United States District Court, N.D. Illinois, Eastern Division
[Copyrighted Material Omitted]
For National American Insurance Company, Plaintiff: Jason Theodore Mayer, Christine Verzani Anto, SmithAmundsen, L.L.C., Chicago, IL.
For Artisan and Truckers Casualty Company, Defendant, Counter Claimant: Jason Orleans, LEAD ATTORNEY, Mark Patrick Doyle, Chilton Yambert & Porter LLP, Waukegan, IL; David William Porter, CHILTON YAMBERT PORTER LLP, Geneva, IL.
For National American Insurance Company, Counter Defendant: Christine Verzani Anto, SmithAmundsen, L.L.C., Chicago, IL.
MEMORANDUM OPINION AND ORDER
MICHAEL T. MASON, United States Magistrate Judge.
National American Insurance Company (" NAICO" ) has sued the Progressive Corporation and Artisan & Truckers Casualty Company (" Artisan" ), seeking to recover money NAICO paid out on behalf of its insured, which it claims Artisan should have paid. The case is before the Court on cross-motions for summary judgment. For the reasons explained below, NAICO's motion  is granted, and Artisan's motion  is denied.
On August 23, 2010, the truck Gustavo Bernal was driving was hit from behind by a semi truck tractor. Gustavo and his wife Maria, who was riding with him at the time, were both injured. A few months later, in October 2010, the Bernals sued Viktor Barengolts and Eduard Gaidishev, who were in the truck at the time of the crash; they also sued Michael Barengolts, who owned the truck at the time of the crash, and Unlimited Carrier, whose placards were on the truck at the time of the crash. See Bernal v. Unlimited Carrier et al., No. 10 L 822, Second Amended Complaint, filed in the Circuit Court of Will County, Illinois (NAICO's Statement of Facts, Exhibit A-1; Artisan's Statement of Facts, Exhibit B). There is some question about who was driving the truck at the time of the accident - whether it was Viktor or Eduard; but there is no question that, at the time of the crash, the truck carried placards bearing a United States Department of Transportation (" USDOT" ) number registered to Unlimited Carrier.
Two insurance policies were potentially at play in the Bernal litigation - one issued by NAICO to Unlimited Carrier and one issued by Artisan to Viktor Barengolts. The NAICO policy, commercial truckers liability policy number SL05050112, was effective from December 7, 2009 to December 7, 2010 and provided liability coverage for " all sums an 'insured' legally must pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies, caused by an 'accident' and resulting from the ownership, maintenance or use of a covered 'auto'." NAICO Policy Number SL05050112, Section II(A) (attached as Exhibit A-2 to Plaintiff's Statement of Facts). Covered autos, as defined in the policy, included " owned autos" and " hired autos" - those leased, hired, rented or borrowed by the insured - as well as autos that were owned by the insured's employees and not owned, leased, hired, rented or borrowed by the insured, " but only while used in your business or your personal affairs." Id., Section I(A).
The Artisan Policy issued to Viktor Barengolts (policy number 07572918-0) lists Viktor as the insured and as a " related driver" ; it also lists Michael Barengolts as an " additional insured" and it lists Michael's truck, the 2001 Volvo (VIN number 4V4NC9TJ11N312861) in the " auto coverage schedule." See Artisan Policy No. 07572918-0, p. 2 (Plaintiff's Statement of
Facts, Exhibit C-A; Defendant's Statement of Facts, Exhibit F). Under the policy, Artisan agreed to " pay damages, OTHER THAN PUNITIVE OR EXEMPLARY DAMAGES, for bodily injury, property damage, and covered pollution cost or expense, for which an insured becomes legally responsible because of an accident arising out of the ownership, maintenance or use of an insured auto." Id., p. 8. The parties do not dispute that Viktor is an insured, that the Volvo semi tractor is an insured auto, or that the accident involving the Bernals arose out of the use of that auto.
The Artisan policy also includes a " Contingent Liability Endorsement" that provides:
Except as specifically modified in this Endorsement, all provisions of the Commercial Auto Policy apply.
We agree with you that the insurance provided under your Commercial Auto Policy is modified as follows:
We agree with you that the provisions of the policy relating to Bodily Injury Liability and Property Damage Liability are subject to the following limitations:
Liability coverage for an insured auto described in the Declarations is changed as follows:
1. These coverages do not apply when the insured auto is being operated, maintained or used for or on behalf of anyone else or any organization whether or not for compensation.
2. These coverages do not apply when the insured auto is being used to transport goods or merchandise, or while the goods or merchandise are being loaded and unloaded from the insured auto.
ALL OTHER TERMS, LIMITS AND PROVISIONS OF THE POLICY REMAIN UNCHANGED.
Id., p. 20 (Plaintiff's Statement of Facts, Exhibit C-A; Defendant's Statement of Facts at Exhibit F).
Initially, the defense of the suit was tendered to NAICO, which investigated the accident and surrounding circumstances. NAICO, which assumed the defense pursuant to a reservation of rights, learned that the lease agreement between Unlimited Carrier and Michael Barengolts was not yet in place at the time of the accident; it wasn't signed until August 31, 2010, more than a week after the accident. According to NAICO, Unlimited Carrier's placards were not authorized until that agreement was signed. Nevertheless, NAICO defended its insured in the Bernal lawsuit and, on behalf of Unlimited Carrier, Viktor Barengolts, Michael Barengolts and Eduard Gaidishev, ultimately settled with the Bernals for a total of almost $100,000 (it paid $50,000 to Gustavo and $48,750 to Maria).
Immediately after the Bernals filed suit, Viktor contacted Artisan directly about coverage. On October 25, 2010, Artisan wrote to him advising that the claims were not covered because, at the time of the accident, he was driving on behalf of Unlimited Carrier. See Plaintiff's Statement of Facts, Group Exhibit A-4. Despite this, counsel for Unlimited Carrier and counsel for Viktor Barengolts repeatedly requested that Artisan get involved in the lawsuit, but Artisan repeatedly declined.
On January 7, 2011, counsel for Unlimited Carrier wrote to Artisan demanding that it defend Viktor Barengolts under the policy issued to him. See Plaintiff's Statement of Facts, Group Exhibit A-3. In a letter dated January 27, 2011, Artisan refused. On April 8, 2011, counsel for Mr. Barengolts wrote to Artisan tendering the defense and requesting copies of any documents, photographs or statements in its possession that supported its decision to
deny coverage in connection with the Bernal lawsuit. Group Exhibit A-3. In a letter sent April 13, 2011, Artisan again refused. Group Exhibit A-4.
Counsel for Mr. Barengolts reiterated his tender of the defense and indemnity in a letter dated August 18, 2011. That letter advised Artisan that both Viktor and Michael Barengolts would look to Artisan for reimbursement of any defense costs, including attorney's fees, and any amounts paid in settlement or in judgment in the suit. Group Exhibit A-3. Three days later, Artisan sent another refusal letter, reiterating its position that the Contingent Liability Endorsement operated to exclude coverage for the claims. Group Exhibit A-4.
On February 17, 2012, counsel for the Barengoltses again wrote to Artisan advising that the lease agreement between Unlimited Carrier and Michael Barengolts (which counsel attached) was not signed until 8 days after the accident with the Bernals. Id. Based upon this, counsel once again tendered the defense and indemnity of both Viktor and Michael Barengolts. Artisan again denied the tender, representing that the lease date changed nothing with respect to the Contingent Liability Endorsement. Group Exhibit A-4. On March 18, 2012, counsel for the Barengoltses again wrote to Artisan advising ...