Cincinnati Ins. Co. v. Menards, Inc., Case No. 16-cv-0666-MJR-SCW

CINCINNATI INSURANCE CO., Plaintiff, v. MENARDS, INC., and DARIN SIGLER, Defendants.

Case No. 16-cv-0666-MJR-SCW

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ILLINOIS

June 9, 2017

MEMORANDUM AND ORDER

Chief Judge Reagan:

A. Procedural Background and Summary of Key Allegations

On May 20, 2014, in the parking lot of the Menards home improvement store in Marion, Illinois, Darin Sigler was standing next to a pickup truck -- a truck belonging to his girlfriend Barbara's stepfather (Ronald Gregory) -- when a forklift collided with the truck, causing the truck door to strike Sigler. According to Menards, Sigler was helping his girlfriend pick up carpeting from the store, Sigler had Mr. Gregory's permission to drive the truck, the forklift was operated by a Menards employee (Anthony Parrino), Parrino was loading the carpet into the truck, and Sigler was injured in the collision. (Cincinnati Insurance Company takes issue with some of these allegations. See Doc. 42, pp. 2-4.)

Sigler filed suit on September 12, 2014 in the Circuit Court of Williamson County, Illinois, looking to recover for personal injuries he suffered in the collision. Sigler named Menards as the sole defendant and alleged that (through its employee) Menards was negligent in various ways that caused or contributed to the accident and to Sigler's injuries. Darin Sigler v. Menard, Inc., Case No. 2014-L-156 ("the underlying action").

On March 24, 2016, Menards tendered the defense of the underlying action to Cincinnati Insurance Company (CIC). Menards asserted that CIC issued an insurance policy to Ronald and Virginia Gregory which covered the truck. Claiming that it qualified as an insured under that policy, Menards sought defense and indemnity from CIC in the underlying action. CIC denied the tender of defense on April 7, 2016.

Two months later, in June 2016, CIC filed in this Court a complaint for declaratory judgment, naming Menards and Sigler as defendants. CIC seeks a declaration of the parties' rights and obligations under two insurance policies. The undersigned enjoys subject matter jurisdiction over the declaratory judgment action based on the federal diversity statute, 28 U.S.C. 1332.¹

Two insurance policies are in play. CIC issued a personal automobile liability policy to Ronald and Virginia Gregory effective October 1, 2013 through October 1, 2014, policy number A01-0546062 (the Auto Policy) and issued a personal umbrella liability policy to Ronald and Virginia Gregory effective October 1, 2013 through October 1, 2014, policy number U01-0546062 (the Umbrella Policy).

CIC's amended complaint filed on October 12, 2016 (Doc. 28) alleges that CIC has no duty to defend or indemnify Menards in the underlying action, because Menards is not a "covered person" under the Auto Policy (Count I), business exclusions in bothpolicies preclude coverage in the underlying action (Count II), an off-the-road vehicle exclusion in the Auto Policy applies to the forklift and precludes coverage for Menards in the underlying action (Count III), Menards failed to comply with notice requirements in both policies (Count IV), Menards has insurance with other carriers which renders the CIC policies "excess" and relieves CIC of the duty to defend Menards in the underlying action (Count V), and to the extent the Umbrella Policy provides any coverage to Menards in the underlying action, that coverage has not yet been triggered (Count VI).

Now before the Court are cross-motions for summary judgment filed by Plaintiff CIC (Docs. 36-37) and Defendant Menards (Doc. 38). Responses were filed on May 1, 2017 (Docs. 42-43) and reply briefs on May 23, 2017 (Docs. 45-46). As explained below, the Court denies in part CIC's motion (Doc. 36) and grants in part Menards' motion (Doc. 38).

B. Applicable Legal Standards

Because the undersigned exercises diversity jurisdiction in this action, state substantive law applies and federal procedural rules apply. See, e.g., Doermer v. Callen, 847 F.3d 522, 529 (7^th Cir. 2017), citing Goesel v. Boley Int'l (H.K.) Ltd., 806 F.3d 414, 419 (7^th Cir. 2015), and Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). See also Great West Cas. Co. v. Robbins, 833 F.3d 711, 715 (7^th Cir. 2016).

Federal courts deciding state law claims apply the forum state's choice of law rules to select the applicable state substantive law, and if no party has raised the choice-of-law issue, "the federal court may simply apply the forum state's substantive law."Selective Ins. Co. of South Carolina v. Target Corp., 845 F.3d 263, 266 (7^th Cir. 2016), quoting McCoy v. Iberdrola Renewables, Inc., 760 F.3d 674, 684 (7^th Cir. 2014). See also Title Industry Assurance Co., R.R.G. v. First American Title Ins. Co., 853 F.3d 876, 883 (7^th Cir. 2017) ("The interpretation of an insurance policy and the contours of the insurer's duty to defend are questions of state law."). Here, no one disputes that Illinois substantive law applies.

