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United States Liability Insurance Co. v. Sigmatek, Inc.

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

February 20, 2015

UNITED STATES LIABILITY INSURANCE COMPANY, Plaintiff,
v.
SIGMATEK, INC., MARATHON TECHNOLOGIES, INC., JERRY KOZLOWSKI, and LAWRENCE McCARTHY, Defendants.

MEMORANDUM OPINION AND ORDER

RUBÉN CASTILLO, Chief District Judge.

Plaintiff United States Liability Insurance ("USLI") brings this action against Sigmatek, Inc. ("Sigmatek"), Marathon Technologies, Inc. ("Marathon"), Jerry Kozlowski (collectively, the "Sigmatek Defendants"), and Lawrence McCarthy, seeking a declaratory judgment pursuant to the Declaratory Judgment Act, 28 U.S.C § 2201. This action arises out of an underlying qui tam lawsuit (the "McCarthy lawsuit") filed under the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq., by the relator-plaintiff McCarthy against the Sigmatek Defendants. United Slates ex rel. McCarthy v. Marathon Techs., Inc., No. 11-cv-7071 (N.D. Ill. filed Oct. 6, 2011) (Coleman, J.). USLI seeks a declaration that it does not have a duty to defend or indemnify the Sigmatek Defendants in connection with the McCarthy lawsuit. Presently before the Court is USLI's motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). For the reasons stated below, the Court denies USLFs motion for judgment on the pleadings and concludes that USLI has a duty to defend the Sigmatek Defendants in connection with the McCarthy lawsuit.

RELEVANT FACTS

USLI is a Pennsylvania corporation with its principal place of business in Pennsylvania. (R. 1, Compl. ¶ 4.) Defendants Sigmatek and Marathon are Illinois corporations with their principal places of business in Illinois. ( Id. ¶¶ 5-6.) Defendant Kozlowski is a citizen of Illinois, and the owner and operator of Sigmatek and Marathon. ( Id. ¶ 7.) Defendant McCarthy is also a citizen of Illinois, and a former employee of Sigmatek and Marathon. ( Id. ¶ 8; R. 1-2, Ex. 2, McCarthy Compl. ¶ 15.)

I. The Insurance Policy

USLI issued Employment Practices Liability Insurance Policy EPL101392E (the "Insurance Policy") to Sigma Tek Inc. d/b/a Marathon Technologies as the Named Insured for the policy period from February 19, 2013, to February 19, 2014. (R. 1, Compl. ¶ 12; R. 1-1, Ex. 1, Insurance Policy at 3.) The Insurance Policy covers "only those Claims first made against the Insured during the Policy Period or Extended Reporting Period, if purchased." (R. 1-1, Ex. 1, Insurance Policy at 14.) Under the Insurance Policy, USLI is obligated to "pay on behalf of the Insured, Loss... for which this coverage applies that the Insured shall become legally obligated to pay because of Claims first made against the Insured during the Policy Period or during any Extended Reporting Period, if applicable, for Wrongful Acts[.]" ( Id. ) Additionally, USLI "has the right and the duty to defend any Claim to which this insurance applies, even if the allegations of the Claim are groundless, false or fraudulent." ( Id. )

The Insurance Policy limits a "Claim" to "(1) any written notice received by any Insured that any person or entity intends to hold such Insured responsible for a Wrongful Act; or (2) any proceeding initiated against any Insured... seeking to hold such Insured responsible for a Wrongful Act[.]" ( Id. ) The Insurance Policy defines "Wrongful Act" as any actual or alleged act of:

(1) Discrimination; or
(2) Harassment; or
(3) Retaliation; or
(4) Wrongful Termination; or
(5) Workplace Tort; or
(6) negligent violation of the Uniform Services Employment & Reemployment Rights Act; or
(7) negligent violation of the Family and Medical Leave Act of 1993; or
(8) negligent violation of state law having the same or substantially similar purpose as the Acts in (6) or (7) above; or
(9) acts descried in clauses (1) through (8) above arising from the use of the Organization's Internet, e-mail, telecommunication or similar systems, including the failure to provide and enforce adequate policies and procedures relating to such use of the Organization's Internet, e-mail, telecommunication or similar systems;
committed or allegedly committed by the Organization or by an Individual Insured acting solely within his/her capacity as such, involving and brought by any Employee, former Employee or applicant for employment with the Organization or asserted by any Employee, former Employee or applicant for employment with the Organization against an Individual Insured because of his/her status as such.

( Id. at 16.)

The Insurance Policy defines the terms "Discrimination, " "Harassment, " "Retaliation, " "Wrongful Termination, " ...


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