Insurer Duty to Defend

Listen to this article

7^th Circuit Court of Appeals

Case Name: St. Paul Guardian Insurance Company v. Walsh Construction Company

Case No.: 23-1662

Officials: Wood, Scudder, and Lee, Circuit Judges.

Focus: Insurer Duty to Defend

In 2003, the City of Chicago engaged Walsh Construction Company to oversee the construction of a canopy and curtain wall system at O’Hare International Airport. Walsh, in turn, subcontracted LB Steel, LLC to fabricate and install steel columns supporting the wall and canopy. After several years, the City discovered weld cracks in the steel columns and sued Walsh for breaching the contract. Walsh counter-sued LB Steel under their subcontract and sought defense from LB Steel’s insurers, who failed to provide it. Subsequently, Walsh obtained a judgment against LB Steel, leading to LB Steel declaring bankruptcy. Walsh then sued LB Steel’s insurers to recover defense costs from the City’s lawsuit and indemnification for ensuing losses.

The district court ruled in favor of the insurers, granting summary judgment on both counts. It reasoned that the damage, limited to LB Steel’s products, didn’t meet the definition of “property damage” in the policies, thus negating coverage. Regarding the duty to defend, the court found no obligation on the insurers’ part, as the City’s claims didn’t potentially fall under LB Steel’s policies.

The Seventh Circuit upheld the district court’s decision, stating that the weld and column defects didn’t qualify as “property damage” under LB Steel’s commercial general liability policies. Additionally, it affirmed the insurers’ lack of duty to defend Walsh. Finally, the court upheld the district court’s refusal to grant Walsh’s request for sanctions under § 155.

Affirmed.

Decided 04/29/24

Full Text