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Magnetek, Inc. v. TTravelers Indemnity Company

United States District Court, N.D. Illinois, Eastern Division

July 11, 2019

MAGNETEK, INC., Plaintiff,



         Plaintiff Magnetek, Inc. brought a three count complaint against defendants The Travelers Indemnity Company and Travelers Casualty and Surety Company (together “Travelers”) seeking a declaration that defendants owe a duty to defend (Count I) and indemnify plaintiff (Count II) under certain insurance policies issued by defendants to plaintiff's predecessor. Count III is a claim for breach of contract. After the court denied Travelers' motion to dismiss for failure to name Velsicol Chemical LLC as a necessary party [Doc. 31], Travelers answered and filed a counter-claim, and Velsicol moved for and was granted leave to intervene as a defendant based on Travelers' assertion that Velsicol[1] has a duty to defend and indemnify it for any liability asserted in this action. Plaintiff has now moved for partial summary judgment on its claim that Travelers has a duty to defend it from certain underlying claims brought against Monsanto Company that Monsanto asserts plaintiff has a duty to defend and indemnify based on a “Special Undertaking” Agreement between plaintiff's predecessor and Monsanto. Travelers have countered with a cross-motion for summary judgment arguing that any duty it may have had has been released. For the reasons that follow, plaintiff's motion is granted, and defendant Travelers' motion is denied.


         This case presents a complicated background, made all the more complicated because none of the parties have bothered to include a narrative factual description of the case in their legal memoranda. Instead, the parties elected to rely on their Local Rule 56.1 Statements by incorporating them into their briefs. As this court has noted in the past, see e.g. Strychalski v. Baxter Healthcare, Corp., 2014 WL 1154030 *2 (N.D. Ill. March 20, 2014), this practice is both improper and poor lawyering. L.R. 56.1 Statements are not intended to be substitutes for a statement of facts section in a memorandum of law. L.R. 56.1 Statements are to be limited to the material facts and are not to be argumentative. A statement of facts section in a brief is the “‘litigant's opportunity to describe the underlying events, provide relevant background information, and persuade the court.'” Id. (quoting Sledge v. Comcast ABB Mgmt. LLC, 2012 WL 2368319 (N.D. Ill. 2012).

         The parties' failure to provide background sections in their briefs has left the court without a sufficient description of the underlying events leading to the contracts and documents on which plaintiff bases its claims and Travelers bases its defenses. The parties assume the court is as familiar as the parties with the underlying facts, jumping directly to their legal arguments without providing any context. “Rather than enlightening the court, the briefs have served only to confuse, focusing entirely on the narrow legal issues between the parties without providing sufficient background information to determine the import of those disputes.” Duchossois Indus., Inc. v. Crawford & Co., 2001 WL 59031, *1 (N.D. Ill. 2001). Despite the parties' failures, the court has examined the documents presented to the court, as well as other lawsuits between the parties to inform itself of the background leading to the instant dispute.

         In the late 1960s and early 1970s, Northwest Industries Inc. (“NWI”) (later known as Fruit of the Loom (“FOTL”) owned a company called Universal Manufacturing Corporation (“UMC”). UMC manufactured florescent light fixtures and ballast. UMC used polychlorinated biphenyls (“PCBs”) in its products. It purchased the PCBs from Monsanto Company (“Monsanto”). Because of the environmental hazards posed by the use of PCBs, in 1972 Monsanto threatened to cut off UMCs supply unless UMC agreed to enter into a “Special Undertaking” in which UMC agreed to “defend, indemnify, and hold harmless Monsanto, its present, past and future directors, officers, employees and agents, from and against any and all liabilities, claims, damages, penalties, actions, suits, losses, costs and expenses arising out of or in connection with the receipt, purchase, possession, handling, use, sale or disposition of any such PCBs . . ..”

         At least in part as a result of UMC entering the Special Undertaking, its parent, FOTL, purchased from Travelers several general liability insurance policies for itself and its subsidiaries, including UMC, which was a named insured on eight separate policies covering October 1, 1969 through October 1, 1970, October 1, 1970 through October 1, 1973, October 1, 1969 through October 1, 1973, October 1, 1973 through October 1, 1974, October 1, 1974 through October 1, 1976, October 1, 1973 through October 1, 1976, October 1, 1976 through November 1, 1978 and October 1, 1976 through November 1, 1978.

         In January 1986, FOTL sold UMC to plaintiff pursuant to a Stock Purchase Agreement (“SPA”). At the same time, those parties entered into a separate “Environmental Agreement” to deal with separate environmental matters, particularly with respect to environmental clean-up obligations at UMC's facilities.

         In the following years, FOTL submitted numerous insurance claims to Travelers under the policies in question, arising out of both UMC's pre-sale activities, as well as claims on behalf of other named insureds. Many of the claims were disputed and resulted in litigation. See Velsicol Chem., LLC v. Magnetek, Inc., 2017 WL 2311245 (N.D. Ill. 2017); FOTL v. Travelers Insurance Co., 284 Ill.App.3d 485, 495 (1st Dist. 1996). In particular, in the early 1990s FOTL submitted to Travelers certain “Velsicol Environmental Damage Claims” requesting that Travelers defend and indemnify FOTL with respect to those claims. Velsicol was an additional named insured with separate limits of liability under each of the policies. Travelers disputed coverage over the claims, resulting in two lawsuits: (1) FOTL v. Travelers Indemnify Co., No. 91-C-7874 in the Northern District of Illinois; and (2) NWI Land Mgmt Corp. f/k/n Northwest Indus., Inc. v. Travelers, 95 CH 2912, in the Circuit Court of Cook County, Illinois. In 1999, Velsicol, FOTL and Travelers entered a settlement agreement resolving their disputes as to coverage of the Velsicol Environmental Claims, with Travelers essentially paying to FOTL the remaining Velsicol policy limits and FOTL agreeing to indemnify Travelers from any further claims.

