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Viking Construction Management5/24/2005
Defendant Liberty Mutual Insurance Company (Liberty Mutual) appeals from an order of the circuit court entering summary judgment in favor of Viking Construction Management, Inc. (Viking) in Viking's declaratory judgment action, declaring that Liberty Mutual owed a duty to defend and indemnify Viking in an underlying lawsuit filed by the Woodland Community School District (Woodland). On appeal, Liberty Mutual contends that the trial court erred in granting summary judgment in favor of Viking because: (1) a breach of contract claim, such as Woodland's, is not covered by its insurance policy; (2) the Woodland complaint failed to allege an "occurrence" covered under the policy; (3) the "your work" policy exclusion bars coverage; (4) Liberty Mutual is not barred, under the estoppel doctrine, from asserting coverage and defense issues; and (5) Liberty Mutual had no duty to indemnify Viking because its policy limits had been exhausted. For the reasons set forth below, we reverse.
STATEMENT OF FACTS
On June 8, 1995, Woodland contracted with Viking to provide construction management services with respect to the design and construction of a new middle school. Pursuant to this agreement, Viking was responsible for, inter alia, determining whether construction was proceeding in accordance with contract documents, guarding Woodland against defects and deficiencies in work, managing the quality program, apprising Woodland of practices that were potentially libelous to Woodland due to safety or other concerns, noting all activities of an unusual or significant nature, reporting to Woodland if it observed activities or situations that were unsafe, and observing the quality of work.
On January 26, 1996, Woodland retained Frederick Quinn as the general contractor, who was required to procure a commercial general liability (CGL) insurance policy naming Viking as an additional insured. Quinn did so through Nationwide Insurance Company (Nationwide). On March 26, Quinn hired Crouch-Walker as the masonry subcontractor. Pursuant to their contract, Crouch-Walker was required to obtain insurance, naming Viking as an additional insured. In this regard, Crouch-Walker obtained a CGL policy in the amount of $1 million from Liberty Mutual as well as an excess policy in the amount of $10 million. Viking was named as an additional insured under both.
The CGL policy contained the following general coverage provision:
"SECTION I - COVERAGES
*
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies.
*
(2) Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverages A or B or medical expenses under Coverage C."
The policy applied to "property damage" only if it was "caused by an 'occurrence.' " Section I also set forth numerous exclusions. However, with the exception of exclusion (a), the exclusions were not applicable to additional insureds, like Viking, pursuant to an endorsement attached to the policy and discussed below.
Section II of the policy defines "WHO IS AN INSURED" and was amended by several endorsements. One, entitled "Additional Insured - Owners, Lessees or Contractors (Form A)," under which Viking was added as an additional insured, provides:
"WHO IS AN INSURED (Section II) is amended to include as an insured the person or organization (called 'additional insured') shown in the Schedule but only with respect to liability arising out of:
A. Your ongoing o
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