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Maryland Cas. Co. v. Dough Mgmt. Co.

Court of Appeals of Illinois, First District, Second Division

June 30, 2015


Appeal from the Circuit Court of Cook County. No. 11 CH 40014. Honorable Kathleen Pantle, Judge Presiding.


LIU, JUSTICE delivered the judgment of the court, with opinion. Justices Neville and Pierce concurred in the judgment and opinion.



[¶1] This action arises out of a complaint for declaratory judgment filed by Maryland Casualty Company (Maryland). Maryland seeks a declaration that it had no duty to indemnify its insureds, Dough Management Company (Dough) and Michael Rose (collectively, the insureds), in a personal injury lawsuit filed by Scot and Patricia Vandenberg, which arose from an accident that occurred on a yacht that the insureds maintained and used. Following a hearing on the parties' cross-motions for summary judgment, the circuit court granted Maryland's motion and denied the motion filed collectively by Dough, Michael Rose, Alan Rose,[1] Scot Vandenberg and Patricia Vandenberg (collectively defendants). On appeal, defendants assert that the circuit court erred in granting summary judgment in favor of Maryland because: (1) the claims asserted by the Vandenbergs in the underlying action are covered by the insurance policy; and (2) the settlement ultimately reached by the parties in the underlying action was reasonable. We affirm.


[¶3] A. The Parties

[¶4] In September 2009, Scot Vandenberg was severely injured when he fell from the top deck to the bottom deck of a 75-foot yacht, the Bad Influence II. Subsequently, in 2011, Scot and his wife Patricia brought a personal injury action for the catastrophic injuries that Scot sustained from the accident. In the personal injury lawsuit, the following were named as defendants: (i) Dough, RQM, Inc. (RQMI), Location Finders International, Inc. (LFI), and Rose Paving Company (Rose Paving), the entities that allegedly owned, maintained, and chartered the yacht; (ii) Michael Rose, Alan Rose, and Carl Quanstrom, the alleged executive officers and directors of the foregoing named businesses; and (iii) Juan Castro, the captain of the yacht on the day of the accident.

[¶5] Maryland is an insurer that provided coverage to Dough, as the named insured, under a commercial general liability policy (the CGL policy). Michael Rose is covered under the CGL policy as an executive officer or director of Dough.

[¶6] B. The Policy

[¶7] Maryland issued the CGL policy to Dough for the period effective November 4, 2008, through November 4, 2009. The policy states, in pertinent part, that Maryland will " pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' *** to which this insurance applies. *** However, we will have no duty to defend the insured against any 'suit' seeking damages for 'bodily injury' *** to which this insurance does not apply." The Policy also contains an " Aircraft, Auto Or. Watercraft" exclusion (watercraft exclusion), which applies to the following:

" '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.'"

[¶8] C. Procedural History

[¶9] 1. Underlying personal injury action

[¶10] In August 2011, the Vandenbergs filed their complaint in the underlying personal injury lawsuit against Dough, RQMI, LFI, Rose Paving, Michael Rose, Alan Rose, Quanstrom, and Castro in the circuit court of Cook County. The Vandenbergs alleged that on September 1, 2009, Scot was aboard the yacht for a charter cruise on Lake Michigan, during which he was " seated on a bench on the upper deck" of the Bad Influence II. At one point, the bench " tipped backwards and he fell from the top of the yacht to the bottom deck." As a result of the fall, Scot suffers from permanent paralysis.

[¶11] The Vandenbergs asserted several claims in their complaint, including negligence against Castro and the " joint venture" of Dough, RQMI, LFI, and Rose Paving (collectively joint venturers). The Vandenbergs further alleged that Castro and the joint venturers were negligent because they engaged " in one or more" of the following acts or omissions:

" a. Failed to provide railing or equivalent protection of the top deck peripheral areas which were accessible to passengers, including Plaintiff [Scot] ***;
b. Failed to prevent [Scot], other passengers and the band from accessing the rear of the top deck of the yacht *** which did not have railings or equivalent protection on the *** rear portion of the top deck;
c. Allowed passengers, including Plaintiff [Scot], to access areas of the top deck which did not have railings or equivalent protection;
d. Failed to warn passengers, including Plaintiff, [Scot], of the lack of railings or equivalent protection on the top peripheral areas of the top deck;
e. Allowed a bench to be placed inches from the rear of the unrailed top deck."

[¶12] In their personal injury suit, the Vandenbergs also asserted a claim of alter ego liability, alleging that Michael Rose, Alan Rose, and Quanstrom " controlled and dominated" and " exercised such complete dominion and control" over the defendant businesses that they should be treated as alter egos of the companies. Patricia also asserted claims for loss of consortium.

[¶13] 2. Complaint for declaratory relief

[¶14] In November 2011, Maryland filed its complaint for declaratory relief against the insureds and the Vandenbergs.[2] As part of its allegations, Maryland denied that it had a duty to defend or indemnify based on the CGL policy's watercraft exclusion. Maryland asserted that the watercraft exclusion precluded coverage because the underlying complaint alleged that the insureds " owned or operated the yacht" on which Scot was injured.

[¶15] In March 2012, the Vandenbergs filed a motion for an extension of time to answer Maryland's complaint. They explained that they had requested leave to file an amended complaint in their personal injury action and wanted to obtain a ruling on this request before responding to Maryland's complaint.

[¶16] In support of their motion, the Vandenbergs attached a copy of their proposed first amended complaint, in which they realleged their claim of negligent ownership, maintenance or use of a yacht based on the failure to provide a railing on the top deck. In addition, they added a new claim, " Negligent Ownership, Maintenance or Use of an Unstable Bench," specifically alleging that the insureds acted negligently ...

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