Appellate Law, Chicago, Client Results, Firm News, Insurance, Johnson & Bell

Johnson & Bell Obtains 7th Circuit Appellate Win in Coverage Dispute

November 6, 2018

The Seventh Circuit affirmed a lower court’s opinion in favor of Johnson & Bell’s insurance client, holding that our client does not have a duty to defend an employment agency in a case pending in New York. The underlying case involves a laborer, an employee of the employment agency, who was injured while performing clean up to a jobsite following Hurricane Sandy. The employment agency was brought into the lawsuit as a third-party defendant and allegedly violated certain NY labor laws. The employment agency tendered its defense to its general liability insurer, our client.

Johnson & Bell reviewed the policies, rendered an opinion and ultimately approved the filing of a declaratory complaint seeking a ruling that our client had no duty to defend the employment agency. We filed the Declaratory Judgment in federal court in Northern Illinois and won on summary judgment. The employment agency appealed to the 7th Circuit. Judges Manion, Hamilton and Scudder issued a unanimous per curiam opinion that the contract pursuant to which the employment agency was supplying the laborer was not an “insured contract” and therefore no coverage was available under our client’s policy.

The Seventh Circuit’s opinion essentially tracked each aspect of Johnson & Bell’s argument: (1) that coverage could only be available if the contract was an “insured contract;” (2) that an “insured contract” requires the assumption of tort liability of another party for the indemnitee’s own negligence; (3) that under Texas law, indemnification of another party for its own negligence is an extraordinary risk so any such shifting of risk must be clear and explicit from the language of the contract; and (4) the contract at issue did not clearly and explicitly shift risk in this way, and therefore as a matter of law is not an “insured contract.”

Johnson & Bell Shareholders, Glenn F. Fencl, Garrett L. Boehm, Jr., and David M. Macksey prepared the appellate briefs and were instrumental in preparation for oral argument.

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