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TIG INSURANCE CO. v. CAREY'S CAR & CREDIT INC.

March 17, 2004.

TIG INSURANCE COMPANY, INC., plaintiff;
v.
CAREY'S CAR & CREDIT, INC., d/b/a CAREY'S CAR & CREDIT CENTER, SMITH'S SOUTHWICK, INC., d/b/a SOUTHWICK FARMS, and SMITH STABLES, INC., d/b/a SOUTHWICK FARMS, Defendants



The opinion of the court was delivered by: DAVID COAR, District Judge

MEMORANDUM OPINION AND ORDER

Before this Court is Carey's Car & Credit, Inc., individually and d/b/a Carey's Car & Credit Center ("Carey's"), Smith's Southwick, Inc., individually and d/b/a Southwick Farms ("Southwick"), and Smith Stables, Inc., individually and d/b/a Southwick Farms ("Stables") (collectively, "Defendants") motion to dismiss TIG Insurance's Company's ("TIG") Complaint for failure to state a claim upon which relief can be granted. For the reasons set forth below, Defendants' motion to dismiss is granted in its entirety.

I. FACTUAL BACKGROUND

  TIG seeks declaratory judgment relief arising from a controversy concerning the Parties' rights, statuses and liabilities under an insurance policy issued by TIG to Carey's (the "Policy"), The Policy issued to Carey's by TIG, effective from February 1, 2002 to February 1, 2003, limits Page 2 liability to $1,000,0000 for each claim and in the aggregate, excess a $1,000 deductible per accident. (See. Def. Ex. 1). The policy contains a "Garage Operations" provision which provides:
We will pay all sums an "insured" legally must pay as damages because of "bodily injury" or "property damage" to which this insurance applies, caused by an "accident" and resulting from "garage operations" involving the ownership, maintenance, or use of covered "autos." (See Def. Ex. 2).
  The declaratory judgment action arises out of a wrongful death suit filed in the Circuit Court of Cook County, Illinois, Case No. 02 L 013065 (the "Medina suit"). (Pl. Comp. ¶ 14). Some time prior to August 8, 2002, Carey's, a used car dealership, loaned a tractor/trailer to Southwick and/or Stables. (pl Comp. ¶ 18). Carey's loaned the tractor/trailer to Southwick and/or Stables on the condition that the vehicle was to be used strictly for farm operations on farm premises. (pl Comp. ¶ 19). Pahnke operated this vehicle in the course of his employment with Southwick and/or Stables. (Pl Comp. ¶ 20). On August 8, 2002, while driving the vehicle, Pahnke collided with Mariela Medina's vehicle, killing Mariela Medina and injuring three other passengers. (pl Comp. ¶ 21). TIG is currently defending Carey's, Southwick, Stables, and Jason Pahnke ("Pahnke") under a reservation of rights in the Medina suit.*fn1 (Pl Comp. ¶ 15). TIG contends that the various terms and conditions of the Policy operate to preclude coverage for the Defendants. (pl Comp. ¶ 26). In Count I of its Complaint, TIG argues that Southwick and Stables' use of the covered auto was not in furtherance of garage business. Additionally, in Page 3 Count II of its Complaint, TIG argues that even if the use of the vehicle was in furtherance of garage business, Southwick, Stables, and Pahnke exceeded the scope of permission granted to them by Carey's. Therefore, TIG seeks a declaration from this Court that, according to the policy terms, there is no duty to defend or indemnify Carey's, Southwick, or Stables.

 II. DISCUSSION

  A. Legal Standard for a Motion to Dismiss

  In ruling on a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court "must accept all well pleaded allegations as true. In addition, the Court must view these allegations in the light most favorable to the plaintiff." Gomez v. Illinois State Board of Education. 811 F.2d 1030, 1039 (7th Cir. 1987). A party's claim should only be dismissed if it is clear that no set of facts in support of the claim would entitle the party to relief. Ledford v. Sullivan. 105 F.3d 354, 356 (7th Cir. 1997) (quoting Hishon v. King & Spaulding, 467 U.S. 69, 73 (1984)). Additionally, where, as here, plaintiff attaches the insurance policy to its pleading, that instrument becomes a part of the complaint for all purposes, and is properly considered as part of the complaint See Tierney v. Vahle, 304 F.3d 734, 738 (7th Cir. 2002).

