Granite State Ins. Co. v. Degerlia
| Decision Date | 14 February 1991 |
| Docket Number | Nos. 90-1843,90-1844,s. 90-1843 |
| Citation | 925 F.2d 189 |
| Parties | GRANITE STATE INSURANCE COMPANY, Plaintiff-Appellee, v. Gerald A. DEGERLIA and Linda Deerhake, Special Administrator of the Estate of Kevin Deerhake, deceased, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Terrence J. Goggin, Mark R. Misiorowski, Goggin, Cutler & Hull, Chicago, Ill., William J. Selinsky, Randall Phillips, Ronald Olzmann, Marilyn A. Madorsky, Marc Shaberman, Provizer, Lichtenstein, Pearlman & Phillips, Southfield, Mich., for Granite State Ins. Co.
Robert S. Forbes, Philip B. Alfeld, Phillip J. Kardis, Kardis, Forbes & Alfeld, Alton, Ill., Terry N. Brown, Belleville, Ill., for Gerald A. Degerlia.
Bernard J. Ysursa, Cook, Shevlin, Keefe & Ysursa, Belleville, Ill., for Linda Deerhake, Special Administrator of the Estate of Kevin Deerhake, deceased.
Before BAUER, Chief Judge, WOOD, Jr., Circuit Judge, and ESCHBACH, Senior Circuit Judge.
On July 27, 1980, patrons gathered at the DuQuoin State Fairgrounds ("Fairgrounds") in DuQuoin, Illinois, for a motorcycle race sponsored by the American Motorcycle Association ("AMA"). The sponsored race was canceled due to inclement weather, but many of the patrons remained to either watch or participate in the unsponsored and unauthorized "racing or stunting" of motorcycles. That activity ended tragically when a motorcycle accident injured Gerald Degerlia and cost Kevin Deerhake his life.
At the time of the accident, the DuQuoin State Fair Association ("Association"), which leased the Fairgrounds to the AMA, maintained four levels of liability coverage with the following limits of liability:
Insurer Limit of Liability
National Union Insurance Company $300,000
Lexington Insurance Company $700,000
Integrity Insurance Company $1,000,000
Granite State Insurance Company $3,000,000
The uppermost layer of coverage, an excess umbrella liability policy issued by Granite State, included the following exclusion:
It is agreed that with respect to operations described above or designated in the policy as subject to this endorsement, the insurance does not apply to bodily injury to any person while practicing for or participating in any contest or exhibition of an athletic or sports nature sponsored by the named insured.
It is agreed that the insurance applies with respect to the operation of any fair out of doors subject to the following additional exclusions:
The insurance does not apply:
1. to bodily injury or property damage arising out of
(a) mechanically operated amusement devices owned or operated by the named insured.
(b) automobile or motorcycle racing or stunting.
(c) rodeos, or
2. to bodily injury to any person while practicing for or participating in any contest or exhibition of an athletic or sports nature sponsored by the names [sic] insured. 1
The Association also procured an additional policy from Lincoln Insurance Company to provide coverage for the AMA-sanctioned motorcycle competition scheduled to take place on July 27, 1980.
After the accident, both Degerlia and Linda Deerhake, the special administrator of Kevin Deerhake's estate, filed suit against a number of defendants, including the Association. These actions were consolidated and produced jury verdicts of $770,000 for Degerlia and $1,757,510 for Deerhake. The only remaining obstacle was collecting the sums awarded by the jury, and the Association's liability coverage provided an attractive means by which to accomplish this goal.
Well aware of the possibility that Degerlia and Deerhake might attempt to collect under the Association's policies, Granite State and Lexington invoked our diversity jurisdiction and filed the present declaratory judgment action. 2 Granite State thereafter filed a motion for summary judgment raising the argument, among others, that the injuries suffered by Degerlia and Deerhake were expressly excluded by its policy. The district court, after examining the exclusion quoted above, agreed with Granite State, granted its motion for summary judgment, and, seeing no just reason for delay, directed entry of final judgment under Rule 54(b) of the Federal Rules of Civil Procedure. 3 Degerlia and Deerhake subsequently filed separate notices of appeal after the district court rejected their motions for reconsideration.
The question presented by this appeal is quite narrow. Both Degerlia and Deerhake do not contest, and thereby concede, that the injuries for which they seek compensation arose out of "motorcycle racing or stunting" that occurred "with respect to the operation of any fair out of doors." Compare Garriguenc v. Love, 67 Wis.2d 130, 226 N.W.2d 414 (1975). They also concede that the exclusion does not violate public policy. The only issue they raise is whether the district court, within the context of a motion for summary judgment, committed reversible error by failing to conclude that the exclusion applied only to "racing or stunting" sponsored by the Association. If their argument is correct, then the exclusion would be inapplicable to these facts--Degerlia's and Deerhake's injuries arose out of unsponsored "racing or stunting." 4
Under Illinois law, which the parties concede applies to this action, we interpret the language of an insurance policy as a matter of law. Sawyer Fruit & Veg. Co-op. Corp. v. Lumbermens Mut. Cas. Co., 117 Ill.App.3d 407, 408, 453 N.E.2d 826, 827, 73 Ill.Dec. 1, 2 (1st Dist.1983). On one end of a spectrum we place that policy language that is clearly and unambiguously in favor of coverage. At the other end of the spectrum we place that policy language that clearly and unambiguously excludes coverage. If the relevant language in the Granite State policy falls at either end of the spectrum--i.e., if it is subject to only one reasonable interpretation--then we apply the terms of the policy as written. See Severs v. Country Mut. Ins. Co., 89 Ill.2d 515, 521, 434 N.E.2d 290, 292, 61 Ill.Dec. 137, 139 (1982); see also National Fidelity Life Ins. Co. v. Karaganis, 811 F.2d 357, 361 (7th Cir.1987) (). If the relevant language in the Granite State policy is ambiguous and falls between the two ends of the spectrum--i.e., if it is subject to more than one reasonable interpretation, at least one of which would favor coverage--then we construe the policy strictly against its drafter, the insurer. Goldblatt Bros., Inc. v. Home Indem. Co., 773 F.2d 121, 125 (7th Cir.1985). Thus, Granite State can prevail on its motion for summary judgment only if its exclusion cannot be reasonably interpreted to favor coverage.
As the district court held, the language in the Granite State exclusion meets this heavy burden. 5 The policy excludes injuries arising out of "automobile or motorcycle racing or stunting." The terms of the exclusion do not limit themselves only to injuries arising from racing or stunting sponsored by the named insured.
An examination of the remainder of the exclusion confirms this conclusion; the Granite State policy is quite specific when it qualifies the scope of its clauses. The first paragraph of the exclusion limits itself to "any contest or exhibition of an athletic or sports nature sponsored by the named insured." 6 In the paragraph under scrutiny, the portion designated "(a)" limits itself to injury arising out of "mechanically operated amusement devices owned or operated by the named insured." Last, the portion designated "2" limits itself to "any contest or exhibition of an athletic or sports nature sponsored by the names [sic] insured." These express limitations, occurring both before and after, but not within, the language under scrutiny, strongly support the determination that no coverage exists.
Our analysis does not end, however, with the four corners of the insurance policy. Under Illinois law, See, e.g., Glidden v. Farmers Auto. Ins. Ass'n, 57 Ill.2d 330,...
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