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CENTRAL MUTUAL INSURANCE CO. v. USEONG INTERNATIONAL

October 3, 2005.

CENTRAL MUTUAL INSURANCE COMPANY, Plaintiff,
v.
USEONG INTERNATIONAL, LTD., GENERAL ELECTRIC COMPANY, AND ELECTRIC INSURANCE COMPANY, Defendant. USEONG INTERNATIONAL, LTD., Counter-Plaintiff v. CENTRAL MUTUAL INSURANCE COMPANY, Counter-Defendant. GENERAL ELECTRIC COMPANY, AND ELECTRIC INSURANCE COMPANY, Counter-Plaintiff, v. CENTRAL MUTUAL INSURANCE COMPANY, Counter-Defendant.



The opinion of the court was delivered by: RUBEN CASTILLO, District Judge

MEMORANDUM OPINION AND ORDER

Central Mutual Insurance Company ("Central") filed this diversity lawsuit seeking a declaration that it does not owe a duty to defend or indemnify its insured, Useong International, Ltd. ("UI"), in an arbitration proceeding against General Electric Company ("GE") and Electric Insurance Company ("EIC"). Central also seeks a declaration that GE and EIC are not named insureds under UI's policy and therefore are not entitled to a defense or indemnification. Central's motion for judgment on the pleadings is currently before this Court. For the following reasons, we grant Central's motion for judgment on the pleadings.

RELEVANT FACTS

  I. Central's Insurance Policies

  Central and UI*fn1 entered into a Business Owner's Policy ("BOP") on three occasions. The first BOP was for the policy period beginning March 1, 2002 and ending March 1, 2003. Inexplicably, it appears that this policy was executed between the parties on February 23, 2004, long after the policy period ended. The second BOP was executed on January 28, 2003 and covered the period beginning March 1, 2003 and ending March 1, 2004. The last policy was executed on December 17, 2003 and covered the period beginning March 1, 2004 and ending March 1, 2005.*fn2 All of these policies have identical language and coverages that reads in part:
We [Central] will pay those sums that the insured [UI] becomes legally obligated to pay as damages because of "bodily injury" or "property damage," "personal injury" or "advertising injury" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages . . .
(R. 32, Central's Exs., Ex. 1, Central's Insurance Policies at 1 of 12.) Each BOP also contains a section stating that the insureds' "rights and duties under this policy may not be transferred without [Central's] written consent except in the case of death of an individual Named Insured." (Id. at 4 of 4.) Besides UI, the only other named insured listed in the policy is Mercury Investments, Inc., which is not a party to this litigation. (Id. at 1 of 1.) II. The 2002 Claims Management and Litigation Agreement and Resulting Arbitration

  In October of 2002, UI entered into an agreement with GE and GE's insurer, EIC, to settle claims resulting from property damage caused by allegedly defective UEM/UI water valves installed into GE refrigerators. This Claims Management and Litigation Agreement ("CMLA") states that UI would pay "55% of the settlement or judgment paid by EIC to resolve the Claim or Lawsuit, plus 55% of EIC's costs and expenses relating to the adjustment or defense of the Claim or Lawsuit. . . ." (Id., Ex. 3, CMLA.) Attached to the CMLA are 150 claims that were pending when the parties signed the CMLA. The CMLA further provides that UI would pay 55% of any claims that arise before December of 2006. (Id.)

  On January 29, 2004, GE notified Central of the CMLA and the property damage claims resulting from the leaking UEM/UI water valves. (Id., Ex. 5, 1/29/04 Letter.) UI failed to make any payments under the CMLA and GE and EIC filed a notice of arbitration on March 23, 2004. Central received notice of the arbitration on March 29, 2004. (Id., Ex. 2, Notice of Arbitration.) On April 1, 2004, GE and EIC filed an amended notice of arbitration. Central received notice on May 4, 2004. (Id., Ex. 4, Am. Notice of Arbitration; id., Ex. 16, 5/4/04 Letter.)

  On April 27, 2004, UI provided Central with its notice of defenses and counterclaims filed in response to the notice of arbitration. (Id., Ex. 15, 4/27/04 Fax.) On June 25, 2004, Central sent UI a letter stating that it had no duty to defend or indemnify UI in the arbitration with GE and EIC. (Id., Ex. 17, 6/25/04 Letter.) On August 11, 2004, GE filed a second amended notice of arbitration which UI forwarded to Central on August 17, 2004. (Id., Ex. 19, 8/17/04 Letter; id., Ex. 20, Second Am. Notice of Arbitration.) After exchanging a series of letters with UI, on December 10, 2004, Central denied any duty to defend or indemnify UI with respect to the underlying arbitration. (Id., Ex. 23, 12/10/04 Letter.)

  On December 20, 2004, Central filed suit in this Court seeking a determination of its rights and obligations under the policy. (R. 1, Central's Compl.) UI counterclaimed, arguing that Central had a duty to defend UI and acted in bad faith in refusing to do so. (R. 7, UI's Compl.) GE and EIC also counterclaimed, arguing that Central has a duty to indemnify UI for any award granted in the underlying arbitration and also that Central must pay a portion of the arbitration award to GE or EIC because they are named insureds. (R. 5, GE/EIC Compl.)

  LEGAL STANDARDS

  Federal Rule of Civil Procedure 12(c)*fn3 permits a party to move for judgment based on the pleadings alone. N. Ind. Gun & Outdoor Shows. Inc. v. City of South Bend, 163 F.3d 449, 452 (7th Cir. 1998). The pleadings consist of the complaint, the answer, and any exhibits which are incorporated into the pleadings for purposes of a Rule 12(c) motion. Id. at 452-53 (stating that exhibits may include any written instruments such as affidavits, letters, contracts, and loan documentation).

  Where the parties do not present any material outside of the pleadings, as is the case here, a Rule 12(c) motion is subject to the same standard as motions brought under Rule 12(b)(6): the motion will only be granted if the moving party "clearly establishes that no material issue of fact remains to be resolved and that he or she is entitled to judgment as a matter of law." Nat'l Fid. Life Ins. Co. v. Karaganis, 811 F.2d 357, 358 (7th Cir. 1987); Knoll Pharm. Co. v. Automobile Ins. Co. of Hartford et. al., 152 F. Supp. 2d 1026, 1031-32 (N.D. Ill. 2001). In resolving the motion, however, the Court must accept as true all facts alleged by the nonmovant and must draw all reasonable inferences in the nonmovant's favor. Republic Steel Corp. v. Pa. Eng'g Corp., 785 F.2d 174, 178 (7th Cir. 1986).

  ...


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