Honorable Edmond E. Chang, United States District Judge.
Serra International and the Serra International Foundation (for convenience's sake, referred to as Serra in this opinion) hired Teledec Limited to do some information-technology work. Teledec worked with Serra until Serra stopped paying. Teledec then sued. Once sued, Serra turned to its insurers, Sentinel Insurance Company and Hartford Casualty, seeking coverage and a defense against Teledec's claims. The insurers refused coverage and sued Serra and Teledec in this Court, seeking a declaration supporting their refusal.
The insurers are right. None of the three types of coverage available under the policies — "bodily injury," "property damage," and "personal and advertising injury" — are triggered by Teledec's lawsuit against Serra. Serra implicitly concedes that bodily injury coverage is not applicable. Property damage coverage is precluded by an exclusion. And the absence of a triggering "offense" blocks out personal and advertising injury coverage.
There are five relevant parties. Sentinel is an insurance company. R. 25, Serra's Rule 56.1 Statement ¶ 1.
From 2008 to 2014, Teledec provided Serra with certain of its "goods and services." State-Court Answer ¶ 10. Then Teledec sued both Serra entities alleging, among other things, nonpayment for those goods and services. State-Court Complaint at 1. Because insurance coverage — the ultimate issue in this case — turns on Teledec's claims and allegations against Serra, they are worth describing in detail:
Facing these allegations, Serra turned to its insurance carriers for defense and coverage. Serra's Rule 56.1 Statement ¶ 21. (Hartford is Serra's insurer. Id. ¶ 18. Sentinel is the Foundation's insurer. Id.) There are four relevant policies; each provides coverage under a "Business Liability Coverage Form" and an "Umbrella Liability Coverage Form." R. 22-2, 22-3, 22-4, 22-5. Each Serra entity is the named insured in two of the four policies. Id. Conveniently, the parties have briefed the case as though all the policies are identical — as if there was really only one insured and one policy. R. 22, Insurers' Rule 56.1 Statement ¶¶ 19-20 (quoting one
Multiple policies notwithstanding, both insurers denied coverage. Serra's Rule 56.1 Statement ¶ 21. To back up their denials, the insurers filed this lawsuit. R. 1, Compl. They seek declarations that they owe no duty to defend or indemnify Serra in connection with Teledec's lawsuit. Id. ¶ 1. Hartford and Sentinel, on the one hand, and Serra and the Foundation, on the other, have filed cross motions for summary judgment. R. 20, Insurers' Mot. for Summ. J.; R. 23, Serra's Mot. for Summ. J. The insurers want the declaration they sued for. Insurers' Mot. for Summ. J. ¶ 3. Serra wants to establish that the insurers are not entitled to that declaration. Serra's Mot. for Summ. J. ¶ 2.
Summary judgment is proper "if the movant shows that 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). A genuine dispute exists if "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, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In evaluating summary judgment motions, courts must view the facts and draw reasonable inferences in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). The Court may not weigh conflicting evidence or make credibility determinations, Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 704 (7th Cir.2011), and must consider only evidence that can "be presented in a form that would be admissible in evidence" at trial, Fed. R. Civ. P. 56(c)(2). The party seeking summary judgment has the initial burden of showing that there is no genuine dispute and that they are entitled to judgment as a matter of law. Carmichael v. Village of Palatine, 605 F.3d 451, 460 (7th Cir.2010); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Wheeler v. Lawson, 539 F.3d 629, 634 (7th Cir.2008). If this burden is met, the adverse party must then "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256, 106 S.Ct. 2505.
The parties agree that Illinois law applies. R. 21, Insurers' Br. at 3, n.3; R. 24, Serra's Resp. Br. at 4 (citing Illinois cases). "Under Illinois law, `[t]he construction of an insurance policy and a determination of the rights and obligations thereunder are questions of law for the court which are appropriate subjects for disposition by way of summary judgment.'" Scottsdale Ins. Co. v. Walsh Constr. Co., 2011 WL 4538456, at *2 (N.D.Ill. Sept. 29, 2011) (quoting Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill.2d 384, 189 Ill.Dec. 756, 620 N.E.2d 1073, 1079 (1998)).
