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Lyerla v. AMCO Insurance Co.

August 2, 2007

LYLE LYERLA, D/B/A WILDEWOOD CONSTRUCTION, PLAINTIFF,
v.
AMCO INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Murphy, Chief District Judge

MEMORANDUM AND ORDER

This matter is before the Court on cross motions for summary judgment (Docs. 27, 28). The Court held a hearing on April 23, 2007, and took the motions under advisement. For the reasons set forth below, the Court denies Plaintiff's motion for summary judgment and grants Defendant's motion for summary judgment on its counterclaim.

BACKGROUND

The parties have filed a joint stipulation of facts (see Doc. 24) which makes recitation of the background in this case relatively simple.

In March 2001, Scott Riddlemoser and Kathleen McNulty entered into a construction contract with Lyle Lyerla, d/b/a Wildewood Construction (hereinafter "Lyerla"). Pursuant to the terms of the contract, Lyerla was to construct a residential dwelling in Madison County, Illinois.

On January 24, 2002, Riddlemoser and McNulty filed suit against Lyerla alleging breach of the construction contract ("the underlying suit") (see Doc. 5, Att. 6). The suit alleged numerous breaches including, among other things: failing to construct the building and other improvements pursuant to the plans and specifications attached to the insurance contract, failing to substantially complete the building and other improvements on or before July 31, 2001, failing to complete punch list items within 20 days of proper notice, failing to construct the building and other improvements in a good workmanship manner, and failing to correct all defects within seven days of notice.

Lyerla carried a Commercial General Liability ("CGL") policy (Policy No. ACP MCTO 7120302594) with AMCO Insurance Company ("AMCO") during the relevant time period. On March 15, 2002, Lyerla tendered notice of the case filed by Riddlemoser and McNulty to AMCO. In a letter dated July 2, 2002, AMCO denied coverage; AMCO also denied that it had a duty to defend or indemnify Lyerla. The underlying suit was ultimately settled by Lyerla for $53,000.

On June 8, 2006, Lyerla filed the instant lawsuit against AMCO in the Circuit Court of Madison County, Illinois, alleging breach of contract and violations of Section 155 of the Illinois Insurance Code (see Doc. 3, Att. 1). AMCO removed the action to this Court on September 1, 2006, and filed a counterclaim against Lyerla shortly thereafter (see Doc. 8). In short, the counterclaim seeks a declaration that the underlying claim is not covered by the policy mentioned above and, therefore, that AMCO had no duty to defend or indemnify Lyerla.

After the Court twice ordered AMCO to cure the allegations of federal subject matter jurisdiction in the notice of removal (see Docs. 7, 14), the Court concluded that federal subject matter jurisdiction exists pursuant to 28 U.S.C. § 1332.*fn1

ANALYSIS

Summary judgment may be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In considering a summary judgment motion, a court must review the entire record and draw all reasonable inferences in the light most favorable to the non-moving party. See NLFC, Inc. v. Devcom Mid-America, Inc., 45 F.3d 231, 234 (7th Cir. 1995); Enquip, Inc. v. Smith-McDonald Corp., 655 F.2d 115, 118 (7th Cir. 1981).

The relevant facts are undisputed. The only issue is whether the CGL policy covers the underlying claim and whether AMCO had a duty to defend and indemnify Lyerla for the suit brought by Riddlemoser and McNulty.

The CGL policy held by Lyerla provides as follows:

COMMERCIAL GENERAL LIABILITY COVERAGE FORM

***

SECTION I -- COVERAGES COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not ...


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