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Archer Daniels Midland Company v. Burlington Insurance Company Group

March 29, 2011


The opinion of the court was delivered by: Judge Robert M. Dow, Jr.


Before the Court is Defendant The Burlington Insurance Company's motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). [10] For the reasons set forth below, the Court grants Defendant's motion [10].

I. Background*fn1

Plaintiff Archer Daniels Midland Company ("ADM") entered into a contract with Independent Building Maintenance Company ("IBM Co.") on June 6, 2002. The contract provided that IBM Co. would perform window cleaning services for ADM. The contract also provided that IBM Co. would obtain insurance to indemnify ADM for any liability arising from the work that IBM Co. performed for ADM under the contract. IBM Co. obtained a commercial general liability ("CGL") policy with The Burlington Insurance Company ("TBIC"). The policy included an endorsement that named ADM as an additional insured. The policy was effective from October 1, 2002, to October 1, 2003, and provided for a $1,000,000 occurrence limit.

On April 10, 2003, IBM Co. employee Miguel Gonzalez was cleaning windows for ADM when the ladder on which he was working slipped, causing him to injure his knee. Mr. Gonzalez filed a lawsuit against ADM on March 3, 2005, asserting negligence and premises liability counts ("the Gonzalez litigation" or "the underlying litigation"). Three months later, ADM tendered the defense of the Gonzalez litigation to TBIC. On June 23, 2005, TBIC accepted ADM's tender of defense. However, on July 11, 2005, TBIC rescinded its acceptance and disclaimed any duty to provide a defense. ADM settled its lawsuit with Mr. Gonzalez for $150,000 in October 2008, and alleges that it spent $197,648 in attorney's fees over the course of the litigation.

ADM filed a complaint against TBIC in the Circuit Court of Cook County on January 6, 2010. ADM's complaint seeks (1) a declaratory judgment that TBIC is liable to indemnify ADM for the Gonzalez settlement, (2) damages in the amount of $347,648, and (3) statutory penalties under 215 ILCS 5/155. TBIC removed the case to this Court on March 9, 2010.

On March 16, 2010, TBIC filed a counterclaim against ADM seeking a declaratory judgment that TBIC had no duty to defend ADM in the Gonzalez litigation because (1) the policy's "cross liability exclusion" barred coverage for bodily injury to an "employee of any insured" and (2) the "employer's liability exclusion" barred coverage for bodily injury to an "employee of the insured."

ADM asserted four affirmative defenses to TBIC's counterclaim. First, ADM contends that the exclusionary provisions do not apply under the circumstances of this case because of a "separation of insureds" clause in the policy. Second, ADM contends that the TBIC policy is ambiguous and thus should be construed in favor of ADM. Third, ADM contends that TBIC's counterclaim is barred by the doctrine of estoppel. Finally, ADM contends that if the exclusionary clause does bar coverage for ADM, then TBIC's policy is illusory and therefore unenforceable.

II. Legal Standard for Deciding a Rule 12(c) Motion for Judgment on the Pleadings

A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) "is designed to provide a means of disposing of cases when the material facts are not in dispute and a judgment on the merits can be achieved by focusing on the content of the pleadings and any facts of which the court will take judicial notice." Cincinnati Ins. Co. v. Contemporary Distrib. Inc., 2010 WL 338943, at *2 (N.D. Ill. Jan. 26, 2010) (internal quotation marks and citation omitted). A defendant may seek dismissal of a complaint under Rule 12(c) after the pleadings are closed, but must do so early enough not to delay trial. See, e.g., Northern Indiana Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 452 (7th Cir. 1998). A court must grant a Rule 12(c) motion that a defendant files if "it appears beyond all doubt that the plaintiff cannot prove any facts that would support his claim for relief." Housing Auth. Risk Retention Group, Inc. v. Chicago Housing Auth., 378 F.3d 596, 600 (7th Cir. 2004). In deciding the motion, a court must view all facts in the light most favorable to the non-moving party. Nat'l Fidelity Life Ins. Co. v. Karaganis, 811 F.2d 357, 358 (7th Cir. 1987).

III. Analysis

The parties agree that there is no dispute concerning the material facts. The Court is called upon only to determine the scope of coverage of the insurance policy, which is a question of law. See Nicor, Inc. v. Associated Elec. and Gas Ins. Services Ltd., 860 N.E.2d 280, 285 (Ill. 2006) (holding that "[t]he construction of the provisions of an insurance policy is a question of law"). Specifically, the Court must determine whether the exclusions in TBIC's CGL policy bar coverage for ADM in the underlying litigation and accordingly, whether TBIC was absolved of its duty to defend ADM in that litigation.

