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United National Insurance Co. v. Fasteel

March 18, 2008


The opinion of the court was delivered by: Judge David H. Coar


Plaintiff United National Insurance Company ("Plaintiff," "UNIC," or "insurer") has brought suit against Defendants Fasteel, Inc. ("the Defendant," "Fasteel," or "insured"), Redfern Design, Ltd., and Vito Recchia (collectively, "Defendants") seeking declaratory judgment with respect to insurance coverage. Now before this court is Plaintiff's motion for summary judgment (Doc. No. 28), filed pursuant to Federal Rules of Civil Procedure 56. For the reasons stated below, Plaintiff's motion for summary judgment is DENIED.


This case involves the status of an insurance policy and the coverage it offers for a personal injury lawsuit filed in Cook County, Illinois.

a. Parties

UNIC is an insurance company, organized under the laws of the Commonwealth of Pennsylvania, with its principal place of business in Bala Cynwyd, Pennsylvania. UNIC is a citizen of the Commonwealth of Pennsylvania.

Fasteel, Inc. ("Fasteel") is an Illinois corporation. Fasteel is and always has been a company engaged in the business of fabricating structural steel and the delivery of those steel products to construction projects. A majority of the construction projects consist of residential construction. Fasteel maintains its office at 607 W. Chicago Street in Plainfield, Illinois and a warehouse in New Lenox, Illinois where the steel is fabricated and from which deliveries are made to customers.

b. Communications between the Parties

In October of 2005 Fasteel applied for general liability insurance with UNIC. As part of that application process, Fasteel President Vanessa Hernandez ("Hernandez") and her father Jafet Gonzales ("Gonzales") were interviewed and an inspection was conducted of the business. UNIC issued a commercial general liability policy to Fasteel, number L7187228, with limits of $1 million each occurrence and a general aggregate limit of $2 million ("the Policy"). See Pl.'s Facts Ex. 5; Gonzales Dep. at 20; see also Compl. Ex. C. That same month UNIC, though its representative and underwriting agency P.S. & Associates, issued a quote for insurance and Fasteel paid a premium of $8,970. See Okal Aff. Ex. C.

On October 28, 2005, a Binder was prepared by P.S. & Associates which referred to a "Residential Projects Exclusion" and further stated that the exclusion "requires insured's signature." See Def.'s Facts Resp. Ex. 2 ("Binder").

The Policy documents were delivered to Fasteel in a single 3-ring binder, though the parties dispute the manner and date of its delivery. See Def.'s Add'l Facts ¶ 11; Pl.'s Facts Reply ¶ 11. The Policy is made up of three documents or sets of documents: a form titled "Commercial General Liability Declarations," Pl.'s Facts Ex. 5 at 2 ("Declarations Form"); a "Commercial General Liability Coverage Form," id. at 3-19 ("Coverage Form"); and a set of endorsements, with schedule, id. at 1, 20-42. This last set of documents contains the two endorsements central to this dispute; one titled Endorsement EAA 148 "RESIDENTIAL PROJECTS EXCLUSION" ("EAA 148" or "Residential Projects Exclusion"), and the other Endorsement PSA 1023 "DESIGNATED OPERATIONS COVERAGE ONLY: NOTICE OF SPECIAL RESTRICTION OF COVERAGE ENDORSEMENT" ("PSA 1023" or "Designated Operations Endorsement").

On December 6, 2005 and December 8, 2005, P.S. & Associates issued an email noting that Fasteel needed to sign the Residential Projects Exclusion. On January 9, 2006 P.S. & Associates issued another email noting that "the insured would not sign the residential exclusion." The Policy was cancelled effective February 19, 2006, which was backdated to January 27, 2006, the same date that Fasteel, Inc. procured alternate insurance from another company.

c. Contract Terms*fn1

The Policy provides for an effective date of October 27, 2005.

The Declarations form is dated October 31, 2005. This document contains some information regarding the Policy's scope, in that it: lists the Policy's effective date as October 27, 2005; names Fasteel Industries as the insured, with an address of 607 W. Chicago Street in Plainfield Illinois; sets forth limits on any payments made under the insurance; and describes insured as "Metal Dealers/Distributor." It also references endorsements and exclusions, stating that "Terrorist Risk Insurance Act Coverage" was declined, and listing "Broad Form Nuclear Exclusion, and as per PSA 1095 attached" as "ENDORSEMENTS ATTACHED TO THIS POLICY." PSA 1095, in turn, is a "FORMS AND ENDORSEMENTS SCHEDULE," which includes the header "ATTACHING TO AND FORMING PART OF POLICY NO. L7187228." This form lists both EAA 148 and PSA 1095 by name and number. Pl.'s Facts Ex. 5 at 20.

The Coverage Form provides that UNIC as the insurer "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. [The insurer] will have the right and duty to defend any 'suit' seeking those damages." Coverage Form ¶ 1(a). The form further states that the insurance is limited to injury or damage "caused by an 'occurrence' that takes place in the 'coverage territory" and occurs during the policy period. Id. ¶ 1(b).

Of the endorsements, of greatest importance is that of EAA 148 and another titled "DESIGNATED OPERATIONS COVERAGE ONLY." EAA 148 states, in relevant part, "THIS ENDORSEMENT CHANGES THE POLICY, PLEASE READ IT CAREFULLY...This insurance does not apply to injury or damage directly or indirectly arising out of, caused by or resulting from 'your products,' or 'your work' in connection with any single custom house or a house which is a part of a multiple tract housing or condominium or other multi-unit residential projects. Projects which are mixed use, any part residential or any part commercial, are considered to be a residential project subject to this endorsement."

The Designated Operations endorsement states:

You, for all insureds, through your insurance broker or advisor, have submitted an application and/or written correspondence or documentation to us which has induced us to issue this restricted policy of insurance. You may have other operations, which have not been revealed to us, intentionally or not. Such exposures may be more hazardous, the same or less hazardous than that which has been set forth in such application, correspondence or documentation for this policy.

You should read this endorsement, and the policy to which it is attached, carefully and consult with your insurance brokers and advisors as only certain, very specific operations have been covered under this policy. Subject to all of the exclusions, terms and conditions of this policy, such insurance as is afforded by this policy applies only to liability arising directly from the ownership, maintenance or use of the following by you or the specific business operations by you as described as follows: Location of Premises: Per locations shown on the Declarations Page, schedule of locations or added by endorsement.

Pl.'s Facts Ex. 5 at 35.

d. Underlying Complaint and Current Action

In November 2005, Fasteel fabricated and delivered steel to a residential construction project located at 1854 Bosworth Lane in Northfield, Illinois ("1854 Bosworth"). Fasteel's contribution to that project was concluded on November 21, 2005 with its final steel delivery.

In July of 2006, Fasteel was served with a Summons and Third Party Complaint in a lawsuit brought by Vitto Recchia ("Recchia Complaint"). Recchia alleges that he was injured while working in the basement of 1854 Bosworth. The Amended Complaint in the lawsuit alleges liability of Fasteel based on an alleged failure to exercise reasonable care in its work on the premises. Fasteel forwarded information regarding the Recchia Complaint to UNIC, who denied coverage and returned to Fasteel a deductible that had been processed.

UNIC filed its Complaint for Declaratory Judgment November 14, 2006, seeking clarification of its obligations in the ...

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