United States District Court, N.D. Illinois, Eastern Division
July 22, 2004.
AMI DIAMONDS COMPANY, an Illinois corporation, Plaintiff,
HANOVER INSURANCE COMPANY, Defendant.
The opinion of the court was delivered by: SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Plaintiff A.M.I. Diamonds
Company's ("AMI") motion for summary judgment, Defendant Hanover
Insurance Company's ("Hanover") motion for summary judgment, and
Plaintiff AMI's motion to strike. For the reasons below, we deny
AMI's motion for summary judgment, grant Hanover's motion for
summary judgment, and deny AMI's motion to strike as moot.
AMI is an Illinois corporation that is in the business of
wholesaling loose, finished diamonds to retail jewelers. Hanover
is a Massachusetts corporation that is in the business of issuing
Jewelers' Block policies of insurance. In return for valuable
consideration by AMI, Hanover issued to AMI a Jewelers' Block
Policy of insurance insuring against risks of physical loss or damage to
property insured under the policy during the time period of
November 1, 2002 to November 1, 2003.
On or about November 8, 2002, AMI's sales representative, Maged
Soliman ("Soliman") was traveling in Arlington Heights, Illinois
making business calls in furtherance of the business of AMI. Mr.
Soliman was carrying approximately $150,000.00 worth of finished
diamonds belonging to AMI in a briefcase. After calling on a
retail jeweler and client of AMI, Soliman drove to a gas station
to use the telephone to call AMI's business manager at AMI's
downtown office to inform him of his whereabouts and to obtain
instructions as to the next retail store he should visit. Soliman
pulled into a designated parking space adjacent to the telephone.
The diamonds were contained in the briefcase and was situated
between the driver's seat and the passenger's seat. Soliman had
to step outside the car to reach the telephone. He leaned on the
door of the driver's side of the car while speaking to the
business manager on the telephone. He then hung up the phone, and
opened the car door to re-enter.
At this time, a Hispanic woman from the passenger side of a
maroon minivan diverted Soliman's attention by calling him and
asking for help. The minivan was approximately five feet from
where Mr. Soliman's car was parked. He asked her what she needed,
and the woman replied that she needed directions.
Mr. Soliman proceeded to walk the five feet to the minivan,
stood at the passenger side of the minivan, and turned at an
angle so as to keep his own car in sight. The woman persisted in
her purported need for assistance in reading the map, and then she dropped the map to the ground where Soliman was
standing. As he bent to pick it up, Soliman observed a white car
near his vehicle. Instantly, Mr. Soliman knew he was being set
up, and that the woman in the maroon minivan was a decoy to lure
him away from his car.
Soliman then ran the few steps back to his car and the white
car sped away. Soliman then saw that his briefcase containing the
diamonds was gone. He looked up and saw the maroon minivan
speeding away as well. Soliman then alleged that he became crazy,
and jumped into his car to try and chase the minivan, to no
avail. He then returned to the gas station where he exclaimed
that he had been robbed, and then called 911. The Arlington
Heights police took Soliman to the Chicago Police Station at
O'Hare Airport and showed him pictures of known Columbian
nationals who specialize in jewelry theft to see if Soliman could
identify any of them. He could not. The diamonds were never
AMI submitted a claim for coverage for the stolen diamonds to
Hanover under its Jewelers' Block Policy. Four months later,
Hanover denied coverage, asserting three separate provisions of
the Policy in support of its position. First, Hanover asserted
the "unexplained loss mysterious disappearance" exclusion,
stating that, because Soliman did not actually see anyone take
the diamonds from his car, and because there were no signs of a
forcible entry, the loss was "unexplained". Second, Hanover
contended that, pursuant to the "in or upon" exclusion clause,
Soliman was not "in" or "upon" the vehicle at the time the loss
occurred. Finally, Hanover claimed that, pursuant to the
"personal conveyance clause", the diamonds were not in Mr. Soliman's "close personal custody" and "under his direct
control "at the time of the theft.
As a result, AMI brought three counts against Hanover. Count I
seeks a declaratory judgment that Hanover is obligated to
indemnify AMI with respect to the loss of over $150,000.00 worth
of goods and merchandise covered under the Jewelers' Block Policy
of insurance issued by Hanover to AMI. Count II asserts a claim
for breach of contract as to the Jewelers' Block Policy issued by
Hanover to AMI, and Count III is for damages for vexatious and
unreasonable conduct under Section 155 of the Illinois Insurance
Summary judgment is appropriate when the record reveals that
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)). In seeking a grant of summary judgment the moving party
must 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 (1986) (quoting Fed.R.Civ.P.
