The opinion of the court was delivered by: McCUSKEY, District Judge.
On May 11, 1998, Plaintiff, American Fire & Casualty Company, filed a
Complaint for Declaratory Judgment (# 1) against Defendant, Broeren Russo
Construction, Inc. This case is now before the court for ruling on
Plaintiff's Motion for Judgment on the Pleadings (# 14), Plaintiff's
Motion to Strike (# 19) and an Agreed Motion for Enlargement of Time (#
25) seeking to extend the discovery deadlines if this court denies
Plaintiff's Motion for Judgment on the Pleadings.
Following careful review, Plaintiff's Motion for Judgment on the
Pleadings (# 14) is GRANTED. Accordingly, Plaintiff's Motion to Strike (#
19) and the parties' Agreed Motion for Enlargement of Time (# 25) are
DENIED as moot.
Plaintiff's Complaint for Declaratory Judgment alleged that this court
has jurisdiction over the action based upon diversity of citizenship (
28 U.S.C. § 1332). Plaintiff alleged that it issued a policy to
Defendant for Commercial General Liability Insurance for the policy
period of February 28, 1996, to February 27, 1997. On March 16, 1998, KDB
III Enterprises, L.L.P. (KDB), filed a complaint against Defendant in the
circuit court of Champaign County. Defendant tendered its defense to
Plaintiff, and Plaintiff accepted the tender subject to a reservation of
rights. In its Complaint, Plaintiff requested a declaration from this
court that it has no duty to defend Defendant in the action pending in
the circuit court of Champaign County. Plaintiff argued that it had no
duty to defend because: (1) the claimed damage occurred before the first
date of coverage; (2) the policy did not provide coverage for the claims
in the underlying action; and (3) Defendant knew or had reason to know of
the loss prior to the inception of the policy on February 28, 1996, so
that the risk was a "known loss" and not covered by the policy.
Plaintiff also attached to its Complaint a copy of the underlying KDB
complaint and attachments. In the underlying complaint, KDB alleged that
Defendant entered into a contract on February 26, 1990, to furnish,
install and deliver an Exterior Insulation Finish System (System) during
the construction of the Trade Centre South Building (Building) in
Champaign, Illinois. The purpose of the System was to prevent water from
leaking to the interior of the Building. The contract specified that
Defendant was responsible for providing a proper and complete
installation of the System. Work ceased on the Building in 1991, and KDB
rented space in the Building to tenants. The System was warranted by
Defendant for a period of one year. KDB alleged that water has leaked
into the Building from the time tenants rented the Building to the
present date. KDB alleged that Defendant attempted to remedy the defective
installation of the System but Defendant's efforts did not stop the
KDB further alleged that it entered into an agreement with Defendant in
April 1995 to remedy the defective installation of the System. Defendant
completed the remedial repair work on June 30, 1995. Defendant provided a
15-month warranty for the remedial work. KDB notified Defendant on May
29, 1996, that the remedial work did not stop the leaking. In this
letter, KDB also stated that Defendant failed to repair the interior
drywall and ceiling tile as agreed. KDB alleged that Defendant has made
no further efforts to remedy the problem. KDB alleged that "Defendant has
been and continues to be in breach of the Contract and the Agreement."
KDB alleged that, "as a direct and proximate result of these breaches of
contract by Defendant, [KDB] has incurred extensive structural and
aesthetic damage to the exterior and interior" of the Building. KDB
sought damages in the amount of $685,908.41 based on Defendant's breach
of contract. KDB alleged that these damages were for money expended in
its attempt to stop the leaking, the cost of complete and proper
reinstallation of the System and related water damage repairs.
