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Public Service Mutual Ins. Co. v. Capitol Transamerica Corp.

November 17, 2010


The opinion of the court was delivered by: John F. Grady, District Judge.


Before the court are the parties' cross-motions for summary judgment. For the reasons explained below we grant plaintiff Public Service Mutual Insurance Company's ("PSM") motion in part, and deny it in part, and deny defendant Capitol Transamerica Corporation's ("Capitol") motion.


This insurance coverage dispute arises from a wrongful death action filed against the parties' mutual insured, Kenard Management Corporation ("Kenard"). (Def.'s Stmt. of Material Facts in Supp. of Mot. for Partial Summ. J. (hereinafter "Def.'s Stmt.") 116.) On January 1, 2007 Michael Doyle fell to his death from the porch of the third-floor apartment located at 3180 North Clark Street, Chicago, Illinois. ( Id. at ¶ 17.) Mr. Doyle's estate alleges that Kenard—the building manager—negligently failed to install building-code compliant guardrails on the porch that would have prevented his death. ( Doyle v. Kenard Corp., No. 07 L 1988 (Compl.), attached as Ex. C to Def.'s Stmt., at 2, 4–5 (the "Underlying Lawsuit").) Kenard managed the property at that time pursuant to a Management Agreement with the property's owner, Belmont Clark Partners ("BCP"). (Def.'s Stmt. ¶ 6; see also Mgmt. Agmt., dated April 17, 2006, attached as Ex. D to Def.'s Stmt.) The Management Agreement contains a "Save Harmless" provision requiring BCP to purchase an insurance policy naming BCP and Kenard as "co-insureds." (Mgmt. Agmt. ¶ 10.) The relationship between this provision and PSM's policy, which names Kenard and "Corus Bank # 141" as insureds, is not entirely clear. Neither party explains who or what "Corus Bank # 141" is, or what it has to do with BCP. Regardless, it is undisputed that PSM's policy was in place when Mr. Doyle died and that the policy covers Kenard's liability for "bodily injury" at the 3180 North Clark Street premises. At that time Kenard was also covered by two insurance policies issued by Capitol: a Commercial General Liability Coverage policy and a Commercial Umbrella General Liability Coverage policy, (Def.'s Stmt. ¶¶ 11, 15.) These policies likewise cover Kenard's liability for "bodily injury" at the Clark Street premises. (Def.'s Resp. to Pl.'s Stmt. of Add'l Material Facts ¶ 2–3.)

Capitol was notified on January 11, 2007 of a potential claim against Kenard stemming from Mr. Doyle's death. (Def.'s Stmt. ¶ 20; Fax from S. McMaster to Capitol Indem., dated Jan. 11, 2007, attached as Ex. ¶ to Def.'s Stmt., at 1.) Capitol acknowledged the notice in a letter to Kenard dated January 16, 2007. (Def.'s Stmt. ¶ 21; Letter from R. Miller to Kenard, dated Jan. 16, 2007, attached as Ex. H to Def.'s Stmt., at 4.) Capitol retained a firm to investigate the potential claim, and retained a lawyer to represent Kenard after Mr. Doyle's estate filed the Underlying Lawsuit in the Circuit Court of Cook County, Illinois on February 22, 2007. ( Id. at ¶¶ 22–23.) The attorney Capitol retained to defend Kenard soon learned that another law firm—retained by PSM—had entered an appearance on Kenard's behalf. ( Id. at ¶¶ 23, 25.)