A. Insurance Policy Contract Interpretation

As an initial matter, the Court notes that this case comes before it pursuant to its diversity jurisdiction, 28 U.S.C. § 1332(a), and that Illinois law governs. Under Illinois law, an insurance policy is a contract, and the same rules of construction that apply to other types of contracts apply to insurance policies. See Nicor, Inc., 860 N.E.2d at 285. Thus, a court must "construe the policy as a whole, taking into account the typeof insurance purchased, the nature of the risks involved, and the overall purpose of the contract." Id. The "primary objective is to ascertain and give effect to the intention of the parties as expressed in the agreement." Id. at 286. A court must accord the insurance policy's terms their plain and ordinary meaning. Id. at 285. When the policy is clear and unambiguous, a court must apply it as written unless doing so would contravene public policy. Id. However, if a policy term is ambiguous, a court must construe the policy "strictly against the insurer, who drafted the policy, and liberally in favor of coverage for the insured." Id. (internal citations omitted). Whether an ambiguity exists turns on whether the language in the policy is susceptible of more than one reasonable interpretation. Id. The test of ambiguity is not what the insurer intended its words to mean, but what a reasonable person in the position of the insured would understand them to mean. See Ins. Co. of Illinois v. Markogiannakis, 544 N.E.2d 1082, 1089 (Ill. App. Ct. 3d Dist. 1989).

A court deciding whether an insurer has a duty to defend its insured must compare the factual allegations in the underlying complaint to the pertinent provisions of the policy. See Valley Forge Ins. Co. v. Swiderski Electronics, Inc., 860 N.E.2d 307, 314 (Ill. 2006). A court should construe the underlying complaint "liberally * * * in favor of the insured, and doubts and ambiguities are to be construed in favor of the insured." Lyons v. State Farm Fire & Cas. Co., 811 N.E.2d 718, 721-22 (Ill. 2004). If the complaint's allegations fall within or even potentiallywithin the policy's coverage provisions, then the insurer has a duty to defend its insured in a lawsuit. See id. (holding that "[a]n insurer may not justifiably refuse to defend an action against its insured unless it is clear from the face of the underlying complaints that the allegations fail to state facts which bring the case within, or potentially within, the policy's coverage" (citations omitted) (emphasis in original)).

When an insurer relies upon an exclusionary provision to deny coverage to an insured, the applicability of the provision must be free and clear from doubt. See Santa's Best Craft, LLC v. St. Paul Fire and Marine Ins. Co., 611 F.3d 339, 347 (7th Cir. 2010) (citing Markogiannakis, 544 N.E.2d at 1094). If the exclusionary provision is at all ambiguous, a court should construe the provision most liberally in favor of the insured. See Lyons, 811 N.E.2d at 721-22; see also Markogiannakis, 544 N.E.2d at 1089 (holding that "[a]mbiguous provisions or equivocal expressions whereby an insurer seeks to limit its liability will be construed most strongly against the insurer and liberally in favor of the insured"). The insurer bears the burden of proving that an exclusionary provision applies. See Santa's Best Craft, 611 F.3d at 347.

B. The TBIC Policy

TBIC issued CGL policy number HGL0001965 to IBM Co., the named insured, for the policy period commencing on October 1, 2002, and ending on October 1, 2003. Reduced to its simplest terms, a CGL policy is a policy that is "usually obtained by a business, that covers damages that the insured becomes legally obligated to pay to a third party because of bodily injury or property damage." BLACK'S LAW DICTIONARY 809 (7th ed. 1999). A CGL policy generally covers liability for damages that are not covered by more specific types of liability insurance policies (e.g., business, automobile, and employer's liability). See Bituminous Cas. Corp. v. Maxey, 110 S.W.3d 203, 207 (Tex. App. 1st Dist. 2003). Here, the section of the policy entitled "commercial general liability coverage form" establishes that the policy covers liability for "bodily injury" caused by an "occurrence" in the "coverage territory" that first occurred during the policy period. [See 6-2, at 27.]

The TBIC policy is modified by an additional insured endorsement, which provides that the section of the policy defining "an insured" "is amended to include as an insured any person or organization with whom you [the named insured] agreed, because of a written contract, written agreement or permit, to provide insurance such as is afforded under this Coverage Part, but only with respect to your operations, 'your work' or facilities owned or used by you." [6-2, at 15]. The parties agree that IBM Co., the primary insured under the TBIC policy, added ADM as an additional insured pursuant to this provision in an endorsement to the policy. [See 6-3, at 31.]

The coverage form of the policy is also modified by several exclusions, only two of which are at issue here. First, the coverage form states that the policy excludes coverage for:

e. Employer's Liability "Bodily injury' to:

(1) an 'employee' of the insured arising out of and in the course of:

(a) Employment of the insured; or

(b) Performing duties related to the conduct of the insured's ...

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