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Plaintiff, West Bend Mutual Insurance Company, sought adeclaration that it had no duty to defend or indemnify its insured,defendant, Mulligan Masonry Company, Inc., against a third-partyaction arising out of an injury to defendant's employee, DonaldWeeks. Ruling that plaintiff owed a duty to defend, the trialcourt denied plaintiff's motion for summary judgment and granteddefendant's motion for summary judgment. On appeal, plaintiffargues that (1) the trial court erred in granting defendantaffirmative relief even though defendant filed no pleadingrequesting such relief; and (2) the trial court incorrectly foundthat plaintiff owed a duty to defend. We affirm.

Our summary of the background facts is taken from thedocuments attached to the pleadings and to the motions for summaryjudgment. On January 27, 1995, plaintiff issued defendant acontractors business owners insurance policy. The policy includeda standard commercial general liability (CGL) coverage form. Also,defendant was a named insured under a workers compensation andemployers liability policy issued by Virginia Surety Company.

R.C. Wegman Construction Company (Wegman) was the generalcontractor on a construction project at St. Joseph Catholic Churchin Aurora. Wegman hired defendant to perform the masonry work onthe project. The contract between Wegman and defendant containedan indemnification clause and required defendant to maintainliability insurance and name Wegman as an additional insured. Thepolicy issued by plaintiff included Wegman as an additionalinsured. The additional insured endorsement provided, however,that the insurance was excess over any other valid and collectibleinsurance and that it provided no coverage for liability arisingout of the claimed negligence of Wegman or any party other thandefendant.

On May 30, 1995, Weeks was injured while working at thechurch. He brought a negligence action against Wegman. Weeks'scomplaint alleged that, while Weeks was working on a scaffold, abundle of bricks sitting on the scaffold fell over and injured him. The complaint alleged further that Wegman was negligent because itfailed to inspect the site, improperly managed the site, and failedto erect a safe scaffold.

Wegman filed a third-party complaint against defendant. Incount I, Wegman alleged that defendant's negligent acts oromissions were a proximate cause of Weeks's injuries and soughtcontribution in the amount of defendant's pro rata share of thecommon liability. Count II sought indemnity under the contractbetween Wegman and defendant, and count III alleged that defendantbreached the contract by failing to provide primary liabilitycoverage for Wegman as an additional insured. The trial court inthe negligence action dismissed count II of the third-partycomplaint.

Defendant tendered the third-party claim to plaintiff, andplaintiff denied coverage. Plaintiff then filed a complaintseeking a declaration of the parties' rights under the policy. Plaintiff filed a first amended complaint that additionally soughta declaration that it did not have a duty to defend or indemnifyWegman against Weeks's negligence claim. Defendant answered thefirst amended complaint and submitted three affirmative defenses. The affirmative defenses were that (1) plaintiff was estopped todeny coverage, (2) the relevant policy terms were ambiguous, and(3) plaintiff was bound by its agent's representation that thepolicy covered losses like the one at issue here. In thesepleadings, defendant asked the trial court to declare thatplaintiff owed it a defense and indemnity.

Wegman ultimately filed a second amended third-partycomplaint. Again, count I sought contribution, and count IIIalleged a breach of the contract. Count II was entitled "liabilityassumed by contract" and relied on the indemnity clause in thecontract. Count II alleged that the trial court in Weeks'snegligence action found that there was a question of fact aboutwhether defendant waived the liability limit afforded under theWorkers' Compensation Act (820 ILCS 305/5 (West 1996)) and Koteckiv. Cyclops Welding Corp., 146 Ill. 2d 155 (1991). See Liccardi v.Stolt Terminals, Inc., 178 Ill. 2d 540, 550 (1997). Therefore,according to Wegman, under the contract, defendant was liable topay Wegman contribution in excess of the "Kotecki cap" ondefendant's liability.