56(c)). This initial burden may be satisfied by presenting
specific evidence on a particular issue or by pointing out "an
absence of evidence to support the non-moving party's case."
Id. at 325. Once the movant has met this burden, the non-moving
party cannot simply rest on the allegations or denials in the pleadings, but, "by
affidavits or as otherwise provided for in [Rule 56], must set
forth specific facts showing that there is a genuine issue for
trial." Fed.R.Civ.P. 56(e). A "genuine issue" in the context
of a motion for summary judgment is not simply a "metaphysical
doubt as to the material facts." Matsushita Elec. Indus. Co.,
Ltd. v. Zenith Radio Corp, 475 U.S. 574, 586 (1986). Rather, a
genuine issue of material fact exists when "the evidence is such
that a reasonable jury could return a verdict for the nonmoving
party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986); Insolia v. Phillip Morris, Inc., 216 F.3d 596, 599
(7th Cir. 2000). The court must consider the record as a
whole, in a light most favorable to the non-moving party, and
draw all reasonable inferences that favor the non-moving party.
Anderson, 477 U.S. at 255; Bay v. Cassens Transport Co.,
212 F.3d 969, 972 (7th Cir. 2000).
I. Declaratory Judgment (Count I)
Count I of the complaint seeks a declaratory judgment that
Hanover is obligated to indemnify AMI with respect to the loss of
over $150,000.00 worth of goods and merchandise covered under the
Jewelers' Block Policy of insurance issued by Hanover to AMI A. In or Upon the Vehicle Exclusion
Under exclusion 5(I) of AMI's policy AMI was not covered under
the policy for property lost while in a vehicle "unless at the
time the loss occur[red] there [wa]s actually in or upon such
vehicle, the insured, or a permanent employee of the
Insured. . . ." AMI argues that Soliman was upon the vehicle at
the time the theft occurred. This court does not agree. AMI
refers to E.M.M.I. Inc. v. Zurich American Insurance Co.,
84 P.3d 385, 393 (Cal. 2004), to construe the meaning of "upon." In
E.M.M.I., the court held that the "upon" requirement is
satisfied when the insured is in close proximity to the vehicle
and attending to it. E.M.M.I. v. Zurich American Insurance Co.,
84 P.3d 385, 393 (Cal. 2004). Therefore, according to AMI,
because Soliman was in close proximity of the car, he was upon
it, and as a result, the "in or upon" exclusion clause does not
apply. However, Hanover argues that it is well settled in
Illinois that under a Jewelers' Block Policy, an insured can only
defeat an "in or upon" vehicle exclusion if its jewelry was lost
and if at the time of the loss a permanent employee of the
plaintiff or person whose duty it was to attend to the vehicle
was actually in or upon such vehicle. Bliss Ring Co. v. Globe
and Rutgers Fire Insurance Co., 7 Ill. App.2d 523, 531 (Ill.App.
Ct. 1955). We agree. Furthermore, according to Hanover, courts
have routinely held that the "in or upon such vehicle" exclusion
of a Jewelers' Block Policy is unambiguous and must be strictly
construed that someone must be actually in the vehicle at the
time of the loss for the coverage to apply. Silverman v. Lloyd's
Underwriters, 422 F. Supp. 89, 90 (S.D.N.Y. 1976); Wieband
Jewelry Corporation v. Sun Insurance Company of New York, 619 N.Y.S.2d 339, 339 (N.Y. App. Div. 1994).
AMI admits pursuant to Local Rule 56.1 that Soliman was not in
or upon the car when the diamonds were stolen. He also indicates
this in his own 56.1 statement of facts. Some of AMI's 56.1
responses are evasive denials in regards to some facts relating
to this issue and AMI attempts to avoid admitting or denying
facts by raising evidentiary objections that are not meritorious.
See Jankovich v. Exelon Corp., 2003 WL 260714, at *5 (N.D. Ill.
