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AIX Specialty Insurance Co. v. Ziegler

United States District Court, N.D. Illinois, Eastern Division

September 1, 2014



MATTHEW F. KENNELLY, District Judge.

Bird Brain, Inc., a manufacturer of firepot products, purchased a liability insurance policy from AIX Specialty Insurance Company. The present lawsuit concerns that insurance policy and the circumstances under which AIX issued it.

Robin and Laurie Herriman purchased one of Bird Brain's products from a Gordmans store. Scott Ziegler was later injured by the product. He and Andrea Ziegler sued Bird Brain, Gordmans, and the Herrimans for damages. Bird Brain tendered its defense to AIX. AIX is defending Bird Brain under a reservation of rights. It also filed this lawsuit, in which it alleges that the claim is not covered by the insurance policy; the policy should be reformed to reflect the parties' purported intent not to cover claims arising from the particular product line; and alternatively, that the policy should be rescinded based on material misrepresentations that AIX claims Bird Brain made in obtaining the policy.

AIX has moved for summary judgment. For the reasons stated below, the Court denies the motion.


Bird Brain is a Michigan corporation that conducts business in Illinois. It manufactures and sells firepots and firepot fuel gel. Bird Brain has sold its products to Gordmans Stores, Inc. and Gordmans, Inc. On September 1, 2011, Bird Brain voluntarily recalled all of its liquid fuel gel because of customer injuries. Pl.'s LR 56.1 Stat., Ex. 1A at 3; Def.'s Ex. 1.

Bird Brain, via an agent, contacted AIX via e-mail on December 2, 2011. Pl.'s LR 56.1 Stat., Ex. 1A at 2. Bird Brain's agent stated:

This product has had a bad history of claims involving there [sic] liquid fuel gel that is used for their fire pots/candles. As of 9/1 this product had been recalled. The current carrier Gemini is cancelling effective 12/5. We were able to secure a discontinued products policy with Navigators covering the liquid fuel gel product that is still in the market place.

Id. The e-mail stated that Bird Brain "need[s] help securing a practice policy for the ongoing products. The liquid fuel gel products have been replaced with a hard burning gel that they contract with Sterno." Id. The agent stated that Bird Brain was looking for a policy "that can exclude all liquid fuel gel but needs to cover the new stern[o] candle/firepot product in addition to the rest of their products." Id.

Sean Rancourt authorized AIX to issue an insurance policy to Bird Brain. Id. His e-mail to Bird Brain's agent said that "[b]ased on the fac[t] that sterno is safer, spill resistant, there is a discontinued products policy in place for the old gel and Bird Brain is indemnified by Sterno for any faulty product involving the Sterno product, I think we may be able to proceed with the submission." Id. at 1.

On December 6, 2011, AIX issued a Products/Completed Operations Policy to Bird Brain for a one-year period. Compl., Ex. A. Even though the earlier correspondence indicated that Bird Brain was looking for a policy that "can exclude all liquid fuel gel, " the policy did not have an exclusion that said that. Rather, the policy contained an exclusion for "ALL FIRE POTS/CANDLES THAT WERE MANUFACTURED TO BE USED WITH LIQUID FUEL GEL AND WERE CONSIDERED, BUT NOT LIMITED TO BE PART OF THEIR RECENT RECALL." Id. at 31.

AIX later learned that despite the agent's representation, Bird Brain had never actually obtained a discontinued products policy. Pl.'s LR 56.1 Stat., Ex. 1 ¶ 6. Bird Brain's former chief executive officer states in an affidavit that the company intended to obtain a discontinued products policy but did not do so "due to the significant amount of the premium." Id., Ex. 2 ¶ 9.

The Zieglers filed suit against Bird Brain, Gordmans, and the Herrimans in state court in May 2013. The Zieglers seek to recover for injuries that Scott Ziegler sustained from an explosion they allege was caused by Bird Brain's firepot and pourable fuel gel, which the Herrimans had purchased at a Goldmans store. Compl., Ex. B ¶¶ 1-22. AIX is currently defending Bird Brain in the Ziegler suit pursuant to a reservation of rights. As indicated earlier, it filed this suit seeking a declaration that it is not obligated to defend Bird Brain.

As the present case has progressed, it appears that Gordmans is the party truly adverse to AIX. Specifically, Gordmans is the only party who opposes ...

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