On November 3, 1998, Plaintiff filed a Motion for Judgment on the
Pleadings (# 14). In its Memorandum of Law in support of the Motion,
Plaintiff contended that it does not have a duty to defend Defendant with
respect to the breach of contract action filed by KDB. Plaintiff argued
that the allegations of the underlying KDB complaint are not within, or
even potentially within, the coverage provided by the policy. Plaintiff
argued that this is because: (1) the KDB complaint does not allege an
"occurrence" as defined by the policy; (2) there are no allegations of
"property damage" as defined by the policy; and (3) coverage is precluded
by three separate exclusions contained in the policy. Plaintiff contended
that the sole issue before the court is the purely legal question of
whether the underlying KDB complaint raises a duty to defend under the
policy issued by Plaintiff.
On December 14, 1998, Plaintiff filed a Motion to Strike (# 19).
Plaintiff asserted that Defendant's reference to the Third-Party
Complaint and the attached Third-Party Complaint should be stricken from
Defendant's Memorandum. On June 28, 1999, the parties filed an Agreed
Motion for Enlargement of Time (# 25), seeking to extend the discovery
deadlines if this court denies Plaintiff's Motion for Judgment on the
A Rule 12(c) judgment on the pleadings is "`designed to provide a means
of disposing of cases when the material facts are not in dispute and a
judgment on the merits can be achieved by focusing on the content of the
pleadings and any facts of which the court will take judicial notice.'"
Continental X-Ray Corp. v. Home Indem. Co., 1997 WL 102537, at *2
(N.D.Ill. 1997)(quoting 5A Charles A. Wright & Arthur R. Miller, Federal
Practice & Procedure § 1367 (1990)). A Rule 12(c) motion is subject
to the same standard as a Rule 12(b)(6) motion to dismiss and "`should
not be granted unless it appears beyond doubt that the plaintiff cannot
prove any facts that would support his claim for relief.'" GATX Leasing
Corp. v. National Union Fire Ins. Co., 64 F.3d 1112, 1114 (7th Cir.
1995)(quoting Thomason v. Nachtrieb, 888 F.2d 1202, 1204 (7th Cir.
1989)); Continental X-Ray Corp., 1997 WL 102537, at *2. When the
plaintiff is the moving party, the motion should not be granted unless it
appears beyond doubt that the non-moving party cannot prove facts
sufficient to support his position. See Continental X-Ray Corp., 1997 WL
102537, at *5-6. In ruling on a Rule 12(c) motion, this court must view
the facts in a light most favorable to the non-moving party. Flenner v.
Sheahan, 107 F.3d 459, 461 (7th Cir. 1997); Continental X-Ray Corp., 1997
WL 102537, at *2. A judgment on the pleadings is proper when only
questions of law, and not questions of fact, exist after the pleadings
have been filed. Indiana Ins. Co. v. Hydra Corp., 245 Ill. App.3d 926,
185 Ill.Dec. 775, 615 N.E.2d 70, 72 (1993), appeal denied, 152 Ill.2d 559,
190 Ill.Dec. 889, 622 N.E.2d 1206 (1993).
Both parties agree that Illinois law governs the policy at issue in
this diversity case. See Prisco Serena Sturm Architects, Ltd. v. Liberty
Mut. Ins. Co., 126 F.3d 886, 890 (7th Cir. 1997). To determine whether
the insurer has a duty to defend the insured, the court must look to the
allegations included in the underlying complaint and compare those
allegations to the relevant provisions of the insurance policy. Outboard
Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill.2d 90, 180 Ill.Dec. 691,
607 N.E.2d 1204, 1212 (1992). An insurer's duty to defend is much broader
than its duty to indemnify. Crum & Forster Managers Corp. v. Resolution
Trust Corp., 156 Ill.2d 384, 189 Ill.Dec. 756, 620 N.E.2d 1073, 1079
(1993); see also Nationwide Ins. v. Board of Trustees of Univ. of
Illinois, 116 F.3d 1154, 1155 n. 2 (7th Cir. 1997). If the facts alleged
in the underlying complaint fall within, or even potentially within, the
policy's coverage, the insurer has a duty to defend. Outboard Marine
Corp., 180 Ill.Dec. 691, ...