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Fragman Construction Co. v. Preston Construction Co.

Citations: 274 N.E.2d 614; 1 Ill. App. 3d 1002; 1971 Ill. App. LEXIS 2030Docket: 70-280

Court: Appellate Court of Illinois; October 15, 1971; Illinois; State Appellate Court

Narrative Opinion Summary

In this case, Aetna Insurance Company appealed a summary judgment that favored Preston Construction Company following a lawsuit initiated by Fragman Construction Company. The dispute arose after Fragman suffered damages due to a malfunctioning shut-off valve installed by Preston in a project for the City of Rockford. Fragman successfully sued Preston for damages, but Aetna, Preston's general liability insurer, denied coverage, arguing that the damages occurred after the completion of Preston's work and were excluded under the policy's completed operations clause. However, Preston contended that Fragman's complaint suggested potential coverage, thus obligating Aetna to defend under the policy. The court concurred, emphasizing that an insurer's duty to defend is broader than its duty to indemnify and is determined by the allegations in the complaint. Since the complaint alleged facts that could potentially trigger coverage, Aetna was found in breach of its duty to defend and was consequently estopped from raising exclusionary defenses. The summary judgment requiring Aetna to cover the judgment amount and attorney's fees was affirmed, with the concurrence of Judges Guild and Seidenfeld.

Legal Issues Addressed

Estoppel for Failure to Defend

Application: Aetna was estopped from asserting exclusionary defenses because it failed to defend Preston when the complaint indicated potential coverage.

Reasoning: Failure to do so estops the insurer from later raising exclusionary defenses in actions brought by the insured.

Insurer's Duty to Defend Based on Allegations

Application: The court ruled that Aetna had a duty to defend Preston because Fragman's complaint alleged facts that potentially suggested coverage under Aetna's policy.

Reasoning: The insurer's duty to defend is triggered when a complaint alleges facts that, if true, would suggest potential coverage under an insurance policy.

Interpretation of Complaint Allegations

Application: The court found that the complaint's allegations suggested negligence during the work, which could be covered by the policy, contrary to Aetna's assertion of post-completion damages.

Reasoning: Count II of the amended complaint alleges negligence 'at and prior to' the time of damage, which implies negligence during the work.