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National Casualty Co. v. Forge Industrial Staffing

July 29, 2008

NATIONAL CASUALTY COMPANY, PLAINTIFF,
v.
FORGE INDUSTRIAL STAFFING, INC., DEFENDANT.



The opinion of the court was delivered by: James F. Holderman, Chief Judge

MEMORANDUM OPINION AND ORDER REGARDING THE PARTIES' CROSS MOTIONS FOR SUMMARY JUDGMENT

Plaintiff and counter-defendant National Casualty Company ("NCC") and defendant and counter-plaintiff Forge Industrial Staffing, Inc. ("Forge") filed cross-motions for summary judgment (Dkt. Nos. 74, 80) in this insurance policy dispute. NCC contends that only one issue remains to be determined and asks the court to enter a declaratory judgment as to the number of deductibles owed to it by Forge. In response, Forge asks the court to determine: (1) which deductible applies to Forge's claims-the $5,000 deductible under the Professional Liability Coverage Part or the $25,000 deductible under the Employment Practices Liability Coverage Part of the policy; and (2) whether Forge has satisfied the applicable deductible. Forge also asks for the court to grant summary judgment in its favor on its breach of contract claim. For the following reasons, the court grants NCC's motion for summary judgment and denies Forge's motion for summary judgment.

This insurance dispute concerns NCC's duty to defend Forge against employment discrimination claims brought by four of Forge's former employees. Most of the material facts at issue in the litigation are undisputed and were set out in this court's "Memorandum Opinion and Order Regarding the Parties' Cross Motions for [Partial] Summary Judgment" dated June 25, 2007 (Dkt. No. 63). The court will not reiterate those facts here. In the June 25, 2007 order, the court determined that NCC's duty to defend Forge under the Employment Practices Liability Coverage Part of the NCC policy did not create a conflict of interest such that NCC was required to pay for Forge to hire its own independent counsel to defend the underlying employment discrimination claims. The court then granted, in general, NCC's motion for partial summary judgment while denying Forge's cross-motion.

The parties have now moved for summary judgment on what they say are the final issues to be resolved in this litigation. The principal issue in dispute is how much, if anything, Forge owes NCC for defending the employment discrimination claims underlying this litigation. To reach a conclusion on this issue, the court must address three distinct questions: (1) whether the employment discrimination claims were covered under the Employment Practices Liability Coverage Part or the Professional Liability Coverage Part of the NCC policy; (2) how many deductibles were triggered under the policy; and (3) whether Forge has satisfied the applicable deductible. Forge also asks this court to grant summary judgment in its favor on Count II of its counterclaim for breach of contract. The court will address each issue in turn.

1. Employment Practices Liability Coverage versus Professional Liability Coverage

It is undisputed that the employment discrimination claims underlying this litigation triggered coverage under the Employment Practices Liability Coverage Part of the NCC policy. Forge, however, has maintained throughout this litigation that the claims also triggered coverage under the Professional Liability Coverage Part of the policy.*fn1 The distinction is significant because under the Employment Practices Liability Coverage Part, Forge is obligated to pay a $25,000 per claim deductible, while under the Professional Liability Coverage Part, Forge is obligated to pay a $5,000 per claim deductible. Thus, Forge reasons, if coverage was triggered under the Professional Liability Coverage Part of the policy, Forge is obligated to pay to NCC only the lower $5,000 per claim deductible rather than the $25,000 per claim deductible.

Under Illinois law, when determining an insurer's duty to defend under a policy of liability insurance, the court must compare the allegations of the underlying complaint with the relevant insurance policy. Native Am. Arts, Inc. v. Hartford Cas. Ins. Co., 435 F.3d 729, 732 (7th Cir. 2006) (interpreting Illinois law); accord Atl. Mut. Ins. Co. v. Am. Acad. of Orthopaedic Surgeons, 734 N.E.2d 50, 56 (Ill. App. 2000). Insurance policy terms should be read according to their plain, ordinary meaning. Commonwealth Ins. Co. v. Stone Container Corp., 351 F.3d 774, 777 (7th Cir. 2003) (interpreting Illinois law); accord Allstate Ins. Co. v. Smiley, 659 N.E.2d 1345, 1350 (Ill. App. 1995). Although ambiguities may arise where a reasonable person in the position of the insured, reading the policy as a whole, could construe the words in different ways, the court should not search for ambiguities where there are none. Geschke v. Air Force Ass'n, 425 F.3d 337, 342 (7th Cir. 2005) (interpreting Illinois law); accord Allstate Ins. Co., 659 N.E.2d at 1350. Insurance policy construction is a question of law. Sokol & Co. v. Atl. Mut. Ins. Co., 430 F.3d 417, 420 (7th Cir. 2005) (interpreting Illinois law); accord Outboard Marine Corp. v. Liberty Mut. Ins. Co., 607 N.E.2d 1204, 1212 (1992).

The Professional Liability Coverage Part of the NCC policy provides that NCC:

[W]ill pay DAMAGES which YOU become legally obligated to pay as a result of CLAIMS first made against YOU and reported to US in writing provided that:

1. the WRONGFUL ACT giving rise to the CLAIM occurred during the POLICY PERIOD; and

2. the WRONGFUL ACT giving rise to the CLAIM is within the coverage of YOUR policy. WE will not pay for any CLAIM excluded by the Coverage Part.

(Compl. Ex. A; Forge Rule 56.1 Statement Ex. A5.) The Professional Liability Coverage Part defines "Wrongful Act" as:

[A]ny actual or alleged negligent act, error or omission, misstatement, misleading statement, breach of duty or any alleged PERSONAL INJURY offense YOU or any person or entity for whom YOU are legally responsible commit, but only in the performance of PERSONNEL CONSULTING SERVICES or TEMPORARY HELP SERVICES for or on behalf of the NAMED INSURED. (Compl. Ex. A; Forge Rule 56.1 Statement Ex. ...


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