Scottsdale Ins. Co. v. Chi. Scaffolding, Inc.

SCOTTSDALE INSURANCE COMPANY, Plaintiff, v. CHICAGO SCAFFOLDING, INC., AAA-1 MASONRY & TUCKPOINTING, INC.,and EMIL PIEKUTOWSKI, Defendants.

Case No.: 14 cv 04268

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

September 30, 2014

Honorable Judge: Joan Humphrey Lefkow

Magistrate Judge: Sidney I. Schenkier

PLAINTIFF'S MOTION FOR JUDGMENT AGAINST DEFAULTED DEFENDANT AAA-1 MASONRY & TUCKPOINTING, INC.

Plaintiff, SCOTTSDALE INSURANCE COMPANY ("Scottsdale"), by and through its attorneys, Goldberg Segalla LLP, submits the following motion for judgment against defaulted defendant AAA-1 Masonry & Tuckpointing, Inc.

Introduction and Procedural History

Scottsdale seeks a judicial declaration that it has no duty to indemnify AAA-1 Masonry & Tuckpointing, Inc. ("AAA-1") for any obligation that AAA-1 allegedly owes to Chicago Scaffolding, Inc. ("CSI") to defend and/or indemnify it in connection with the lawsuit pending in the Circuit Court of Cook County, Illinois, encaptioned Piekutowski v. AAA-1 Masonry & Tuckpointing et al., No. 2013 L 10341 ("Underlying Lawsuit"). This declaratory judgment action arises out of an alleged construction site incident where the underlying plaintiff, Emil Piekutowski, was struck by falling scaffolding.

On September 4, 2014, Scottsdale filed its Motion For Entry Of Order Of Default Against AAA-1 Masonry & Tuckpointing, Inc., which this Court granted by Order dated September 16, 2014. See Dkt. Nos. 21 and 23.

This Court should now enter judgment against AAA-1 because Scottsdaie cannot be obligated to indemnify AAA-1 for any contractual liability it may have to CSI with respect to the Underlying Lawsuit. The indemnity provisions in the subject Swing Stage Scaffold rental contract between AAA-1 and CSI, which are the sole source of AAA-1's purported indemnity obligation to CSI, are void and unenforceable pursuant to the Illinois Construction Contract Indemnification for Negligence Act (740 ILCS 35/1 et seq.) ("Act"), Thus, any contractual liability coverage under the commercial general liability policy Scottsdaie issued to AAA-1, No. BCS0023761, effective from December 31, 2010 to December 31, 2011 ("Policy"), does not apply here.

AAA-1 /CSI Rental Contract

AAA-1 and CSI entered into a contract ("Agreement") for the rental of a Swing Stage Scaffold by AAA-1, as lessee, from CSI, as lessor. See Dkt. No. 1, Exhibit #3. The 2011 Credit Policy, General Usage and Terms & Conditions part of the Agreement contains indemnification provisions which state, in relevant part, as follows:

5. Disclaimer of Warranties and Indemnification By Lessee/Purchaser. . . . [AAA-1] agrees to indemnify and hold [CSI] free and harmless . . . from any and all liability caused or alleged to be caused directly or indirectly by the leased/purchased Equipment, by any inadequacy thereof, or defect therein, or by any incident in connection therewith.

* * *

15. Indemnification. [AAA-1J shall indemnify and defend [CSI] against and hold [CSI] harmless from any and all claims, actions, suits, proceedings, costs, expenses, damages, and liabilities, including attorney's fees which:

(1) Relate to injury or destruction of property, or bodily injury, illness, sickness, disease or death of any person including employees of [AAA-1] and:

(2) Are caused or claimed to be caused, in whole or in part by the Equipment leased herein or by the liability or conduct (including active, passive, primary or secondary) of [CSI], its agents or employees, or anyone for whose acts of them may be liable. The parties agree that [CSI] shall only be liable or responsible for actions of willful misconduct.

(3) [AAA-1] shall, at its own cost and expense, defend [CSI] against all suits or proceedings commenced by anyone in which [CSI] is a named party for which [CSI] is alleged to be liable or responsible as a result of or arising out of the Equipment, or any alleged act and/or settlement, judgment or other resolution, in the event that such action is commenced naming [CSI] as a party, [CSI] may elect to defend on its own behalf and [AAA-1] agrees that it shall be liable for all costs, expenses and attorney's fees incurred by [CSI] in such defense.

* * *

The Swing Stage/Hanging Platforms General Conditions for Sale, Lease or Work Performed part of the Agreement contains another indemnification provision which states, in relevant part, as follows:

Liability for injury, disability and death of workmen and other persons caused by operation, handling or transportation shall be assumed by [AAA-1] and [AAA-1] shall indemnify, hold harmless and Name as Additional Insured to [AAA-1's] Liability Policy, [CSI]. [AAA-1] shall also indemnify [CSI] against all losses, damages, expense and penalties arising from any action on account of damage to property occasioned by the operation, handling or transportation of any equipment.