In response to the second amended third-party complaint,plaintiff filed a second amended complaint containing essentiallythe same allegations as its earlier complaints. In its answer toplaintiff's second amended complaint, defendant again asked thetrial court to declare that plaintiff owed it a defense andindemnity.

Plaintiff and defendant each moved for summary judgment. Plaintiff relied on the "employer's liability" exclusion, whichexcludes coverage for work-related injuries sustained by anemployee of the insured, and the "contractual liability" exclusion,which excludes coverage for liability the insured assumed in acontract. Defendant argued that, under the exception for liabilityassumed by the insured under an "insured contract," theseexclusions did not apply. Plaintiff and Wegman also filed cross-motions for summary judgment.

The trial court granted plaintiff summary judgment againstWegman and declared that plaintiff owed Wegman no defense. Findingthat plaintiff owed defendant a duty to defend the third-partyclaim, the trial court denied plaintiff's summary judgment motionand granted defendant's motion. The court reserved a finding onthe duty to indemnify until a judgment or settlement was reached inthe underlying litigation. The court found, pursuant to SupremeCourt Rule 304(a) (155 Ill. 2d R. 304(a)), that there was no justreason to delay the enforcement or appeal of its order. Plaintifftimely appealed. Defendant and Wegman cross-appealed the trialcourt's finding that plaintiff did not owe Wegman a duty to defend. The parties have not filed briefs addressing the cross-appeal. During the oral argument, the parties informed us that defendantand Wegman are abandoning the cross-appeal. Therefore, we addressonly plaintiff's appeal.

Summary judgment is properly granted if, when viewed in thelight most favorable to the nonmovant, the pleadings, affidavits,depositions, admissions, and exhibits on file reveal that there isno genuine issue of material fact and that the movant is entitledto a judgment as a matter of law. Diehl v. Polo Cooperative Ass'n,328 Ill. App. 3d 576, 579 (2002). The nonmovant need not prove itscase at the summary judgment stage but must come forward withevidence that establishes a genuine issue of material fact. Diehl,328 Ill. App. 3d at 579. We review de novo the trial court'sruling. General Casualty Insurance Co. v. Lacey, 199 Ill. 2d 281,284 (2002).

Plaintiff's first contention on appeal is that the trial courtimproperly granted defendant affirmative relief, i.e., adeclaratory judgment in defendant's favor, even though defendantdid not file a counterclaim seeking such relief. Defendant filedan answer and affirmative defenses. In these pleadings, defendantasked the trial court to declare that plaintiff owed it a defenseand indemnity.

In declaratory judgment actions, an answer that includes aprayer for specific relief may be considered a counterclaim. Kendle v. Village of Downers Grove, 156 Ill. App. 3d 545, 553(1987); In re Estate of Soderholm, 127 Ill. App. 3d 871, 875(1984). Where the answer to a complaint for a declaratory judgment meets and controverts the issues raised by the complaint, no formalcounterclaim is required to allow the court to declare the rightsof all of the parties. Johnson v. Town of the City of Evanston, 39Ill. App. 3d 419, 423 (1976). If plaintiff's complaint for adeclaration that it owes no duty to defend Wegman's third-partyclaim is without merit, then it naturally follows that plaintiffdoes owe a duty to defend. Under the circumstances, the trialcourt properly construed the pleadings liberally and declared the parties' rights under the policy. See Norman A. Koglin Associatesv. Valenz Oro, Inc., 176 Ill. 2d 385, 395-96 (1997).

Plaintiff's second contention on appeal is that it does notowe defendant a duty to defend Wegman's third-party action. Aninsurer owes its insured a duty to defend an action brought againstthe insured if the underlying complaints allege facts within orpotentially within the policy's coverage. Northbrook Property &Casualty Co. v. Transportation Joint Agreement, 194 Ill. 2d 96, 98(2000). An insurer may not justifiably refuse to defend an actionagainst its insured unless it is clear from the face of theunderlying complaints that the allegations fail to state facts thatbring the case within or potentially within the policy's coverage. Northbrook Property, 194 Ill. 2d at 98.

