United States District Court, N.D. Illinois
For Hartford Casualty Insurance Company, Plaintiff: Charles F Morrissey, LEAD ATTORNEY, Wayne S. Karbal, Alan M. Posner, Karbal, Cohen, Economou, Silk & Dunne, LLC, Chicago, IL.
For KGP, Inc., Jean Kaiser, as Representative of the Estate of Jay Kaiser, Kaiser Design Group, Ltd., Defendants: Peter C. Morse, LEAD ATTORNEY, Cynthia Ramirez, Morse & Bolduc, Chicago, IL.
For Nautilus Insurance Company, Defendant: Ray Hunter Rittenhouse, LEAD ATTORNEY, Mulherin, Rehfeldt & Varchetto, P.C., Wheaton, IL.
For Pekin Insurance Company, Defendant: Robert Marc Chemers, LEAD ATTORNEY, Heather Egan Plunkett, Michael Anthony Clarke, Pretzel & Stouffer, Chtd., Chicago, IL; Peter George Syregelas, Richard Mangieri Burgland, Pretzel & Stouffer, Chartered, Chicago, IL.
For United Fire & Casualty Company, Defendant: Melissa A Anderson, Cassiday Schade LLP, Chicago, IL.
For Rockford Mutual Insurance Company, Defendant: Joseph Patrick Postel, LEAD ATTORNEY, Lindsay Rappaport & Postel, LLC, Chicago, IL; Christopher James Pickett, Lindsay Rappaport & Postel LLC, Chicago, IL; Jeffrey A Merar, Lindsay, Rappaport & Postel, Chicago, IL; Le Gia Trieu, Lindsay, Rappaport & Postel, Llc, Chicago, IL.
For Nautilus Insurance Company, Cross Claimant: Ray Hunter Rittenhouse, LEAD ATTORNEY, Mulherin, Rehfeldt & Varchetto, P.C., Wheaton, IL.
For Nancy Gidwitz, Cross Defendant: David J. Fischer, LEAD ATTORNEY, Dolgin & Fischer, LLC, Chicago, IL.
For KGP, Inc., Kaiser Design Group, Ltd., Jean Kaiser, as Representative of the Estate of Jay Kaiser, Cross Defendants: Peter C. Morse, LEAD ATTORNEY, Cynthia Ramirez, Morse & Bolduc, Chicago, IL.
For Rockford Mutual Insurance Company, ThirdParty Plaintiff: Joseph Patrick Postel, LEAD ATTORNEY, Le Gia Trieu, Christopher James Pickett, Lindsay Rappaport & Postel, LLC, Chicago, IL; Jeffrey A Merar, Lindsay, Rappaport & Postel, Chicago, IL.
For Nancy Gidwitz, Third Party Defendant: David J. Fischer, LEAD ATTORNEY, Dolgin & Fischer, LLC, Chicago, IL.
For Rockford Mutual Insurance Company, Cross Claimant: Joseph Patrick Postel, LEAD ATTORNEY, Le Gia Trieu, Christopher James Pickett, Lindsay Rappaport & Postel, LLC, Chicago, IL; Jeffrey A Merar, Lindsay, Rappaport & Postel, Chicago, IL.
Virginia M. Kendall, United States District Court Judge.
MEMORANDUM OPINION AND ORDER
This is an insurance coverage dispute regarding an insurer's duty under a commercial general liability (" CGL" ) policy to defend and indemnify an insured in an underlying case regarding the construction of a residence. Nancy Gidwitz (" Gidwitz" ) filed a suit (" the Underlying Action" ) against defendants KGP Inc., Kaiser Design Group, Ltd., and Jean Kaiser, as representative of the Estate of Jay Kaiser (collectively " the Kaiser Defendants" ), alleging defective construction and faulty design and workmanship. The Kaiser Defendants in turn filed two third-party complaints against subcontractors: a third-party
complaint against Pawel & Son Construction, Inc. (" Pawel" ), the masonry subcontractor, alleging breach of contract, equitable subrogation, and contribution in the event Gidwitz prevails on her claim against the Kaiser Defendants in the Underlying Action; and a third-party complaint against Construction Builders in Motion, Inc. (" CBM" ), a carpentry subcontractor on the Gidwitz home, and CBM's owner Tadeusz Kocanda (" Kocanda" and together with CBM, the " CBM Defendants" ) for indemnification and contribution, also in the event that Gidwitz prevails in the Underlying Action.
Plaintiff Hartford Casualty Insurance Company (" Hartford" ) filed the instant suit against various insurance carriers, the Kaiser Defendants, and the CBM Defendants. Hartford seeks declaratory judgment that Hartford is not obligated to defend or indemnify the CBM Defendants or the Kaiser Defendants under the CGL policies (the " Hartford Policies" ) it issued to " Ted Kocanda DBA Construction in Motion" with the Kaiser Defendants as additional insureds. In the event Hartford is obligated to defend or indemnify the Kaiser Defendants in the Underlying Action, Hartford seeks a declaration that Nautilus, Pekin, Rockford and United Fire are also obligated or indemnify the Kaiser Defendants and contribute to the Kaiser Defendants' defense.
