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Secura Insurance Co. v. Plumb

United States District Court, C.D. Illinois, Rock Island Division

September 8, 2014



SARA DARROW, District Judge.

Plaintiff Secura Insurance Company seeks a declaration that it has no duty to defend or indemnify its insured, Defendant Rick R. Plumb, d/b/a Superior Home Improvement, in a lawsuit brought against Superior by Defendant Linda J. Plumb in Illinois state court. For the following reasons, Plaintiff's Motion for Summary Judgment, ECF No. 19, is GRANTED.


In 2005, Superior constructed a single family home in Taylor Ridge, Illinois. Superior subcontracted foundation work to Alliance Foundations, Inc. On February 2, 2006, Linda Plumb, Rick Plumb's mother, acquired ownership of the home. On or about February 11, 2008, Linda Plumb discovered that the basement was moving out from underneath the house, causing external and interior damage. On some prior date that he cannot recall, Rick Plumb had noticed some cracks in the drywall which he attributed to the fact that "it's a new house; it's settling." He did not realize that the foundation was actually moving until he saw a crack form between the wall and the floor in the basement. As a result of the damage, the County of Rock Island declared the premises unsafe for occupancy and ordered repairs to be completed.

On June 7, 2010, Linda Plumb filed suit against Superior in the Circuit Court for the Fourteenth Judicial Circuit, Rock Island, Illinois, alleging breach of an implied warranty of habitability. Compl., Ex. 1, ECF No. 1. Superior in turn filed a third-party complaint seeking contribution from Alliance on the grounds that the damage to Linda Plumb's home resulted from Alliance's allegedly negligent foundation work. According to Linda Plumb, the total cost of stabilizing the basement and repairing or replacing other damaged portions of the home is $164, 378.00. L. Plumb Decl. ¶ 6, ECF No. 19-1.

Secura had issued Superior a "Target Contractor" insurance policy, providing "contractors businessowners" coverage. Pl.'s Mot. Summ. J., Ex. F at 4, ECF No. 19-1. Among its relevant provisions, Superior's policy provided that Secura would cover "business liability" as follows: "We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury, " "property damage, " "personal injury" or "advertising injury" to which this insurance applies." The policy applies to "bodily injury" and "property damages" only if (1) the injury or damage "is caused by an occurrence' that takes place in the coverage territory'"; and (2) the injury or damage "occurs during the policy period." The policy defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." It defines "property damage, " in pertinent part, as "[p]hysical injury to tangible property, including all resulting loss of use of that property." Finally, it defines "your work" as including both "[w]ork or operations performed by you or on your behalf" and "[m]aterials, parts or equipment furnished in connection with such work or operations." Secura had issued Superior this policy for the period of October 27, 2005, to October 27, 2006, but later cancelled the policy, due to nonpayment of premium, effective May 19, 2006.[2]

Superior referred Plumb's claim to Secura for defense and indemnification. Secura preliminarily agreed to defend Superior against Plumb's suit, while simultaneously reserving its right to seek a declaration that Superior's policy did not cover these circumstances. While simultaneously defending Superior in state court, on June 21, 2013, Secura filed the instant suit seeking a declaration under the Declaratory Judgment Act, 28 U.S.C. § 2201, and Federal Rule of Civil Procedure 57 that Secura has no obligation to defend or indemnify Superior with respect to Plumb's lawsuit. Compl. 1-7. The Court's jurisdiction was invoked pursuant to 28 U.S.C. § 1332. On March, 2013, the Court denied Linda Plumb's motion to dismiss or stay Secura's suit in deference to an ongoing, parallel state court adjudication, holding that the state and federal actions here were not "parallel." See Mar. 26, 2013 Order 3-5, ECF No. 28. Now before the Court is Secura's Motion for Summary Judgment, ECF No. 19.


