Defective Workmanship




Defective Workmanship


The City of Naperville and Wil-Freds Construction Inc. entered into an agreement for the construction of a 3-story municipal building and adjoining parking garage. The contract between Wil-Freds and Naperville provided that Wil-Freds was solely responsible for all construction methods, techniques, and procedures.


Following the construction of the project, Naperville filed suit against Wil-Freds alleging breach of contract. The complaint alleged construction defects including abnormal voids and cracks in the concrete walls and columns in the parking garage, leaking in the parking garage, water damage to the lobby of the office building, and numerous miscellaneous construction defects.


Wil-Freds was insured by Monticello under a comprehensive general liability policy. Wil-Freds tendered the defense of Naperville’s action to Monticello.  Monticello filed a declaratory judgment action against Wil-Freds seeking a determination of its obligation under the policy.


Monticello argued that because Naperville sought to recover for property damage resulting from a breach of contract, there was no occurrence under the policy.  Monticello also argued that coverage was precluded based on the policy’s exclusion for “property damage to the named insured’s products arising out of such products or any part of such products.”


Wil-Freds argued that the Monticello policy provided coverage because true but unpleaded facts showed that the allegedly defective construction had caused damage to property other than the project itself.  In addition, Wil-Freds argued that, based on the broad form property damage endorsement, coverage existed for defects that resulted from the work of subcontractors rather than from the work of Wil-Freds itself.  Wil-Freds’s project manager submitted an affidavit in support of its motion for summary judgment stating that the construction defects were attributable to the work of the subcontractors engaged by Wil-Freds, not Wil-Freds’s  own work.


The trial court granted Monticello’s motion for summary judgment and held that Monticello did not have a duty to defend or indemnify Wil-Freds under its comprehensive general liability policy.


With regard to the “named insured’s product” exclusion, the court stated that if Naperville had sued Wil-Freds for water damage suffered by cars in t he parking lot, or if a pedestrian had sued Wil-Freds for injury caused by falling concrete, the underlying claim would have alleged an occurrence and Monticello would have been required to defend Wil-Freds under its policy.  The Naperville complaint, however, only alleged a claim for property damage to the project itself resulting from breach of contract.


The court found the recent decision Home Inc. Co. v Wil-Freds, Inc., 601 NE2d 281 (Ill App 1992) [see summary at (5) 315-4*], to be directly on point.  A complaint based on a myriad of construction defects for damages to the project itself cannot be covered.  The fact that a building would constitute a general contractor’s own product was consistent with the underlying purpose of CGL insurance.


Accordingly, the appellate court affirmed the decision of the district court, holding that Monticello had no duty to defend or indemnify Wil-Freds for the allegations in the Naperville complaint because the complaint did not allege an occurrence within the meaning of the policy.


Monticello Insurance Company v Wil-Freds Construction Inc., 661 NE2d 451 (Ill App 1996).


Note: Decisions from other jurisdictions follow the above reasoning including Hartford Acc. & Indem. Co. v Pacific Mut. Life Ins. Co., 861 F2d 250, 252-53 (10th Cir 1988)  [see summary at (2) 120-11*] (CGL policy not intended to function as a performance bond); Home Indemnity Co. v Miller, 399 F2d 78 (8th Cir 1968); Centex Homes Corp. v Prestressed Systems, Inc., (444 S2d 66) (Fla App 1984); Indiana Ins. Co. v DeZutti, 408 NE2d 1275 (Inc. 1980); Kendall Plumbing, Inc. v St. Paul Mercury Ins. Co., 189 Kan 528, 370 P2d 396 (1962); Vobill Homes, Inc. v Hartford Accident & Indemnity Co., 179 S2d 496 (La App 1965); Knutson Constr. Co. v St. Paul Fire & Marine Ins. Co., 396 NW2d 229 (Minn 1986) (en banc) [see summary at (1) 315-17*];  Weedo v Stone-E-Brick, Inc. 405 A2d 788 (NJ 1979); Federated Service Ins. Co. v R.E.W., Inc., 53 Wash App 730, 770 P2d 654 (1989) [see summary at (2) 315-11*].  See also Tinker, “Comprehensive General Liability Insurance – Perspective & Overview,” 25 Fed’n Ins. Couns Q. 217, 224 (1975).


Also see other issues in this case at (8) 105-7.