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Hartford Casualty Insurance Co. v. Hench Control Corp.

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

September 12, 2019

HARTFORD CASUALTY INSURANCE COMPANY, Plaintiff,
v.
HENCH CONTROL CORPORATION, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          ANDREA R. WOOD UNITED STATES DISTRICT JUDGE

         This case concerns an insurance coverage dispute over whether Plaintiff Hartford Casualty Insurance Company (“Hartford”) has a duty to defend, indemnify, or pay judgments against Defendants Hench Control Corporation (“Hench I”), Hench Control, Inc. (“Hench II”), and Caesar-Verona, Inc. (“Caesar-Verona”) (collectively, “Hench”)[1] in connection with a breach of contract lawsuit filed by Defendant Dual-Temp of Illinois (“Dual-Temp”). Dual-Temp had contracted to build a refrigeration system for a customer. As part of that project, Dual-Temp hired Hench to design and provide a refrigeration control system (“RCS”), a piece of equipment that controls temperature. However, Dual-Temp subsequently had to hire a third party to repair the RCS provided by Hench because the RCS did not work properly. Dual-Temp then sued Hench for breach of contract (“2009 case”) and prevailed after a bench trial. In the instant lawsuit, Hartford seeks a declaratory judgment that it is not obligated to defend or indemnify Hench, nor is it required to pay Dual-Temp's award, with respect to the 2009 case. Before the Court are the parties' cross-motions for summary judgment. (Dkt. Nos. 41, 44.)[2] For the reasons set forth below, the Court grants Hartford's motion and denies Dual-Temp's motion.

         BACKGROUND

         Unless otherwise noted, the following facts are undisputed.

         The Policies

         Hartford and Hench I entered into a liability insurance agreement, policy number 57 SBN LP1764, which was effective March 31, 2006 through March 1, 2007 (“Hench I Policy”). (Pl.'s Corrected R. 56.1(a)(3) Stmt. of Mat. Facts in Support of its Mot. for Summ. J. (“PSMF”) ¶ 42, Dkt. No. 43.)[3] After Caesar-Verona purchased Hench I's assets and began doing business under the Hench name, Hartford issued a separate liability insurance policy numbered 57 SBA RH8556 to “Caesar-Verona Inc. DBA Hench Control, Inc, ” which was effective March 31, 2007 through April 8, 2010 (“Caesar-Verona Policy, ” together with the Hench I Policy, the “Policies”). (Id. ¶ 43.) The Policies provided coverage for “those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury,' ‘property damage' or ‘personal and advertising injury' to which this insurance applies, ” but only if the injury or damage “is caused by an ‘occurrence' that takes place in the ‘coverage territory'” and “occurs during the policy period.”

         (Id. ¶ 44(A).) An “occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” (Id. ¶ 44(G)(16).)

         Each of the Policies also contain an Exclusions section that limits the scope of coverage. For example, the Policies expressly exclude damages stemming from “Contractual Liability, ” which is defined as injuries or damage “for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement.” (Id. ¶ 44(B)(1)(b).) The Exclusions section also provides that the policy does not apply where the claimed property damage is “any property that must be restored, repaired or replaced because ‘your work' was incorrectly performed on it, ” or where the damage is incurred by “‘your product.'” (Id. ¶ 44(B)(1)(k).) Furthermore, the Exclusions section includes “Damage To Impaired Property Or Property Not Physically Injured, ” which is defined as “[a] defect, deficiency, inadequacy or dangerous condition in ‘your product' or ‘your work'; or [a] delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.” (Id. ¶ 44(B)(1)(n).) Finally, the Exclusions section withholds coverage for the “Recall Of Products, Work Or Impaired Property”:

Damages claimed for any loss, cost or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of:
(1) “Your product”;
(2) “Your work”; or
(3) “Impaired property[”];
If such product, work, or property is withdrawn or recalled from the market or from use by any person or organization because of a known or suspected defect, deficiency, ...

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