I. Legal Framework

Summary judgment is the "put up or shut up moment in a lawsuit, when a party must show what evidence it has that would convince a trier of fact to accept its version of events." Johnson v. Cambridge Indus., Inc. , 325 F.3d 892, 901 (7th Cir. 2003) (internal quotation marks omitted). A court should grant summary judgment only "if 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).

At the summary judgment stage the court's function is not to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial-that is, whether there is sufficient evidence favoring the non-moving party for a jury to return a verdict in its favor. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249 (1986); Patel v. Allstate Ins. Co. , 105 F.3d 365, 370 (7th Cir. 1997). The court must view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. McCann v. Iroquois Mem'l Hosp. , 622 F.3d 745, 752 (7th Cir. 2010) (citing Anderson , 477 U.S. at 255). There can be no genuine issue as to any material fact, however, when a party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett , 477 U.S. 317, 322 (1986). Additionally, when there is no material factual dispute, contract interpretation is a question of law that the court may decide on summary judgment. Citadel Group Ltd. v. Wash. Reg'l Med. Cntr. , 692 F.3d 580, 587 (7th Cir. 2012).

A court compares the allegations in the underlying complaint with the relevant provisions of the insurance policy to determine whether the insurer has a duty to defend its insured. Pekin Ins. Co. v. Wilson , 930 N.E.2d 1011, 1016-17 (Ill. 2010). The insurer has a duty to defend where the facts alleged in the underlying complaint "fall within, or potentially within, the policy's coverage." Id. at 1017. The duty-to-defend threshold is low: the complaint need present only the possibility, not probability, of recovery under the policy. Bituminous Cas. Corp. v. Gust K. Newberg Constr. Co. , 578 N.E.2d 1003, 1006 (Ill.App.Ct. 1991); W. Cas. & Sur. Co. v. Adams Cnty. , 534 N.E.2d 1066, 1068 (Ill.App.Ct. 1989). This duty is thus broader than an insurer's duty to indemnify. See Pekin Ins. Co. , 930 N.E.2d at 1017. The duty to indemnify does not arise until the insured becomes obligated to pay damages in the underlying action, Zurich Ins. Co. v. Raymark Indus., Inc. , 514 N.E.2d 150, 163 (Ill. 1987), and then only if the insured's activity and resulting damage "actually fall within" the policy's coverage, Travelers Ins. Co. v. Eljer Mfg., Inc. , 757 N.E.2d 481, 492 (Ill. 2001).

In interpreting insurance policies, "[a] court must construe the policy as a whole and take into account the type of insurance purchased, the nature of the risks involved, and the overall purpose of the contract." Pekin Ins. Co. , 930 N.E.2d at 1017 (quoting Am. States Ins. Co. v. Koloms , 687 N.E.2d 72, 75 (Ill. 1997)). Provisions that limit or exclude coverage are interpreted liberally in the insured's favor. Koloms , 687 N.E.2d at 75. Terms are given their plain and ordinary meaning unless they are susceptible to more than one meaning; such ambiguous terms are construed strictly against the insurer. Id. The construction of an insurance policy is a question of law. Id.

When an insurer contends that its insured is not actually covered by a policy, the general rule of estoppel dictates that the insurer must defend the suit against its insured under a reservation of rights or seek a declaratory judgment that there is no coverage. State Farm Fire & Cas. Co. v. Martin , 710 N.E.2d 1228, 1230-31 (Ill. 1999). If the insurer fails to follow either course, it will be estopped from raising policy defenses to coverage. Id. at 1231. Further, an insurer's delay in bringing its declaratory action may be grounds for estoppel. Cent. Mut. Ins. Co. v. Kammerling , 571 N.E.2d 806, 810 (Ill.App.Ct. 1991). "[A] liability insurer in doubt over whether it has a duty to defend its insured, cannot simply stand on the sidelines and wait until the tort action is complete before contesting the question of coverage." Id. (quoting Reis v. Aetna Cas. & Sur. Co. , 387 N.E.2d ...

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