Liberty Surplus Ins. Corp. v. City of Vandalia

LIBERTY SURPLUS INSURANCE CORPORATION, Plaintiff, v. THE CITY OF VANDALIA, ILLINOIS; VANDALIA RAILROAD COMPANY;and SCOTT WISNASKY, as next of kin and administrator of the estates of DR.W.(deceased) and A.W. (deceased), as administrator of the estate of ALYSSASEWELL (deceased), as father and next of friend of DY. W. who is a minorand as father and next friend of DA. W. who is a minor, Defendants.

Case No. 17-cv-1536

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF ILLINOIS PEORIA DIVISION

June 7, 2018

Honorable Joe B. McDade

MEMORANDUM OPINION & ORDER

Before the Court is Plaintiff Liberty Surplus Insurance Corporation's Motion for Summary Judgment (Doc. 14) and Defendant City of Vandalia's Rule 56(d) Motion to Take Discovery to Further Respond to Plaintiff Liberty Surplus Insurance Corporation's Motion for Summary Judgment (Doc. 17). The motions have been fully briefed and await disposition. For the reasons stated below, Liberty Surplus Insurance Corporation's Motion for Summary Judgment (Doc. 14) is GRANTED and City of Vandalia's Rule 56(d) Motion to Take Discovery to Further Respond to Plaintiff Liberty Surplus Insurance Corporation's Motion for Summary Judgment (Doc. 17) is DENIED.

LEGAL STANDARDS

"The court shall grant summary judgment 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 issue of material fact 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 (1986). The movant may demonstrate the absence of a genuine dispute of material fact by citing to admissible evidence, or by showing that the non-movant cannot produce admissible evidence to support a genuine dispute of material fact. Fed. R. Civ. P. 56(c)(1). Upon such a showing by the movant, the non-movant may not simply rest on his or her allegations in the complaint. "The nonmovant may not rest upon mere allegations in the pleadings or upon conclusory statements in affidavits; it must go beyond the pleadings and support its contentions with proper documentary evidence." Warsco v. Preferred Technical Grp., 258 F.3d 557, 563 (7th Cir. 2001) (internal quotations and citation omitted); Fed. R. Civ. P. 56(c)(1). Typically, all inferences drawn from the facts must be construed in favor of the non-movant, but the court is not required to draw every conceivable inference from the record. Smith v. Hope School, 560 F.3d 694, 699 (7th Cir. 2009). At the summary judgment stage, however, the court may not resolve issues of fact; disputed material facts must be left for resolution at trial. Anderson, 477 U.S. at 249-50.

Rule 56(b) provides that in general, a party may file a motion for summary judgment at any time after the case is initiated until thirty days after the close of discovery. Thus, discovery need not be completed before a party can move forsummary judgment. Fed. R. Civ. P. 56(b); Am. Nurses' Ass'n v. State of Ill., 783 F.2d 716, 729 (7th Cir. 1986). The drafters of the Federal Rules foresaw instances where parties would move for summary judgment prematurely and to safeguard against such premature motions they included sub-paragraph (d). King v. Cooke, 26 F.3d 720, 726 (7th Cir. 1994) (dealing with then codified Rule 56 (f)). The provisions of Rule 56(f) were moved to subsection (d) in 2010 "without any substantial changes." 10B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2740 (3d ed. 2014). This provision allows a non-movant to demonstrate to the Court by giving specific reasons in an affidavit or declaration that the non-movant cannot present facts necessary to oppose the motion. Deere & Co. v. Ohio Gear, 462 F.3d 701, 706 (7th Cir. 2006). Upon such a showing, the Court is empowered to defer ruling on the summary judgment motion or deny it; allow a continuance so the nonmovant can obtain the necessary materials to oppose the summary judgment motion; or issue any order the court deems appropriate. Fed. R. Civ. P. 56(d).

