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Selective Insurance Co. of South Carolina v. Target Corp.

United States Court of Appeals, Seventh Circuit

December 29, 2016

Selective Insurance Company of South Carolina, Plaintiff-Appellant,
v.
Target Corporation, Defendant-Appellee.

          Argued November 4, 2016

         Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 13-cv-5910 - Elaine E. Bucklo, District Judge.

          Before Flaum and Kanne, Circuit Judges, and MAGNUS-Stinson, District Judge. [*]

          MAGNUS-STINSON, District Judge.

         Plaintiff-Appellant Selective Insurance Company of South Carolina ("Selective") filed a declaratory judgment action, asking the district court to declare that it owed no duty to defend or indemnify Defendant- Appellee Target Corporation ("Target") in a lawsuit initiated by customer Angela Brown, who sued Target after a fitting room door fell on her. The district court granted summary judgment in favor of Target, finding that Target was an additional insured on a commercial general liability insurance policy (the "Policy") that the door supplier, Harbor Industries, Inc. ("Harbor"), had with Selective. The district court further held that Selective had both a duty to defend and indemnify Target for the entire cost Target incurred settling the Brown litigation. Selective appealed the district court's decision and, for the reasons that follow, we affirm.

         I. Background

         On December 17, 2011, Angela Brown was injured at a Target store in Gurnee, Illinois, when a fitting room door came off its hinges and fell on her. She sued Target in Illinois state court on February 14, 2012, and Target removed the case to federal court. In her complaint, Ms. Brown alleged that Target was negligent for failing to maintain and repair the fitting room door and failing to warn her that the fitting room door was in an unreasonably dangerous and hazardous condition. Target filed a third-party complaint against Harbor-the company that Target had contracted to supply the fitting rooms at the Gurnee store-seeking contribution and indemnification. Discovery during the Brown litigation revealed that the same fitting room door fell on another Target customer approximately one week before it fell on Ms. Brown. Ultimately, both Target and Harbor settled with Ms. Brown.

         Target tendered its defense of Ms. Brown's lawsuit to Selective on May 7, 2012, claiming that it was an additional insured on Harbor's Policy with Selective because of a contract with Harbor. On July 30, 2013, Selective filed the underlying declaratory judgment action against Target in Illinois state court, and Target removed it to federal court on the basis of diversity jurisdiction.

         The parties filed cross-motions for summary judgment, and the district court granted summary judgment to Target after finding in its favor on three issues. First, the district court found that Target was an additional insured on Harbor's Policy with Selective because of the interaction between a Supplier Qualification Agreement ("Supplier Agreement") that required Harbor to designate Target as an additional insured and their Program Agreement for the fitting rooms. Second, the district court found that Selective had a duty to defend Target because Ms. Brown's allegations fell within the scope of the Policy, since they could reasonably be read to assert a bodily injury caused in whole or in part by Harbor's product. Third, the district court found that Target had settled the lawsuit with Ms. Brown in reasonable anticipation of liability and, thus, Selective had a duty to indemnify Target for costs incurred defending and settling the Brown litigation. Final judgment was entered in favor of Target in the total amount of $714, 450.24. Selective now appeals.

         II. Analysis

         Summary judgment is appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). We review de novo a district court's decision on cross-motions for summary judgment. Calumet River Fleeting, Inc. v. Int'l Union of Operating Eng'rs, Local 150, AFL-CIO, 824 F.3d 645, 647 (7th Cir. 2016) (citations omitted). "The general standards for summary judgment do not change: with cross summary judgment motions, we construe all facts and inferences therefrom in favor of the party against whom the motion under consideration is made." Id. at 647-48 (citations and quotations omitted). Because we are only considering whether it was proper for the district court to grant summary judgment in favor of Target, we resolve any factual disputes in Selective's favor.

         Our subject matter jurisdiction over this dispute is based on the parties' diversity of citizenship. 28 U.S.C. § 1332. Federal courts deciding state law claims under diversity jurisdiction apply the forum state's choice of law rules to select the applicable state substantive law. McCoy v. Iberdrola Renewables, Inc., 760 F.3d 674, 684 (7th Cir. 2014) (citations omitted). If no party raises a choice of law issue to the district court, "the federal court may simply apply the forum state's substantive law." Id. Although Selective correctly points out that there is a Minnesota choice-of-law provision in one of the contracts at issue, it admits that Target and Selective have both argued the insurance coverage issues under Illinois law. Thus, we will continue to apply Illinois law to this case.

         A. The Contracts at Issue

         Three contracts are relevant to addressing the parties' arguments-Target and Harbor's Supplier Agreement, which was executed in April 2001; Target and Harbor's Program Agreement for the fitting rooms, which was executed in April 2009; and Harbor and Selective's Policy, which was in effect when Ms. Brown was injured on December 17, 2011.

         Target and Harbor executed the Supplier Agreement in April 2001. It ...


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