United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
S. SHAH UNITED STATES DISTRICT JUDGE.
have been problems at the house that Elements Architectural
Group designed for Stefen and Kristi Lippitz in Chicago. The
Lippitzes say holes in the planter boxes caused water damage
in the garage, flecks of metal were found lodged in the
picture windows, and the hot tub on the top floor sprung a
leak. They sent Elements three letters demanding money and
repairs before initiating a lawsuit in state court. When
Elements reported all of this to its insurance provider
(Wesco Insurance), Wesco denied coverage, saying Elements had
waited too long to tell them about it. Wesco then filed this
declaratory action and, while it was pending, reached an
agreement with the Lippitzes and Elements to settle their
underlying dispute. Elements says that, during those
settlement discussions (and again in open court), Wesco made
admissions that resolve all of the issues presented here.
Wesco and Elements have filed cross-motions for summary
judgment, both seeking a declaration that the other should
have to foot the bill for the defense of Elements in the
state- court suit. For the reasons discussed below,
Wesco's motion is granted and Elements's is denied.
judgment is appropriate if there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a
matter of law. Fed.R.Civ.P. 56(a). The moving party must show
that, after “construing all facts, and drawing all
reasonable inferences from those facts, in favor of the
non-moving party, ” United States v. P.H.
Glatfelter Co., 768 F.3d 662, 668 (7th Cir. 2014), a
“reasonable jury could not return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). The moving party is also
entitled to summary judgment when the “nonmoving party
has failed to make a sufficient showing on an essential
element of her case with respect to which she has the burden
of proof.” Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986). These same rules apply equally to
cross-motions for summary judgment, Blow v. Bijora,
Inc., 855 F.3d 793, 797 (7th Cir. 2017), and I may
consider evidence from one motion when deciding the other.
Torry v. City of Chicago, 932 F.3d 579, 584 (7th
Cir. 2019). In deciding a motion for summary judgment that
calls for the interpretation and application of a contract in
a declaratory judgment action, when the terms of the contract
are “clear and unambiguous, ” the contract should
be construed and applied according to its literal terms.
Elkhart Lake's Rd. Am., Inc. v. Chicago Historic
Races, Ltd., 158 F.3d 970, 972 (7th Cir. 1998).
and counter-defendant Wesco Insurance Company issued
defendant and counter-claimant Elements Architectural Group
Inc. two professional liability insurance policies. 
¶¶ 8, 9. The first had a policy period spanning
from November 6, 2015, to November 6, 2016.  ¶ 8.
The second (a renewal of the first) spanned from November 6,
2016, to November 6, 2017.  ¶ 9.
to both policies, Wesco agreed to indemnify Elements against
claims that were made against it for damages “for
wrongful acts arising out of the performance of professional
services for others, ” and to defend Elements against
all “covered claims.”  ¶ 10. The
policies define “claim” to mean “a demand
received by [Elements] for money, damages, or professional
services alleging a wrongful act arising out of the
performance of professional services or contracting
services.”  ¶ 11. And the policies say that
the insurance only applies to a “wrongful act” if
the claim arising out of the wrongful act is “first
made against [Elements] during the policy period” and
reported in writing “no later than 60 days after the
end of the policy period or, if applicable, during an
extended claims reporting period.”  ¶ 10.
See also  ¶ 13 (Elements was also
obligated to report any potential claims “as soon as
practicable during the policy period”).
policies treat “[t]wo or more covered claims arising
out of a single wrongful act or any series of related
wrongful acts” as a single claim.  ¶ 12. If a
claim was made-not reported, made-before the effective date
of the second policy (i.e., before November 6, 2016,
see [1-2] at 4-5), the second policy does not
provide coverage for any claim made after the effective date
that is “based upon the same or related wrongful
acts.”  ¶ 12.
Lippitzes and Elements entered into a contract for Elements
to provide professional architectural design services to
design a house on West Stratford Court in Chicago. 
¶ 3;  ¶ 14. Elements designed the house and
construction was completed in 2011.  ¶ 15. A few
years later, when a leak developed in a planter that Elements
had designed, the Lippitzes asked Elements and the general
contractor to investigate. See  ¶ 16.
Elements obliged,  ¶ 1,  but nonetheless, in July of
2016, the Lippitzes sent Elements a letter in which they
claimed that the planter was defective and had caused water
to collect under their deck and damage their garage. 
¶ 17. The Lippitzes considered Elements to be one of the
liable parties (along with the construction firm), 
¶ 18, and sought $64, 070 in damages.  ¶ 19.