BACKGROUND

Undisputed Facts

Liberty Surplus Insurance Corporation (hereinafter "Liberty") issued to Pioneer Railcorp Railroad (hereinafter "Pioneer") Liability Insurance Policy No. RRHV372358-2, effective July 7, 2014 to August 20, 2015 (hereinafter the "Policy"). Vandalia Railroad Company (hereinafter "VRRC") is a Named Insured under the Policy. The Policy affords coverage under its various insuring agreements for persons or organizations who qualify as "insureds." The Policy states that "[the] word 'Insured' means any person or organization qualifying as such under WHO ISAN INSURED (Section IV.)." Under Section IV, Paragraph 5 of the Policy, an insured includes "[a]ny person or organization to whom or to which [VRRC is] obligated by an insured contract to provide insurance of the type afforded by this policy, but only in connection with [VRRC's] business." Vandalia owns a portion of railway known as the Vandalia Segment. VRRC leases the Vandalia Segment from the City pursuant to a Railway Redevelopment Lease Agreement (the "Lease"), initially effective September 19, 1983. The Lease states that "[VRRC] shall provide public liability and property damage insurance as required by the regulations of the Interstate Commerce Commission [("ICC")] or any successor agency to such commission." Vandalia claims it is an insured under the Policy by way of Section IV, Paragraph 5.

Facts Not In Dispute But Not Identified As Undisputed By The Parties

Scott Wisnasky sued Pioneer, Vandalia, VRRC and several others for several tort claims arising out of the deaths and serious bodily harm of several of Mr. Wisnasky's children. The children were passengers in a vehicle that collided with a train. Several defendants to the underlying state lawsuit were nonsuited, yet Vandalia remains. Vandalia tendered the underlying lawsuit to Liberty for defense and indemnity under the Policy. Liberty denies that it owes a duty to defend or indemnify Vandalia for the underlying lawsuit under the Policy.

Disputed Facts Material to an Issue Before The Court

Marsh USA Inc. issued several certificates of insurance to Vandalia. These certificates purported to certify that the policies of insurance listed on the certificate, the Policy being one of them, had been issued to the insured namedabove, VRRC, for the policy period indicated on the certificate. Each certificate carried the following message across the front of it at the top of the certificate:

THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THE CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER.

However, each certificate also named Vandalia as an additional insured to the Liberty respective policy as well.

DISCUSSION

I. Vandalia's Estoppel Theory Is Futile So The Motion To Stay Is Denied.

Vandalia has moved under Federal Rule of Civil Procedure 56(d) to take discovery to further respond to Liberty's motion for summary judgment. Initially, Vandalia claimed that it sought to establish an estoppel defense based upon the certificates of insurance that Marsh issued to it, but in its reply in support of its motion, Vandalia now states there are other equitable defenses it should be allowed to unearth facts in support thereof, such as waiver. Vandalia did not identify any equitable defenses in its Answer, and only now speculates whether other equitable defenses exist to support its claims. Liberty contends that additional discovery is unnecessary because an estoppel defense is futile.

The Court will not allow Vandalia to simply make references to possible theories in hopes of staving off summary judgment. Vandalia moved to stay summary judgment proceedings and allow for more discovery on the ground thatthere may be colorable evidence to support an estoppel theory, so that is the only issue the Court will now consider.

The first and foremost question is whether Illinois law recognizes a coverage by estoppel theory of the sort Vandalia attempts to press forward here. Vandalia has not produced a single Illinois authority in support of its theory that Marsh's issuance of certificates of insurance bind Liberty to insure Vandalia under VRRC's Policy for the Wisnasky lawsuit.

"[A] United States district court sitting in diversity, see 28 U.S.C. § 1332, must apply the law of the state as it believes the highest court of the state would apply it if the issue were presently before that tribunal." State Farm Mut. Auto. Ins. Co. v. Pate, 275 F.3d 666, 669 (7th Cir. 2001). "In the absence of guiding decisions by the state's highest court, we consult and follow the decisions of intermediate appellate courts unless there is a convincing reason to predict the state's highest court would disagree." ADT Soc. Servs., Inc. v. Lisle-Woodridge Fire Prot. Dist., 672 F.3d 492, 498 (7th Cir. 2012).

The most applicable state appellate court opinion on this issue is Midwest Family Mut. Ins. Co. v. Walsh Const. Co., 2015 IL App (1st) 133420-U. Despite the fact that this decision is an unpublished order filed under Illinois Supreme Court Rule 23, the Court believes it gives better insight into how the Illinois Supreme Court would treat Vandalia's coverage by estoppel theory than any other alternative source, including decisions from other jurisdictions applying non-Illinois law.

In Midwest, an insurer brought an action against a general contractor and a subcontractor, seeking a declaration that the general contractor was not coveredunder the subcontractor's commercial general liability policy. 2015 IL App (1st) 133420-U at ¶¶ 1-7. The general contractor asserted a counterclaim of promissory estoppel alleging that a third-party...