United States District Court, S.D. Illinois
MEMORANDUM AND ORDER
Michael J. Reagan United States District Judge
Procedural Background and Summary of Key
20, 2014, in the parking lot of the Menards home improvement
store in Marion, Illinois, Darin Sigler was standing next to
a pickup truck -- a truck belonging to his girlfriend
Barbara's stepfather (Ronald Gregory) -- when a forklift
collided with the truck, causing the truck door to strike
Sigler. According to Menards, Sigler was helping his
girlfriend pick up carpeting from the store, Sigler had Mr.
Gregory's permission to drive the truck, the forklift was
operated by a Menards employee (Anthony Parrino), Parrino was
loading the carpet into the truck, and Sigler was injured in
the collision. (Cincinnati Insurance Company takes issue with
some of these allegations. See Doc. 42, pp. 2-4.)
filed suit on September 12, 2014 in the Circuit Court of
Williamson County, Illinois, looking to recover for personal
injuries he suffered in the collision. Sigler named Menards
as the sole defendant and alleged that (through its employee)
Menards was negligent in various ways that caused or
contributed to the accident and to Sigler's injuries.
Darin Sigler v. Menard, Inc., Case No. 2014-L-156
(“the underlying action”).
March 24, 2016, Menards tendered the defense of the
underlying action to Cincinnati Insurance Company (CIC).
Menards asserted that CIC issued an insurance policy to
Ronald and Virginia Gregory which covered the truck. Claiming
that it qualified as an insured under that policy, Menards
sought defense and indemnity from CIC in the underlying
action. CIC denied the tender of defense on April 7, 2016.
months later, in June 2016, CIC filed in this Court a
complaint for declaratory judgment, naming Menards and Sigler
as defendants. CIC seeks a declaration of the parties'
rights and obligations under two insurance policies. The
undersigned enjoys subject matter jurisdiction over the
declaratory judgment action based on the federal diversity
statute, 28 U.S.C. 1332.
insurance policies are in play. CIC issued a personal
automobile liability policy to Ronald and Virginia Gregory
effective October 1, 2013 through October 1, 2014, policy
number A01-0546062 (the Auto Policy) and issued a personal
umbrella liability policy to Ronald and Virginia Gregory
effective October 1, 2013 through October 1, 2014, policy
number U01-0546062 (the Umbrella Policy).
amended complaint filed on October 12, 2016 (Doc. 28) alleges
that CIC has no duty to defend or indemnify Menards in the
underlying action, because Menards is not a “covered
person” under the Auto Policy (Count I), business
exclusions in both policies preclude coverage in the
underlying action (Count II), an off-the-road vehicle
exclusion in the Auto Policy applies to the forklift and
precludes coverage for Menards in the underlying action
(Count III), Menards failed to comply with notice
requirements in both policies (Count IV), Menards has
insurance with other carriers which renders the CIC policies
“excess” and relieves CIC of the duty to defend
Menards in the underlying action (Count V), and to the extent
the Umbrella Policy provides any coverage to Menards in the
underlying action, that coverage has not yet been triggered
before the Court are cross-motions for summary judgment filed
by Plaintiff CIC (Docs. 36-37) and Defendant Menards (Doc.
38). Responses were filed on May 1, 2017 (Docs. 42-43) and
reply briefs on May 23, 2017 (Docs. 45-46). As explained
below, the Court denies in part CIC's motion (Doc. 36)
and grants in part Menards' motion (Doc. 38).
Applicable Legal Standards
the undersigned exercises diversity jurisdiction in this
action, state substantive law applies and federal procedural
rules apply. See, e.g., Doermer v. Callen, 847 F.3d
522, 529 (7th Cir. 2017), citing Goesel v.
Boley Int'l (H.K.) Ltd., 806 F.3d 414, 419
(7th Cir. 2015), and Erie Railroad Co. v.
Tompkins, 304 U.S. 64 (1938). See also Great West
Cas. Co. v. Robbins, 833 F.3d 711, 715 (7th
courts deciding state law claims apply the forum state's
choice of law rules to select the applicable state
substantive law, and if no party has raised the choice-of-law
issue, “the federal court may simply apply the forum
state's substantive law.” Selective Ins. Co. of
South Carolina v. Target Corp., 845 F.3d 263, 266
(7th Cir. 2016), quoting McCoy v. Iberdrola
Renewables, Inc., 760 F.3d 674, 684 (7th Cir.
