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Nautilus Insurance Co. v. Chicago Transit Authority

August 27, 2009


The opinion of the court was delivered by: Samuel Der-Yeghiayan United States District Court Judge



This matter is before the court on Plaintiff Nautilus Insurance Company's (Nautilus) motion for summary judgment and on Defendant Chicago Transit Authority's (CTA) motion for summary judgment. For the reasons stated below, we grant Nautilus' motion for summary judgment and deny CTA's motion for summary judgment.


Nautilus contends that Defendant Chicago Bulk Carriers, Inc. (Bulk) entered into a contract (Contract) with CTA to perform construction work for CTA at a specific site (Construction Site). Defendant Karry Williams (Williams) allegedly worked for CTA and was present at the Construction Site when he was allegedly injured by the negligent operation of a backhoe. Williams and his wife Eliza Williams (Eliza) brought an action in state court based on his alleged injuries, naming Bulk as one of the defendants (Williams Action). Bulk then filed a third-party complaint against CTA in the Williams Action, contending that an agent of CTA directed Bulk to operate the backhoe in an unsafe manner and CTA's negligence was in part the cause of Williams' injuries. Nautilus subsequently brought the instant action against Bulk, CTA, Williams, and Eliza. Nautilus alleges that it issued an insurance policy to Bulk (Policy) and that CTA signed an Additional Insured Endorsement for the Policy. Nautilus brought the instant declaratory judgment action. Nautilus seeks a declaratory judgment stating that: (1) the Policy does not potentially or actually cover any portion of the claims brought against CTA in the Williams Action, and (2) Nautilus does not have a duty to defend CTA in connection with the Williams Action. CTA filed a counterclaim seeking a declaratory judgment, stating that Nautilus owes CTA a duty to defend CTA in the Williams Action. Nautilus and CTA have each moved for summary judgment on their respective claims. On November 19, 2008, we granted Nautilus' motion for default against Bulk.


Summary judgment is appropriate when the record, viewed in the light most favorable to the non-moving party, reveals that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). In seeking a grant of summary judgment, the moving party must identify "those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)(quoting Fed. R. Civ. P. 56(c)). This initial burden may be satisfied by presenting specific evidence on a particular issue or by pointing out "an absence of evidence to support the non-moving party's case." Id. at 325. Once the movant has met this burden, the non-moving party cannot simply rest on the allegations in the pleadings, but, "by affidavits or as otherwise provided for in [Rule 56], must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). A "genuine issue" in the context of a motion for summary judgment is not simply a "metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, a genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Insolia v. Philip Morris, Inc., 216 F.3d 596, 599 (7th Cir. 2000). The court must consider the record as a whole, in a light most favorable to the non-moving party, and draw all reasonable inferences that favor the non-moving party. Anderson, 477 U.S. at 255; Bay v. Cassens Transport Co., 212 F.3d 969, 972 (7th Cir. 2000). When there are cross motions for summary judgment, the court should "construe the evidence and all reasonable inferences in favor of the party against whom the motion under consideration is made." Premcor USA, Inc. v. American Home Assurance Co., 400 F.3d 523, 526-27 (7th Cir. 2005).


CTA contends that Nautilus has a duty to defend CTA in the Williams Action under the terms of the Policy and the Additional Insured Endorsement that was signed by CTA. Under Illinois law, "the general rules governing the interpretation of other types of contracts . . . govern the interpretation of insurance policies." Hobbs v. Hartford Ins. Co. of the Midwest, 823 N.E.2d 561, 564 (Ill. 2005)(stating that the court's "primary objective is to ascertain and give effect to the intention of the parties, as expressed in the policy language"). If the language in an insurance policy "is unambiguous, the policy will be applied as written, unless it contravenes public policy." Id. (stating that "[w]hether an ambiguity exists turns on whether the policy language is subject to more than one reasonable interpretation" and "[a]lthough creative possibilities may be suggested, only reasonable interpretations will be considered" and a court "will not strain to find an ambiguity where none exists"); see also Brile for Brile v. Estate of Brile, 695 N.E.2d 1309, 1312 (Ill. App. Ct. 1998)(stating that in construing the terms of a policy, "a court must ascertain and give effect to the intention of the parties as expressed in their agreement" and "[t]o that end, terms utilized in the policy are accorded their plain and ordinary meaning . . . unless specifically defined in the policy, in which case they will be given the meaning as defined in the policy"). In construing terms, a court must also "read the policy as a whole and consider the type of insurance purchased, the nature of the risks involved, and the overall purpose of the contract." Brile, 695 N.E.2d at 1312 (stating that "[p]rovisions that limit or exclude coverage are to be construed liberally in favor of the insured and most strongly against the insurer" and "all doubts and ambiguities in the policy language must be construed in favor of the insured"); see also Valley Forge Ins. Co. v. Swiderski Electronics, Inc., 860 N.E.2d 307, 331 (Ill. 2006)(stating that "[t]o determine whether an insurer has a duty to defend its insured from a lawsuit, a court must compare the facts alleged in the underlying complaint to the relevant provisions of the insurance policy," that "[t]he allegations must be liberally construed in favor of the insured" and that "[i]f the facts alleged fall within, or potentially within, the policy's coverage, the insurer is obligated to defend its insured").

In the instant action, the Policy and the Amendatory Endorsement - Employee Exclusion provide the following exclusion (Employee Exclusion):

This Insurance does not apply to: . . . Employer's Liability . . . 'Bodily Injury' to: (1) An 'employee' of the insured arising out of and in the course of:

(a) Employment by the insured; or (b) Performing duties related to the conduct of the insured's business. . . . (D Ex. D)(emphasis added). The Additional Insured Endorsement for the Policy provides in part the following:

WHO IS AN INSURED(Section II) is amended to include as an insured [CTA] and only for liability arising out of [Bulk's] negligence and only for occurrences or coverages not otherwise excluded in the policy to which this endorsement applies. . . .

Your policy is primary in the event of an occurrence caused by your sole negligence as respects the ...

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