Westfield Insurance Company v. National Decorating Service, I, et al
Filed opinion of the court by Judge Williams. AFFIRMED. Richard A. Posner, Circuit Judge; Ilana Diamond Rovner, Circuit Judge and Ann Claire Williams, Circuit Judge. [6853968-1]  [16-1439]
United States Court of Appeals
For the Seventh Circuit
WESTFIELD INSURANCE COMPANY,
NATIONAL DECORATING SERVICE, INC.,
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:14‐cv‐01572 — John Robert Blakey, Judge.
ARGUED APRIL 12, 2017— DECIDED JULY 13, 2017
Before POSNER, ROVNER, and WILLIAMS, Circuit Judges.
WILLIAMS, Circuit Judge. This is an insurance coverage dis‐
pute that resulted after a newly constructed multi‐story con‐
dominium building suffered water damage. The water dam‐
age was allegedly caused by the failure of the painting sub‐
contractor, National Decorating Service, to apply an adequate
coat of sealant to the exterior of the building.
In Illinois state court, the building’s condominium associ‐
ation filed suit against the general contractor, developer, and
various subcontractors (collectively the “defendants”) to re‐
cover for the damages incurred. When the defendants ten‐
dered the defense to Westfield, National Decorating Service’s
insurer, Westfield filed this action seeking a declaration that it
owes no duty to defend the defendants in the underlying ac‐
tion. After cross‐motions for summary judgment were filed
and fully briefed, the district court determined that the con‐
dominium association’s complaint triggered Westfield’s duty
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 pur‐
sue these claims.
Second, Westfield contends it owes no duty to defend be‐
cause the condominium association’s complaint does not al‐
lege a covered incident under its policy. Rather, the complaint
alleges that the painting contractor failed to apply an ade‐
quate amount of paint, which cannot be said to be an “acci‐
dent.” Absent an “accident,” Westfield asserts that there was
not a covered “occurrence” under the policy. Further, West‐
field argues that because the damage alleged is to the building
itself, which was a new construction and not an existing struc‐
ture, the condominium association has not demonstrated that
there was property damage incurred that is subject to its pol‐
Here, we disagree. When the policy defines the term to in‐
clude the “continuous or repeated exposure to substantially
the same harmful conditions,” as it does here, the condomin‐
ium association’s allegation that the painting subcontractor
acted negligently is sufficient under Illinois law to constitute
an “occurrence.” Further, because the painting subcontrac‐
tor’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.
This coverage dispute arises out of the construction of a
24‐story condominium building located at 200 North Jeffer‐
son Street, Chicago, Illinois (“200 North” or the “Building”).
200 North Jefferson, LLC was the owner and developer of the
Building. James McHugh Construction Company (“McHugh
Construction”) was the general contractor who retained Na‐
tional Decorating Service, Incorporated (“National Decorat‐
ing”) as a subcontractor to perform all of the painting work.
Specifically, National Decorating was tasked with painting
the exterior of the Building with a protective coating known
as Modac, a waterproof sealant.
A. Underlying Action
On January 13, 2012, the Board of Managers of 200 North
Jefferson Tower Condominium Association (the “Associa‐
tion”) filed suit in the Circuit Court of Cook County. See Bd. of
Managers of 200 N. Jefferson Tower Condo. Ass’n v. 200 Jefferson
LLC, No. 2012‐L‐000480 (Cir Ct. Cook Cnty. filed January 13,
2012). This action, which we will refer to as the “underlying
action,” is currently pending and seeks to recover for dam‐
ages incurred as the result of faulty workmanship on the
Building. 200 North Jefferson, LLC, McHugh Construction,
MCZ/Jameson Development Group, LLC, and National Dec‐
orating were named as defendants. On September 4, 2014, the
Association filed the operative five‐count Third Amended
In this Third Amended Complaint, the Association identi‐
fies the following damages: (1) significant cracking of the ex‐
terior concrete walls, interior walls, and ceilings; (2) signifi‐
cant leakage through the exterior concrete walls, balconies,
and windows; (3) defects to the common elements of the
Building; and (4) damage to the interior ceilings, floors, inte‐
rior painting, drywall, and furniture in the units. Although
the previous complaint contained similar allegations regard‐
ing the damages incurred, it was not until the Third Amended
Complaint was filed that damage to furniture was alleged.
Further, it was only after the filing of the Third Amended
Complaint that any of the named defendants claimed that
Westfield had a duty to defend in the underlying action.