2014). See also Title Industry Assurance Co., R.R.G. v.
First American Title Ins. Co., 853 F.3d 876, 883
(7th Cir. 2017) (“The interpretation of an
insurance policy and the contours of the insurer's duty
to defend are questions of state law.”). Here, no one
disputes that Illinois substantive law applies.
Illinois law, the primary goal in interpreting an insurance
policy is “to give effect to the intent of the parties
as expressed in the agreement.” Berg v. New York
Life Ins. Co., 831 F.3d 426, 428-29 (7th Cir.
2016), quoting DeSaga v. W. Bend Mut. Ins. Co., 910
N.E.2d 159, 163 (Ill. 2009). When the terms of an insurance
policy are unambiguous, they must be given their plain,
ordinary meaning and enforced as written, unless doing so
would contravene public policy. Id. at 429. If the
policy language is ambiguous (i.e., susceptible to more than
one reasonable meaning), the policy is construed against the
insurer. Berg, 831 F.3d at 429, citing Gillen v.
State Farm Mut. Auto. Ins. Co., 830 N.E.2d 575, 582
(Ill. 2005). Accord Trotter v. Harleysville Ins.
Co., 821 F.3d 916, 918 (7th Cir. 2016)
(“Under Illinois law, a provision in an insurance
policy is ambiguous only when it is susceptible to more than
one reasonable interpretation.”). A court should not
strain to find an ambiguity where none exists. Berg,
831 F.3d at 429, quoting Founders Ins. Co. v. Munoz,
930 N.E.2d 999, 1004 (Ill. 2010).
any policy provision that limits or excludes coverage
“must be construed liberally in favor of the insured
and against the insurer” and applied only if its terms
are clear, definite, and specific. Berg, 831 F.3d at
429, quoting DeSaga, 910 N.E.2d at 164, and
Gillen, 830 N.E.2d at 582. The undersigned also
bears in mind that the court must construe an insurance
policy as a whole, “taking into account the type of
insurance for which the parties have contracted, the risks
undertaken and purchased, the subject matter that is insured,
and the purposes of the entire contract.”
Westfield Ins. Co. v. Vandenberg, 796 F.3d 773, 778
(7th Cir. 2015), quoting Crum & Forster
Managers Corp. v. Resolution Tr. Corp., 620 N.E.2d 1073,
1078 (Ill. 1993).
Rule of Civil Procedure 56 governs motions for summary
judgment. Summary judgment is appropriate where the
admissible evidence shows that there is no genuine dispute as
to any material fact, and the movant is entitled to judgment
as a matter of law. Taylor-Novotny v. Health Alliance
Medical Plans, Inc., 772 F.3d 478, 488 (7th
Cir. 2014). Accord Archdiocese of Milwaukee v. Doe,
743 F.3d 1101, 1105 (7thCir. 2014),
citing Fed. R. Civ. P. 56. A "material
fact" is a fact that affects the outcome of the lawsuit,
i.e., it is outcome-determinative under the applicable
substantive law. Taylor-Novotny, 772 F.3d at 488;
Hanover Ins. Co. v. Northern Bldg. Co., 751 F.3d
788, 791 (7th Cir.), cert. denied, 135
S.Ct. 280 (2014).
genuine issue of material fact remains (and summary judgment
should be denied), “if the evidence is such that a
reasonable jury could return a verdict for the nonmoving
party.” Miller v. Gonzalez, 761 F.3d 822, 827
(7th Cir. 2014), quoting Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). However, if the
factual record taken as a whole could not lead a reasonable
jury to find for the non-moving party, there is nothing for
the jury to do, and summary judgment is properly granted.
Bunn v. Khoury Enterprises, Inc., 753 F.3d 676, 682
(7th Cir. 2014), citing Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
assessing whether a genuine issue of material fact exists,
this Court views the record in the light most favorable to
the non-moving party. Bunn, 753 F.3d at 682. See
also 520 South Michigan Ave. Associates, Ltd. v. Unite Here
Local 1, 760 F.3d 708, 718 (7th Cir. 2014).
