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Nautilus Insurance Company, An Arizona Corporation v. Dubin & Associates

June 27, 2012

NAUTILUS INSURANCE COMPANY, AN ARIZONA CORPORATION, PLAINTIFF,
v.
DUBIN & ASSOCIATES, INC., AN HON. HARRY D. LEINENWEBER ILLINOIS CORPORATION, AND WILLIE WAKEFIELD, INDIVIDUALLY, DEFENDANTS.



The opinion of the court was delivered by: Harry D. Leinenweber, JudgeUnited States District Court

MEMORANDUM OPINION AND ORDER

Before the Court is Plaintiff Nautilus Insurance Company's (hereinafter, "Nautilus") Motion for Summary Judgment. In its response, Defendant Dubin & Associates, Inc. (hereinafter, "Dubin") requests Summary Judgment on its behalf or, in the alternative, a stay of this litigation until resolution of the underlying bodily injury lawsuit. For the following reasons, Nautilus' Motion for Summary Judgment is granted in its entirety and Defendant's Motions are denied.

I. BACKGROUND

Nautilus issued to Dubin a Commercial General Liability Coverage insurance policy effective April 14, 2004 through April 14, 2005. The policy insures against bodily injury for occurrences on Dubin's worksites, but does not cover those defined as employees under the policy. The policy covers bodily injury resulting from negligence, but not injury "expected or intended" by the insured.

On March 16, 2005, Dubin was the general contractor of a building site at 4500 West Belmont Avenue, Chicago, Illinois. Also on site were Dubin subcontractors Air-Rite Heating and Cooling ("Air-Rite") and Asbach & Vanselow, Inc. ("Asbach"), a carpentry company. Defendant Willie Wakefield ("Wakefield") worked for Air-Rite and was injured when lumber controlled by Asbach fell from the third floor. Wakefield sued Dubin in DuPage County, Illinois on August 23, 2006, alleging (Count I) construction negligence and (Count III) a "willful violation" of the Illinois Structural Work Act. Specifically, Count III alleges that Dubin knew there were no stays or supports in place as required by the Act to prevent the accident. Pl.'s Statement of Undisputed Material Facts (Pl.'s "SUMF"), Ex. A, 1-7.

Nautilus wrote Dubin on March 28, 2007, advising Dubin it had retained the law firm of Adams Swatek, LLC to defend the Wakefield lawsuit on Dubin's behalf. It also stated:

Please do not mistake our providing a legal defense to you as an admission of coverage for all the claims and damages set forth in the [Wakefield] petition.

Pl.'s SUMF, Ex. C, 1. The letter then went on to explain that it viewed the "expected or intended" exclusion as applying to the "willful" allegation in Count III. However, Nautilus, at that time, did not specifically identify as a possible grounds for non- coverage the fact that Wakefield might qualify as an uncovered "employee" under the policy's definition of that term. However, it did advise Dubin that:

Nautilus Insurance Company reserves the right to disclaim any liability for such damages, and to bring an action in an appropriate state or federal court of competent jurisdiction and venue, in order to limit, obtain a declaration, or interplead, in order to enforce the limitations mentioned herein.

Additionally, we reserve the right to withdraw from the defense, upon appropriate written notification to you, if at any time it becomes apparent that none of the damages being claimed are covered under the policy with Nautilus Insurance Company.

Nautilus Insurance Company continues to reserve all rights under the policy and reserves its rights to supplement this letter at a later date. The specifications of the above policy provisions for non-coverage should not be deemed as a waiver of any of the provisions, terms or conditions under the policy that you may have.

Id. at 4.

Nautilus filed an action in this Court on February 22, 2011 seeking a declaration that it had no duty to defend on the grounds that Wakefield, as the employee of a Dubin subcontractor, was not covered under the policy. The relevant exclusionary portion of the policy states:

This insurance does not apply to:

"Bodily Injury" to:

(1) An "employee" of the insured arising out of and in the course of:

(a) Employment by the insured; or

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

Pl.s' SUMF, Ex. B, 16; ECF No. 57, PageID 371. The policy's original definition of employee arguably did not include the employee of a subcontractor (Id. at 26; ECF No. 57, PageID 382) but was amended by a three-page endorsement. ...


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