On January 9, 2014, McHugh Construction filed an
Amended Third‐Party Complaint against National Decorat‐
ing. It contains three counts: (1) breach of contract; (2) “ex‐
press contractual defense & indemnity”; and (3) negligence.
McHugh alleged that it was National Decorating’s actions that
caused the alleged damages to 200 North.
B. Coverage Dispute
Westfield filed the instant action on March 6, 2014. It seeks
a declaration that under the policy it issued to National Dec‐
orating, it owes neither a duty to defend nor to indemnify Na‐
tional Decorating, McHugh Construction, 200 North Jefferson
LLC, or MCZ/Jameson. The policy at issue is a commercial
general liability policy (“CGL”), which was initially effective
from February 28, 2008 until February 28, 2009. It was re‐
newed three times until it ultimately expired on November 1,
2011. There is no dispute that the policy was in place at the
time the work was performed and the relevant language re‐
mained the same throughout the coverage period.
The Insuring Agreement of the policy provides that West‐
[P]ay those sums that the insured becomes le‐
gally obligated to pay as damages because of
ʺbodily injuryʺ or ʺproperty damageʺ to which
this insurance applies. We will have the right
and duty to defend the insured against any
ʺsuitʺ seeking those damages. However, we will
have no duty to defend the insured against any
ʺsuitʺ seeking damages for ʺbodily injuryʺ or
ʺproperty damageʺ to which this insurance does
“Property damage” is defined as the “[p]hysical injury to tan‐
gible property, including all resulting loss of use of that prop‐
erty.” Per the policy, the insurance only covers “property
damage” caused by an “occurrence,” which is further defined
as an “accident, including continuous or repeated exposure to
substantially the same general harmful conditions.” But, the
policy does not define the term “accident.”
The parties agree that National Decorating is the “Named
Insured” under the policy, which also defines the terms “you”
and “your” as referring to the “Named Insured,” i.e., National
Decorating. They also agree that 200 North Jefferson,
McHugh Construction, and MCZ/Jameson are not “Named
Insureds,” but rather are “Additional Insureds” under the
policy by virtue of the contracts that they entered into with
each other. Instead, the parties’ dispute focuses on whether
the damages alleged fall within the policy’s coverage param‐
eters such that Westfield has a duty to defend in the underly‐
C. Proceedings Below
After the parties filed cross motions for summary judg‐
ment and the matter was fully briefed, the district judge de‐
nied Westfield’s motion. At the same time, the court granted
the defendants’ motions for summary judgment. While the
district court found that the issue of indemnification was
premature at this juncture in the litigation, it concluded that
pursuant to the Westfield policy and Illinois law, Westfield
had a duty to defend the defendants in the underlying action.
Westfield now appeals.
We review the district court’s interpretation of the insur‐
ance policy at issue and the resulting grant of summary judg‐
ment de novo, Nautilus Insurance Co. v. Board of Directors. of Re‐
gal Lofts Condominium Assʹn, 764 F.3d 726, 730 (7th Cir. 2014),
construing all facts in the light most favorable to the non‐mov‐
ing party. Suarez v. W.M. Barr & Co., 842 F.3d 513, 517 (7th Cir.
2016) (citing Stephens v. Erickson, 569 F.3d 779, 786 (7th Cir.
2009)). When considering a district court’s decision on cross‐
motions, we must “construe all inferences in favor of the party
against whom the motion under consideration is made.”
Tompkins v. Cent. Laborers’ Pension Fund, 712 F.3d 995, 999 (7th
Cir. 2013) (quoting Hendricks‐Robinson v. Excel Corp., 154 F.3d
685, 692 (7th Cir. 1998)) (internal quotation mark omitted).
Summary judgment is appropriate only where “there is no
genuine dispute as to any material fact and the movant is en‐
titled to judgment as a matter of law.” FED. R. CIV. P. 56(a).
Under Illinois law, which the parties agree applies, the
duty to defend is determined by comparing the allegations in
the underlying complaint to the policy at issue. Taco Bell Corp.
v. Cont’l Cas. Co., 388 F.3d 1069, 1073 (7th Cir. 2004) (citing
Dixon Distrib. Co. v. Hanover Ins. Co., 641 N.E.2d 395, 398 (Ill.
1994)) (additional citations omitted). We must liberally con‐
strue the underlying complaint and the insurance policies in
favor of the insured. U.S. Fid. & Guar. Co. v. Wilkin Insulation
Co., 578 N.E.2d 926, 930 (Ill. 1991); see also Westfield Ins. Co. v.
