Hanover Ins. Co. v. R.W. Dunteman Co.

446 F.Supp.3d 336

The HANOVER INSURANCE COMPANY, Plaintiff,

v.R.W. DUNTEMAN COMPANY, Du-Kane Asphalt Co., Crush-Crete, Inc., Paul Dunteman Jr., Jeffrey Dunteman, Roland Dunteman III, Matthew Dunteman and Audrey B. Coffey, as Personal Representative of the Estate of Jane Elizabeth Dunteman., Defendant(s).

Case No. 19-cv-1979

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

Signed March 17, 2020

David Frederick Cutter, Michael T. Skoglund, Ommid Charles Farashahi, Ryan M. Henderson, BatesCarey LLP, Chicago, IL, for Plaintiff.

Thomas Andrew Christensen, Jenna Nicole Wadulak, Huck Bouma PC, Wheaton, IL, for Defendants R.W. Dunteman Company, Du-Kane Asphalt Co., Crush-Crete, Inc.

Kevin M. Lyons, Stephanie Kopalski, Lyons Law Firm, LLC, Downers Grove, IL, for Defendant Paul Dunteman, Jr., Jeffrey Dunteman, Roland Dunteman, Matthew Dunteman.

MEMORANDUM OPINION & ORDER

MARY M. ROWLAND, United States District Judge Before the Court are the Parties' cross motions for judgment on the pleadings. For the reasons stated below, the motion for judgment on the pleadings filed by Defendants R.W. Dunteman Company ("Dunteman"), Du-Kane Asphalt Co. ("Du-Kane"), Crush-Crete, Inc. ("Crush-Crete") (Dkt. 35) is denied, and the motion filed by Paul Dunteman, Jr., Jeffrey Dunteman, Roland Dunteman, III, and Matthew Dunteman (collectively, the "Dunteman Brothers")¹ (Dkt. 38) is denied. Plaintiff The Hanover Insurance Company's ("Hanover") motion for judgment on the pleadings (Dkt. 36) is granted as to Counts I and II. Hanover's remaining Counts are dismissed as moot.

BACKGROUND

This lawsuit arises from an insurance coverage dispute between the Dunteman Brothers, Du-Kane, Dunteman, and Crush-Crete on the one side, and Hanover on the other. The relevant facts are as follows.

1. The Estate Lawsuit

Hanover issued two consecutive Directors, Officers, and Entity Liability Insurance Policies to Defendants for the period of March 31, 2017 to March 31, 2018 (the "2017 Policy"), and March 31, 2018 to March 31, 2019 (the "2018 Policy"). (Dkt. 1 ¶ 17). Each policy contains identical provisions.

On August 28, 2017, during the 2017 Policy, Audrey B. Coffey, as Personal Representative of the Estate of Jane Elizabeth Dunteman, filed a complaint for declaratory judgment in the Circuit Court of DuPage County (the "Original Complaint"). (Dkt. 37, 2). The Original Complaint alleged that Jane Dunteman was married to Paul Dunteman until their divorce in 2009. (Dkt. 35, Ex. 3 ¶¶ 4, 17). Prior to the divorce, Jane owned 24% of the stock of Du-Kane. (Id. at ¶¶ 11-24). As part of the divorce settlement, Jane and Paul agreed that they would each retain their approximately equal ownership interests in Du-Kane. (Id. ). In 2013, Paul's shares were divided evenly and transferred to his sons. (Id. at ¶¶ 26-29) The Original Complaint alleged that without her knowledge, permission, or consent, and without providing consideration to her, Jane's ownership interest was reduced from 24% to 10%. (Id. ). The Original Complaint further alleged that "[t]he 14% ownership unilaterally taken from Jane was divided evenly and transferred to her sons: Paul Jr., Jeffrey, Roland, and Matthew." (Id. at ¶ 27). The Dunteman brothers each received an additional 10% in shares of Du-Kane, increasing their ownership to 22.5% each. (Id. at ¶ 28). Jane passed away in March 2017. (Id. at ¶ 30). On July 14, 2017, Du-Kane filed a Statement of Claim against Jane's estate, seeking $521,472 of unjust enrichment. (Id. at ¶¶ 32-33). Du-Kane asserts that Jane received incorrect distributions because she never owned 24% of the business, and that this mistake was corrected in 2013. (Id. ).

The Original Complaint brought a single count for declaratory judgment. In that count, Coffey alleged that "Du-Kane's attempt to reduce Jane's ownership by 14% was done without the knowledge or consent of Jane, and more importantly, it was done without providing consideration to her for the sale of the stock. As such, the attempted transfer is void." (Dkt. 35, Ex. 3 ¶ 36). The Original Complaint requested that the court "find and enter a declaratory judgment ordering that Jane was the rightful owner of 24% ownership interest in Du-Kane at the time of her death on March 2, 2017 and invalidating the wrongful 14% reduction in her ownership interest in 2013." (Id. at ¶ 37).

