State Auto. Mut. Ins. Co. v. Lot'sa Liquors, Ltd.

675 F.Supp.3d 899

STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, Plaintiff, v. LOT'SA LIQUORS, LTD., an Illinois corporation, Defendant.

No. 21 C 2831

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

Signed May 31, 2023

Robert Marc Chemers, David Norman Larson, Pretzel & Stouffer, Chartered, Chicago, IL, for Plaintiff.

Ariel Weissberg, Weissberg and Associates, Ltd., Chicago, IL, for Defendant.

OPINION AND ORDER

SARA L. ELLIS, United States District Judge

On March 31, 2019, a shooting occurred in the parking lot of a gas station owned and operated by Defendant Lot'sa Liquors, Ltd. ("Lotsa"). Approximately two years later, the victim filed suit against Lotsa, and Lotsa tendered the claim to its insurer, Plaintiff State Automobile Mutual Insurance Company ("State Auto"). State Auto then filed this insurance coverage lawsuit, seeking a declaration that it has no duty to defend Lotsa in the underlying action and reimbursement of defense costs that State Auto has incurred in that action. State Auto has now moved for summary judgment on the question of its duty to defend, arguing that Lotsa did not comply with the insurance policy's notice condition, relieving State Auto from its obligation to defend Lotsa in the underlying action. Because the Court finds that Lotsa provided State Auto with reasonable notice, the Court denies State Auto's motion for summary judgment.

BACKGROUND¹

I. The Policy

Premsagar Mulkanoor, who immigrated from India in 1978 and has a high school education, has owned and operated Lotsa, a gas station in Harvey, Illinois, since 1999. He also owns two additional gas stations, which he acquired in 2002 and 2006. Mulkanoor is involved in the gas stations' day-to-day operations. Mulkanoor has liquor liability, building coverage, business, and workman's compensation insurance for Lotsa, which he has obtained at the direction of his insurance agent or to comply with licensing requirements. Mulkanoor also has homeowner's insurance for his personal residence, on which he has never made a claim.

State Auto issued Lotsa a businessowners liability insurance policy for the period from October 15, 2018 to October 15, 2019. Mulkanoor obtained this policy through his insurance agent. He completed the application for the policy on October 16, 2018, identifying Lotsa as the applicant and its business as a retail gas station minimart. Mulkanoor understood the policy to cover property damage, such as broken glass, fire, and theft. Mulkanoor did not read the policy, however, and testified that he would not have understood it even if he had.

The policy provides business liability coverage for "bodily injury" caused by an "occurrence." Doc. 65 ¶ 12. The policy includes the following notice provision:

Duties In The Event Of Occurrence, Offense, Claim Or Suit

a. You must see to it that we are notified as soon as practicable of an "occurrence" or an offense which may result in a claim. To the extent possible, notice should include:

(1) How, when and where the "occurrence" or offense took place;

(2) The names and addresses of any injured person and witnesses; and

(3) The nature and location of any injury or damage arising out of the "occurrence" or offense.

b. If a claim is made or "suit" is brought against any insured, you must:

(1) Immediately record the specifics of the claim or "suit" and the date received; and

(2) Notify us as soon as practicable.

You must see to it that we receive written notice of the claim or "suit" as soon as practicable.

c. You and any other involved insured must:

(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or "suit";

(2) Authorize us to obtain records and other information;

(3) Cooperate with us in the investigation or settlement of the claim or defense against the "suit"; and

(4) Assist us, upon our request, in the enforcement of any right against any person or organization which may be liable to the insured because of injury or damage to which this insurance may also apply.

d. No insured will, except at that insured's own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.

Id. ¶ 13. The policy defines an "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Id. ¶ 14. The policy defines a "suit" as "a civil proceeding in which damages because of 'bodily injury', 'property damage', or 'personal and advertising injury' to which this insurance applies are alleged." Id. ¶ 15.

II. The Underlying Action

On March 31, 2019, Adonis Hill was shot in Lotsa's parking lot. Mulkanoor learned of the shooting the following day, when one of his employees told him that a shooting had occurred and that she had called the police. No Lotsa employee engaged in any investigation of the incident, and the police did not return to Lotsa after the night of the shooting or otherwise contact Mulkanoor or interview any Lotsa employees.