W. Van Buren, LLC, 59 N.E.3d 877, 882 (Ill. App. Ct. 2016) (“The
complaint must be liberally construed and all doubts resolved
in favor of coverage for the insured.”). “The construction of
an insurance policy is a question of law[,]” Milwaukee Mutual
Insurance Co. v. J.P. Larsen, Inc., 956 N.E.2d 524, 527 (Ill. App.
Ct. 2011), and when interpreting a policy, we are bound by the
same general rules governing contract interpretation. W. Van
Buren, 59 N.E.3d at 882.
The duty to defend is triggered if the allegations in the un‐
derlying complaint fall within, or potentially within, the pol‐
icy’s coverage. Lagestee‐Mulder, Inc. v. Consol. Ins. Co., 682 F.3d
1054, 1056 (7th Cir. 2012) (quoting Gen. Agents Ins. Co. of Am.,
Inc. v. Midwest Sporting Goods Co., 828 N.E.2d 1092, 1098 (Ill.
2005)). “This is true even if the allegations are groundless,
false, or fraudulent, and even if only one of several theories of
recovery alleged in the complaint falls within the potential
coverage of the policy.” Valley Forge Ins. Co. v. Swiderski Elecs.,
Inc., 860 N.E.2d 307, 315 (Ill. 2006) (citing Wilkin Insulation Co.,
578 N.E.2d at 929).
Therefore, for an insurer to justifiably refuse to defend a
lawsuit it must be “clear from the face of the underlying com‐
plaint” that the allegations fail to bring the case within or po‐
tentially within, the policy’s coverage. Id. Nonetheless, while
under Illinois law the duty to defend is broad, the duty is not
limitless. Amerisure Mut. Ins. Co. v. Microplastics, Inc., 622 F.3d
806, 812 (7th Cir. 2010). It is also distinct from the duty to in‐
demnify, which is determined once liability has been as‐
signed, National American Insurance Co. v. Artisan & Truckers
Casualty Co., 796 F.3d 717, 724 (7th Cir. 2015), and is “signifi‐
cantly narrower than the duty to defend … .” Allied Prop. &
Cas. Ins. Co. v. Metro N. Condo. Ass’n, 850 F.3d 844, 847 (7th Cir.
2017); see also Ohio Cas. Ins. Co. v. Bazzi Constr. Co., 815 F.2d
1146, 1147 (7th Cir. 1987) (noting that “an insurer’s duty to de‐
fend is much broader than its duty to indemnify”).
A. Unit Owners’ Property Damage Insufficient
for the Duty to Defend
Westfield asserts that the only allegations contained in the
Association’s Third Amended Complaint that might be suffi‐
cient to invoke a duty to defend are the allegations that indi‐
vidual unit owners suffered damage to their property (i.e.,
furniture, etc.). Nonetheless, because Westfield contends that
the Association does not have standing to pursue these
claims, it argues that these allegations are insufficient to trig‐
ger the duty to defend. We agree.
As we recently noted in Allied Property, under the Illinois
Condominium Property Act, 765 Ill. Comp. Stat. 605/1, et seq.,
a condominium association may act in a representative capac‐
ity on behalf of its unit owners. See 765 Ill. Comp. Stat.
605/9.1(b). Yet, the Act limits the scope of such representation
“to matters involving the common elements or more than one
unit, on behalf of the unit owners, as their interests may ap‐
pear.” Id.; see also Allied Prop., 850 F.3d at 849. This limitation
precludes the Association from being able to pursue a legal
remedy for the damage that it alleges National Decorating’s
actions caused to the individual unit owners’ furniture. Be‐
cause the Association cannot legally recover for this alleged
damage, these allegations are insufficient to invoke the duty
to defend. See Allied Prop., 850 F.3d at 849.
B. Other Damage to the Building Sufficient to In‐
voke the Duty to Defend
Our conclusion that the allegations of damage to the indi‐
vidual unit owners’ property are insufficient to invoke the
duty to defend is not, however, the end of our inquiry. Rather,
we must determine whether the policy’s coverage is triggered,
or potentially triggered, by the other damage allegedly
caused by National Decorating’s actions.
