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Superior Fuels, Inc. v. Nationwide Agribusiness Insurance Co.

United States District Court, S.D. Illinois

August 16, 2016

SUPERIOR FUELS, INC., an Illinois Corporation, Plaintiff/Counter-Defendant,



         This matter comes before the Court on Defendant Nationwide Agribusiness Insurance Company’s (“Nationwide”) Motion for Summary Judgment on its Counterclaim for Declaratory Judgment and on Plaintiff’s Amended Complaint for Declaratory Judgment (Doc. 59). Plaintiff Superior Fuels, Inc. (“Superior”) filed a Memorandum in Opposition (Doc. 64). For the reasons that follow, Defendant’s motion is GRANTED.


         Defendant issued an insurance policy providing various types of coverage to Plaintiff including property, general liability and a liability umbrella among others. Doc. 20, p. 2. During the course of coverage in 2010 and 2011, Plaintiff purchased biodiesel fuel from e-Biofuels, LLC-a subsidiary of Imperial Petroleum. Id. at p. 4. The fuel was purported to be B100 fuel with Renewable Identification Numbers (“RINs”).[1]

         Plaintiff sold the biofuel and attached RINs to its customers under the presumption that the RINs were valid. Doc. 59, p. 2-7. However, on or about December 18, 2013, the Environmental Protection Agency (“EPA”) deemed a series of RINs attached to the purchased biofuel invalid and/or fraudulent. Id. E-Biofuels filed for bankruptcy in 2012. Id. Beginning in January 2014, Plaintiff began receiving claims from its customers for compensation for the invalidated RINs. Id. Plaintiff advised Defendant of the claims and requested that it provide a defense for the resulting litigation. Doc. 20, p. 5. Defendant refused to defend Plaintiff, and Plaintiff filed this declaratory judgment action.

         Defendant now seeks a summary finding from the Court that it owes no duty to defend or indemnify Plaintiff with respect to the sale of the invalidated RINs under any of the policies issued by Defendant. In response Plaintiff argues that, pursuant to established Illinois law, an insurer must defend unless the allegations clearly demonstrate that the claim is beyond policy coverage.


         Summary judgment is appropriate where “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Spath v. Hayes Wheels Int’l-Ind., Inc., 211 F.3d 392, 396 (7th Cir. 2000). The reviewing court must construe the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in favor of that party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Chelios v. Heavener, 520 F.3d 678, 685 (7th Cir. 2008); Spath, 211 F.3d at 396. Where the moving party fails to meet its strict burden of proof, a court cannot enter summary judgment for the moving party even if the opposing party fails to present relevant evidence in response to the motion. Cooper v. Lane, 969 F.2d 368, 371 (7th Cir. 1992).

         In Illinois, an insurer may not refuse to defend “unless it is clear from the face of the underlying complaint that the allegations fail to state facts which bring the case within, or potentially within, the policy’s coverage.” Emp’r. Ins. of Wausau v. Ehlco Liquidating Trust, 708 N.E.2d 1122, 1135 (Ill. 1999) (quoting U.S. Fid. & Guar. Co. v. Wilkin Insulation Co., 578 N.E.2d 926, 930 (Ill. 1991)). When the underlying complaint alleges facts within or potentially within policy coverage, the insurer is obligated to defend even if the allegations are groundless. Emp’r. Ins. of Wausau, 708 N.E.2d at 1135.

         When determining whether an insurance provider has a duty to defend, a court should apply an “eight corners rule.” Farmers Auto. Ins. Ass’n v. Country Mut. Ins. Co., 722 N.E.2d 1228, 1232 (Ill. 2000). The four corners of the underlying complaint are compared with the four corners of the insurance contract, and the court must determine whether the facts alleged in the underlying complaint fall within, or potentially within, the insurance policy’s coverage. Id. “The underlying complaint and the policy must be construed in favor of the insured, with all doubts resolved in the insured’s favor.” Emp’r. Ins. Of Wausau, 708 N.E.2d at 1135.

         The rule of construction that policy terms are liberally construed in favor of coverage only comes into play when the policy is ambiguous. Hobbs v. Hartford Ins., 823 N.E.2d 561, 564 (Ill. 2005). Whether an ambiguity exists depends on whether the policy language is subject to more than one reasonable interpretation. Id. When a policy includes a section with definitions, a court should enforce the definitions as stated in the policy. Farmers Auto. Ins. Ass’n, 722 N.E.2d at 1232.

         Here, Plaintiff emphasizes the “Fraud and Deceit” section of the Commercial Output Program Property policy. This section, found at Paragraph 5 of the “Covered Extensions” section of the Commercial Property policy, states:

“We” pay up to $5, 000 for “theft” of covered property when “you, ” “your” agents, customers, or consignees are fraudulently induced to part with the covered property:
a. to persons who falsely represent themselves as the proper persons to receive the property; or b. by the acceptance of fraudulent ...

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