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West American Insurance Co. v. Kamadulski Excavating & Granding Co.

May 4, 2006

WEST AMERICAN INSURANCE COMPANY, PLAINTIFF,
v.
KAMADULSKI EXCAVATING & GRADING COMPANY, INC., AN ILLINOIS CORPORATION, ALTON COMMUNITY UNIT SCHOOL DISTRICT NO. 11, AN ILLINOIS MUNICIPAL CORPORATION, S.M. WILSON & COMPANY, A KANSAS CORPORATION, HARRY HAZELTON, AND RANDALL HOLYFIELD, DEFENDANTS.



The opinion of the court was delivered by: Herndon District Judge

MEMORANDUM AND ORDER

I. Introduction

Before the Court is a motion for judgment on the pleadings filed by Plaintiff West American Insurance Company ("Plaintiff") pursuant to Federal Rule of Civil Procedure 12(c). (Doc. 30.) Defendants Kamadulski Excavating and Grading Company ("Kamadulski"), Alton Community Unit School District Number Eleven ("Alton School District"), and S.M. Wilson & Company ("Wilson") respond in opposition. (Docs. 37, 42, 35.) For the reasons below, the Court denies Plaintiff's motion.

II. Background

Plaintiff brings this action seeking a declaratory judgment and reimbursement of its defense costs relating to a separate, state-court action filed by Defendants Hazelton and Holyfield against Kamadulski, Alton School District, and Wilson. The instant action arises as follows: Plaintiff, an insurer, issued a policy to Kamadulski (the "Policy"), providing for commercial general liability insurance. Hazelton and Holyfield then filed suit against Kamadulski, Alton School District, and Wilson in Madison County, Illinois state court alleging that those Defendants, through their servants and agents, destroyed trees belonging to Hazelton and Holyfield while engaging in construction activities on adjacent property. Because the alleged events transpired during the period in which this Policy was effective, Defendants Kamadulski, Alton School District, and Wilson then tendered their defenses to Plaintiff, who accepted them subject to a reservation of rights. Plaintiff now sues, seeking (1) a declaratory judgment establishing that it has no duty to defend Kamadulski, Alton School District, or Wilson under the Policy, and (2) reimbursement of all attorneys' fees spent on behalf of the Defendants in question. (Doc. 1.)

In support of its position, Plaintiff sets forth the following arguments: first, that the property damage alleged in Hazelton and Holyfield's complaint was not caused by an unintentional "occurrence" that would trigger liability under the Policy; second, that any property damage that occurred is subject to one of two exclusions that cause the Policy not to be triggered; and third, that the "additional insured" provision does not apply to liability caused by either of the additional insureds, Alton School District and Wilson. Defendants Kamadulski, Wilson, and Alton School District disagree. They argue that the clearing of trees was accidental, not intentional, that the relevant exclusions - (j)5 and (j)6 - are inapplicable, and that Wilson and Alton School District are covered by the additional insured clause.*fn1

III. Analysis

A. Judgment on the Pleadings Standard

A party may move for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) after the parties have filed the complaint and answer. Fed. R. Civ. P. 12(c). A motion for judgment on the pleadings is reviewed "under the same standards as a motion to dismiss under 12(b); the motion is not granted unless it appears beyond doubt that the [non-movant] can prove no facts sufficient to support his [position]." Flenner v. Sheahan, 107 F.3d 459 (7th Cir. 1997). When considering a motion for judgment on the pleadings, a court must view all allegations in the light most favorable to the nonmoving party, and must further draw all reasonable inferences in favor of that party. Kiddy-Brown v. Blagojevich, 408 F.3d 346, 355 (7th Cir. 2005); Forseth v. Village of Sussex, 199 F.3d 363, 368 (7th Cir. 2000). In evaluating a Rule 12(c) motion, a court is only allowed to consider the pleadings, which include "the complaint, the answer, and any written instruments attached as exhibits." Northern Ind. Gun & Outdoor Shows v. City of S. Bend, 163 F.3d 449, 452 (7th Cir. 1998).

B. Duty to Defend Standard

Because this is a diversity case, Illinois law applies. It is this Court's duty to predict what the Illinois Supreme Court would do if presented with an identical issue. Taco Bell Corp. v. Continental Cas. Co. 388 F.3d 1069, 1077 (7th Cir. 2004). Illinois law treats the interpretation of an insurance policy as a question of law that the court may resolve summarily. See Connecticut Indem. Co. v. DER Travel Service, Inc., 328 F.3d 347, 349 (7th Cir. 2003) (citing Crum & Forster Managers Corp. v. Resolution Trust Corp., 620 N.E.2d 1073, 1077 (Ill. 1993)). Whether an insurer must defend the insured is a question resolved by comparing the allegations of the underlying complaint to the insurance policy. Id. (citing Lapham-HickeySteel Corp. v. Protection Mut. Ins. Co., 166 Ill. 2d 520, 655 N.E.2d 842, 847 (Ill. 1995)). If the underlying complaint alleges facts within or potentially within policy coverage, the insurer is obligated to defend its insured, even if the allegations are groundless, false, or fraudulent. United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill. 2d 64, 578 N.E.2d 926, 930 (Ill. 1991).

An insurer, however, has no duty to defend where it is "'clear from the face of the underlying complaint that the allegations fail to state facts which bring the case within, or potentially within, the policy's coverage.'" Connecticut Indem. Co., 328 F.3d at 349(quoting United States Fidelity & Guaranty Co., 578 N.E.2d at 930). The legal labels used are not dispositive as to whether a duty to defend exists. Id. (citing LexmarkInt'l, Inc. v. Transportation Ins. Co., 327 Ill. App. 3d 128, 761 N.E.2d 1214, 1221 (Ill. App. Ct. 2001)). Furthermore, if the insurer relies on an exclusionary provision, it must be "clear and free from doubt" that the policy's exclusion prevents coverage. See Bituminous Cas. Corp. v. Fulkerson, 212 Ill. App. 3d 556, 571 N.E.2d 256, 262 (Ill. App. Ct. 1991). The Court must liberally construe the underlying complaint and the insurance policy in favor of the insured. SeeUnited States Fidelity & Guaranty Co., 578 N.E.2d at 930.

C. The Policy

The Policy in question provides general commercial liability coverage. (Doc.1, Ex. A.) The Policy provides coverage for "occurance[s]," which it defines as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Id.). It does not provide any more precise definition of "accident." The Policy also provides several exclusions from coverage, two of which are relevant here: exclusion j(5); and exclusion j(6). Exclusion j(5) states that coverage does not extend to property damage to "[t]hat particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the 'property damage' arises out of those operations." (Id.) Exclusion j(6) states that coverage does not extend to property damage to "[t]hat particular part of any property that must be restored, repaired or replaced ...


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