On appeal, Westfield advances two arguments in support
of its position that the damages alleged do not, as a matter of
law, constitute an occurrence under the policy. First, it argues
that National Decorating’s failure to apply a sufficiently thick
coat of paint to the exterior of the Building cannot constitute
an “accident” under the policy. Absent an “accident,” West‐
field notes, there can be no “occurrence,” as the policy re‐
quires for coverage. Second, Westfield argues that because the
damage was to the Building itself, the damage is exempted
from the policy’s coverage. We will discuss each argument in
Underlying complaint sufficiently alleges
According to Westfield, there is no duty to defend the de‐
fendants here because National Decorating’s failure to apply
a thick enough coat of paint to the exterior of the building can‐
not constitute an “accident.” As we have already noted, the
policy at issue defines “occurrence” as an “accident, including
continuous or repeated exposure to substantially the same
general harmful conditions.” Therefore, Westfield contends
that absent an “accident,” there can be no “occurrence.” But,
we disagree that National Decorating’s actions cannot consti‐
tute an “occurrence” as a matter of law.
Courts have defined the term “accident” as used in insur‐
ance policies as “an unforeseen occurrence, usually of an un‐
toward or disastrous character or an undesigned, sudden, or
unexpected event of an inflictive or unfortunate character.”
Nautilus Ins. Co., 764 F.3d at 731 (quoting Westfield Natʹl Ins.
Co. v. Contʹl Cmty. Bank & Trust Co., 804 N.E.2d 601, 605 (Ill.
App. Ct. 2003)) (internal quotation mark omitted). Therefore,
Illinois courts have determined that damage to a construction
project that occurs as a result of a construction defect, does
not constitute an “accident” or “occurrence” because it is “the
natural and ordinary consequence of faulty construction.”
See, e.g., Lyerla v. AMCO Ins. Co., 536 F.3d 684, 689 (7th Cir.
But, this does not foreclose the defendants’ arguments that
the alleged damage could fall within the policy’s coverage and
therefore, triggers a duty to defend. Under Illinois law, negli‐
gently performed work or defective work can give rise to an
“occurrence” under a CGL policy. Id. at 690 (citing Prisco
Serena Sturm Architects, Ltd. v. Liberty Mut. Ins. Co., 126 F.3d
886 (7th Cir. 1997)). This is true where, as is the case here, the
policy defines an “occurrence” to include not only an acci‐
dent, but also “continuous or repeated exposure to condi‐
tions.” Id. Here, the underlying complaint alleges that Na‐
tional Decorating was negligent. This is sufficient to satisfy
the policy’s occurrence requirement when determining
whether there is a duty to defend at this juncture in the litiga‐
1 We agree with the district court that the issue of indemnification is
premature at this point in the litigation. Therefore, we leave for another
day whether the record demonstrates that there was an “accident” such
that the policy dictates indemnification.
Underlying complaint alleges covered
Under Illinois law, CGL policies are not intended to serve
as performance bonds, and therefore, “economic losses sus‐
tained as a result of defects in or damage to the insuredʹs own
work or product are not covered.” Bazzi, 815 F.2d at 1148.
Nonetheless, “damage to something other than the project it‐
self does constitute an ‘occurrence’ under a CGL policy.” J.P.
Larsen, 956 N.E.2d at 532 (citing CMK Dev. Corp. v. W. Bend
Mut. Ins. Co., 917 N.E2d 1155 (Ill. App. Ct. 2009)). Here, the
parties dispute what constitutes the scope of the project. West‐
field contends that the project was the entire 200 North Jeffer‐
son building and because the damage alleged is to that build‐
ing, it is excluded from the policy’s scope. The defendants dis‐
agree, arguing that the scope of the project was National Dec‐
orating, the Named Insured’s, work. We agree with the de‐
We find Bazzi instructive. There, a construction company
was hired to remodel an existing garage by adding a second
floor. While pouring the concrete for the additional level, the
supporting joists of the garage began to buckle and the struc‐
tural integrity of the whole building was compromised. In the
underlying suit against the construction company, the com‐
plaint alleged that the structural integrity of the existing gar‐
age building was compromised by the construction com‐
pany’s negligent, willful, and wanton conduct.
The construction company tendered its defense to the in‐
surance company under a CGL policy. The insurance com‐
pany in turn filed a declaratory action, much like the one here.
We found that although under Illinois law CGL policies “are
not intended to pay the costs associated with repairing or re‐
placing the insuredʹs defective work and products,” the duty
to defend had been triggered because the underlying com‐
plaint contained allegations of damage to the building beyond
the construction company’s own work and product. 815 F.2d
at 1148–49 (citation omitted).