Under Illinois law, the primary goal in interpreting an insurance policy is "to give effect to the intent of the parties as expressed in the agreement." Berg v. New York Life Ins. Co., 831 F.3d 426, 428-29 (7^th Cir. 2016), quoting DeSaga v. W. Bend Mut. Ins. Co., 910 N.E.2d 159, 163 (Ill. 2009). When the terms of an insurance policy are unambiguous, they must be given their plain, ordinary meaning and enforced as written, unless doing so would contravene public policy. Id. at 429. If the policy language is ambiguous (i.e., susceptible to more than one reasonable meaning), the policy is construed against the insurer. Berg, 831 F.3d at 429, citing Gillen v. State Farm Mut. Auto. Ins. Co., 830 N.E.2d 575, 582 (Ill. 2005). Accord Trotter v. Harleysville Ins. Co., 821 F.3d 916, 918 (7^th Cir. 2016) ("Under Illinois law, a provision in an insurance policy is ambiguous only when it is susceptible to more than one reasonable interpretation."). A court should not strain to find an ambiguity where none exists. Berg, 831 F.3d at 429, quoting Founders Ins. Co. v. Munoz, 930 N.E2d 999, 1004 (Ill. 2010).

Additionally, any policy provision that limits or excludes coverage "must be construed liberally in favor of the insured and against the insurer" and applied only ifits terms are clear, definite, and specific. Berg, 831 F.3d at 429, quoting DeSaga, 910 N.E.2d at 164, and Gillen, 830 N.E.2d at 582. The undersigned also bears in mind that the court must construe an insurance 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." Westfield Ins. Co. v. Vandenberg, 796 F.3d 773, 778 (7^th Cir. 2015), quoting Crum & Forster Managers Corp. v. Resolution Tr. Corp., 620 N.E.2d 1073, 1078 (Ill. 1993).

Federal Rule of Civil Procedure 56 governs motions for summary judgment. Summary judgment is appropriate where the admissible evidence shows that there is no genuine dispute as to any material fact, and the movant is entitled to judgment as a matter of law. Taylor-Novotny v. Health Alliance Medical Plans, Inc., 772 F.3d 478, 488 (7^th Cir. 2014). Accord Archdiocese of Milwaukee v. Doe, 743 F.3d 1101, 1105 (7^th Cir. 2014), citing FED. R. CIV. P. 56. A "material fact" is a fact that affects the outcome of the lawsuit, i.e., it is outcome-determinative under the applicable substantive law. Taylor-Novotny, 772 F.3d at 488; Hanover Ins. Co. v. Northern Bldg. Co., 751 F.3d 788, 791 (7^th Cir.), cert. denied, 135 S. Ct. 280 (2014).

A genuine issue of material fact remains (and summary judgment should be denied), "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Miller v. Gonzalez, 761 F.3d 822, 827 (7^th Cir. 2014), quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). However, if the factual record taken as a whole could not lead a reasonable jury to find for the non-moving party, there is nothing for the jury to do, and summary judgment is properly granted. Bunn v.Khoury Enterprises, Inc., 753 F.3d 676, 682 (7^th Cir. 2014), citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

In assessing whether a genuine issue of material fact exists, this Court views the record in the light most favorable to the non-moving party. Bunn, 753 F.3d at 682. See also 520 South Michigan Ave. Associates, Ltd. v. Unite Here Local 1, 760 F.3d 708, 718 (7^th Cir. 2014). The undersigned examines the competent evidence of record "in the light reasonably most favorable to the non-moving party," giving the non-movant the benefit of reasonable, favorable inferences and resolving conflicts in the evidence in the non-movant's favor. Spaine v. Community Contacts, Inc., 756 F.3d 542, 544 (7^th Cir. 2014).

On cross-motions for summary judgment, the court construes all facts and reasonable inferences derived from those facts "in favor of the party against whom the motion under consideration was made." Great West Cas. Co. v. Robbins, 833 F.3d 711, 715 (7^th Cir. 2016), quoting Clarendon Nat. Ins. Co. v. Medina, 645 F.3d 928, 933 (7^th Cir. 2011). In other words, the undersigned views the facts and reasonable inferences in the light most favorable to the nonmovant on each motion. Lalowski v. City of Des Plaines, 789 F.3d 784, 787 (7^th Cir. 2015).

C. Analysis

The ultimate question presented by this case is whether CIC has a duty to defend and/or a duty to indemnify Menards in the underlying action. In its summary judgment motion, CIC seeks a declaration that it owes neither duty because Menards' breached the notice condition of the policies (Doc. 36, p. 2). In its cross-motion,Menards asks the undersigned to declare that omnibus coverage is afforded to Menards, that CIC owes a duty to defend Menard's in the underlying lawsuit, and that CIC should reimburse Menards for attorney fees and costs incurred in defending that action (Doc. 38, p. 15).

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