United States District Court, N.D. Illinois, Eastern Division
Acuity, a mutual insurance company, Plaintiff, Counter
Defendant: David S. Osborne, LEAD ATTORNEY, Justin Keith
Seigler, Lindsay, Rappaport & Postel, LLC, Chicago, IL.
Lenny Szarek, Inc., Defendant: Richard M. Waris, LEAD
ATTORNEY, Donald Patrick Eckler, Pretzel & Stouffer, Chtd.,
Lennar Chicago, Inc., Cary Woods, LLC, Defendants: Ernest
Summers, III, LEAD ATTORNEY, Kevin Lloyd Morrow, Rachel T.
Nguyen, Faegre Baker Daniels LLP, Chicago, IL.
Cary Woods, LLC, Lennar Chicago, Inc., Cary Woods, LLC,
Lennar Chicago, Inc., Cary Woods, LLC, Lennar Chicago, Inc.,
Counter Claimants: Ernest Summers, III, LEAD ATTORNEY, Kevin
Lloyd Morrow, Faegre Baker Daniels LLP, Chicago, IL.
OPINION AND ORDER
JORGE ALONSO, United States District Judge.
diversity case, plaintiff Acuity, an insurance company, seeks
a declaration that certain commercial general liability
(" CGL" ) insurance policies that Acuity issued to
Lenny Szarek, Inc. (" Szarek" ) do not cover the
underlying claims against defendants Szarek, Lennar Chicago,
Inc. (" Lennar" ), and Cary Woods LLC ("
Cary" ), which stem from the faulty construction of two
condominium projects, the Mulberry Grove Condominium
development and the Cary Woods Condominium
development. Defendants Lennar and Cary have counterclaimed,
seeking a declaration that Acuity breached its duty to defend
them. Acuity has filed a partial motion for judgment on the
pleadings under Federal Rule of Civil Procedure 12(c).
Defendants Lennar and Szarek have filed a cross-motion for
judgment on the pleadings regarding Acuity's duty to
defend. For the reasons set forth below, Acuity's motion
is granted, and Lennar and Szarek's motion is denied.
issued Szarek, a carpentry contractor, a series of CGL
insurance policies effective from 2002 to 2009. (3d Am.
Compl. ¶ 41, ECF No. 51.) Beginning in 2001, Szarek
agreed to perform carpentry work on both the Mulberry Grove
and Cary Woods condominium projects. ( Id. ¶
¶ 20, 25, 34.) In approximately 2010, the condominium
unit owners began to investigate apparent water infiltration
issues, and the Mulberry Grove Condominium Association and
the Cary Woods Condominium Association took action against
the condominium developers and builders. ( Id.
¶ ¶ 20, 29.) This case concerns whether
Acuity's policies provide coverage for the damage
allegedly caused by Szarek's work.
Mulberry Grove action, the Mulberry Grove Condominium
Association and its board of directors (" the Mulberry
Grove plaintiffs" ) filed suit against Mulberry Grove
LLC--the developer of the Mulberry Grove Condominium--and its
two members, Concord Homes, Inc. (" Concord" ) and
Lennar. ( Id. ¶ ¶ 7, 16.)
The Mulberry Grove plaintiffs later amended their complaint
to add claims against various contractors, including Szarek.
( Id. ¶ ¶ 17-19.) The complaint included
allegations that Szarek's improper construction and
installation of building materials resulted in water
infiltration that " caused substantial damages to common
elements, . . . drywall, garage walls and ceilings, and
interior finishings of the units, as well as wood floors,
carpeting, window coverings and personal property, all
located inside the affected unit." (Id. ¶
¶ 20 (citing Mulberry Grove Compl. Count I ¶ 69,
Count II ¶ 76, Count III ¶ 76, Count IV ¶ 41,
Count V ¶ 38).)
2014, Lennar filed a complaint against Szarek in state court
(" the Lennar complaint" ), contending
that Szarek breached its subcontract by failing to defend
Lennar in the Mulberry Grove plaintiffs' lawsuit. (3d Am.
Compl. ¶ ¶ 39-40.)
Cary Woods underlying matter, the Cary Woods Condominium
Association notified Cary Woods LLC, the developer of the
condominium, and Lennar of water infiltration problems at the
condominium and alleged that the problems were due to
construction defects. In 2012, the Condominium Association
submitted a request for mediation under the mandatory
alternative dispute resolution process prescribed by its
Declaration of Condominium Ownership for Cary Woods
Condominium (" Declaration" ) for resolving
disputes with the condominium developers and
builders. After the mediation concluded
unsuccessfully in January 2014, the Condominium Association
sought arbitration of its claim,
again pursuant to the alternative dispute resolution process
prescribed by the Declaration. ( Id. ¶ 32.)
