Coca–Cola Enters., Inc. v. ATS Enters., Inc.

• Decision Date: 22 February 2012
• Docket Number: No. 10–2443.,10–2443.
• Parties: COCA–COLA ENTERPRISES, INC., and ACE American Insurance Company, Plaintiffs–Appellants, v. ATS ENTERPRISES, INC., d/b/a S & S Service Co., Daniel Zacha, and Universal Underwriters Insurance Company, Defendants–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

670 F.3d 771

COCA–COLA ENTERPRISES, INC., and ACE American Insurance Company, Plaintiffs–Appellants,
v.
ATS ENTERPRISES, INC., d/b/a S & S Service Co., Daniel Zacha, and Universal Underwriters Insurance Company, Defendants–Appellees.

No. 10–2443.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 7, 2010.Decided Feb. 22, 2012.

[670 F.3d 773]

Kevin J. Bahr (argued), Attorney, Mason Bahr, Atlanta, GA, for Plaintiffs–Appellants.

Brian E. McGovern (argued), Attorney, McCarthy, Leonard & Kaemmer, Chesterfield, MO, for Defendants–Appellees.

Before RIPPLE, KANNE, and SYKES, Circuit Judges.

SYKES, Circuit Judge.

S & S Service Company performed occasional maintenance and repair service on a fleet of Coca–Cola delivery trucks regularly kept at the softdrink company's bottling plant in central Illinois. S & S would usually provide this service onsite at the Coca–Cola plant, but sometimes it would take the trucks to its shop to perform the repairs. In November 2007 Daniel Zacha, an employee of S & S, caused a fatal traffic accident while driving a Coca–Cola tractor-trailer to S & S's repair shop for service. The dispute here concerns which company's insurer—Coca-Cola's or S & S's—is ultimately responsible for the amount paid to settle the claims of the decedent's estate. The district court concluded that under Illinois law only Coca–Cola's insurance policy provided coverage for the accident and entered summary judgment in favor of S & S and its insurer.

We affirm, although on slightly modified grounds. Contrary to the district court's conclusion, both insurance policies provide coverage: S & S's policy applies by its plain language, while Coca–Cola's policy applies by operation of Illinois public policy. Still, we agree that Coca–Cola and its insurer are ultimately responsible for the settlement amount. Under Illinois law the vehicle owner's policy is primary over the vehicle operator's policy unless a statute provides otherwise. Coca–Cola argues that the Illinois tow-truck insurance statute supplies the necessary exception. We disagree; the accident did not involve a tow-truck or other vehicle owned by S & S.

I. Background

Coca–Cola Enterprises, Inc., operates a soft-drink bottling plant in Mattoon, Illinois, a small city located about 45 miles south of Champaign. S & S, a local towing-and-repair company, performed maintenance and repair work on Coca–Cola's fleet of delivery vehicles on an order-by-order basis. S & S's employees usually performed this service work at Coca–Cola's plant, but sometimes they serviced the trucks at S & S's shop.

On November 9, 2007, Zacha, an S & S employee, was performing routine maintenance on one of Coca–Cola's tractor-trailers at the Mattoon plant. With Coca–Cola's permission, Zacha drove the tractor-trailer from the bottling plant to S & S's shop to complete the repairs. The vehicle never reached its destination. On the way to S & S, Zacha negligently made a left turn across oncoming traffic, causing a head-on collision with a minivan. The driver of the minivan suffered serious injuries and died shortly thereafter.

Coca–Cola's tractor-trailer was insured under a policy from ACE American Insurance Company (“ACE”).¹ S & S and Zacha, acting within the scope of his employment, were insured under a policy from Universal Underwriters Insurance Company

[670 F.3d 774]

(“Universal”).² The decedent's estate sent an initial settlement demand to Universal. S & S and Universal tendered the claim to Coca–Cola and ACE, but they declined the tender. The insurers then made reciprocal demands to defend and indemnify their respective insureds, and Universal eventually agreed to take the lead in negotiations with the decedent's estate. The estate later filed a wrongful-death action in Illinois state court. Universal settled the estate's claims for $1.9 million, which was within Universal's policy limits.

Meanwhile, Coca–Cola and ACE filed this diversity action against S & S, Zacha, and Universal, seeking a declaratory judgment regarding the parties' obligations with respect to the estate's claims. The defendants answered and counterclaimed for reimbursement of the settlement amount, claiming that Coca–Cola and ACE were solely responsible for payment.³ Both sides moved for summary judgment. The district court entered two key holdings: (1) under Illinois law Coca–Cola's policy with ACE is primary over S & S's policy with Universal unless a statutory exception exists; and (2) the Illinois tow-truck statute does not provide an exception because the accident did not involve an S & S tow-truck. The court then concluded that the Universal policy did not apply, and Coca–Cola and ACE were responsible for the entire settlement amount. Accordingly, the court entered summary judgment for S & S, and Coca–Cola appealed.

II. Discussion

We review the district court's grant of summary judgment de novo, construing all facts and reasonable inferences in the light most favorable to the nonmoving party. Righi v. SMC Corp., 632 F.3d 404, 408 (7th Cir.2011). Summary judgment is appropriate when “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). Here, the material facts are undisputed, leaving only a legal issue: Under Illinois insurance law, which insurer is responsible for paying the settlement amount? Is it ACE, under the policy insuring Coca–Cola as the owner of the vehicle involved in the accident; or Universal, under the policy insuring S & S, whose employee, Zacha, was operating the vehicle in the course of S & S's business?

A threshold question is whether either or both policies provide coverage for this accident. There is no dispute that the ACE policy does. That policy covers permissive drivers of Coca–Cola's vehicles, although it purports to exclude “[s]omeone using a covered ‘auto’ while he or she is working in a business of ... servicing [or] repairing ... ‘autos.’ ” Under Illinois law, however, all vehicle-owner insurance policies must cover any “person using or responsible for the use of such motor vehicle or vehicles with the express or implied permission of the insured.” 625 Ill. Comp. Stat.. 5/7–317(b)(2). Another statute requires all motor vehicle owners to carry a minimum level of insurance. See id. 5/7–601(a). This set of statutory requirements is generally referred to as “omnibus” coverage. See Zurich Am. Ins. Co. v. Key Cartage, Inc., 236 Ill.2d 117, 337 Ill.Dec. 859, 923 N.E.2d 710, 711 (2009). Where the omnibus requirements apply, the

[670 F.3d 775]

“[permissive user] clause must be read into every such policy.” State Farm Mut. Auto. Ins. Co. v. Universal Underwriters Grp., 182 Ill.2d 240, 231 Ill.Dec. 75, 695 N.E.2d 848, 850 (1998). Zacha's use of the Coca–Cola tractor-trailer was permissive, so Illinois law mandates coverage under the ACE policy notwithstanding its exclusionary language.

Whether the Universal policy applies is a slightly more difficult matter. The Universal policy provides in relevant part: “WE will pay ... all sums the INSURED legally must pay as DAMAGES ... because of...