It appears that Kenard initially failed to respond to Capitol's requests for information about the claim. ( See Letter from H. Russo to R. Miller, dated Mar. 5, 2007, attached as Ex. H to Def.'s Stmt.; Fax from H. Russo to K. Wenkus, dated April 4, 2007, attached as Ex. H to Def.'s Stmt.; Letter from H. Russo to R. Miller, dated April 26, 2007, attached as Ex. H to Def.'s Stmt.)*fn1 Then, in a letter dated July 2, 2007, Kenard's president Geraldine Lichterman informed Capitol's investigator that: (1) the Management Agreement required the building owner to obtain insurance protecting Kenard; (2) a policy "was put into effect" with PSM during the relevant period; and (3) PSM had selected an attorney "to defend [Kenard's] interests" in the Underlying Lawsuit. ( See Letter from G. Lichterman to H. Russo, dated July 2, 2007, attached as Ex. H to Def.'s Stmt.) Ms. Lichterman went on to state her "understanding" of the relationship between the PSM and Capitol policies:

It is my understanding that [Capitol's primary and umbrella policies] are excess over any other insurance we may have. We are assuming the Policy with Public Service Mutual Insurance Company is primary insurance.

( Id.) In November 2007—approximately four months after Ms. Lichterman's letter—PSM first demanded that Capitol contribute to the cost of Kenard's defense. (Pl.'s Stmt, of Add'l Facts ¶ 12.) The record does not indicate what, if anything, came of PSM's initial demand. Then, in a series of letters in early 2009, PSM renewed its demand that Capitol contribute to Kenard's defense. ( Id. at ¶ 15.) Kenard, in a letter dated May 11, 2009, likewise demanded that Capitol acknowledge its duty to defend Kenard. ( See Letter from G. Collins to J. McCarthy, dated May 11, 2009, attached as Ex. 6 to Pl.'s Reap. ("Your Company has a fiduciary duty to its policyholder to defend the case and not to put its own interest ahead of that of the policyholder.").)

This flurry of activity was evidently sparked by the plaintiff's offer to settle the Underlying Lawsuit in exchange for $3 million—the combined policy limits of the three policies at issue. (Pl.'s Stmt. of Add'l Facts ¶ 19.) PSM has indicated its willingness to offer its policy limits, Capitol has not. ( Id. at ¶¶ 20–21.) Both parties have requested declaratory judgment concerning the parties' defense and indemnity obligations. ( See Compl. (Count I); Counterclaim (Count I).) In their cross-motions for partial summary judgment the parties dispute only whether Capitol has a duty to defend Kenard in the Underlying Lawsuit.*fn2


A. Legal Standard

Summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In considering such a motion, the court construes the evidence and all inferences that reasonably can be drawn therefrom in the light most favorable to the nonmoving party. See Pitasi v. Gartner Group, Inc., 184 F.3d 709, 714 (7th Cir.1999). "Summary judgment should be denied if the dispute is 'genuine': 'if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.' " Talanda v. KFC Nat'l Mgmt. Co., 140 F.3d 1090, 1095 (7th Cir.1998) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The court will enter summary judgment against a party who does not "come forward with evidence that would reasonably permit the finder of fact to find in [its] favor on a material question." McGrath v. Gillis, 44 F.3d 567, 569 (7th Cir.1995).

B. Targeted Tender

Capitol contends that Kenard tendered its defense to PSM exclusively. When an insured has coverage under multiple insurance policies, it may choose a single insurer to defend and indemnify it and forego coverage under its other policies. John Burns Construction Co. v. Indiana Ins. Co., 189 Ill.2d 570, 244 Ill.Dec. 912, 727 N.E.2d 211, 215 (2000).*fn3 When an insured has made such an election, the "targeted" insurer may not demand contribution from those insurers whose coverage the insured has elected to forgo. Id., 244 Ill.Dec. 912, 727 N.E.2d at 216–17. This rule protects the insured's "paramount right ... 'to seek or not to seek an insurer's participation in a claim as the insured chooses.' " Alcan United. Inc. v. West Bend Mutual Ins. Co., 303 Ill.App.3d 72, 236 Ill.Dec. 560, 707 N.E.2d 687, 692 (1999) (quoting Institute of London Underwriters v. Hartford Fire Ins. Co., 234 Ill.App.3d 70, 175 Ill.Dec. ...

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