The undersigned examines the competent evidence of record
“in the light reasonably most favorable to the
non-moving party, ” giving the non-movant the benefit
of reasonable, favorable inferences and resolving conflicts
in the evidence in the non-movant's favor. Spaine v.
Community Contacts, Inc., 756 F.3d 542, 544
(7th Cir. 2014).
cross-motions for summary judgment, the court construes all
facts and reasonable inferences derived from those facts
“in favor of the party against whom the motion under
consideration was made.” Great West Cas. Co. v.
Robbins, 833 F.3d 711, 715 (7th Cir. 2016),
quoting Clarendon Nat. Ins. Co. v. Medina, 645 F.3d
928, 933 (7th Cir. 2011). In other words, the
undersigned views the facts and reasonable inferences in the
light most favorable to the nonmovant on each motion.
Lalowski v. City of Des Plaines, 789 F.3d 784, 787
(7th Cir. 2015).
ultimate question presented by this case is whether CIC has a
duty to defend and/or a duty to indemnify
Menards in the underlying action. In its summary judgment
motion, CIC seeks a declaration that it owes neither duty
because Menards' breached the notice condition of the
policies (Doc. 36, p. 2). In its cross-motion, Menards asks
the undersigned to declare that omnibus coverage is afforded
to Menards, that CIC owes a duty to defend Menard's in
the underlying lawsuit, and that CIC should reimburse Menards
for attorney fees and costs incurred in defending that action
(Doc. 38, p. 15).
general principles regarding these duties warrant mention.
The starting point is the oft-quoted principle of Illinois
law that an insurer's duty to defend is “much
broader” than its duty to indemnify. Landmark
American Ins. Co. v. Hilger, 838 F.3d 821, 824
(7th Cir. 2016). The insurer's duty to defend
depends on the allegations of the complaint, as opposed to
what is actually proved. Selective Ins., 845 F.3d at
duty to defend exists if the factual allegations of the
underlying complaint fall within or potentially fall
within policy coverage. Id., citing Amerisure Mut. Ins.
Co. v. Microplastics, Inc., 622 F.3d 806, 810
(7th Cir. 2010). The Court examines the factual
allegations and policy terms keeping in mind that ambiguities
are resolved against the insurer. However, this principle
favoring the insured “must ‘yield to the
paramount rule of reasonable construction which guides all
contract interpretations.'” Selective
Ins., 845 F.3d at 269, quoting Amerisure, 622
F.3d at 811.
weeks ago, the Seventh Circuit reiterated:
“A duty to defend will arise when the allegations of
the underlying complaint may potentially come within the
coverage of the policy.” Westfield Ins. Co. v. West
Van Buren, LLC, … 59 N.E.3d 877, 882 (2016). The
insurer may not simply refuse to defend a suit against its
insured unless it is clear from the underlying complaint
“that the allegations fail to state facts which bring
the case within, or potentially within, the policy's
coverage.” Employers Ins. of Wausau v. Ehlco
Liquidating Trust, … 708 N.E.2d 1122, 1136
In deciding whether an insurer breached its duty, Illinois
courts ordinarily apply the “eight-corners” rule:
“the court ‘compares the four corners of the
underlying complaint with the four corners of the insurance
policy to determine whether facts alleged in the underlying
complaint fall within or potentially within
coverage.'” American Alternative Ins. Corp. v.
Metro Paramedic Services, Inc., 829 F.3d 509, 513-14
(7th Cir. 2016)….
Title Industry, 853 F.3d at 883.
insurer “tries to deny coverage without seeking a
declaratory judgment or defending under a reservation of
rights, ” the court's inquiry is “necessarily
limited to the allegations of the underlying
complaint.” If the insurer files a declaratory judgment
action, that limitation does not apply. Selective
Ins., 845 F.3d at 269, citing Landmark, 838
F.3d at 824. In that instance, the trial court may look
beyond the underlying complaint and consider all
relevant facts contained in the pleadings (e.g., in a
third-party complaint or other evidence appropriate to a
motion for summary judgment) to determine if there is a duty
to defend. Selective Ins., 845 F.3d at 269,
citing Pekin Ins. Co. v. Wilson, 930 N.E.2d 1011,
1020 (Ill. 2010). See also Title Industry, 853 F.3d
at 884 (if declaratory judgment action is filed, court can
look beyond insurance policy and underlying complaint and
consider extrinsic evidence).
duty to indemnify is determined after liability has been
affixed. Nat'l Am. Ins. Co. v. Artisan Truckers Cas.
