the damages alleged in Santucci's complaint are covered by the
policy issued to Crider. The parties' briefs have raised numerous
arguments, all of which will be considered after a brief
discussion of the applicable principles of law.
Rule 56(c) provides that a motion for summary judgment shall be
granted if the pleadings, depositions, answers to
interrogatories, admissions on file, and affidavits show that
there are no genuine issues as to any material fact and the
moving party is entitled to a judgment as a matter of law. As a
procedural matter, the granting of a motion is a drastic remedy
which is available only upon a clear showing that no material
issues of fact remain for trial. Mintz v. Mathers Fund,
463 F.2d 495 (7th Cir. 1972). Accord, Kirk v. Home Indemnity Co.,
431 F.2d 554 (7th Cir. 1970).
In the present case there is no factual dispute disclosed by
the pleadings and affidavits. At most, the parties disagree on
what label should be attached to the facts. Hartford's liability
under the policy turns on the construction of several policy
exclusions; this presents a question of law for the court.
Hartford Accident & Indem. Co. v. Case Foundation Co., 10
Ill. App.3d 115, 294 N.E.2d 7, 11 (1st Dist. 1973); 6 J. Moore,
Federal Practice, ¶ 56.17, at 2561 (1974). And each movant
has the burden of establishing the facts that entitle him to
judgment are not in dispute. Id. at 2563. See generally, Thoresen
v. Roth, 351 F.2d 573 (7th Cir. 1965).
The final preliminary matter is the applicable choice of law
rule. The parties' briefs refer to decisions of many different
states and various federal circuits. Since this is a diversity
action, the substantive law of Illinois as well as its applicable
conflicts of laws decisions are controlling. Klaxon Co. v.
Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed.
1477 (1941); Erie R.R. Co. v. Thompkins, 304 U.S. 64, 58 S.Ct.
817, 82 L.Ed. 1188 (1938). Under Illinois conflicts of law
decisions, the validity, construction, and obligation of a
contract must be determined by the law of the place where it is
made or to be performed. Harris v. American Surety Co., 372 Ill. 361,
24 N.E.2d 42 (1939); Ryan v. Napier, 252 F. Supp. 730
(N.D.Ill. 1966). Therefore, Illinois law is controlling, since
the contract was made in Illinois and covered work being
performed in Illinois.
The first issue presented by the motions is whether an action
for declaratory judgment lies when the insurer denies liability
in full and defends under a reservation of rights. This issue is
raised by Crider in his cross-motion for summary judgment.*fn9 And
although his papers are not altogether clear, he appears to
assert that an action for declaratory judgment is improper
because of the difficulties in determining which damages are
excluded under the policy's terms. Crider suggests that any claim
of exclusion should be raised by Hartford in a garnishment
proceeding if Santucci prevails in the state action.
This argument is without merit. The rule in Illinois is that an
insurer has the duty to defend the insured when a complaint is
filed and it arguably states facts that bring the case within the
policy's coverage. If there is potential coverage but the insurer
believes it has valid defenses based upon exclusionary provisions
of the policy, it has two options. One, it may secure a
declaratory judgment of its rights while defending the potential
insured under a reservation of rights. Or two, it may defend the
potential insured under a reservation of rights and seek to
adjudicate its rights by a supplemental suit. If the insurer
refuses to follow either of these procedures and does not defend
when there is potential coverage, it is estopped to raise the
exclusionary defenses in a subsequent action against it by the
insured. John Mohr & Sons v. Hanover Ins. Co., 322 F. Supp. 184
Gulf Ins. Co. v. Dooley, 286 F. Supp. 16 (N.D.Ill. 1968); Fragman
Const. Co. v. Preston Const. Co., 1 Ill. App.3d 1002,
274 N.E.2d 614, 616 (2d Dist. 1971); see Sims v. Illinois Nat. Cas. Co.,
43 Ill. App.2d 184, 193 N.E.2d 123 (3d Dist. 1963).
Hartford is presently defending Crider under a reservation of
rights. Therefore, Hartford may bring this declaratory judgment
action to protect its rights under the exclusionary provisions in
the policy. Crider's motion on this issue is Denied.
The next issue, and the one most vigorously argued by the
parties, is whether the "collapse hazard" exclusion excludes
liability for the damages alleged by Santucci. The policy
I. COVERAGE B — PROPERTY DAMAGE LIABILITY
The company will pay on behalf of the insured all
sums which the insured shall become legally
obligated to pay as damages because of
Coverage B, property damage