On December 20, 2017, also during the 2017 Policy, Coffey filed a First Amended Complaint for Declaratory Judgment ("FAC"). (Dkt. 35, Ex. 4). On July 16, 2018, based on written discovery and third party-subpoenas and during the 2018 Policy, Coffey filed a Second Amended Complaint ("SAC"). (Dkt. 35, Ex. 5). The SAC added Crush-Crete and the four (4) individual Dunteman Brothers as defendants. It also brought several new allegations, including: (i) that Jane was not receiving regular dividends from Du-Kane and Crush-Crete (Id. at ¶¶ 57-61); (ii) that revenues of Du-Kane and Crush-Crete had "suspiciously" declined after Jane died (Id. at ¶¶ 62-67); (iii) that the Dunteman Brothers "are either diverting Crush-Crete's business and/or revenue to [Dunteman] or engaging in price fixing to depress earnings" in order to "[f]reeze out the Estate as a minority shareholder by not paying distributions to it and devaluing its shares prior to a fair value analysis" (Id. at ¶ 70); (iv) the Dunteman Brothers were failing to hold shareholder meetings for Du-Kane and Crush-Crete (Id. at ¶¶ 71-74); and (v) that the Dunteman Brothers failed to repay a 2005 loan of $1,350,000 made to them by Du-Kane (Id. at ¶¶ 75-79).

Based on the new allegations, the SAC contained the following new counts: Count II: Minority Shareholder Oppression and Dissipation in violation of 805 ILCS 5/12.56 (Du-Kane); Count III: Minority Shareholder Oppression and Dissipation in violation of 805 ILCS 5/12.56 (Crush-Crete); Count IV: Breach of Fiduciary Duties (Dunteman Brothers); Count V: Fraud (Dunteman Brothers); Count VI: Conspiracy to Defraud and Breach Fiduciary Duties (Dunteman Brothers). The SAC contained the same count for declaratory judgment against Du-Kane, which asked the court for an order "invalidating the wrongful 14% reduction in [Jane's] ownership in 2013." (Dkt. 35, Ex. 5 ¶ 84).²

Du-Kane, Crush-Crete, and the Dunteman Brothers first reported the Estate lawsuit to Hanover on July 13, 2018. Hanover denied coverage. According to Hanover, the Original Complaint constitutes a "Claim" as defined in the insurance policy. Hanover asserts that the Defendants were required to report the lawsuit within 90 days of the expiration of the 2017 Policy and their failure to do so makes their claim untimely. Hanover therefore believes it need not provide coverage to Defendants. Defendants argue that the Original Complaint did not constitute a "Claim," and they were not required to inform Hanover of the lawsuit until the filing of the SAC, which asserted new causes of action against new Defendants. Thus, according to Defendants, their notice was timely and Hanover has a duty to defend them in the underlying litigation.

Hanover filed a complaint in this Court seeking a declaratory judgment that they have no duty to defend Defendants and provide coverage.³ (Dkt. 1). In response, Defendants Du-Kane and Crush-Crete filed one Answer and Counterclaims (Dkt. 19), and the Dunteman Brothers filed a separate Answer and Counterclaims (Dkt. 21). Both documents assert Counterclaims for breach of contract (Count I) and a violation of Section 155 of the Illinois Insurance Code, 215 ILCS 5/155 (Count II). The Court dismissed the Section 155 claim in a previous ruling. (Dkt. 56).

2. Relevant Policy Provisions

As mentioned above, Hanover issued two consecutive insurance policies. Each policy contains identical provisions. The relevant policy provisions are as follows:

Section III defines Claim to mean in relevant part:

A. With respect to Insuring Agreements I.A. and I.B., any:

1. Written demand received by an Insured for monetary or non-monetary relief including injunctive relief;

2. Civil proceeding commenced by the service of a complaint or similar proceeding; ...

against an Insured Individual for a Wrongful Act, including any appeal therefrom; ...

C. With respect to Insuring Agreement I.C., any:

1. Written demand received by an Insured for monetary or non-monetary relief including injunctive relief;

2. Civil proceeding commenced by service of a complaint or similar proceeding; ...

against an Insured Entity for a Wrongful Act, including any appeal therefrom; ...

(Dkt. 35, Ex. 1 at 22). The Policies state that "Wrongful Act means any actual or alleged act, error, omission, misstatement, misleading statement, neglect, breach of duty committed or attempted or allegedly committed or attempted by:

A. With respect to Insuring Agreements I.A. and I.B., an Insured Individual in his or her capacity as such or any other matter claimed against an Insured Individual solely in his or her status as such; or

B. With respect to Insuring Agreement I.C., an Insured Entity.

All Related Wrongful Acts shall be considered a single Wrongful Act and all Related Wrongful Acts will be deemed to have occurred at the time the first of such Related Wrongful Acts occurred whether prior to or during the Policy Period."

(Dkt. 35, Ex. 1 at 24).

The Policies define Related Wrongful Acts: "Related Wrongful Acts means Wrongful Acts which are logically or causally connected by reason of any common fact, circumstance, situation, transaction, casualty, event, result, injury or decision." (Dkt. 35, Ex. 1 at 24). The Policies similarly define Related Claims: "Related Claims means all Claims based upon, arising from or in any way related to the same facts, circumstances, situations, transactions, results, damages or events or the same series of facts, circumstances, situations, transactions, results, damages, or events." (Id. ).

In addition to the definition of Related Claims, Section VI of the Policies states:

With respect to the Liability Coverage Parts all Related

...