Rockford Mutual Insurance Company (" Rockford" ), who has a CGL policy with Pawel (the " Rockford Policy" ) filed a cross-claim against the Kaiser Defendants for a declaration that it has no duty to defend and indemnify the Kaiser Defendants as additional insureds under the Rockford Policy Nautilus Insurance Company (" Nautilus" ) also filed a cross-claim against the Kaiser Defendants seeking a declaration that it has no duty to defend and indemnify the Kaiser Defendants under its CGL insurance policy with KGP, Inc. (" the Nautilus Policy" ).
Presently before the court are three motions for summary judgment. Each of Hartford, Rockford, and Nautilus (together, the " Moving Insurers" ) moves pursuant to Federal Rule of Civil Procedure 56 for summary judgment against the Kaiser Defendants, and in some cases others, seeking a declaration that the undisputed material facts show that each Moving Insurer has no obligation to defend or indemnify the Kaiser Defendants in the Underlying Action and likewise no obligation to defend third party subcontractors, in each case because the complaint filed in the Underlying Action (the " Underlying Complaint" ) does not allege or potentially allege an " occurrence" or " property damage," or, in the altenrative, because the exclusions contained in each of the Moving Insurers' policies serve to otherwise eliminate any coverage that might otherwise exist.
For the reasons stated herein, the Moving Insurers' motions for summary judgment are granted because the Underlying Complaint does not allege " property damage" or an " occurrence" triggering a duty to defend.
STATEMENT OF MATERIAL UNDISPUTED FACTS
I. The Underlying Action
On April 9, 2012, Nancy Gidwitz filed the six-count Underlying Complaint in the Circuit Court of Cook County, naming the Kaiser Defendants as defendants. (Rockford
56.1 at ¶ ¶ 21, 23; Hartford 56.1 at ¶ 10.) The Underlying Action alleges that Gidwitz entered into an agreement with KGP, Inc. (" KGP" ) effective October 1, 2004 for the design and construction of a single-family home for herself. (Rockford 56.1 at ¶ 22(a).) Gidwitz alleges that KGP and Kaiser Design Group, Ltd (" Kaiser Design" ) entered into a subcontract under which Kaiser Design would serve as the architect on the Gidwitz project and that Gidwitz was a third party beneficiary on the subcontract. ( Id. ¶ 22(b).) Gidwitz states that in May or June of 2007, she began communicating with the Kaiser Defendants regarding defective work because the plans prepared by the Kaiser Defendants for the heating and cooling system for the Gidwitz project contained material errors and inconsistences. ( Id. ¶ 22(f)-(g).) According to Gidwitz, the Kaiser Defendants failed to take any corrective action and on October 19, 2007, Gidwitz terminated the contract with KGP and engaged other contractors to complete the work. ( Id. ¶ 22(h).) Gidwitz also alleges claims against the Kaiser Defendants for negligence and fraud. (Hartford 56.1 at ¶ 10).
In the course of inspecting the Kaiser Defendants' work, Gidwitz states that she discovered defects, including but not limited to: (1) flattened HVAC ducts in an attempt to install level ceilings; (2) water line puncture during installation of drywall; (3) damage to wooden flooring caused by water line punctures; (4) cracks in the garage walls caused by deflection of lintel above the garage door; (5) scratched door jambs caused by improper jamb thickness; (6) damage done to the cabinetry occurring during tear-out of drywall to uncover and replace previous duct work; (7) defects in framing, drywall, and finish carpentry; (8) defects in the alignment of ceilings, walls, and cabinetry; (9) poorly designed and poorly installed coping and parapet causing efflorescence staining on certain parts of the exterior masonry walls; and (10) defects in the design and installation of the hydronic heating system. (Rockford 56.1 at ¶ 22.)
In the Underlying Complaint, Gidwitz alleged that KGP breached various provisions of its agreement with Gidwitz, including but not limited to (1) its failure to meet quality specifications in its agreement, both individually and through its responsibility to assume the obligations of its subcontractors; (2) its failure to properly coordinate the activities of its subcontractors to avoid delay and ensure that all work met applicable standards; and (3) its failure to perform duties in accordance with standards of professional care. (Rockford 56.1 at ¶ 22(i), Nautilus 56.1 at ¶ 19). Gidwitz alleged the same facts under a negligence standard as a separate claim against KGP. (Nautilus 56.1 at ¶ 23).
Gidwitz also alleged that Kaiser Ltd. breached various provisions of its agreement, including but not limited to its failures to meet the specifications in its agreement and its failure to perform design functions in accordance with the standards of professional care. (Rockford 56.1 at ¶ 22(j), Nautilus 56.1 at ¶ 20). As with KGP, Gidwitz alleged factually identical allegations against Kaiser Ltd. but under a negligence standard. (Nautilus 56.1 at ¶ 24).
Finally, Gidwitz alleged that Jay Kaiser failed to properly capitalize KGP or Kaiser Ltd. and that Gidwitz should be permitted to pierce the corporate veil to recover against Jay Kaiser. (Nautilus 56.1 at ¶ 21). She also alleged that Jay and Jean Kaiser intentionally withheld critical information about Jay Kaiser's medical condition in order ...