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Indiana Insurance Co. v. Westfield Insurance Co.

August 26, 2010

INDIANA INSURANCE COMPANY, AN INDIANA CORPORATION, PLAINTIFF,
v.
WESTFIELD INSURANCE COMPANY, AN OHIO CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge

MEMORANDUM OPINION AND ORDER

Before the Court are Defendant Westfield Insurance Company's ("Westfield") motion to strike paragraphs 9-18 of the complaint, Rule 12(b)(6) motion to dismiss, and motion to strike portions of Plaintiff Indiana Insurance Company's ("Indiana") response to Westfield's Rule 12(b)(6) motion to dismiss. For the following reasons, the Court denies Westfield's motion to strike paragraphs 9-18 of the complaint, denies Westfield's motion to strike portions of Indiana's response, and grants Westfield's motion to dismiss.

BACKGROUND

For the purpose of resolving the motion to dismiss, the Court assumes the following allegations are true. On November 30, 1996, a gas explosion occurred at the home of Kim Bowen in Downers Grove which resulted in two deaths, several injuries and property damage.

(R. 1-1, Compl., ¶ 6.) The accident also resulted in the filing of eight lawsuits (collectively, the "Bowen Estate litigation"). The allegations in the Bowen Estate litigation asserted that Professional Plumbing, Inc. ("Professional Plumbing"), a subcontractor that conducted plumbing and gas delivery work, was negligent in its work at the Bowen premises, and that Richard Smykal, Inc. ("Smykal"), the general contractor, was negligent in allowing Professional Plumbing to conduct its plumbing and gas delivery work at the Bowen premises. Id. at ¶¶ 6-8. At the time of the accident, Indiana insured Smykal, and Westfield insured Professional Plumbing. Id. at ¶¶ 1-2.

On March 25, 1998, Indiana tendered the defense of the Bowen Estate litigation to Westfield. Id. at ¶ 9. On May 19, 1999, Westfield refused to defend Smykal because it asserted that, as of the date of the accident, Professional Plumbing has completed its operations at the Bowen premises and the policy contained no "completed operations" coverage. Id. at ¶ 10. As a result, Smykal filed a third-party complaint for declaratory judgment against Westfield in a pending action in the Bowen Estate litigation between American States Insurance, Co. and Northern Illinois Gas, Co. in Illinois state court. Id. at ¶ 13, Ex. 4.*fn1

On September 21, 2000, before the court ruled on the parties' cross-motions for summary judgment, Westfield wrote Smykal's attorney to accept the defense of Smykal and stated:

[T]he defense is accepted without reservation as to coverage.... Westfield does, however, reserve its right to seek contribution, apportionment and/or reimbursement for any defense costs and/or other payments made on behalf of Smykal with regard to this litigation from any other insurance company which provides insurance coverage to Smykal with regard to the aforesaid lawsuit.

Id. at Ex. 6.*fn2 On September 29, 2000, Westfield withdrew its counterclaim for declaratory judgment against Smykal, and Smykal voluntarily dismissed its third-party complaint for declaratory judgment against Westfield. Id. at Ex. 5. Thereafter, on February 16, 2001, Westfield wrote Ralph Smykal, President of Smykal and stated:

Westfield Companies has accepted the defense of Richard Smykal, Inc.... However, Westfield reserves its right to seek contribution, apportionment and/or reimbursement for any defense costs and other payments made on behalf of Smykal with regard to this litigation from any other insurance company which provides insurance coverage to Smykal with regard to the aforesaid lawsuit.

(R. 1-1, Compl., Ex. 7.)

Five years later, on May 7, 2006, the parties reached a settlement in the Bowen Estate litigation. Id. at ¶ 23. At the settlement conference, Westfield agreed that it would "square up" with Indiana once the Bowen Estate litigation was "put to rest and all releases and dismissal orders entered." Id. at ¶ 28. To settle the litigation, Indiana paid $2,525,000 on behalf of Professional Plumbing, and Westfield paid $2,250,000 on behalf of Smykal. Id. Westfield had two policies providing coverage for Professional Plumbing and its "additional insured", Smykal:

(a) a CGL Policy with $1 million policy limits, and (b) a Commercial Umbrella Policy with $10 million policy limits. Id. at ¶ 24. Indiana also had two polices providing coverage for Smykal:

(a) a CGL Policy with $1 million policy limits; and (b) a Commercial Umbrella Policy with $5 million policy limits. Id. at ¶ 25. Because Westfield agreed to provide the defense for Smykal without reservation as to coverage, once Indiana exhausted its $1 million in primary CGL policy limits, Westfield should have paid the remaining $1,250,000 under its $10 million Commercial Umbrella Policy limits. Id. at ¶ 27. Westfield ...


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