Westfield contends that Bazzi is inapplicable here because
200 North was a new construction. Yet, this is neither the line
that Bazzi drew nor one that we find we must draw. Rather, in
Bazzi, we noted that “[h]ad Bazzi contracted to construct an
entirely new building for [the defendant], any damage to or
defects in that building, which would be defined as the property
or work product of Bazzi, would not be covered under the pol‐
icy.” Id. (emphasis added). In Bazzi, that was not the case. Id.
And, although Westfield would have us ignore the italicized
language, Bazzi dictates that the relevant inquiry when deter‐
mining the scope of a project is what the parties contracted
for, not whether the project was a new construction or an ex‐
isting building. See also J.P. Larsen, 956 N.E.2d at 532 (finding
a duty to defend in a suit for damages caused by the subcon‐
tractor’s negligent workmanship to the new construction).
Westfield points to Viking Construction Management, Inc. v.
Liberty Mutual Insurance Company, 831 N.E.2d 1 (Ill. App. Ct.
2005), in support of its position that damage to a new con‐
struction is not covered property damage under a CGL. This
case is not, however, persuasive as there, the underlying com‐
plaint only sought to recover the cost to repair and replace the
named insured’s work. Id. at 16. That is not the case here.
Nor is CMK Development instructive. 917 N.E.2d 1155. In
CMK Development, the Named Insured was the developer,
who brought suit after its insurer failed to provide it with a
defense in the underlying action brought by a purchaser of
one of its homes. But there, the project was clearly the entire
home—the purchaser contracted directly with the developer
for the delivery of the new construction. Therefore, there
could be no dispute over the project’s scope.
Here, in contrast, the Named Insured is National Decorat‐
ing, a subcontractor responsible for painting the exterior of
200 North. The underlying complaint seeks to recover for
damages incurred to other portions of the building, not just
the exterior, which was allegedly coated with an insufficient
amount of paint. It would be illogical to conclude that the
scope of the project for which National Decorating contracted
was the entire 200 North Building. Yet, to rebut this conclu‐
sion, Westfield contends that the appropriate test for deter‐
mining the scope of the project is from the end‐user’s perspec‐
tive. Therefore, it argues, because the end user contracted for
the construction of the entire building, not simply the paint‐
ing services, the project must be considered to be the entire
Building. In support of this position, Westfield relies upon a
products liability case, Trans State Airlines v. Pratt & Whitney
Canada, Inc., 682 N.E.2d 45 (Ill. 1997). But, we do not see a com‐
pelling reason for turning to the products liability realm when
Bazzi compels a finding that the duty to defend has been trig‐
Additionally, Westfield argues that from a policy perspec‐
tive, finding that there is a duty to defend under a subcontrac‐
tor’s CGL policy would obviate the need for a general contrac‐
tor or developer to carry its own coverage. Rather, Westfield
asserts that a general contractor or developer could trigger
coverage under “multiple policies for any damage to the
‘building itself.’” But, this argument is disingenuous, as cov‐
erage would only be available for damage caused to the build‐
ing as a result of an “occurrence” caused by the Named In‐
sured’s work. Therefore, the policy requires a clear connection
between the damage and the subcontractor’s work. It would
not allow for absolute coverage for any and all harm caused
by a project, such that it is no longer prudent or necessary for
the general contractor or developer to carry its own CGL cov‐
erage. Westfield’s concerns are without merit.
Lastly, and without citing any supporting authority, West‐
field contends that it is “well‐settled ... that additional insured
coverage is not broader than, but in fact narrower than the
coverage offered the name insured in the same CGL policy.”
Yet, the plain language of the “Additional Insured Endorse‐
ment” belies this assertion. That endorsement states, “Who Is
An Insured is amended to include as an insured the person
or organization shown in the Schedule, but only with respect to
liability arising out of ‘your work’ … .” (emphasis added). The
policy later defines “your work” as “work or operations per‐
formed by you or on your behalf.” It also defines “you” and
“your” as the “Named Insured,” who all parties here agree is
National Decorating. Therefore, the policy clearly contem‐
plates providing coverage for the Additional Insureds, here
the defendants, for liability arising out of National Decorat‐
ing’s work, and Bazzi and J.P. Larsen support our conclusion
that there is a duty to defend here.
We AFFIRM the district court’s grant of summary judgment
for the Appellees‐defendants.
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