2003) (indicating that evasive denials that do not directly
oppose an assertion are improper and thus the contested fact is
deemed to be admitted pursuant to Local Rule 56.1). AMI admits
pursuant to Local Rule 56.1 that Soliman walked away from his car
before the jewelry was stolen. (RHSF 14, 16). AMI also states
this in its own 56.1 statement of facts. (AMI SF 34-40). Under
the plain meaning of the language in Exclusion 5(I) of the
policy, AMI's loss is not afforded coverage because AMI's agent
and/or employee was not "actually in or upon" his vehicle at the
time that AMI claims the jewelry was missing. AMI attempts to
introduce a variety of red herrings arguing that at one point he
was leaning on his car and that he did not intend to abandon his
car. However, the admitted fact is that he walked away from his
car and left the diamonds unattended in the car. (RHSF 14, 16)
Regardless of the period of time he left the diamonds, Soliman
engaged in exactly the type of conduct that is described in the
exclusion provision. B. Personal Custody Exclusion
An endorsement in AMI's policy states that the policy does not
cover losses incurred "when in transit unless the property
insured is in the close personal custody and under the direct
control of a Director or Employee of the Assured's Firm and/sales
representatives, commission salesmen or selling agents. . . ."
AMI argues that the diamonds were in Soliman's close personal
custody and under his direct control at the time of the theft.
However, clearly the jewelry was not in Soliman's close personal
custody at the time of the loss. Soliman admits that he was duped
into approaching the woman and that the diamonds were taken while
he was preoccupied with her. (RHSF 14, 15, 16) (AMI SF 34-40).
Thus, Soliman in no way, shape, or form had the diamonds in his
"personal custody" or under his "direct control." Therefore, we
grant Hanover's motion for summary judgment on the declaratory
II Breach of Contract Claim (Count II)
Count II of the complaint alleges that Hanover breached the
contract of the Jewelers' Block Policy. However, because no
reasonable trier of fact could conclude other than that Soliman's
conduct fell within the exclusion clauses of the contract, AMI is
not entitled to coverage under the contract. Therefore, Hanover
did not breach the contract with AMI by refusing to pay for its
loss. Therefore, we grant Hanover's motion for summary judgment
on the breach of contract claim. (Count II).
III. Vexatious and Unreasonable Conduct Claim (Count III)
Count III is for damages for vexatious and unreasonable conduct
under Section 155 of the Illinois Insurance Code. Section 155 of
the Illinois Insurance Code provides for the award of attorney
fees in cases where the insurer caused "an unreasonable delay in
settling a claim, and it appears to the court that such action or
delay is vexatious and unreasonable." 215 ILCS 5/155(1); Mobile
Oil Corporation v. Maryland Casualty Company, 681 N.E.2d 552,
558 (Ill.App. Ct. 1997). According to AMI, Hanover's denial of
coverage in this case is a striking example of the type of
conduct Section 155 of the Insurance Code is intended to deter.
However, as Hanover asserts, in determining if an insurer is
guilty of vexatious and unreasonable conduct, the court must look
at the "totality of the circumstances." Spearman Industries,
Inc. v. Paul Fire and Marine Insurance Co., 138 F. Supp.2d 1088,
1102 (N.D. Ill. 2001). An insurer is not guilty of vexatious and
unreasonable conduct if:" (1) there is a bona fide dispute
concerning the scope and application of the insurance coverage,
(2) the insurer asserts a legitimate policy defense, (3) the
claim presents a genuine legal or factual issue regarding
coverage, or (4) the insurer takes a reasonable legal position on
an unsettled issue of law." Id. According to Hanover, in the
instant case it conducted a thorough investigation of the claim
and determined that AMI was not entitled to insurance coverage
under the policy based on several exclusions. Hanover retained an investigator, immediately upon
AMI submitting the insurance claim, who investigated the claim
for several months. AMI contends that Hanover engaged in a
"fabrication of evidence to support is [sic] decision to deny
coverage. . . ." (Ans. HSJ 15). However, there is no evidence
that Hanover fabricated evidence. There is every indication, that
even if Hanover accepted AMI's version of the facts as indicated
in their 56.1 statement of facts, that the exclusion provisions
applied and that AMI was not entitled to coverage. There is
insufficient evidence for a reasonable trier of fact to conclude
that Hanover engaged in vexatious and unreasonable conduct.
Therefore, we grant Hanover's motion for summary judgment on the
vexatious and unreasonable conduct claim (Count III).
Based on the foregoing analysis, we deny AMI's motion for
summary judgment and grant Hanover's motion for summary judgment.
In addition, we deny AMI's motion to strike as moot.
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