         After the 1999 agreement, another dispute arose between Velsicol, FOTL and Travelers, this time dealing with certain “Asbestos Bodily Injury Claims” that had been brought against Velsicol. That dispute resulted in a lawsuit in the Circuit Court of Cook County entitled FOTL v. Transportation Ins. Co., 97 L 01355 (the “Illinois action”). On June 11, 2004, the parties entered into a “Settlement and Release Agreement” by which they attempted to settle “all claims including, without limitation, Environmental Contamination Claims, Asbestos Bodily Injury claims, the policies and the rights and duties of the parties thereunder as well as matters that were or might have been raised in the Illinoi action.” It is this Settlement and Release Agreement that forms the basis of Travelers defense to plaintiff's motion for summary judgment and its own cross-motion for summary judgment.

         Meanwhile, a number of claimants have filed lawsuits or otherwise asserted claims against Monsanto's successors and affiliates (“New Monsanto”) alleging bodily injury and property damage caused by pollution from PCBs that Monsanto had manufactured back in the 1970s. On August 31, 2016, lawyers representing both New and Old Monsanto wrote to plaintiff demanding that plaintiff defend, indemnify, and hold harmless Old Monsanto in connection with all current and future PCB- related litigation in which Old Monsanto is or will be named as a defendant, and for the amount of any resulting judgments and settlements to the full extent required by the Special Undertaking. The letter formerly tendered the defense of a number of listed lawsuits. The letter indicated that Old Monsanto “would welcome the opportunity to discuss the PCB-related litigation . . . and the scope of [plaintiff's] obligations under the Special Undertaking.” The letter further indicated that “New Monsanto expects to put a process in place for the resolution of this obligation, and those obligations of other similarly situated parties.”

         On September 7, 2016, plaintiff tendered notice of the Monsanto demand to Travelers and requested that Travelers defend and indemnify plaintiff under the applicable Travelers' policies. Travelers in turn, tendered plaintiff's demand to Velsicol pursuant to the 1999 and 2004 settlement agreements.

         Neither Travelers nor Velsicol agreed to plaintiff's demands, so on April 27, 2017, plaintiff filed the instant action seeking defense and indemnity. In addition, to protect itself, two weeks after filing the instant action, plaintiff sued Monsanto in New Jersey (the “NJ Action”) seeking a declaration that it has no duty to defend nor indemnify Monsanto in the underlying suits brought against Monsanto. Several months later, Monsanto responded by suing plaintiff in Missouri (the “Missouri Action”) seeking a declaration that plaintiff owes it a duty to defend and indemnify.


         Plaintiff and Travelers have filed cross-motions for summary judgment on plaintiff's claim in Count I that Travelers has a duty to defend plaintiff in the “underlying actions.” Summary judgment is appropriate when the moving papers and affidavits show that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once a moving party has met its burden, the nonmovant must go beyond the pleadings and set forth specific facts showing that there is a genuine issue for trial. See Fed.R.Civ.P. 56(c); Becker v. Tenenbaum-Hill Assoc., Inc., 914 F.2d 107, 110 (7th Cir. 1990). The court considers the evidence as a whole and draws all reasonable inferences in the light most favorable to the party opposing the motion. Green v. Carlson, 826 F.2d 647, 651 (7th Cir. 1987).

         A genuine issue of material fact exists when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The nonmoving party must, however, do more than simply show that there is some metaphysical doubt about the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). “The mere existence of a scintilla of evidence in support of the [nonmoving party's] position will be insufficient, there must be some evidence on which the jury could reasonably find for the [nonmoving party].” Anderson, 477 U.S. at 252.

         In the instant case there are few, if any, facts in dispute. The policies in question have been provided to the court, as have the SPA and the Environmental Agreement transferring UMC to plaintiff, as well as the settlements and release documents relied on by Travelers and Velsicol. The interpretation of an unambiguous contract is a question of law, and therefore a dispute over the terms of an unambiguous contract is suited to disposition on summary judgment. Utility Audit, Inc. v. Horace Mann Serv. Corp., 383 F.3d 683, 687 (7th Cir. 2004). Under Illinois law, which all parties agree applies in this case, the construction of an insurance policy and any determination of the rights and obligations under the policy, including the scope of an insurers' duty to defend, are questions of law appropriate for resolution on summary judgment. Crum & Forster Managers Corp. v. Resolution Trust Co., 156 Ill.2d 384, 391 (1993). In construing an insurance policy, the court is to ascertain and enforce the intensions of the parties as expressed in the agreement. Id. To ascertain the parties' intent and the meaning of the words used in the policy, the court must construe the 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. Id. The court gives the words in the policy their plain ordinary meaning and does not search for ambiguity where none exists. Id.

         Under Illinois law, an “insurer's duty to defend its insured is much broader than its duty to indemnify.” Outboard Marine Corp. v. Liberty Mutual Ins., Co., 154 Ill.2d 90 (1992). To determine whether an insurer has a duty to defend its insured, the court compares the allegations in the underlying complaint with the relevant coverage provisions of the policy. Native Am. Arts, Inc. v. Hartford Cas. Ins. Co., 435 F.3d 729, 732 (7th Cir. 2006). If the facts alleged in the underlying action fall within, or even potentially within, the policy's coverage provisions the insurer must defend the insured. Id. The court must construe the allegations of the underlying complaint liberally and any doubt about coverage must be resolved in favor of the insured. Id. Additionally, if the underlying complaint asserts several theories of recovery ...

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