that it has no obligation to indemnify under the terms of the policy because Schwinn's defense costs were covered in their entirety by the underlying insurance, the Columbia Policy and the Great American Policy.
Resolving coverage disputes that arise between an insured and insurer is often like working on a jig-saw puzzle. The parties invariably agree on the pieces to be assembled, but they disagree on the picture the puzzle will represent once the pieces are fitted together. With a jig-saw puzzle, the pieces are placed by their shapes, sizes and colors. With a coverage dispute, the court is supplied with instructions, in the form of insurance policy terms, on how the pieces are to be arranged. Both Schwinn and Hartford agree on the relevant pieces the court must assemble and the policy terms the court must follow in resolving their dispute. The end result is a picture showing either an obligation to indemnify Schwinn or a proper basis for refusing to indemnify. In this case, the assemblage of the relevant pieces demonstrates that Hartford is under a contractual obligation to indemnify Schwinn for its pro rata share of the defense costs.
Rule 56(c) of the Federal Rules of Civil Procedure provides that a summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); Transportation Communications Int'l Union v. CSX Transp., Inc., 30 F.3d 903, 904 (7th Cir. 1994). Summary judgment is not a discretionary remedy and must be granted when it is warranted. Jones v. Johnson, 26 F.3d 727, 728 (7th Cir. 1994) (per curiam). Even though all reasonable inferences are drawn in favor of the party opposing the motion, Associated Milk Producers, Inc. v. Meadow Gold Dairies, 27 F.3d 268, 270 (7th Cir. 1994), presenting only a scintilla of evidence will not suffice to oppose a motion for summary judgment, Walker v. Shansky, 28 F.3d 666, 671 (7th Cir. 1994).
In this case, the material facts are not in dispute and the adjudication of the coverage issue hinges on the interpretation of the policy terms governing defense costs. In adjudicating the issue before the court, the court will apply and follow the law of Illinois. The court has diversity jurisdiction over the instant action. See 28 U.S.C. § 1332. It is a well settled principle that a court exercising diversity jurisdiction and sitting in the State of Illinois must apply Illinois' choice-of-law rules. Boggs v. Adams, 838 F. Supp. 1293, 1295 (N.D. Ill. 1993); Colonial Penn Life Ins. Co. v. Assured Enter., Ltd., 151 F.R.D. 91, 95 (N.D. Ill. 1993). The choice-of-law rules of Illinois require the court to follow the "most significant contacts" approach in identifying the applicable state law in contract disputes. Palmer v. Beverly Enter., 823 F.2d 1105, 1109 (7th Cir. 1987); Continental Casualty Co. v. Armstrong World Indus., Inc., 776 F. Supp. 1296, 1301 (N.D. Ill. 1991) ("Interpretation of insurance policies under Illinois rules are governed by the law of the state where the policy was issued, delivered, or where the last act completing the policy took place.").
In the case sub judice, the court finds that Illinois has the most significant contacts. Schwinn, having its principle place of business in Illinois, filed the instant action in Illinois seeking enforcement of the Hartford Policy. Additionally, the parties negotiated and executed the Hartford Policy in Illinois. Further, in diversity actions, absent a valid challenge by either party as to the choice-of-law, the law of the forum state will govern the substantive issues. Ness v. Ford Motor Co., 835 F. Supp. 453, 456 n.5 (N.D. Ill. 1993). While Hartford asserts in its briefs that the applicable law is that of Illinois, Schwinn does not challenge the asserted choice-of-law. Therefore, the court will look to Illinois to resolve the substantive issue the parties raise in their motions for summary judgment.
Under Illinois law, the interpretation of insurance policy provisions is a question of law for the court and, therefore, subject to resolution in a motion for summary judgment. Employers Ins. of Wausau v. Bodi-Wachs Aviation Ins. Agency Inc., 846 F. Supp. 677, 684 (N.D. Ill. 1994). In resolving the question, it is the duty of the court to effectuate the parties' intent as expressed by the terms of the insurance policy. Travelers Ins. Co. v. Freightliner Corp., 256 Ill. App. 3d 1049, 628 N.E.2d 325, 329, 194 Ill. Dec. 828 (1993). "Normally contracts are to be taken at face value, and the written agreement is presumed to express the parties' intent." Board of Trustees of the Univ. of Ill. v. Insurance Corp. of Ireland, Ltd., 969 F.2d 329, 332 (7th Cir. 1992).
To ascertain the intent of the contracting parties, the court must consider the policy as a whole. Grevas v. U.S. Fidelity and Guar. Co., 152 Ill. 2d 407, 604 N.E.2d 942, 944, 178 Ill. Dec. 419 (1992). If the terms of the policy are plain and unambiguous, the court must apply the plain, ordinary meaning associated with them. Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384, 620 N.E.2d 1073, 1078, 189 Ill. Dec. 756 (1993). If, however, the terms are susceptible to more than one reasonable construction, they are deemed ambiguous and interpreted in favor of the insured and against the insurer who drafted the policy. Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90, 607 N.E.2d 1204, 1212, 180 Ill. Dec. 691 (1992).
Mindful of these axioms, the court begins its analysis by first examining the terms under II(c) of the Hartford Policy, which is the provision Schwinn relies on in making its claim. As reflected under the terms of II(c), the parties agreed to the following:
[Hartford] shall not be obligated to assume charge of the investigation, defense or settlement of any claim or suit against [Schwinn], but [Hartford] shall have the right and shall be given the opportunity to associate with [Schwinn] or its underlying insurers, or both, in the investigation, defense or settlement of any claim or suit which, in the opinion of the company, involves or appears reasonably likely to involve [Hartford]. If [Hartford) avails itself of such right and opportunity, [Schwinn), its insurers and [Hartford] shall cooperate in such matters so as to effect a final determination thereof. [Schwinn] shall not make or agree to any settlement for an amount in excess of underlying insurance without the approval of [Hartford]. Subject to the above provision, costs incurred by [Schwinn] shall be borne as follows: . . . (c) If the sum for which a claim or suit is settled exceeds the limits of underlying insurance, then [Hartford], if it approves such settlement or consents to the continuation of the proceedings, shall contribute to the costs incurred by the insured in the proportion which the amount of ultimate net loss is finally determined to be payable by [Hartford] bears to the total amount paid on such claim or suit by all interests . . . .