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Hartford Casualty Insurance Company v. Construction Builders In Motion

October 29, 2012

HARTFORD CASUALTY INSURANCE COMPANY, PLAINTIFF,
v.
CONSTRUCTION BUILDERS IN MOTION, INC., TADEUSZ KOCANDA, KGP INC., KAISER DESIGN GROUP, LTD., JEAN KAISER AS REPRESENTATIVE OF THE ESTATE OF JAY KAISER , NAUTILUS INSURANCE COMPANY, PEKIN INSURANCE COMPANY, UNITED FIRE & CASUALTY, AND ROCKFORD MUTUAL INSURANCE COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

This is an insurance coverage dispute regarding the policy's requirement to defend and indemnify the insured in an underlying case regarding the construction of a residence. Plaintiff Hartford Casualty Insurance Company ("Hartford") filed suit against various defendants, including: Construction Builders in Motion, Inc. and Tadeusz Kocanda (collectively "CBM"); KGP Inc., Kaiser Design Group, Ltd., Jean Kaiser, as representative of the Estate of Jay Kaiser (collectively "Kaiser"); and Pekin Insurance Company ("Pekin").

Hartford seeks declaratory judgment against CBM that Hartford is not obligated to defend or indemnify CBM with respect to a third-party complaint filed against it by Kaiser in an underlying lawsuit ("the Underlying Action") (Count I). Hartford also seeks declaratory judgment against Kaiser that Hartford is not obligated to defend or indemnify Kaiser in the Underlying Action (Count II). In the event Hartford is obligated to defend or indemnify Kaiser with respect to the Underlying Action, Hartford seeks a declaration that Pekin, among others, is also obligated to defend and indemnify Kaiser (Count III), and contribute to Kaiser's defense (Count IV).

Pekin moves to dismiss counts III and IV of Hartford's Amended Complaint. For the reasons stated below, Pekin's Motion to Dismiss Counts III and IV is denied.

STATEMENT OF FACTS

The following facts are taken from Hartford's Amended Complaint and are assumed to be true for the purposes of this Motion to Dismiss. See Voelker v. Porsche Cars North America, Inc., 353 F. 3d 516, 520 (7th Cir. 2003). All reasonable inferences are drawn in favor of Hartford, the non-moving party. See Killingsworth v. HSBC Bank, 507 F.3d 614, 618 (7th Cir. 2007) (citing Savory v. Lyons, 469 F.3d 667, 670 (7th Cir. 2006)).

Hartford issued six separate consecutive primary liability insurance policies ("the Hartford Policies") to CBM,*fn1 a carpentry subcontractor engaged on a single-family home construction project ("the Gidwitz Home") by Kaiser, the home's designer and builder (Am. Comp. ¶¶ 18--19.) Kaiser, which entered a contract with Nancy Gidwitz ("Gidwitz") to build the Gidwitz Home, is listed as an additional insured in the Hartford Policies. (Id. at ¶ 26.) Kaiser is also listed as an additional insured on a policy issued by Pekin ("the Pekin Policy") to Manuel Contractors, Ltd. ("Manuel"), a drywall subcontractor on the Gidwitz Home. (Id. at ¶ 30.)

Hartford's claims in this case arise from the Underlying Action, which alleges breach of contract, negligence, and fraud.*fn2 In the Underlying Action, Gidwitz alleges Kaiser breached contractual obligations to Gidwitz in connection with the design and construction of the Gidwitz Home.*fn3 (Id. at ¶ 14.) Kaiser tendered its defense of the Underlying Action to both Hartford and Pekin as an additional insured. (Id. at ¶¶ 25, 30.) Hartford agreed to participate in Kaiser's defense, subject to reservation, and has paid for Kaiser's fees and expenses incurred in the Underlying Action. (Id. at ¶ 26.) Pekin denied coverage, and commenced a declaratory judgment action in the Circuit Court of Cook County, Illinois, seeking a determination that it is not obligated to defend Kaiser in the Underlying Action. (Id. at ¶ 30.) Hartford was not joined as a party in that case. (Id.) After being sued by Gidwitz, Kaiser filed a third party complaint against CBM, among others, alleging that CBM is obligated to reimburse or indemnify Kaiser in the event Gidwitz prevails against it. (Id. at ¶ 16.)

In Counts I and II of its Amended Complaint, Hartford seeks declaratory judgment that it is not obligated to defend or indemnify CBM, or Kaiser as additional insureds. Counts III and IV of Hartford's Amended Complaint plead in the alternative. Count III seeks a declaration that if the Court determines Hartford is obligated to defend and indemnify Kaiser, then Pekin, among others, is also obligated to share in the defense and indemnity going forward. Count IV seeks a declaration that if Hartford must defend or indemnify Kaiser in the Underlying Action, then Pekin, among others, must contribute to that defense or indemnification.

STANDARD OF REVIEW

When considering a motion to dismiss under Rule 12(b)(6), the Court accepts as true all facts alleged in the complaint and construes all reasonable inferences in favor of the plaintiff. Killingsworth, 507 F.3d at 618 (citing Savory, 469 F.3d at 670); accord Murphy, 51 F.3d at 717. To state a claim upon which relief can be granted, a compliant must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). "Detailed factual allegations" are not required, but the plaintiff must allege facts that, when "accepted as true . . . 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). To determine whether a complaint meets this standard, the "reviewing court [must] draw on its judicial experience and common sense." Id. When there are well-pleaded factual allegations, the Court assumes their veracity and determines if they plausibly give rise to an entitlement to relief. Id. at 679. A claim has facial plausibility when the pleaded factual content allows the Court to draw a reasonable inference that the defendant is liable for the misconduct alleged. See Id. at 678.

When exercising diversity jurisdiction, this Court applies the substantive law of the pertinent state -- in this case, Illinois. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); Prince v. Zazove, 959 F.2d 1395, 1400--01 (7th Cir. 1992). The Court will apply Illinois state law as it would be applied by the Illinois Supreme Court. Kaplan v. Pavalon & Gifford, 12 F.3d 87, 89 (7th Cir. 1993); Green v. J.C. Penney Auto. Ins. Co., 806 F.2d 759, 761 n.12 (7th Cir. 1986).

DISCUSSION

In Illinois, "[c]ontribution as it pertains to insurance law is an equitable principle arising among co-insurers which permits one insurer who has paid the entire loss, or greater than its share of the loss, to be reimbursed from other insurers who are liable for the same loss." Home Ins. Co. v. Cincinnati Ins. Co., 821 N.E.2d 269, 276 (Ill. 2004) (citing Cincinnati Cos. v. West American Ins. Co., 701 N.E.2d 499, 502 (Ill. 1998)). In order to recover under a theory of equitable contribution, "the insurer seeking contribution must prove: (1) all facts necessary to the claimant's recovery against the insured; (2) the reasonableness of the amount paid to the insured; and (3) an identity between the policies as to parties and ...


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