INSURANCE COVERAGE UPDATE: On June 24, an Illinois court issued a ruling on insurance coverage involving a general contractor which provides guidance to all Nebraska construction industry contractors.  The Illinois case involved a roof resurfacing project at a high school.  The general contractor hired subcontractor 1 who, in turn, hired subcontractor 2.  An employee of subcontractor 2 suffered fatal injuries after a boom lift he was operating flipped over while he was working at the project.  Subcontractor 1 leased the boom lift from a third party.  Following the accident, the employee’s estate brought a construction negligence and wrongful death lawsuit against the general contractor, the vendor who provided the boom lift and two other parties.   However, the complaint did not name or mention subcontractor 1.  Subcontractor 1 had a Commercial General Liability policy (CGL) which named the general contractor as an additional insured.  The insurance company argued that it did not have a duty to defend the general contractor because the complaint did not state a cause of action against its insured, subcontractor 1.  The Illinois Appeals Court reversed a lower court ruling granting summary judgment to the insurance carrier for two reasons.  First, the “sole negligence” clause in the CGL was found to not apply since the complaint was not based entirely on alleged negligence of the general contractor and, instead, named other parties.  Second, the Appeals Court noted that an insurance carrier may not refuse to defend an insured simply because it believes the insured is not covered under the policy.  Rather, the insurance carrier must either defend the suit under a “reservation of rights” or seek a declaratory judgment finding no coverage.  Since the insurance carrier in the Illinois case failed to take either approach, the court concluded that it was not now able to raise policy defenses to coverage.  This ruling is consistent with Nebraska law and points out the good business reasons for general contractors to request that subcontractors on any project name the general contractor as an additional insured on any subcontractor provided CGL.      By Bill Harding, Chapter Attorney