Acuity, Ins. Co. v. Kessor Enters., Ltd.

• Decision Date: 23 August 2017
• Docket Number: Case No. 16-cv-3683
• Parties: ACUITY, a Mutual Insurance Company, Plaintiff / Counter-Defendant, v. KESSOR ENTERPRISES, LTD. d/b/a SUPERIOR LABOR SOLUTIONS, Defendant / Counter-Plaintiff.
• Court: U.S. District Court — Northern District of Illinois

ACUITY, a Mutual Insurance Company, Plaintiff / Counter-Defendant, v. KESSOR ENTERPRISES, LTD. d/b/a SUPERIOR LABOR SOLUTIONS, Defendant / Counter-Plaintiff.

Case No. 16-cv-3683

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

August 23, 2017

Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

Plaintiff Acuity, a Mutual Insurance Company, brings this diversity suit seeking a declaration that insurance policies Plaintiff issued to DefendantKessor Enterprises, Ltd., doing business as Superior Labor Solutions, do not provide coverage for the third-party complaint filed against Defendant in an underlying lawsuit pending in New York state court.Defendant brought counterclaims seeking a declaratory judgment that it is entitled to coverage under the insurance policies at issue and alleging that Plaintiff breached the policies by refusing to provide a defense.Before the Court are Plaintiff's motion for summary judgment[31], Defendant's motion for summary judgment[33], and Plaintiff's motion to strike certain paragraphs of Michael Kuehn's affidavit [37].For the reasons that follow, the Court grants Plaintiff's motion for summary judgment[31], denies Defendant's motion for summary judgment[33], and denies as moot Plaintiff's motion to strike certain paragraphs of Michael Kuehn's affidavit [37].The Court will enter a final judgment and close the case.

I.Background

The following facts are drawn primarily from the parties' Local Rule 56.1 statements, [32], [33-1], and [36].¹This action is an insurance coverage dispute.Plaintiff is a Wisconsin company that issued a General Commercial Liability ("CGL")² policy and a Worker's Compensation and Employers' Liability ("WC/EL") policy to Defendant, both of which covered the policy period of May 1, 2012 to May 1, 2013.[1, at ¶ 1;32, at ¶¶ 13, 15;33-1, at ¶¶ 2, 26, 33.]Defendant is an Illinois corporation that supplies union labor to disaster clean-up and repair projects.[33-1, at ¶ 1;41, at 2.]

A.The CGL Policy

The CGL policy provides that Plaintiff"will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which the insurance applies."[32, at ¶ 14; 33-1 at ¶ 27(emphasis in original).]The policy further states that Plaintiff"will have no duty to defend the insured against any suit seeking damages for bodily injury or property damage to which this insurance does not apply."[Id.]The policy is limited to bodily injury and property damage "caused by an occurrence that takes place in the coverage territory" and "occurs during the policy period."[Id.]

The CGL policy includes a Contractual Liability Exclusion and an Employer's Liability Exclusion.The Contractual Liability Exclusion excludes from coverage claims for "[b]odily injury or property damage for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement."[32, at ¶ 14;33-1, at ¶ 29.]However, there are two exceptions to the Contractual Liability Exclusion: the exclusion does not apply to liability for damages (1)"[a]ssumed in a contract or agreement that is an insured contract," or (2)"that the insured would have in the absence of the contract or agreement."[33-1, at 29.]

The Employer's Liability Exclusion excludes coverage for bodily injury to an "employee of the insured arising out of and in the course of: (a)[e]mployment by the insured; or (b)[p]erforming duties related to the conduct of the insured's business."[32, at ¶ 14; 33-1 at ¶ 32.]The exclusion applies "whether the insured may be liable as an employer or in any other capacity and to any obligation to share damages with or repay someone else who must pay damages because of the injury."[Id.]However, there is an insured contract exception, which indicates that the Employer's Liability Exclusion "does not apply to liability assumed by the insured under an insured contract."[32, at ¶ 14;33-1, at ¶ 32.]An insured contract is defined as "[t]hat part of any other contract or agreement pertaining to your business * * * under which [the insured] assume[s] the tort liability of another party to pay for bodily injury or property damage to a third person or organization."[32, at ¶ 14;33-1, at ¶ 30.]Tort liability is defined as "a liability that would be imposed by law in the absence of any contract or agreement."[Id.]

