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Selective Insurance Company of South Carolina v. City of Paris

November 23, 2009

SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA, PLAINTIFF,
v.
CITY OF PARIS, GENE RAY, JAMES PARRISH, AND GORDON RANDY STEIDL, HERBERT WHITLOCK DEFENDANTS.
ALLIANZ GLOBAL RISKS US INSURANCE COMPANY, PLAINTIFF-INTERVENOR
v.
CITY OF PARIS, GENE RAY, JAMES PARRIS, AND GORDON RANDY STEIDL, HERBERT WHITLOCK DEFENDANTS.
CONSOLIDATED WITH
WESTERN WORLD INSURANCE GROUP, PLAINTIFF,
v.
SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA AND MONTICELLO INSURANCE COMPANY N/K/A ALLIANCE GLOBAL U.S., DEFENDANTS.



The opinion of the court was delivered by: Michael P. McCUSKEY Chief U.S. District Judge

OPINION

On October 6, 2009, Plaintiff Western World Insurance Group (Western) filed its Motion for Leave to File Its Second Amended Complaint and Sur-Reply In Support of Its Motion for Summary Judgment and In Opposition to Selective's and Allianz's Motion for Summary Judgment (#103). Defendants City of Paris, Gene Ray, and James Parrish filed their Objection (#107) on October 20, 2009. For the following reasons, Western's Motion (#103) is DENIED.

BACKGROUND

This case arises out of the arrest, prosecution, conviction and imprisonment of Gordon Randy Steidl and Herbert Whitlock for the 1986 Edgar County murders of Dyke and Karen Rhoads. Steidl and Whitlock were tried and convicted in 1987. Steidl's conviction was overturned a new trial ordered by this court in Steidl v. Walls, 267 F.Supp.2d 919 (C.D. Ill. 2003). The State of Illinois decided not to retry Steidl. Steidl was released from custody in 2004. Whitlock was released from custody in January 2008. A dispute has now arisen as to who will defend and indemnify the City against the lawsuit between the City of Paris and the various insurance companies who insured the City from 1986 to 2005: Western World Insurance Group, which insured the City from before the time of the murders up through January 1996; Allianz who insured the City from 1995 to 1999; and Selective, who insured the City from 1999 to 2005.

On December 18, 2008, Western filed its Amended Complaint for Declaratory Judgment. The complaint contained one count, in which Western asked the court to declare that Western is an excess carrier and has no current obligation to defend Defendants under its policies for the lawsuits filed by Steidl and Whitlock in federal court. During the course of this year, all three insurance companies have filed motions for summary judgment, with Selective and Allianz moving for summary judgment on the grounds that the occurrences that would have triggered their duty to defend or indemnify Defendants from the Stiedl and Whitlock lawsuits occurred outside their respective policy periods and with Western moving for summary judgment based on their only being an excess carrier to Selective's and Allianz's primary obligation.

On October 6, 2009, Western filed its Motion for Leave to File Its Second Amended Complaint and Sur-Reply In Support of Its Motion for Summary Judgment and In Opposition to Selective's and Allianz's Motion for Summary Judgment (#103). The proposed Second Amended Complaint is nearly identical to the First Amended Complaint, except that it adds some different text from its insurance policies to the body of the complaint and removes the following paragraph from count one: "Western World does not seek to abrogate its obligations to the City of Paris, Parrish, or Ray upon exhaustion of the limits of liability under the Selective and Monticello polices, except as previously set forth in its reservation of rights letter."

However, the Second Amended Complaint adds a second count. The second count asks the court to declare, if Western is determined to be a primary carrier, that Western has no obligation to defend or indemnify Defendants for injuries or damages suffered by Whitlock or Steidl outside of Western's respective policy periods. It asks the court to declare that if the "triggering events" for insurance coverage occurred prior or subsequent to Western's policy, such policy would not be triggered and Western would owe no duty to defend or indemnify Defendants with respect to the non-triggered policies. Further, Western asks the court to declare that, if it is determined that Defendants' liability arises out of the oral or written publication of material done by the Defendants at their direction with knowledge of falsity, the "knowledge of falsity" exclusion in Western Policy would act as a complete bar to coverage under such policy. The Sur-Reply filed by Western acts as a memorandum explaining Western's position as encapsulated in count two of the Second Amended Complaint. It argues that, if the court determines that Selective and Allianz owe no duty to defend or indemnify Defendants because the triggering event occurred outside of the policy period, that determination should operate as "law of the case" and Western would similarly have no duty to defend or indemnify Defendants for the policy periods outside of the triggering events. As an example, if the triggering events are said to occur in 1986 or 1987, Western policies for the years 1988 to 1996 or before 1986 would not be implicated.

ANALYSIS

Western argues that leave to file an amended complaint should be freely given under the Federal Rules of Civil Procedure and Supreme Court precedent. It further contends that there is good cause for allowing the amendment and no prejudice will result to any other party because the trigger of coverage issue has been fully briefed in the various summary judgment motions and responses. Defendants argue that the Western exclusions plead in the proposed second count differ substantially from their counterparts in the Selective and Allianz policies and that different facts apply to the Western policies. They also argue that the law of the case doctrine does not apply.

Federal Rule of Civil Procedure 15(a)(2) states:

"In all other cases, a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires." Fed. R. Civ. P. 15(a)(2).

However, where, as is the case here, a party seeks to amend a pleading after the expiration of the court's Scheduling Order deadline to amend pleadings, the moving party must show "good cause" under Federal Rule of Civil Procedure 16(b). Trustmark Ins. Co. v. General & Cologne Life Re of America, 424 F.3d 542, 553 (7th Cir. 2005). The rule states that "[a] schedule may be modified only for good cause and with the judge's consent." Fed. R. Civ. P. 16(b)(4). Rule 16(b)(4)'s "good cause" standard primarily considers the diligence of the party seeking amendment. Trustmark, 424 F.3d at 553. Further, the district court need not allow an amendment when there is undue delay, dilatory motive, undue prejudice to the opposing party, or when the amendment would be futile. Bethany Pharmacal Co., Inc. v. QVC, Inc., 241 F.3d 854, 861 (7th Cir. 2001). The decision whether to allow leave to amend a complaint is left to the discretion of the district court. Trustmark, 424 F.3d at 553.

Here, the deadline for the amendment of pleadings contained in the Amended Discovery Order was November 3, 2008, more than eleven months before Western filed its motion for leave to file a second amended complaint. The triggering event issue that Western wants to add as count two was first raised by Selective in its summary judgment motion (#66) on March 18, 2009, nearly six months before Western filed this motion. Certainly, there has been undue delay.

However, delay alone may be an insufficient ground to warrant denial of leave to amend the complaint, rather the degree of prejudice to the opposing party is a significant factor in determining whether the lateness of the request ought to bar the following. Park v. City of Chicago, 297 F.3d 606, 613 (7th Cir. 2002). In their response, Defendants note that different facts and different policy language distinguish Western's "triggering event" argument from that of Selective and Allianz. Further, ...


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