Co., 796 F.3d 717, 724 (7th Cir. 2015).
“The duty to indemnify arises only when the insured
becomes legally obligated to pay damages in the underlying
action” that gave rise to the claim under the policy.
Pekin, 930 N.E.2d at 1018, quoting Zurich Ins.
Co. v. Raymark Industries, Inc., 514 N.E.2d 150, 163
(Ill. 1987). Accord Allied Property & Cas. Ins. Co.
v. Metro North Condominium Ass'n, 850 F.3d 844, 847
(7th Cir. 2017) (Once the insured has incurred
liability on the underlying claim, the insurer's duty to
indemnify is triggered only if the insured's activity and
resulting loss or damage actually fall within policy
to the case at bar, CIC's amended complaint offers six
bases on which the Court could declare that CIC owes no duty
to Menards in the underlying action. CIC's summary
judgment motion pares this down to a single ground - Menard
breached the notice requirement in both insurance policies,
thereby forfeiting the right to any coverage.
Illinois law, a notice provision in an insurance policy is a
“condition precedent” to trigger the
insurer's contractual duties. AMCO Ins. Co. v. Erie
Ins. Exchange, 49 N.E.3d 900, 907-08 ( Ill. App. 2016).
If the insured fails to comply with the notice provision,
“the insurer may be relieved from its duty to defend
and indemnify the insured under the policy.”
Id., quoting Northern Ins. Co. of New York v.
City of Chicago, 759 N.E.2d 144, 149 ( Ill. App. 2001).
The Illinois Supreme Court has emphasized that insurance
policy notice provisions are not mere technical requirements.
They are valid prerequisites to coverage, conditions
precedent that trigger the insurer's contractual duties.
Country Mutual Ins. Co. v. Livorsi Marine, Inc., 856
N.E.2d 338, 341 (Ill. 2006); Zurich Ins. Co. v. Walsh
Construction Co. of Illinois, Inc., 816 N.E.2d 801, 805
purpose of an insurance policy notice requirement is to allow
the insurer to conduct a timely, thorough investigation of
the insured's claim and to gather and preserve possible
evidence. Commercial Underwriters Ins. Co. v. Aires
Environmental Services, Ltd., 259 F.3d 792,
795-96 (7th Cir. 2001); AMCO, 49 N.E.3d
at 908; Kerr v. Illinois Central R.R. Co., 670
N.E.2d 759, 767 (Ill. 1996). Accord Berglind v. Paintball
Business Ass'n, 930 N.E.2d 1036, 1044 ( Ill. App.
2010) (purpose of notice provision is to ensure the insurer
can timely investigate and defend claims against its
question, an insured must act diligently in providing notice
to its insurer. Berglind, 930 N.E.2d at 1044.
Illinois Supreme Court jurisprudence establishes that a
policy calling for notice “as soon as
practicable” means notice within a reasonable time, and
what constitutes a reasonable period of time is a
fact-dependent, case-by-case inquiry.
Id. “Breaching a policy's notice
clause by failing to give reasonable notice will defeat the
right of the insured party to recover under the
policy.” Country Mutual, 856 N.E.2d at 343,
citing Simmon v. Iowa Mutual Cas. Co., 121 N.E.2d
509 (Ill. 1954).
deciding whether notice was given within a reasonable time,
the court applies five factors: (1) the specific language of
the policy's notice provision, (2) the insured's
degree of sophistication in commerce and insurance matters,
(3) the insured's awareness that an occurrence under the
policy terms has taken place; (4) the insured's diligence
in ascertaining whether coverage is available; and (5) any
prejudice to the insurer. AMCO, 49 N.E.3d at 908;
Berglind, 930 N.E.2d at 1045; Country
Mutual, 856 N.E.2d at ...