  B. Analysis

  1. Must the Use of the Auto be "In Furtherance of Garage Business!"

  As stated, TIG contends that it is under no obligation to provide coverage for the Defendants, because the use of the covered vehicle involved in the Medina suit was not used in furtherance of garage business. Defendants, however, contend that whether the vehicle was used in furtherance of garage business is irrelevant, as the policy clearly provides coverage for the Page 4 ownership, maintenance, or use of any covered auto, regardless if the use is in furtherance of garage business.

  Section VI(H) of the Garage Coverage Form defines "Garage Operations" as follows:
"Garage operations" means the ownership, maintenance, or use of locations for garage business and that portion of the roads or other accesses that adjoin these locations. "Garage operations" includes the ownership, maintenance, or use of the "autos" indicated in Section I of this Coverage form as covered "autos," "Garage operations" also include all operations necessary or incidental to a garage business.
(See Def. Ex. 2). The plaintiffs do not dispute that the vehicle in question was a "covered auto" as defined by the Policy, (See Def. Ex. 1). However, the plaintiff contends that the insurance policy must be read as a whole, and that the sentence that defines "garage operations" as the ownership, maintenance, or use of covered "autos" must be read in the context of the other sentences in the paragraph defining "garage operations." Therefore, TIG contends, there must be a determination as to whether Southwick and/or Stables were granted use of the vehicle in furtherance of "garage business."

  In Illinois, "in construing an insurance policy, a court must ascertain the intent of the parties to the contract." Indiana Ins. Co. v. PANA Community Unit School Dist. No. 8. 314 F.3d 895, 900, (7th Cir. 2002). Further, in order to determine the meaning of the policy's words and the intent of the parties, the court construes the policy, "as a whole with due regard to the risk undertaken, the subject matter that is insured, and the purposes of the entire contract." Id. Additionally, in contemplating what the provisions in an insurance agreement may mean, the Court considers them in the factual context of the case. Id., at 901 (citing Putzbach v. Allstate Ins. Co., 494 N.E.2d 192, 195 (Ill. 1986)). The entire insurance policy, rather than an isolated part, should be read to determine whether an ambiguity exists. See Cobbins v. Gen. Accident Page 5 Fire & Life Assurance Corp., 290 N.E.2d 873, 876 (Ill. 1972). However, the structure of plaintiffs own policy language in Section VI(H), even when read in context of the entire policy, leads to the conclusion that the policy includes coverage for all maintenance, ownership and use of covered autos, even if not in furtherance of garage business. plaintiffs included the phrase "for garage business" when describing the coverage for the location used for garage business. Additionally, TIG was clear to use the qualifying phrase "incidental to garage business" when stating the coverage provided for garage operations. By failing to use qualifying language, it is clear that the ownership, maintenance or use of covered autos need not be in furtherance of or incidental to garage business.

  Assuming, arguendo, that plaintiff's interpretation that the use of covered autos must be incidental to garage business is reasonable, this means that there are two reasonable interpretations of the coverage of autos under the policy. If the words in an insurance policy are susceptible to more than one reasonable interpretation, they are ambiguous. Indiana Insurance. 314 F.3d 895, 902 (7th Cir. 2002) (citing United States Fid. & Guar. Co. v. Wilkin Insulation Co., 578 N.E.2d 926.930 (Ill. 1991)). Any ambiguity will be construed against the insurer who drafted the policy. Indiana Insurance. 314 F.3d at 902 (citing Outboard Marine Corp. v. Liberty Mut. Ins. Co., 607 N.E.2d 1204, 1212 (Ill. 1992)). See. also Employers Ins, of Wausau v. Ehlco. Liquidating Trust. 708 N.E.2d 1122, 1130 (Ill. 1999) ("[T]he court must construe the policy in favor of the insured and against the insurer that drafted the policy."). Consequently, even if the policy's definition of "covered autos" is ambiguous, it ...


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