The Terms and Conditions part of the Agreement contains another indemnification provision which states, in relevant part, as follows:

[CSI] shall have no responsibility, direction or control over the manner of erection, maintenance, use or operation of said equipment by [CSI]. [AAA-1] assumes all responsibility for claims asserted by any person [whatsoever] growing out of the erection, and maintenance, use or possession of said equipment and agrees to hold [CSI] harmless from all such claims.

SCOTTSDALE POLICY PROVISIONS

The Policy, a copy of which is attached as Exhibit A to Scottsdale's Complaint for Declaratory Judgment (see Dkt. No. 1), contains the following relevant exclusion:

2. Exclusions

This insurance does not apply to:

* * *

b. Contractual Liability

"Bodily injury" ... for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:

* * *

(2) Assumed in a contract or agreement that is an "insured contract", provided the "bodily injury" ... occurs subsequent to the execution of the contract or agreement. Solely for the purposes of liability assumed in an "insured contract", reasonable attorney fees and necessary litigation expenses incurred by or for a party other than an insured are deemed to be damages because of "bodily injury" ... provided:

(a) Liability to such party for, or for the cost of, that party's defense has also been assumed in the same "insured contract" ...

The Policy as amended by Amendment of Insured Contract Definition Endorsement defines "insured contract" as "[t]hat part of any other contract or agreement pertaining to your business . . . under which you assume the tort liability of another party to pay for "bodily injury" ... [t]ort liability means a liability that would be imposed by law in the absence of any contract or agreement."

LEGAL AUTHORITY IN SUPPORT OF NO DUTY TO INDEMNIFY

AAA-1 UNDER SCOTTSDALE POLICY

The broad, all-encompassing indemnification provisions of the Agreement are void as against public policy because they seek to shift all liability for CSI's own negligence to AAA-1. Accordingly, Scottsdaie cannot be required to indemnify AAA-1 for an unenforceable obligation to CSI. Therefore, AAA-1 has no rights to coverage under the Policy in connection with any tort liability it attempted to assume in the Agreement. Also, given its failure to file an appearance or otherwise participate in this declaratory judgment action, AAA-1 has no rights to contest or challenge any judgment entered by this Court regarding Scottsdale's duties and obligations to CSI.

Standard for Evaluating a Motion for Judgment Against Defaulted Defendants in the Context of aDeclaratory Judgment Action Seeking a Finding of No Coverage

For purposes of whether to enter a default judgment, well-pleaded allegations of a complaint are considered admitted by a defendant when that defendant is held In default for failure to answer the complaint. Dundee Cement Co. v. Howard Pipe & Concrete Prods., Inc., 722 F.2d 1319, 1323 (7th Cir. 1983). A court is vested with the power and authority to enter declaratory default judgments. Nautilus Ins. Co. v. Front Range Env'tl, LLC, 14 CV 50083, 2014 U.S. Dist. LEXIS 124135 at *4 (N.D. Ill. Aug. 6, 2014), citing Tygris Asset Fin., Inc. v. Szollas, No. 09 C 4488, 2010 U.S. Dist. LEXIS 56491 at *6 (N.D. Ill Jun. 7, 2010), and Owners Ins. Co. v. Complete Mech. Servs., Inc., No. C 4201, 2008 U.S. Dist. LEXIS 88753 at *1-2 (N.D. Ill. Oct. 31, 2008) (copies attached).

Canons of Contract Interpretation

The primary objective in construing the language of a contract, such as an insurance policy, is to ascertain and give effect to the intentions of the parties as expressed by their agreement. BASF AG v. Great Am. Assur. Co., 522 F.3d 813, 819 (7th Cir. 2008). Like any contract, an insurance policy is construed as a whole, giving meaning to every provision because "every provision was intended to serve a purpose." Cent. Ill. Light Co. v. Home Ins. Co., 213 Ill. 2d 141, 821 N.E.2d 206 (2004).

Issues of contract construction, as well as determinations of whether a contract contravenes public policy, are questions of law that are readily susceptible to early judicial resolution by motion. See Liccardi v. Stolt Terminals (Chi.), Inc., 283 Ill. App. 3d 141, 147, 669 N.E.2d 1192 (1st Dist. 1996).

Illinois Construction Contract Indemnification for Negligence Act Voids

the Indemnification Provision of the Agreement

The Act Voids Indemnity Provisions in Construction Contracts

Requiring the Indemnitor To Indemnify the Indemnitee

for the Indemnitee's Own Negligence

At all relevant times, there existed the Illinois Construction Contract Indemnification for Negligence Act, 740 ILCS 35/1 et. seq., which provides, in relevant part, as follows:

With respect to contracts or agreements, either public or private, for the construction, alteration, repair or maintenance of a building, structure, ... or other work dealing with construction ... every covenant, promise or agreement to indemnify or hold harmless another person

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