Plaintiff asserts that the "employer's liability" and the"contractual liability" exclusions apply and therefore that it doesnot owe defendant a duty to defend. The policy states:

"2. Exclusions

This insurance does not apply to:

***

b. Contractual Liability

'Bodily injury' or 'property damage' for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:

(1) Assumed in a contract or agreement that

is an 'insured contract,' provided the 'bodilyinjury' or 'property damage' occurs subsequent tothe execution of the contract or agreement; or

(2) That the insured would have in the absence of the contract or agreement.

* * *

e. Employer's Liability

'Bodily injury' to:

(1) An 'employee' of the insured arising out of and in the course of:

(a) Employment by the insured; or

(b) Performing duties related to the conduct of the insured's business; or

(2) The spouse, child, parent, brother or sister of that 'employee' as a consequence ofparagraph (1) above.

This exclusion applies:

(1) Whether the insured may be liable as an employer or in any other capacity; and 

(2) To any obligation to share damages with or repay someone else who must pay damages becauseof the injury.

This exclusion does not apply to liabilityassumed by the insured under an 'insuredcontract.' "

The parties do not dispute that the exclusions are triggeredhere. The issue is whether the "insured contract" exceptioncontained in each exclusion applies. The policy defines an"insured contract" in pertinent part as:

"That part of any other contract or agreement pertainingto your business *** under which [the insured] assume[s] thetort liability of another party to pay for 'bodily injury' or'property damage' to a third person or organization. Tortliability means a liability that would be imposed by law inthe absence of any contract or agreement."

The contract between defendant and Wegman contains anindemnification clause stating:

"To the fullest extent permitted by law, [defendant]shall indemnify and hold harmless [Wegman] *** and all of[its] agents and employees from and against claims, damages,losses, and expenses, including but not limited to attorneys'fees arising out of or resulting from the performance orfailure in performance of [defendant's] work under thisagreement provided that any such claim, damage, loss, orexpense (1) is attributable to bodily injury, sickness,disease, or death, or to injury to or destruction of tangibleproperty including the loss of use resulting therefrom, (2) iscaused, in whole or in part, by any negligent act or omissionof [defendant] or anyone directly or indirectly employed by[defendant], or anyone for whose acts [defendant] may beliable, regardless of whether caused in part by a partyindemnified hereunder. *** In any and all claims against[Wegman], or any of its agents or employees, by any employeeof [defendant], or anyone directly or indirectly employed by[defendant], or anyone for whose acts he may be liable, ***the indemnification obligation under this paragraph 5.2 shallnot be limited in any way by any limitation on the amount ortype of damages, compensation, or benefits payable by or for[defendant] under Worker's Compensation Acts, disabilitybenefit acts, or other employee benefit acts."

When construing an insurance policy, the court must ascertainthe parties' intent. Konami (America), Inc. v. Hartford InsuranceCo. of Illinois, 326 Ill. App. 3d 874, 879 (2002). If the policyterms are unambiguous, the court will afford them their plain,ordinary, and popular meaning. Konami, 326 Ill. App. 3d at 879. If, however, the terms are susceptible to more than oneinterpretation, they are ambiguous and will be construed in favorof the insured and against the insurer that drafted the policy. Konami, 326 Ill. App. 3d at 879.

Plaintiff acknowledges that this court's decision in MichaelNicholas, Inc. v. Royal Insurance Co. of America, 321 Ill. App. 3d909 (2001), controls here. Plaintiff asks us to reject it,however. Michael Nicholas involved the same factual scenario andidentical insurance policy language. The insured was asubcontractor at a subdivision that Kimball Hill was developing. An employee of the insured was injured on the site and, allegingnegligence and violations of the Structural Work Act (740 ILCS150/0.01 et seq. (West 1994) (repealed by Pub. Act 89--2,