scope of the work for which it was engaged, the condominium association’s complaint alleges potentially covered property damage sufficient to invoke the duty to defend. Therefore, we affirm the district court’s grant of summary judgment to the defendants.

Affirmed

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.

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