NORTHLAND INSURANCE CO. and NORTHLAND CASUALTY CO, Plaintiffs,
BARNHART CRANE & RIGGING CO., DIAMOND RING SPECIALIZED, LLC, and JEFF KERN, Defendants.
MEMORANDUM OPINION AND ORDER
VIRGINIA M. KENDALL, District Judge.
This is an insurance coverage dispute regarding an insurer's duty under a commercial general liability ("CGL") policy and a motor carrier policy to defend and indemnify defendants in an underlying personal injury case. Jeff Kern ("Kern") filed a personal injury lawsuit (the "Underlying Action") against defendants Barnhart Crane & Rigging Co. ("BCR"), Diamond Ring Specialized, LLC ("Diamond"), Nelson Manufacturing Co., and All-State Dynamic, LLC for injuries he allegedly sustained while transporting a crane girder. Plaintiffs Northland Insurance Co. ("NIC") and Northland Casualty Co. ("NCC") insure Diamond under a Commercial Insurance Policy and filed the instant suit against BCR and Diamond seeking the declaratory judgment that they are not obligated to defend or indemnify either in the Underlying Action. BCR filed a counter-claim against NIC and NCC for the opposite declaration. In its pleadings, BCR subsequently conceded its claim that Kern's NCC policy requires NCC to defend and indemnify BCR in the Underlying Action. (Defendants' Memorandum of Law Opposing Plaintiffs' Motion for Summary Judgment at ¶ 20.) The parties filed cross-motions for summary judgment on the issues. For the reasons stated below, the Court grants NIC's motion and holds that it has no duty to defend or indemnify BCR and Diamond in the Underlying Action; and therefore denies the opposite motion.
I. The Underlying Action
On March 31, 2012, Kern filed a lawsuit in the Circuit Court of Cook County naming BCR, Diamond, and two other parties as defendants. ( BCR v. NIC 56.1 Resp. ¶ 8.) The claims against BCR and Diamond in the Underlying Action are identical and stem from alleged injuries Kern sustained on June 2, 2011 during the movement of a crane girder. ( BCR v. NIC 56.1 Resp. ¶ 9; NIC v. BCR 56.1 Resp. ¶ 10.) The crane girder was transported by a dolly/trailer system owned by BCR, which was pulled by a tractor and driver BCR leased from Diamond. ( NIC v. BCR 56.1 Resp. ¶ 10.) Kern's injury allegedly occurred when the tractor pulled the dolly/trailer system forward and ran him over, severing his leg. ( NIC v. BCR 56.1 Resp. ¶ 11.) Diamond leased the tractor, a 2000 Peterbilt, and a driver to BCR pursuant to a written lease in February 2011. ( BCR v. NIC 56.1 Resp. ¶ 10; NIC v. BCR 56.1 Resp. ¶ 14.) At the time of the Kern incident, neither the tractor nor the dolly/trailer components involved in the incident were leased to or hired by Diamond. ( NIC v. BCR 56.1 Resp. ¶ 22.) The trip that was underway when Kern was injured was done under BCR's operating authority. ( NIC v. BCR 56.1 Resp. Add. Facts ¶ 5.)
II. The Documents at Issue
Three documents govern the present issue: (1) a lease agreement between Diamond and BCR, (2) Diamond's insurance policy from NIC, and (3) BCR's insurance policy from Amerisure.
A. BCR's Independent Contractor Owner Operator Agreement with Diamond
Barnhart's leasing of the tractor and driver from Diamond was subject to a written agreement executed on February 7, 2011. ( BCR v. NIC 56.1 Resp. Add. Facts ¶ 2.) The Lease states that, "Diamond Ring Specialized (hereinafter called INDEPENDENT CONTRACTOR) agrees to provide independent contract transportation services as an Owner/Operator to Barnhart Crane And Rigging Co. (hereinafter called BCR)." ( BCR v. NIC 56.1 Resp. Add. Facts ¶ 3.) Regarding personnel, Section 12 of the Lease provides that, "Independent Contractor shall operate equipment covered by this agreement or shall furnish sufficient drivers to operate said equipment. Any drivers furnished by Independent Contractor [Diamond] shall be his employees or agents and shall be hired, directed, paid, controlled and discharged by Independent Contractor [Diamond]." ( BCR v. NIC 56.1 Resp. Add. Facts ¶ 4.) Section 13 further states that, "It is agreed by the parties hereto that Independent Contractor [Diamond] assumes full and complete responsibility for all employees employed by him/it in the performance of all duties and obligations under this Agreement." ( BCR v. NIC 56.1 Resp. Add. Facts ¶ 5.)