To determine if an insurer must defend its insured, the Court compares "the underlying complaint and the language of the insurance policy," resolving "[a]ny doubts as to whether particular claims fall within the policy ... in favor of coverage." Nat'l Cas. Co. v. McFatridge, 604 F.3d 335, 338 (7th Cir.2010) (applying Illinois law) (internal citations and quotation
Many of Serra's coverage arguments are based on Serra's own state-court answer to Teledec's complaint and Serra's own counterclaim against Teledec. Serra's Resp. Br. at passim. But insurance coverage typically turns on the allegations in the complaint against the insured and nothing else. See generally Am. Econ. Ins. Co. v. Holabird & Root, 382 Ill.App.3d 1017, 320 Ill.Dec. 97, 886 N.E.2d 1166, 1172 (Ill.App. Ct.2008). That said, many Illinois Courts will consider outside information, including other pleadings, when deciding summary judgment motions dealing with coverage. Id. 320 Ill.Dec. 97, 886 N.E.2d at 1172-79 (collecting and describing cases). Serra relies on these cases, but that reliance is misplaced.
Illinois insurance law's willingness to look beyond the underlying complaint has limits. One is that the insured cannot establish coverage using its own pleadings from the underlying action. See, e.g., Nat'l Fire Ins. of Hartford v. Walsh Constr. Co., 392 Ill.App.3d 312, 330 Ill.Dec. 572, 909 N.E.2d 285, 292-94 (Ill.App.Ct. 2009) (rejecting insured's attempt to base coverage on insured's own pleading) (citing Am. Econ. Ins. Co. v. DePaul University, 383 Ill.App.3d 172, 321 Ill.Dec. 860, 890 N.E.2d 582 (Ill.App.Ct.2008)); see also Lexmark Int'l, Inc. v. Transp. Ins. Co., 327 Ill.App.3d 128, 260 Ill.Dec. 658, 761 N.E.2d 1214, 1222 (Ill.App.Ct.2001) ("The exception ... was not meant to be applied... where the only extraneous facts are supplied by the insured."). Serra has cited no cases holding otherwise. Serra's Resp. Br. at 5. So Serra's arguments based on its own pleadings must be rejected.
Having set aside Serra's arguments based on its own pleadings, the Court now compares Teledec's state-court complaint against Serra with the insurance policies to determine coverage. The policies here provide coverage for (1) bodily injury caused by an occurrence, (2) personal or advertising injury caused by an offense, and (3) property damage caused by an occurrence. R. 22-2, Sentinel Policy at 76, Business Liability Coverage Form § A.1.b.(1).(a) & (2). Not one of these three types of coverage applies to Teledec's claims against Serra.
The insurers have no duty to defend or indemnify Serra based on the policies' bodily injury coverage because Serra has waived any arguments for that coverage. "[I]t is a well-settled rule that a party opposing summary judgment must inform the trial judge of the reasons, legal or factual, why summary judgment should not be entered.... If the opposing party fails to do so, the claim is deemed waived and the nonmoving party will lose the motion." De v. City of Chicago, 912 F.Supp.2d 709, 733 (N.D.Ill.2012) (internal citations omitted) (collecting cases). Here, the insurers argued that Serra could not make a case for bodily injury coverage. Insurers' Br. at 2 ("[The] Teledec suit does not assert a claim for damages because of
Next, Serra is not entitled to coverage for personal and advertising injury for two reasons. First, the coverage extends to personal and advertising injury only if caused by one or more listed "offenses." Sentinel Policy at 76, Business Liability Coverage Form § G.17. But, as the insurers point out, the "Teledec suit does not allege any of the enumerated `personal and advertising injury' offenses." Insurers' Br. at 9. This defeats coverage. Second, even if Teledec had alleged one of the listed offenses against it, Serra would still lose because they failed to respond to the insurers' argument on this point. De, 912 F.Supp.2d at 733 (on pain of waiver, party opposing summary judgment "must inform the trial judge of the reasons ... why summary judgment should not be entered summary judgment"); Insurers' Reply Br. at 11 ("[Serra] fail[s] to point to any specific allegations in the underlying complaint that fall within an enumerated offense...."). Just like Serra's failure to expressly argue for bodily-injury coverage, Serra's silence in the face of the insurers' arguments amounts to waiver.
