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Scottsdale Insurance Co. v. Chris Carpentry Co.

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

December 22, 2019

SCOTTSDALE INSURANCE CO., Plaintiff,
v.
CHRIS CARPENTRY CO., KRYSIEK, YOWALKOWSKI, and JAN BRYJAK, Defendants.

          MEMORANDUM OPINION AND ORDER

          MATTHEW F. KENNELLY UNITED STATES DISTRICT JUDGE.

         This case involves an insurance coverage dispute. Scottsdale Insurance Company seeks a declaratory judgment that it has no duty to defend or indemnify Chris Carpentry Company or its owner, Krysiek Yowalkowski, in connection with a personal injury lawsuit against them by Jan Bryjak, who is also a defendant in the present case. Bryjak has moved for partial judgment on the pleadings under Federal Rule of Civil Procedure 12(c), and Yowalkowski has joined. For the reasons stated below, the Court denies the motion.

         Background

         Annually from 2012 through mid-2019, Scottsdale issued to Chris Carpentry a commercial general liability insurance policy, which Scottsdale and Chris Carpentry renewed each July. The policy at issue in this case (the Policy) provided coverage from July 17, 2017 to July 17, 2018. It contained an "Injury to Worker Exclusion Endorsement" stating that the Policy did not cover a bodily injury to certain persons, including employees, contractors, subcontractors, and sub-subcontractors, "if such 'bodily injury' arises out of and in the course of their employment or retention" as contractors, subcontractors, or sub-subcontractors, "regardless of whether or not [the injury] is caused in part by" Chris Carpentry. Am. Compl., dkt. no. 152, at 3. The Policy also included a provision stating that if Scottsdale initially defended an insured party or paid for the insured's defense but later determined that the claim was not covered by the policy, Scottsdale had "the right to reimbursement for the defense costs" it incurred. Id. at 4.

         Prior to July 2016, the commercial general liability insurance policies issued by Scottsdale to Chris Carpentry contained no Injury to Worker Exclusion Endorsement. Scottsdale added that Endorsement in the policy that took effect in July 2016. It is undisputed that the addition of the Endorsement was a material modification to the policy and that, when Scottsdale made the modification, Scottsdale did not provide Chris Carpentry with prior written notice of it.

         Jan Bryjak is a construction worker. He alleges that in March 2018, while working on a construction project in Hickory Hills, Illinois, he fell through a hole in a floor and sustained severe and permanent injuries. Chris Carpentry was a subcontractor engaged on the project. At the time of his injury, Bryjak was working for either Chris Carpentry or a sub-subcontractor, PTS Construction Services, Inc.

         On May 18, 2018, Bryjak filed a personal injury lawsuit in the Circuit Court of Cook County, Illinois in relation to his fall (the Underlying Lawsuit). In the Underlying Lawsuit, Bryjak asserts various claims against and seeks damages from Chris Carpentry and Yowalkowski, as well as the owner of the construction site and other contractors. Scottsdale is defending Chris Carpentry and Yowalkowski in the Underlying Lawsuit.

         In September 2018, Scottsdale sued Chris Carpentry, Yowalkowski, and Bryjak in this Court based on diversity jurisdiction. See 28 U.S.C. § 1332(a)(1). In its first amended complaint Scottsdale asserts five counts, in each of which it seeks a declaratory judgment regarding its duties in the Underlying Lawsuit. Only count 2 is relevant to the present order. In count 2, Scottsdale seeks a declaratory judgment finding that it has no duty to indemnify Chris Carpentry against any adverse judgment or settlement in the Underlying Lawsuit.

         Bryjak answered the amended complaint and attached Scottsdale's responses to Bryjak's requests to admit as exhibits. In those responses, Scottsdale asserted that it issued the Policy as a surplus line insurer and thus was not subject to requirements under the Illinois Insurance Code for material modifications to insurance policies, 215 ILCS 5/143.17a(b).

         Bryjak has moved for entry of judgment on the pleadings in its favor on Count 2. Yowalkowski has joined Bryjak's motion.

         Discussion

         "After the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings." Fed.R.Civ.P. 12(c). "To survive a motion for judgment on the pleadings (or a motion to dismiss), the complaint must state a claim to relief that is plausible on its face." ADM Alliance Nutrition, Inc. v. SGA Pharm Lab, Inc., 877 F.3d 742, 746 (7th Cir. 2017) (internal quotation marks omitted). "Judgment on the pleadings is appropriate when there are no disputed issues of material fact and it is clear that the moving party . . . is entitled to judgment as a matter of law." Unite Here Local 1 v. Hyatt Corp., 862 F.3d 588, 595 (7th Cir. 2017). In assessing the motion, a court is "confined to the matters presented in the pleadings" and "must consider those pleadings in the light most favorable to" the nonmoving party. Id.

         "The pleadings include the complaint, the answer, and any written instruments attached as exhibits." N. Indiana Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 452 (7th Cir. 1998) (citing Fed.R.Civ.P. 10(c)). On a motion for judgment on the pleadings, if "matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56." Fed.R.Civ.P. 12(d). In this case, the pleadings consist of the First Amended Complaint; the insurance policy Scottsdale issued to Chris Carpentry for the July 17, 2017 to July 17, 2018 period, attached as Exhibit A to the First Amended Complaint; the complaint in the Underlying Lawsuit and its exhibits, attached as Exhibit B to the First Amended Complaint; Bryjak's answer and four exhibits attached to it, including Scottsdale's responses to Bryjak's requests to admit; and Yowalkowski's answer. In response to Bryjak's motion for judgment on the pleadings, Scottsdale filed an opposition brief and attached an exhibit that is not part of the pleadings. The Court declines to treat Scottdale's opposition brief as a motion for summary judgment and thus will not consider the exhibit attached to that motion.

         The parties dispute whether Scottsdale issued the Policy to Chris Carpentry as an authorized or unauthorized insurer. To do business in Illinois, an insurer must obtain a certificate of authority from the state's Director of Insurance. 215 ILCS § 5/24. An insurer that holds such a certificate is considered an authorized insurer. Id. § 5/445(1). A party seeking insurance may be unable to obtain it from an authorized insurer, however, either because authorized insurers do not provide the desired type of coverage or because, after evaluating the insured's risk, they decline to provide coverage. See 50 Ill. Adm. Code § 2701.50(a) (describing situations where an insurance agent may fail to procure insurance after making a diligent effort); see also People ex rel. Madigan v. Illinois Commerce Comm'n, 231 Ill.2d 370, 380, 899 N.E.2d 227, 232 (2008) ("Administrative rules and regulations have the force and effect of law."). In those situations, the insured may procure insurance from an unauthorized insurer subject to certain requirements set forth in section 445 of the Illinois Insurance Code; insurance that meets those requirements is called surplus line insurance. 215 ILCS § 5/445(1)-(1.5); see also 50 Ill. Adm. Code § 2701.10; Corday's Dep't ...


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