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Panfil v. Nautilus Insurance Co.

United States District Court, Seventh Circuit

December 18, 2013

JOE PANFIL, RENEE MICHELON, and JRJ ADA, LLC, an Illinois limited liability company, Plaintiffs,
NAUTILUS INSURANCE COMPANY, an Arizona corporation, Defendant.


JAMES B. ZAGEL, District Judge.

Plaintiffs Joseph Panfil and Renee Michelon have brought this action against Defendant Nautilus for breach of contract regarding an insurance policy. Defendant now moves for summary judgment, and Plaintiffs move for partial summary judgment as to reformation of the policy and Defendant's breach of duty to defend the underlying lawsuit. For the following reasons, Defendant's motion for summary judgment is denied, and Plaintiff's motion is granted.


Plaintiffs Joseph Panfil and Renee Michelon are the sole members of JRJ Ada, an Illinois Limited Liability Company. Plaintiffs filed suit against their insurance company, Nautilus, after JRJ Ada was sued and Nautilus did not defend the suit. In the underlying complaint, the apparent employee of a subcontractor sued JRJ Ada, alleging that he sustained serious and permanent injuries in September 2010 when he fell through a hole while working on JRJ Ada's property.

JRJ Ada filed a report with Nautilus. Nautilus replied, saying it would not defend JRJ Ada because the policy named the individual plaintiffs as the insured, not the LLC. JRJ Ada hired an attorney to defend the underlying complaint. Plaintiffs brought this action against Nautilus to recover their losses.

The policy was in place at the time of the injury. The policy names as the insured only the individual plaintiffs, however, and not JRJ Ada. Plaintiffs urge that the parties nevertheless intended to insure the owner of the property, and that the fact that the policy happened to misname the proper owner was simply a mutual mistake. Defendant contends it never knew of JRJ Ada's existence and never knew Plaintiffs wanted the policy to cover an LLC. The parties also disagree as to whether the policy in any event covers injuries sustained by the particular plaintiff in the underlying suit.


Summary judgment should be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A genuine issue of triable fact exists only if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Pugh v. City of Attica, Ind., 259 F.3d 619, 625 (7th Cir.2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

Once the moving party has set forth the basis for summary judgment, the burden then shifts to the nonmoving party who must go beyond mere allegations and offer specific facts showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e); see Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The nonmoving party must offer more than "[c]onclusory allegations, unsupported by specific facts" in order to establish a genuine issue of material fact. Payne v. Pauley, 337 F.3d 767, 773 (7th Cir.2003) (citing Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990)). A party will be successful in opposing summary judgment only if it presents "definite, competent evidence to rebut the motion." EEOC v. Sears, Roebuck & Co., 233 F.3d 432, 437 (7th Cir. 2000). I consider the record in the light most favorable to the non-moving party, and draw I all reasonable inferences in the non-movant's favor. Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir.2002).


A. Reformation

Insurance policies may be reformed for the same reasons as any other written contract. Board of Trustees of University of Illinois v. Insurance Corp. of Ireland, Ltd., 969 F.2d 329, 332 (7th Cir. 1992). A written agreement is generally presumed to express the intent of the parties on its face. Where a writing fails to express the parties' intent because of a mistake of both parties as to the content of the writing, however, a party may request that the Court reform the writing to accurately express the intended agreement. N.L.R.B. v. Cook County School Bus, Inc., 283 F.3d 888, 893 (7th Cir. 2002); Restatement (Second) of Contracts § 155 (1981).

"In order to be entitled to reformation, a party must present clear and convincing evidence that the agreement as written does not express the true intention of the parties and that there was a mutual mistake." Id. In determining the true intention of the parties in the insurance context, a court must consider the policy as a whole, including the subject matter that is insured, and the purpose of the policy. Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill.2d 90, 108 (Ill. 1992).

Here, the policy at issue is meant to insure the owner of a given piece of property against the risk that a third-party should be hurt or damaged on the premises. Pl SOF ¶ 46. It is not clear why a non-owner of property would ever pay for such coverage; a non-owner is not at risk. Indeed, Defendant's own 30(b)(6) witness affirmed that he had never seen a situation where ...

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