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St. Paul Fire and Marine Insurance Co. v. Sunset Marine

August 22, 2007

ST. PAUL FIRE AND MARINE INSURANCE COMPANY, PLAINTIFF,
v.
SUNSET MARINE, INC., JOHN EAKLE D/B/A SUNSET MARINE, INC., JOHN EAKLE, INDIVIDUALLY, AND CHADWICK L. MCDONALD, SPECIAL ADMINISTRATOR OF THE ESTATE OF KRIS MCDONALD, DECEASED, DEFENDANTS.



The opinion of the court was delivered by: Michael M. Mihm United States District Judge

ORDER

This matter is now before the Court on Cross Motions for Summary Judgment and a Motion for Default Judgment. For the reasons set forth below, the Motion for Summary Judgment by Sunset Marine ("Sunset") and John Eakle d/b/a Sunset ("Eakle") [#25] is DENIED, and St. Paul's Motion for Summary Judgment [#27] is GRANTED. The Motion for Default Judgment against Eakle individually [#38] is also GRANTED.

FACTUAL BACKGROUND

This insurance coverage dispute arises from an accident that occurred on June 12, 2004. Decedent, Kris McDonald was a passenger on a golf cart being driven at the Eastport Marina. She was thrown from the golf cart and struck her head on the pavement, causing her death.

At all relevant times, Eakle was the harbormaster for Eastport Marina and managed the marina for the City of East Peoria, Illinois (the "City"). He was also the President and sole employee of Sunset. Sunset entered into a Management Agreement with the City in December 2002. The Management Agreement provides:

1. Appointments: The City hereby appoints and retains Marine as the sole managing agent of Eastport and Marine and hereby accepts such appointment and agrees to manage and operate Eastport in accordance with the terms and conditions of this Agreement.

4. Marine's Personnel:

(d) During the term of this Agreement, Marine shall cause its principal, John Eakle, to provide management services on behalf of Marine in connection with its management of Eastport . . . John Eakle shall be in charge of all aspects of Eastport operations and shall serve as Harbor Master.

15. Representations and Warranties; Indemnification: * * *

(b) Marine shall defend, indemnify and hold the City of East Peoria . . . harmless from and against any and all claims, actions, damages, expenses (including attorneys fees), losses or liabilities arising out of any claim made as a result of Marine's bad faith, recklessness, gross negligence, gross misconduct in its management and operation of Eastport, or arising out of any breach or claimed breach of any representation or any of its obligations pursuant to this agreement.

(c) The City shall defend, indemnify and hold Marine . . . harmless from and against any and all claims, actions, damages, expenses (including attorneys fees), losses or liabilities arising out of any claim made as a result of the City's bad faith, recklessness, gross negligence, gross misconduct in its management and operation of Eastport, or arising out of any breach or claimed breach of any representation or any of its obligations pursuant to this Agreement.

On December 29, 2004, Chadwick McDonald, acting as the Special Administrator for the Decedent's Estate, filed a complaint in state court alleging wrongful death and negligent entrustment against Sunset, Eakle, Eastport Marina, and the City (the "underlying complaint"). The underlying complaint alleges that the golf cart belonged to Eakle, Sunset, or Eastport Marina, and that Eakle exercised control over the golf cart. It is also alleged that Eakle gave the driver of the golf cart permission to drive it knowing that the driver had consumed alcohol, was intoxicated, and that her ability to drive was impaired or alternatively that Eakle had negligently entrusted the golf cart to the driver.

St. Paul issued policy number GP09312454 to the City, with a policy period of May 1, 2004, to May 1, 2005 (the "Policy"). The Policy contains a Public Entity General Liability Protection coverage part with a $2,000,000 limit for each event and a $6,000,000 general total limit. The Policy also contains an Umbrella Excess Liability Protection (the "Umbrella Policy") coverage with a $10,000 deductible, limit of $5,000,000 for each event, and a general total limit of $5,000,000.

On June 9, 2005, Eakle wrote to St. Paul on behalf of himself and Sunset to notify it of the underlying litigation and to tender the defense to St. Paul. On September 9, 2005, Eakle wrote again, contending that he and Sunset are additional insureds under a St. Paul policy, advising that he had exercised his right to select an attorney of his choice, and asserting St. Paul's obligation to reimburse him for the defense. That same day, an attorney purporting to represent Sunset and Eakle wrote to St. Paul again formally tendering the defense of the underlying litigation. On January 19, 2006, St. Paul wrote to Eakle and Sunset reserving its rights and informing them that they are not covered for the underlying litigation under the St. Paul policy.

On March 24, 2006, St. Paul filed this declaratory judgment action in which it seeks a declaration that it does not have a duty to defend or indemnify Sunset or Eakle in the underlying litigation. The parties have now filed cross motions for summary ...


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