In Powerscreen, Terrell Materials leased a concrete crusher from Powerscreen to be used in connection with a road construction site. Pursuant to the rental agreement entered into between Terrell Materials and Powerscreen, Terrell Materials was required to “at its own costs, operate and maintain the equipment with factory authorized parts and to make any repairs which may become necessary” and “to return the equipment to [Powerscreen] in the same condition as received.” In addition, the rental agreement required Terrell Materials to name Powerscreen as an additional insured on its liability policy. An employee of another subcontractor at the construction site was allegedly injured in the process of moving the concrete crusher. The injured employee filed a personal injury suit against Terrell Materials and Powerscreen. When sued, Hartford, on behalf of Powerscreen, tendered the defense of the underlying lawsuit to Indiana Insurance, claiming that Powerscreen was an additional insured under the Indiana Insurance Policy issued to Terrell Materials. Indiana Insurance denied the tender, contending that Powerscreen was not an additional insured under the Indiana Insurance Policy because Terrell Materials was not performing “ongoing operations” for Powerscreen at the time of the employee’s injury. It further argued that Terrell Materials’ obligations under the rental agreement did not constitute “ongoing operations” conducted for Powerscreen.
Having concluded that the rental agreement between Terrell Materials and Powerscreen satisfied the “writing” requirement under the additional insured endorsement, the Court considered the allegations of the underlying complaint to determine whether “the liability at issue arose out of Terrell Materials’ ‘ongoing operations’ performed for Powerscreen.” Relying on Cincinnati Ins. Co. v. Dawes Rigging & Crane Rental, Inc., 321 F. Supp.2d 975 (C.D. IL. 2004), the District Court concluded that Terrell Materials’ contractual obligation under the rental agreement to perform necessary maintenance work satisfied the "ongoing operations" language under the policy. Therefore, its alleged failure to do so potentially fell within the terms of the policy, triggering coverage, obligating Indiana Insurance to provide additional insured coverage to Powerscreen, stating that “but for Terrell Materials’ use, maintenance and failure to repair the concrete crusher under the rental agreement, John’s injury would not have occurred.” The First District Court’s opinion in Powerscreen has shown the courts’ reluctance to find a distinction between
liability “arising out of your work,” and liability “arising out of your ongoing operations” despite different terms used in additional insured endorsements. It also provides a basis to apply an expansive “but for” analysis to find additional insured coverage, creating a hardship on insurers writing policies to limit the scope of additional insured coverage. For further information contact Sumi Yang at 312.558.8306 or syang@mckenna- law.com
Lien Act Amended to Allow Injured Plaintiffs to Receive Higher Award Ratio
Effective January 1, 2013, the Health Care Services Lien Act will be changed to allow medical insurance company claims to be cut proportionally to the drop in a plaintiff's recovery. The new law reduces the amount insurers can collect from a plaintiff's award when full damages are not paid out. For example, if a person sustains an injury worth $1 million, but settles for the $100,000 in insurance coverage held by the defendant, any lienholders' claims would also drop by 90 percent. The change in the law was advocated by plaintiffs’ attorneys who argued that at times the insurance companies were receiving more from a settlement than the injured plaintiff received after deducting for the insurance company’s lien. Some plaintiffs’ attorneys believe this change will prevent lienholders from holding a case hostage because they have refused in the past to reduce their lien, thus making it difficult to reach a settlement.