Cincinnati Ins. Co. v. Blue Cab Co.
| Decision Date | 09 May 2014 |
| Docket Number | Case No. 11 C 2055 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | CINCINNATI INSURANCE COMPANY, Plaintiff, v. BLUE CAB COMPANY, INC. and ROSE WASHINGTON SANDERS, Defendants. |
OPINION AND ORDER
This is an insurance coverage dispute over an insurer's duty to indemnify defendants in an underlying personal injury case. Rose Washington Sanders filed a personal injury lawsuit ("the Underlying Action") against Thomas McFadden and Blue Cab Company, Inc. ("Blue Cab") for injuries she sustained in an accident while she was a passenger in a Blue Cab taxi driven by McFadden. Plaintiff Cincinnati Insurance Company ("Cincinnati") insured Blue Cab under a commercial general liability and garage policy ("the Cincinnati Policy"). Cincinnati filed the instant suit against Blue Cab and Sanders seeking a declaratory judgment that the Cincinnati Policy does not require it to defend or indemnify Blue Cab in connection with the Underlying Action. (See dkt. 1.)
On July 1, 2013, Sanders, McFadden, and Blue Cab settled the Underlying Action. Cincinnati did not participate in the settlement discussions. As part of the settlement Blue Cab assigned its rights under the Cincinnati Policy to Sanders. Sanders, individually and as Blue Cab's assignee, then filed a counterclaim against Cincinnati in this suit seeking (i) a declaratory judgment that she is entitled to indemnity from Cincinnati (counts 1 and 2), and (ii) collectionfrom Cincinnati as a judgment creditor of Blue Cab (count 3). (Dkt. 60.) Sanders now moves for summary judgment on counts 1 and 3 of her counterclaim. (Dkt. 63.) For the following reasons, Sanders' motion for summary judgment is denied.1
Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party 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, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). To determine whether any genuine fact issue exists, the court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed. R. Civ. P. 56(c). In doing so, the court must view the facts in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Scott v. Harris, 550 U.S. 372, 378, 127 S. Ct. 1769, 167 L. Ed. 2d 686 (2007). The court may not weigh conflicting evidence or make credibility determinations. Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 704 (7th Cir. 2011).
The party seeking summary judgment bears the initial burden of proving there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). In response, the non-moving party cannot rest on bare pleadings but must designate specific material facts showing that there is a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). If a claim or defense is factually unsupported, it should be disposed of on summary judgment. Celotex, 477 U.S. at 323-24.
McFadden began driving a Blue Cab taxi in 2002. In 2006, McFadden purchased his own taxi from Blue Cab and entered into an Owner-Operator Agreement with Blue Cab. Under the Owner-Operator Agreement, McFadden paid weekly fees to Blue Cab in exchange for the right to use Blue Cab's trade name on his taxi and to receive radio transmissions from Blue Cab about potential taxi customers. The agreement provided that McFadden was an independent contractor and stated that it did "not render [McFadden] an agent, legal representative, joint venture or partner of Blue Cab." .) McFadden was not supervised or managed by Blue Cab while transporting customers and Blue Cab did not control McFadden's hours, the routes he took, or the passengers he picked up.
Prior to starting with Blue Cab, McFadden had experienced unexplained loss of consciousness on one or more occasions. McFadden testified that he had fainted only once in 1999 or 2000, but McFadden's doctor testified that McFadden had lost consciousness several times. (Compare dkt. 70, ex. 4 ("McFadden Dep.") at 59:18-60:6, with dkt. 70, ex. 6 ("Grodinsky Dep.") at 8:14-17.) The doctor never determined a reason for the episode(s) despite doing a "pretty extensive work up." (Id. at 8:20-9:5.) He attributed the episode(s) to McFadden's "being acutely intoxicated, which by itself can lead to loss of consciousness [and] can also trigger other events[.]" (Id.) There is no record of McFadden losing consciousness after2001 when his doctor reported that he stopped drinking.3 (Id. at 9:8-23.) McFadden also was diagnosed with diabetes in 2007 and he took medicine for high blood pressure and hypertension. Despite these conditions, McFadden testified that his driving was never restricted and no physician ever expressed concern about his driving, even after the fainting episode(s). In addition, McFadden's doctor testified that McFadden was able to safely operate a taxi as his profession in 2007 and that he had no concerns about McFadden's medical condition. (Id. at 85:6-87:6.)
