The opinion of the court was delivered by: J. Phil Gilbert District Judge
This matter comes before the Court on the parties' cross motions for summary judgment in this declaratory judgment action regarding the scope of a homeowner's insurance policy issued to defendant Jeanne Hentz by plaintiff Nationwide Insurance Company ("Nationwide"). Defendants Central Laborers Pension Fund, Central Laborers Welfare Fund and Central Laborers Annuity Fund (collectively, "Central Laborers") filed a motion for summary judgment (Doc. 8), to which Nationwide has responded (Doc. 34). Nationwide has filed its own summary judgment motion (Doc. 23), to which Central Laborers has responded (Doc. 30), to which Nationwide has, in turn, replied (Doc. 34). Hentz has not responded to either summary judgment motion.
I. Summary Judgment Standard
Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Spath v. Hayes Wheels Int'l-Ind., Inc., 211 F.3d 392, 396 (7th Cir. 2000). Because the essential facts are not in dispute in this case, the case will turn on whether either party can demonstrate it is entitled to judgment as a matter of law.
II. Facts and Procedural History
This matter arose after a CD-ROM and a portable laptop computer were stolen from Hentz's car on October 31, 2010. The car was parked outsider her residence. The CD-ROM contained the names of and other personal information concerning approximately 30,000 participants and beneficiaries of Central Laborers' funds. Following the theft, Central Laborers notified the individuals whose information was on the stolen CD-ROM and contracted for credit monitoring services and insurance. The cost to Central Laborers for these measures was approximately $200,000.
Hentz, an accountant, originally came to possess the CD-ROM because she was employed by an accounting and auditing firm ("Firm") that Central Laborers had retained to perform accounting and auditing services. After the CD-ROM was stolen from Hentz's car, Central Laborers sued Hentz in state court to recover the costs it incurred in response to the theft. See Central Laborers Pension Fund v. Hentz, No. 2011-L-12 (Ill. Cir. Ct. Morgan County). The state law suit advances negligence and breach of contract causes of action. With respect to the negligence claim, Central Laborers alleges Hentz failed to exercise reasonable care to protect Central Laborers' CD-ROM and the data on it by failing to secure it adequately from theft. The breach of contract claim asserts that the Firm had contracted with Central Laborers to ensure the Firm's employees would protect the personal information given to it, that Hentz had agreed with the Firm to protect that information, and that by taking possession of the CD-ROM Hentz had entered into an implied contract with Central Laborers to protect the information.
Hentz tendered the defense of the state law suit to Nationwide, which had written her homeowner's insurance policy (HOA 0028898726-0; "Policy") that covered the date of the theft. Essentially, the Policy covers property damage but contains exclusions for property damage in connection with a business, under a contract by the insured, or to property in the care of the insured. The specific language of the Policy with respect to each of these areas will be set out in more detail in the Court's discussion of those provisions.
Nationwide refused to defend and indemnify Hentz and instead brought this action under the Declaratory Judgment Act, 28 U.S.C. § 2201, seeking a declaration that the Policy does not cover the October 31, 2010, loss of Central Laborers' data and resulting damages and that, as a consequence, it is not obligated to defend or indemnify Hentz. It believes there was no property damage as that term is defined in the Policy and that all three of the foregoing exclusions apply. Central Laborers, of course, disagrees.
Under Illinois law, which all parties agree applies to this action, the interpretation of an insurance policy, even an ambiguous policy, is a question of law, and questions of coverage are therefore appropriate for summary judgment. Twenhafel v. State Auto Prop. & Cas. Ins. Co., 581 F.3d 625, 628 (7th Cir. 2009) (citing BASF AG v. Great Am. Assur. Co., 522 F.3d 813, 818-19 (7th Cir. 2008)); Crum & Forster Managers Corp. v. Resolution Trust Corp., 620 N.E.2d 1073, 1077 (Ill. 1993). The BASF court succinctly explained:
A court's primary objective in construing the language of an insurance policy is to ascertain and give effect to the intentions of the parties as expressed by the language of the policy. In performing that task, the court must construe the policy as a whole, taking into account the type of insurance purchased, the nature of the risks involved, and the overall purpose of the contract. Where the terms of an insurance policy are clear and unambiguous, they must be applied as written; but where ambiguity exists, the terms will be strictly construed against the drafter. Policy terms are ambiguous if they are reasonably susceptible to more than one interpretation, not simply if the parties can suggest creative possibilities for their meaning, and a court will not search for ambiguity where there is none.
BASF, 522 F.3d at 819 (citations and quotation marks omitted); accord Twenhafel, 581 F.3d at 628.
Under Illinois law, an insurer can owe two distinct duties to an insured: "(1) the duty to defend him if a claim is made against him; and (2) the duty to indemnify him if he is found legally liable for the occurrence of a covered risk." ...