Serra is not entitled to the coverage in its policies for property damage because of the care, custody, or control exclusion to that type of coverage. Under that exclusion, the policies do "not apply to `[p]roperty damage' to [p]ersonal property in the care, custody or control of the insured." Sentinel Policy at 82, Business Liability Coverage Form § B.1.k.(4). The exclusion applies to property that (1) is "within the possessory control of the insured at the time of the loss," and (2) that "is a necessary element of the work performed" by the insured. Liberty Mut. Ins. Co. v. Zurich Ins. Co., 402 Ill.App.3d 37, 341 Ill.Dec. 363, 930 N.E.2d 573, 576-77 (Ill.App.Ct.2010) (quoting Caisson Corp. v. Home Indemnity Corp., 151 Ill.App.3d 130, 104 Ill.Dec. 508, 502 N.E.2d 1168 (Ill. App.Ct.1986)) (affirming judgment on the pleadings for an insurer based on the exclusion); Essex Ins. Co. v. Wright, 371 Ill.App.3d 437, 308 Ill.Dec. 991, 862 N.E.2d 1194, 1197 (Ill.App.Ct.2007) (affirming summary judgment to insurer based on the exclusion); see also Nationwide Ins. Co. v. Central Laborers' Pension Fund, 704 F.3d 522, 525-27 (7th Cir.2013) (applying same test).
Both requirements for the exclusion's applicability are satisfied here. Teledec alleges that the Serra is "currently and wrongfully in exclusive possession of" all
That said, it could have been argued, at least as to the "work performed" requirement, that the complaint and work orders are insufficient to meet the insurers' high burden to show that the exclusion applies. See Santa's Best, 611 F.3d at 348 ("[I]f an insurer relies on an exclusion, it must be `clear and free from doubt' that the exclusion applies.") (quoting St. Paul Fire & Marine Ins. Co. v. Antel Corp., 387 Ill.App.3d 158, 326 Ill.Dec. 516, 899 N.E.2d 1167, 1176 (Ill.App.Ct.2008)). But Serra waived this argument because it did not address either requirement at all in its brief. See Nationwide Ins., 704 F.3d at 527 & n. 5 (recognizing insured's waiver of "necessary to the work performed" arguments).
Rather than address the exclusions' requirements, Serra made three off-target arguments. First, Serra argues that exclusion cannot apply because the ownership of the property is in dispute. Serra's Resp. Br. at 10-11. But ownership is irrelevant. Insurer's Reply Br. at 10. The exclusion does not turn on ownership — it turns on "possessory control." Liberty Mut., 341 Ill.Dec. 363, 930 N.E.2d at 576-77. Second, Serra argues that the exclusion does not apply because "[i]ndeed, at this point in the lawsuit, there is an equal possibility under the parties' allegations that the property at issue was damaged outside of the care, custody, or control of SERRA." Serra's Resp. Br. at 10-11. But Serra cites nothing to support this and it contradicts Teledec's complaint. State-Court Complaint ¶ 61 (alleging that Serra has the property in its "exclusive possession"). It is, of course, possible that Teledec's allegations are wrong, but absent proof that they are, the Court must rely on them to decide whether the insurers must defend Serra. Holabird & Root, 320 Ill.Dec. 97, 886 N.E.2d at 1172-79. Parties cannot rely on unsupported what-ifs to defeat summary judgment.
Finally, Serra cites Gen. Ins. Co. of Am. v. Clark Mall, Corp., 631 F.Supp.2d 968, 976 (N.D.Ill.2009). But Clark Mall is an extreme case that does not help Serra. There, the insurer argued for the exclusion but made "no reference to the Underlying Complaint at all." Id. at 976. And the complaint did not say whether the insured had possession of the property at issue at the time of the loss. Id. Here, by contrast, the insurers are relying on the underlying complaint to show that the exclusion applies and the complaint says explicitly that Serra has "exclusive possession" of the property. State-Court Complaint ¶ 61.
Serra's motion for summary judgment, R. 23, is denied. The insurers' motion for summary judgment, R. 20, is granted as to Counts 1 (bodily injury), 3 (personal and advertising injury), and 7 (care, custody, or control exclusion & property damage). Victory on those counts provides the insurers with all the relief they requested by this lawsuit, so the remaining counts are dismissed and the case will be terminated and a declaratory judgment entered in the insurers' favor.