On March 25, 2021, Hill filed suit against Lotsa in the Circuit Court of Cook County. Mulkanoor first learned of the underlying action when served with a copy of the summons and complaint on April 5, 2021. No Lotsa employee, including Mulkanoor, had any contact with Hill or anyone on his behalf until Mulkanoor received the summons and complaint in the underlying action. Mulkanoor also did not know of Hill's alleged injuries at any time prior to the filing of the underlying action.

After receiving notice of the underlying action, Mulkanoor called his insurance agent to report the claim. After receiving notice of the underlying action, State Auto agreed to provide Lotsa with a defense subject to a reservation of rights.

This is the only claim that Mulkanoor has made for any of his three gas stations. He testified that he did not report the shooting before receiving notice of the underlying action because he did not see a reason to do so, although he does understand that liability insurance covers injuries to other people.

LEGAL STANDARD

Summary judgment obviates the need for a trial where "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). To determine whether a genuine dispute of material fact exists, the Court must pierce the pleadings and assess the proof as presented in depositions, documents, answers to interrogatories, admissions, stipulations, and affidavits or declarations that are part of the record. Fed. R. Civ. P. 56(c)(1); A.V. Consultants, Inc. v. Barnes, 978 F.2d 996, 999 (7th Cir. 1992). The party seeking summary judgment bears the initial burden of demonstrating that no genuine dispute of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Bunn v. Fed. Deposit Ins. Corp. for Valley Bank Ill., 908 F.3d 290, 295 (7th Cir. 2018). In response, the non-moving party cannot rest on mere pleadings alone but must use the evidentiary tools listed above to identify specific material facts that demonstrate a genuine dispute for trial. Fed. R. Civ. P. 56(c)(1); Celotex, 477 U.S. at 324, 106 S.Ct. 2548; Sterk v. Redbox Automated Retail, LLC, 770 F.3d 618, 627 (7th Cir. 2014). The Court must construe all facts in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Wehrle v. Cincinnati Ins. Co., 719 F.3d 840, 842 (7th Cir. 2013). However, a bare contention by the non-moving party that an issue of fact exists does not create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), and the non-moving party is "only entitled to the benefit of inferences supported by admissible evidence, not those 'supported by only speculation or conjecture,' " Grant v. Trs. of Ind. Univ., 870 F.3d 562, 568 (7th Cir. 2017) (citation omitted).

ANALYSIS

State Auto argues that it does not have a duty to defend Lotsa in the underlying action because Lotsa did not comply with the policy's notice provision. The parties agree that Illinois law applies to this insurance contract. Notice provisions in insurance contracts are reasonable conditions precedent to coverage. State Auto Prop. & Cas. Co. v. Brumit Servs., Inc., 877 F.3d 355, 357 (7th Cir. 2017). An insured's failure to timely notify the insurance company under the terms of a policy "absolves the insurance company of any obligation to defend or indemnify the insured." Id.

Here, the policy required Lotsa to provide State Auto with notice of an occurrence or offense that may result in a claim "as soon as practicable." Doc. 65 ¶ 13. It similarly required Lotsa to provide State Auto with notice of a claim or suit "as soon as practicable." Id. State Auto maintains that Lotsa needed to comply with both requirements, with Lotsa's failure to notify State Auto of the shooting until Hill filed suit precluding coverage. Lotsa, on the other hand, maintains that the policy is ambiguous as to the need to comply with both notice provisions, and so the Court should find its almost immediate notice of the underlying action sufficient. Lotsa does not argue that an insured never has to give notice of an occurrence, which would essentially "allow it to perpetually forgo notice in the event of an occurrence and wait until a lawsuit materialized" and "undermine the central purpose of the occurrence-based provision—to afford the insurer the chance to timely investigate and preserve possible evidence of a potential claim." Westport Ins. Corp. v. Sycamore Cmty. Unit Sch. Dist. #427, 555 F. Supp. 3d 550, 560 (N.D. Ill. 2021). Instead, Lotsa maintains that the notice of occurrence requirement does not apply in this case because the shooting does not qualify as an "occurrence," which the policy defines as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Doc. 65 ¶ 14. Although the policy does not further define ...