B.The WC/EL Policy

There are three key parts to the WC/EL policy.Part One of the policy applies to the Workers' Compensation Law of Illinois, Wisconsin, and Michigan.[32, at ¶ 16/] Part Two of the policy provides Employers' Liability Insurance and "applies to work in each state listed in Item 3.A."[Id.]Item 3A lists the following states: Illinois, Wisconsin, and Michigan.[1, Exhibit F, at 2.]Part Two is entitled "Employers' Liability Insurance" and provides coverage for "bodily injury by accident or bodily injury by disease" but the "bodily injury must arise out of and in the course of the injured employee's employment by [the insured]."[32, at ¶ 17;33-1, at ¶ 35.]Further, "the employment must be necessary or incidental to [the insured's] work in a state or territory listed in Item 3A of the Information Page."[Id.]Part Two contains a Contractual Liability Exclusion, which states, "This insurance does not cover * * * Liabilityassumed under a contract.This exclusion does not apply to a warranty that your work will be done in a workmanlike manner."[32, at ¶ 8.]

Part Three of the policy is entitled "Other States Insurance."Part Three applies "only if one or more states are shown in Item 3C of the Information Page."[32, at ¶ 19;33-1, at ¶ 36.]Item 3C includes "all states except North Dakota, Ohio, Washington and Wyoming and States designated in Item 3A."[1, Exhibit F, at 2.]Part Three states that "[i]f you begin work in any one of those states after the effective date of this policy and are not insured or are not self-insured for such work, all provisions of the policy will apply as though that state were listed in 3A."[32, at ¶ 19;33-1, at ¶ 36.]However, "[i]f you have work on the effective date of this policy in any state not listed in Item 3A [ ], coverage will not be afforded for that state unless [the insurer] is notified within 30 days."[Id.]Finally, Part Three, Section B provides the following Notice Condition: "Tell us at once if you begin work in any state listed in Item 3C of the Information Page."

C.The Underlying Action

The underlying action stems from an injury allegedly suffered by Michael Christie, an employee of Defendant Kessor, at a construction project that took place at Jones Beach Theater on Long Island, New York.On December 6, 2012, Live Nation and BMS-CAT entered into an agreement under which BMS-CAT would provide general contracting services at Jones Beach Theater in New York, which is owned and operated by Live Nation.[32, at ¶ 3;33-1, at ¶¶ 7-8.]On January 19, 2012, Defendant entered into a contract to provide union labor to BMS-CAT at jobsites including the Jones Beach Theater (the "Master Contract").[32, at ¶ 4;33-1, at ¶ 9].Section 3.1 of the Master Contract provides that Defendant"shall purchase and maintain insurance to fully protect and insure BMS-CAT and [Defendant] from claims of any natureconcerning [Defendant's] actions and inaction pursuant to [Defendant's] performance of the Work."[32, at ¶ 5;33-1, at ¶ 17.]Defendant first began supplying union laborers to BMS-CAT in New York in mid-to-late November 2012.[33-1, at ¶ 20.]Additionally, Paragraph 4.1 of the Master Contract states that Defendant"shall indemnify and hold harmless BMS-CAT, the customer with whom BMS-CAT contracts for the Project, and/or the owner(s) of the property at which the Project is located, [ ] from and against all claims, actions, liabilities, losses, costs, damages, and expenses * * * sustained or incurred by reason of any act, omission, negligence, or fault by [Defendant], or its agents and employees, or otherwise arising out of or in any manner related to the Services, the Work, or the performance by [Defendant] under the Contract."[Id.]

On December 31, 2013, Christie filed a lawsuit entitled Michael Christie v. Live Nation Concerts, Inc.and BMS-CAT, Inc. in the Suffolk County, New York Supreme Court under index number 00790/2014("the Christie Lawsuit").[32, at ¶ 1;33-1, at ¶ 6.]Christie alleged that he had been injured on December 4, 2012 while working as a construction worker at Jones Beach Theater as an employee of Defendant.[33-1, at 7.]In Count I of the underlying lawsuit, Christie brings a negligence claim, alleging that Live Nation and BMS-CAT created a dangerous condition at Jones Beach Theater, causing Christie's injuries.[Id.at ¶¶ 10-11.]In Count II, Christie alleges that Live Nation and BMS-CAT violated certain New York State labor laws governing overhead hazards and the operation of hoisting equipment, causing Christie's injuries.[Id.at ¶ 12.]The Christie Lawsuit makes no claims or allegations against Defendant Kessor.[33-1, at ¶ 13.]Christie had previously brought a claim against Defendant Kessor under New York's workers' compensation laws, but this claim has been settled.[Id.]

On December 18, 2015, Live Nation filed a Third-Party Complaint against Defendant in the Suffolk County, New York Supreme Court under index number 7800992/15 ("the Third-Party Complaint").[32, at ¶ 6;33-1, at ¶ 21.]The Third-Party Complaint alleges that "[Christie] claims that on or about December 4, 2012, while an employee of Third-Party Defendant Kessor, he was injured at a construction site commonly known as the Jones Beach Theater in Wantagh, NY."[32, at ¶ 7.]The Third-Party Complaint further alleges that "Defendant/Third-PartyPlaintiff Live Nation entered into a written contract with Defendant BMS for Defendant BMS to provide services at Jones Beach Theater" and that Defendant Kessor "was required to...