Cary and Lennar filed a complaint (" the Cary/Lennar
complaint" ) against Szarek and other contractors for
breach of contract, indemnification and declaratory relief,
contending that Szarek failed to provide work " free
from defects in workmanship, materials and design," to
procure insurance covering Cary and Lennar, and to defend
Cary and Lennar from claims arising out of Szarek's
defective work, as the subcontract between Szarek and Cary
required. (3d Am. Compl. ¶ 34.)
Acuity policies issued to Szarek require Acuity to pay "
those sums that the insured becomes legally obligated to pay
as damages because of bodily injury or property
damage to which this insurance applies."
(3d Am. Compl. ¶ 42, section I.A.1.a.) The policies also
confer on Acuity " the right and duty to defend the
insured against any suit seeking those
damages." ( Id. ) Further, the policies provide
that " this insurance applies to bodily injury and
property damage only if: (1) [t]he bodily injury or
property damage is caused by an occurrence
that takes place in the coverage territory; [and] (2) [t]he
bodily injury or property damage occurs
during the policy period . . . ." ( Id. ¶
42, section I.A.1.b.) The policies define an occurrence as
" an accident, including continuous or repeated exposure
to substantially the same general harmful conditions,"
and " property damage" as " [a.] physical
injury to tangible property, including all resulting loss of
use of that property . . . ; or [b.] loss of use of tangible
property that is not physically injured." ( Id.
¶ 46, sections 13, 17.)
policies contain an additional insured endorsement that
provides that they insure not only Szarek but also " any
person or organization for whom you [Szarek] are performing
operations when you and such person or organization have
agreed in writing in a contract or agreement that such person
or organization be added as additional insured on your
policy." ( Id. ¶ ¶ 49-53.)
Szarek's subcontracts with Mulberry Grove LLC and Cary
contained provisions requiring Szarek to obtain insurance
covering them as additional insureds. ( Id. ¶
¶ 25, 37-38.)
seeks a declaration that it has no duty to defend or
indemnify Szarek against the Mulberry Grove complaint (Count
I), the Cary/Lennar complaint (Count II), or the
Lennar complaint (Count VII); it has no duty to
defend or indemnify Mulberry (Count III), Concord or Lennar
(Count IV) against the Mulberry Grove complaint as additional
insureds; it has no duty to defend or indemnify Cary (Count
V) or Lennar (Count VI) against the Cary Woods mediation as
additional insureds; and it has no duty to defend or
indemnify Cary against the Cary Woods arbitration as an
additional insured (Count VIII). Lennar and Cary have filed
counterclaims that amount to mirror images of Acuity's
claims. (ECF No. 53.) Acuity has filed a motion for judgment
on the pleadings (ECF No. 57), although it notes that Acuity,
Lennar and Cary have agreed to " hold . . . in
abeyance" Acuity's claims in Counts V, VI and VIII,
as well as Counts I and II of Cary's amended
counterclaim, due to the settlement of the Cary Woods claim
during the pendency of this case. (Mem. Supp. Acuity's
12(c) Mot. at 2-3, ECF No. 58.) Lennar and Szarek have filed
a cross-motion for judgment on the pleadings as to
Acuity's duty to defend. (ECF No. 59.)
12(c) permits a party to move for judgment on the pleadings,
of the " the complaint, the answer, and any written
instruments attached as exhibits." N. Ind. Gun &
Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449,
452 (7th Cir. 1998) (citing Fed.R.Civ.P. 10(c)). A motion for
judgment on the pleadings under Rule 12(c) is governed by the
same standards as a motion to dismiss for failure to state a
claim pursuant to Rule 12(b)(6). Hayes v. City of
Chi., 670 F.3d 810, 813 (7th Cir. 2012).
A motion under Rule 12(b)(6) tests whether the complaint
states a claim on which relief may be granted."
Richards v. Mitcheff, 696 F.3d 635, 637 (7th Cir.
2012). Under Rule 8(a)(2), a complaint must include " a
short and plain statement of the claim showing that the
pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2).
The short and plain statement under Rule 8(a)(2) must "
give the defendant fair notice of what the claim is and the
grounds upon which it rests." Bell A. Corp. v.
Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d
929 (2007) (ellipsis omitted).
federal notice-pleading standards, a plaintiff's "
[f]actual allegations must be enough to raise a right to
relief above the speculative level." Id. Stated
differently, " a complaint must contain sufficient
factual matter, accepted as true, to 'state a claim to
relief that is plausible on its face.'" Ashcroft
v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d
868 (2009) (quoting Twombly, 550 U.S. at 570).
" A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged." Id. (citing
Twombly, 550 U.S. at 556). " In reviewing the
sufficiency of a complaint under the plausibility standard,
[courts must] accept the well-pleaded facts in the complaint
as true, but [they] 'need[ ] not accept as true legal
conclusions, or threadbare recitals of the elements of a
cause of action, supported by mere conclusory
statements.'" Alam v. Miller Brewing Co.,
709 F.3d 662, 665-66 (7th Cir. 2013) (quoting Brooks v.
Ross, 578 F.3d 574, 581 (7th Cir. 2009)).