They characterized their letter as a “claim”
against Elements and said that they planned to sue Elements
if the requested payment was not received within fourteen
days.  ¶ 19; [1-3] at 2. But at the end of that
fourteen-day period, they did not file a lawsuit (or follow
up on their letter). See  ¶¶ 19-20;
 ¶ 4. Elements did not report the July 2016 letter
to Wesco before November 6, 2016 (the end of the first policy
period).  ¶ 25.
February of 2017, the Lippitzes sent a second letter, this
time demanding arbitration and $92, 000.  ¶¶
21, 22; [1-5] at 1. Attached to that letter was a
“statement of claim” that included descriptions
of unsatisfactory picture windows (also designed by Elements,
also mentioned in the July 2016 letter, see [1-3] at
2) and the water damage that had resulted from the planters.
[1-5] at 3. The Lippitzes served a copy of the letter on
Elements, [1-5] at 5-6, but never filed an official claim
with the American Arbitration Association.  ¶ 5.
Elements did not report the February 2017 demand to Wesco
until August of 2017. See  ¶ 25.
August of 2017, the Lippitzes circulated a second demand for
arbitration, this time seeking $200, 000 in damages. 
¶¶ 23-24. That demand attached an estimate from a
restoration company that included costs associated with
repairing both the garage and a hot tub located on the top
level deck of the house. [1-6] at 36- 40. Thirteen days after
receiving the second arbitration demand, Elements made its
first report to Wesco about the defective-design claims. 
¶ 25;  ¶ 11. Wesco denied tender of the claim,
denied that it had a duty to defend Elements against the
claim, and denied that it had a duty to indemnify Elements.
See  ¶ 12. Instead, seven months after
receiving notice of the claim, Wesco filed this lawsuit
seeking a declaration as to its duties under the policies.
See  ¶ 26. Shortly thereafter, the
Lippitzes filed an action for professional malpractice
against Elements in Cook County.  ¶ 27.
Elements, and the Lippitzes eventually attended mediation and
reached an agreement in principle to resolve both the
state-court lawsuit and any obligation Wesco had to
“indemnify Elements in connection with the
Lippitzes' claim.”  ¶ 32. That agreement
has still not been finalized. See  ¶ 33;
 ¶¶ 2, 3. An unsigned document (titled,
“confidential agreement and release”) states that
neither the release nor the consideration provided for
therein “is intended to be or should be construed as an
admission by any of the [parties to the agreement] of any
obligation, fault, wrongdoing or liability whatsoever.”
[31-5] at 4, § VII.C. It also says that the purpose of
the release is “to avoid the risks, burdens, and
expenses attendant upon litigation, to cease certain
adversarial relationships among [the parties to the
agreement] and to settle and release the matters and
claims.” [31-5] at 1. It refers to both the state-court
malpractice suit and this declaratory judgment case.
Id. at 1, 2. The matters and claims covered include
“any and all claims for coverage under the Wesco
Policies arising out of” the lawsuit in state court.
[31-5] at 2 § I.A. There is one exception: the agreement
does not purport to settle “Elements' claim for
defense costs incurred in the Underlying Action until its
dismissal.” Id. See also  ¶
5 (Wesco has “agreed to compromise the portion of its
declaratory judgment action … against Elements and the
Lippitzes regarding Wesco's duty to indemnify”).
weeks after that mediation, during a status hearing in this
case, counsel for Wesco reported that the parties were
“close to a settlement” of the state-court case
and that Wesco “believe[d]” that the parties had
reached a “settlement in principle” that
“should also dispose of this case.”  at
2:13-17. Counsel for Elements said that the malpractice case
against Elements had been resolved and that, as far as
Elements was concerned, the resolution “satisfie[d] the
indemnity issue on the coverage part of the case but leaves
unaddressed the duty-to-defend issue.” Id. at
3:3-7. Elements acknowledged that Wesco disagreed with that
understanding.  at 3:4-6.
is an Illinois Corporation with its principal place of
business in Cook County, Illinois.  ¶ 2. Wesco is a
Delaware corporation with its principal place of business in
New York.  ¶ 1. The Lippitzes's demands exceeded
$200, 000 at the time this case was filed, see 
¶ 5, and evidence in the record substantiates those
demands. See, e.g., [1-6] at 37-40. I have
jurisdiction under 28 U.S.C. § 1332(a). Wesco and
Elements disagree over whether the former owes a duty to
defend and indemnify Elements against certain claims
submitted in relation to a set of insurance policies.
See  ...