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NATIONAL UNION FIRE INS. CO. v. THOMAS M. MADDEN &

February 4, 1993

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Plaintiff,
v.
THOMAS M. MADDEN & COMPANY; FRANK STECK; PHYLLIS CANNONITO, Executrix of the Estate of IMMANUEL CANNONITO, deceased; JOSEPH T. ZIEMINSKI; CAROL MARYNOWSKI; and CLARENCE DEW, Defendants.



The opinion of the court was delivered by: MARVIN E. ASPEN

MEMORANDUM OPINION AND ORDER

 MARVIN E. ASPEN, District Judge:

 Presently before the court is plaintiff National Union Fire Insurance Company's ("National Union") motion for summary judgment. For the reasons set forth below, we deny the motion and sua sponte dismiss National Union's complaint on behalf of all defendants.

 I. Summary Judgment Standard

 Under the Federal Rules of Civil Procedure, summary judgment is appropriate if "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). This standard places the initial burden on the moving party to identify "those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986) (quoting Rule 56(c)). Once the moving party has done this, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial. Fed. R. Civ. P. 56(c). In deciding a motion for summary judgment, the court must read all facts in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254, 106 S. Ct. 2505, 2513, 91 L. Ed. 2d 202 (1986); Griffin v. Thomas, 929 F.2d 1210, 1212 (7th Cir. 1991).

 II. Background

 On approximately June 6, 1988, defendant Thos. M. Madden & Company ("Madden") entered into a contract with the County of Cook, whereby Madden agreed to perform certain construction on Cottage Grove Avenue in Bloom Township, Illinois. In connection with Madden's performance of its contractual obligations, Madden entered into an oral lease with defendant Clarence Dew, whereby Dew authorized Madden to erect and operate a portable concrete batch plant on certain property located near the construction cite. Dew explicitly represented to Madden that he owned the property at issue. In the summer of 1989, however, Madden learned that the portable concrete batch plant was erected partially on property owned by Frank Steck and Emanuel Cannonito. Madden subsequently attempted to rent the property in order to operate the batch plant, but Steck and Cannonito refused. Madden continued to operate the batch plant until at least September 29, 1989.

 On August 10, 1989, Cannonito and Steck filed a complaint in the Circuit Court of Cook County, alleging unlawful trespass by Madden. Steck v. Thos. M. Madden & Co., No. 89 CH 7082. Cannonito, Steck, Joseph T. Zieminski and Carol Marynowski *fn1" filed a second suit against Madden on November 8, 1990, in which they alleged additional unlawful acts committed by Madden while occupying Steck and Cannonito's property without consent. Steck v. Thos. M. Madden & Co., No. 90 M6 6292. The two state-court actions were consolidated on December 10, 1990. On May 30, 1991, the underlying plaintiffs filed an amended complaint containing two counts. Count I alleged that Madden negligently failed to survey and ascertain the ownership of the property on which the company erected the cement batch plant. Count II alleged unlawful trespass by Madden as well as wilful and wanton acts causing damage to the land. On June 19, 1992, the state court granted plaintiffs' motion for voluntary dismissal. Plaintiffs subsequently refiled the action on July 9, 1992, alleging the same causes of action in negligence and trespass, but adding as defendants Dew and Brites Cartage, Ltd.

 National Union, a New York Corporation, issued two commercial general liability insurance policies to Madden, Nos. 817-14-25 RA (effective May 21, 1988 to July 6, 1989) and 817-31-84 RA (effective July 6, 1989 to July 6, 1990). Both policies were, of course, subject to certain terms, conditions, limitations, and exclusions. Madden first notified National Union of the underlying action on or about May 21, 1991, just prior to the filing of the first-amended complaint. On December 27, 1991, National Union filed this diversity action pursuant to the Declaratory Judgments Act, 28 U.S.C. §§ 2201, 2202 (1988). It is seeking a declaration that it owes no duty to defend or to indemnify Madden under these policies against the underlying claims pending in the Circuit Court of Cook County. *fn2"

 III. Discussion

 Under Illinois law, "an insurer has two duties to an insured when a lawsuit is filed that may trigger the insurer's policy coverage: the duty to defend and the duty to indemnify. Aetna Casualty and Sur. Co. v. Prestige Casualty Co., 195 Ill. App. 3d 660, 664, 553 N.E.2d 39, 41, 142 Ill. Dec. 689 (1st Dist. 1990) (citing Zurich Ins. Co. v. Raymark Indus., Inc., 118 Ill. 2d 23, 514 N.E.2d 150, 112 Ill. Dec. 684 (1987)). These duties are separate and distinct, the duty to defend being the broader of the two. Id. We begin our analysis with National Union's duty to defend.

 The duty to defend hinges on a liberal reading of the underlying complaint: to the extent that a single cause of action is potentially within the policy coverage, the duty to defend is triggered, Maryland Casualty Co. v. Peppers, 64 Ill. 2d 187, 193, 355 N.E.2d 24, 28 (1976), even if the insurer discovers that the allegations are groundless, false or fraudulent. Thornton v. Paul, 74 Ill. 2d 132, 144, 384 N.E.2d 335, 339, 23 Ill. Dec. 541 (1978). "Unless the complaint, on its face, clearly alleges facts which, if true, would exclude coverage, the potentiality of coverage is present and the insurer has a duty to defend. Aetna Casualty, 195 Ill. App. 3d at 664, 553 N.E.2d at 41 (citing Reis v. Aetna Casualty & Sur. Co., 69 Ill. App. 3d 777, 387 N.E.2d 700, 25 Ill. Dec. 824 (1st Dist. 1978). A court may look beyond the allegations of the complaint "only if the coverage issue involves such ancillary matters as whether the insured paid the premiums or whether he is the proper insured under the policy." Bituminous Casualty Corp. v. Fulkerson, 212 Ill. App. 3d 556, 562, 571 N.E.2d 256, 261 (5th Dist. 1991); State Farm Fire & Casualty Co. v. Shelton, 176 Ill. App. 3d 858, 867, 531 N.E.2d 913, 919, 126 Ill. Dec. 286 (1st Dist. 1988); cf. Fidelity & Casualty Co. of New York v. Envirodyne Eng., 122 Ill. App. 3d 301, 306-08, 461 N.E.2d 471, 475-76, 77 Ill. Dec. 848 (1st Dist. 1983) (looking beyond the allegations of the underlying complaint where duty to defend hinged solely on the nature of the services performed by the insured, an issue which could not be considered an "ultimate fact" upon which recovery is predicated in the underlying case).

 In support of its current contention that it is not obligated to defend Madden in the underlying suit, National Union maintains that: (1) Madden breached the notice provision of the policies; (2) Madden acted intentionally and, hence, there was no occurrence" as defined by the policies; (3) Madden acted intentionally and, thus, coverage is excluded by the "expected or intended" provision of the policies; and (4) any damage resulting from fill material deposited by Madden does not constitute "property damage" as such material are "pollutants" as defined under the policies. There can be no doubt that plaintiffs' negligence claim in the underlying action potentially falls within the policies' coverage. The issue presently confronting the court is whether we may look beyond the allegations of the underlying complaint to consider the "defenses" as asserted by National Union.

 Of the four above mentioned "defenses" set forth by National Union in support of summary judgment, only one can be considered ancillary to the underlying dispute, i.e., whether Madden breached the notice provision of the policies. Accordingly, we will look beyond the allegations of the underlying complaint in order to ...


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