United States District Court, N.D. Illinois, Eastern Division
DePASQUALE STEEL ERECTORS INC., an Illinois Corporation, Plaintiff,
GEMINI INSURANCE COMPANY, a Delaware Corporation, Defendant.
MEMORANDUM OPINION AND ORDER
I. Shadur Senior United States District Judge
Steel Erectors Inc. ("DePasquale") filed a lawsuit
against its insurer, Gemini Insurance Company
("Gemini"), alleging breach of contract and bad
faith under 215 ILCS 5/155 in a matter related to an
underlying lawsuit filed against DePasquale as third party
defendant. DePasquale asserts that a conflict of interest
exists between itself and Gemini so that Gemini may not use
its own counsel to defend the lawsuit and must instead
appoint independent counsel. Although the parties have filed
cross-motions for summary judgment, this opinion explains
that both parties' failure to provide sufficient input on
all genuine issues of material fact requires that both
motions be denied.
holds a Commercial General Liability policy from Gemini with
a $1 million per occurrence limit (D. St. ¶¶ 4, 5).
According to the policy Gemini has a "right and duty to
defend the insured against any suit" (D. St. ¶ 6).
about June 14, 2016 Two Brothers Property LLC and Go To
Logistics, Inc. filed a complaint against Triumph Development
Corporation and Triumph Construction Services (collectively
"Triumph") charging that negligent construction
resulted in the sudden and violent collapse of the roof of
their property and seeking damages in excess of $1.7 million
(G. St. ¶¶ 8, 9, 10). Triumph then filed a third
party complaint against nine subcontractors, including
DePasquale, seeking contribution for their pro rata shares of
liability as joint tortfeasors (G. St. ¶¶ 12, 13).
DePasquale in turn tendered the original and third party
complaints to Gemini, noting that the liability was at least
potentially covered by its insurance policy and thus Gemini
owed a duty to defend DePasquale in the lawsuit (D. St.
then notified DePasquale by email that it would defend the
lawsuit without reservation of right (D. St. ¶¶ 19,
20). DePasquale then sent a letter to Gemini explaining that
a potential conflict of interest existed because the jury
demand exceeded Gemini's policy limit, so that Gemini was
required to pay for independent counsel to defend the lawsuit
(D. St. ¶ 21). DePasquale's letter cited
Perma-Pipe, Inc. v. Liberty Surplus Ins. Corp., 38
F.Supp.3d 890 (N.D. Ill. 2014) for that proposition (D. St.
¶ 22). On November 4 Gemini sent a letter to DePasquale
advising it to put its excess insurance carrier on notice
because there could be a verdict in excess of its policy
limits (G. St. ¶ 17). On November 7 Gemini sent a letter
to DePasquale stating that it disagreed with that position
and denying Pasquale's request to retain independent
counsel at Gemini's expense (D. St. ¶ 23).
Rule 56 movant bears the burden of establishing the absence
of any genuine issue of material fact (Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23 (1986)). For that purpose
courts consider evidentiary records in the light most
favorable to nonmovants and draw all reasonable inferences in
their favor (Lesch v. Crown Cork & Seal Co., 282
F.3d 467, 471 (7th Cir. 2002)). Courts "may not make
credibility determinations, weigh the evidence, or decide
which inferences to draw from the facts" in resolving
motions for summary judgment (Payne v. Pauley, 337
F.3d 767, 770 (7th Cir. 2003)). But a nonmovant must produce
more than "a mere scintilla of evidence" to support
the position that a genuine issue of material fact exists
(Wheeler v. Lawson, 539 F.3d 629, 634 (7th Cir.
2008)) and "must come forward with specific facts
demonstrating that there is a genuine issue for trial"
(id.). Ultimately summary judgment is warranted only
if a reasonable jury could not return a verdict for the
nonmovant (Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986)).
is a potential added complexity where, as here, cross-motions
for summary judgment are presented. Because the court must
then adopt a dual perspective that this Court has often
referred to as Janus-like, it must credit the nonmovant's
version of any disputed facts as to each motion, and that can
on occasion lead to the denial of both motions. Regrettably
that unfortunate consequence has eventuated here.
Illinois law "an insurer has a broad duty to defend its
insured in any action where the allegations in the complaint
are even potentially within the scope of the policy's
coverage" (Nat'l Cas. Co. v. Forge Indus.
Staffing Inc., 567 F.3d 871, 874 (7th Cir. 2009)). And
with its duty to defend comes its right to direct its
defense, which includes choosing its lawyer (id.).
To be sure, that lawyer owes ethical obligations to both the
insurer and the insured, but in reality an insurer-appointed
lawyer may be more closely aligned with the insurer's
interests (id.). Thus if a conflict of interest
exists between the insurer and the insured, the insurer may
be required to appoint and pay for independent counsel
that respect Littlefield v. McGuffey, 979 F.2d 101,
105 (7th Cir. 1992) has cautioned that "[n]ot just any
conflict will do." Instead Illinois courts have found
that a conflict necessitating independent counsel exists
"when the insurer's and the insured's interests
in the conduct of the tort action are in serious
conflict" and the insurer and the insured are
"complete adversaries on a crucial issue which would
necessarily be decided either one way or the other if
liability was imposed" (id. at 106).
Littlefield was also informed by the less demanding
standard in Illinois caselaw --specifically Nandorf, Inc.
v CNA Ins. Cos., 134 Ill.App.3d 134, 479 N.E.2d 988 (1st
Dist. 1985) -- that recognized a broader category of
conflicts of interest, noting that one could exist when
"the insurer has 'an interest in providing a less
than vigorous defense'" (Littlefield, 979
F.2d at 106, quoting Nandorf, 134 Ill.App.3d at 139,
479 N.E.2d at 992). In that light Littlefield,
id. concluded that "[u]nder Nandorf,
then, a conflict of interest may exist when the insurer lacks
incentive to defend its insured on a portion of the claims
that appear not to be covered by the insurance
course the operative word in Littlefield is
"may;" and here the parties pose the question
whether the $700, 000 disparity between DePasquale's $1
million policy limit with Gemini and the $1.7 million total
sought from all nine subcontractors as joint and several
tortfeasors creates the degree of conflict that requires