Blue Cab did not take any steps to inquire about McFadden's health and medical history at any time before or after entering into the Owner-Operator Agreement with McFadden.
On September 23, 2007, McFadden, responding to a dispatch from Blue Cab, picked up Sanders at Midway Airport in Chicago. While transporting Sanders from the airport to her home in Oak Park, Illinois, McFadden lost consciousness and his taxi struck a light pole. Sanders suffered extensive injuries as a result of the accident and incurred medical expenses exceeding $450,000.
In December 2007, Sanders filed suit against McFadden and Blue Cab in the Circuit Court of Cook County, Illinois. Sanders v. McFadden, No. 07 L 13584. The suit included claims against Blue Cab for negligently approving McFadden as an operator of a Blue Cab taxi under the Owner-Operator Agreement and negligently failing to obtain McFadden's medical history before entering into the Owner-Operator Agreement. In particular, Sanders asserted thatBlue Cab should not have allowed McFadden to operate a taxi under its name because McFadden had lost consciousness in the past and had a history of other health issues. After Sanders filed the Underlying Action, Cincinnati instituted this suit seeking a declaratory judgment that it was not required to defend or indemnify Blue Cab for liability related to Sanders' injuries.
In July 2013, Sanders, McFadden, and Blue Cab settled the Underlying Action, and judgments in the amount of $1,250,000 were entered against McFadden and Blue Cab.4 Blue Cab assigned its rights under the Cincinnati Policy to Sanders in consideration for a covenant not to execute on the judgment against it. McFadden's insurer, First Chicago Insurance Company, agreed to tender its policy limit of $250,000 to Sanders. Although Cincinnati was involved in some prior settlement discussions, it did not participate in the settlement discussions that led to settlement and was not party to the settlement agreement.
Under the Cincinnati Policy, Cincinnati provided Blue Cab with both commercial general liability coverage ("the CGL Policy") and garage liability coverage. The policy had a limit of $1,000,000 per occurrence. Although Sanders asserts counterclaims under both parts of the Cincinnati Policy, she only moves for summary judgment with respect to liability under the CGL Policy.5
The CGL Policy covers amounts "that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies." (Dkt.64, ex. I ("Policy") at CIN000010.) "Insureds" under the CGL Policy include Blue Cab's "employees" acting "within the scope of their employment . . . or while performing duties related to the conduct of [Blue Cab's] business." (Id. at CIN000020.) The policy excludes coverage for bodily injury "arising out of the ownership, maintenance, use or entrustment to others of any . . . auto . . . owned or operated by or rented or loaned to any insured" ("the Auto Exclusion"). (Id. at CIN000013.) The Auto Exclusion applies "even if the claims against any insured allege negligence or any wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the 'occurrence' . . . involved the ownership, maintenance, use or entrustment to others of any . . . auto . . . that is owned or operated by or rented or loaned to any insured." (Id.)
Sanders asserts that, as an assignee of Blue Cab's rights under the CGL Policy, she is entitled to indemnification from Cincinnati with respect to the judgment against Blue Cab in the Underlying Action. To succeed on her motion for summary judgment, Sanders must establish that there is no genuine issue of material fact that (1) the liability underlying the judgment entered against Blue Cab is covered by the CGL Policy; and (2) Blue Cab entered into the settlement in reasonable anticipation of such liability.6 See Santa's Best Craft, LLC v. St. Paul Fire & Marine Ins. Co., 483 Fed. App'x 285, 286 (7th Cir. 2012) ("When an insured settles the underlying lawsuit prior to trial, the insurer need only indemnify the settlement payments made in reasonable anticipation of liability for damages covered under the policy.") (citing U.S. Gypsum Co. v. Admiral Ins. Co., 643 N.E.2d 1226, 1244, 268 Ill. App. 3d 598, 205 Ill. Dec. 619 (1994)).
Cincinnati argues that the Auto Exclusion in the CGL Policy precludes its liability in the...
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