BCR received the equipment on February 7, 2011. ( BCR v. NIC 56.1 Resp. Add. Facts ¶ 2.) Under Section 11 of the Lease, "It is the intent of both parties to comply with [Federal Highway Administration] regulations. Pursuant to said regulations, BCR shall have exclusive possession, control, and use of the equipment covered hereby and assumes complete responsibility for operation thereof under this Agreement to the public." ( NIC v. BCR 56.1 Resp. Add. Facts ¶ 3.) It also states that:
Nothing in the provisions required by 49 C.F.R. 376.12(c)(1) is intended to affect whether an independent contractor or any driver provided by an independent contractor is an independent contractor or employee of BCR. It is agreed by the parties hereto that BCR has no right to and will not control the manner nor prescribe the method of doing that portion of the operation which is contracted for in this Agreement by Independent Contractor, except such control as can reasonably be construed to be required by said regulations.
(Lease, Schedule A at § 11, admitted by NIC v. BCR 56.1 Resp. Add. Facts ¶ 2.) 49 C.F.R. § 376.12(c)(1) states: "The lease shall provide that the authorized carrier lessee shall have exclusive possession, control, and use of the equipment for the duration of the lease. The lease shall further provide that the authorized carrier lessee shall assume complete responsibility for the operation of the equipment for the duration of the lease."
The Lease also requires BCR to insure the equipment, stating:
In accordance with applicable [Federal Highway Administration] rules and regulations, it shall be BCR's responsibility to provide public liability, property damage and cargo loss and damage insurance for the Equipment at all times while the Equipment is being operated on behalf of BCR provided, however, that Independent Contractor shall be charged back, up to $1, 000 for any cargo claim, and up to $1, 000 for any liability claim, to be deducted from Independent Contractor's compensation.
( NIC v. BCR 56.1 Resp. Add. Facts ¶ 4.) BCR added the vehicle involved in the Underlying Action and its driver, Brett Bernard, to its Amerisure commercial automobile insurance policy on February 10, 2011, three days after signing the Lease. ( NIC v. BCR 56.1 Resp. Add. Facts ¶¶ 6-7.)
B. Diamond's NIC Insurance Policy
NIC issued an insurance policy to Diamond for the period of November 10, 2010 to November 19, 2011 (the "Policy"). ( BCR v. NIC 56.1 Resp. ¶ 22.) The Policy contains two provisions that could possibly give rise to a requirement that NIC provide coverage to BCR and Diamond in the Underlying Action.
1. Commercial General Liability Coverage Form
The Commercial General Liability Coverage Form ("CGLC") states that:
[NIC] will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.
( NIC v. BCR 56.1 Resp. ¶ 33.) It defines "you" and "your" as "the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy" and "insured" as "any person or organization qualifying as such under Section II - Who Is An Insured." ( NIC v. BCR 56.1 Resp. ¶ 33.) The CGLC excludes coverage for
"Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading."
This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the "occurrence" which caused the "bodily injury" or "property damage" involved the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured.
( NIC v. BCR 56.1 Resp. ¶ 34.) An "auto" is a "land motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment." ( NIC v. BCR 56.1 Resp. ¶ 35.) "Bodily injury" is "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time." (Doc. 33, page 85 of 135, admitted via BCR v. NIC 56.1 Resp. ¶ 22.)
The CGLC also has an endorsement designating BCR as an additional insured. ( NIC v. BCR 56.1 Resp. ¶ 36.) The endorsement modifies the "Who is An Insured" section of the CGLC (which is different from the "Who is An Insured" in the ...