Markel Am. Ins. Co. v. Vantage Yacht Club, LLC

• Citation: 158 F.Supp.3d 699
• Decision Date: 26 January 2016
• Docket Number: No. 14 C 7360,14 C 7360
• Parties: Markel American Insurance Company, Plaintiff, v. Vantage Yacht Club, LLC, Defendant.
• Court: U.S. District Court — Northern District of Illinois

158 F.Supp.3d 699

Markel American Insurance Company, Plaintiff,

v.Vantage Yacht Club, LLC, Defendant.

No. 14 C 7360

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

Signed January 26, 2016

Shannon Marie Oberkrom, James Mondl, Tonkin & Mondl, L.C., St. Louis, MO, Mark Daniel Roth, Orum & Roth, LLC, Chicago, IL, for Plaintiff.

Cynthia M. Rote, William J. Delaney, Delaney Law, Chicago, IL, for Defendant.

Memorandum Opinion and Order

Thomas M. Durkin

, United States District Judge

Markel American Insurance Company seeks a declaratory judgment that it does not have a duty to defend its insured, Vantage Yacht Club, LLC, in an underlying state court action. Markel has moved for summary judgment pursuant to Federal Rule of Civil Procedure 56

. R. 45. For the following reasons, Markel's motion is granted.

Subject Matter Jurisdiction & Governing Law

The Court has subject matter jurisdiction over this action under “admiralty or maritime jurisdiction,” 28 U.S.C. § 1333(1)

, because the claim involves a “standard marine insurance policy.” See Cont'l Cas. Co. v. Anderson Excavating & Wrecking Co. , 189 F.3d 512, 517 (7th Cir.1999)

; see also

St. Paul Ins. Co. of Ill. v. Great Lakes Turnings, Ltd. , 829 F.Supp. 982, 984 (N.D.Ill.1993) (“It is undisputed that marine contracts, including marine insurance contracts, fall under federal admiralty jurisdiction in Article 3, Section 2 of the United States Constitution.”).

However, “from the fact that this is an admiralty case it does not automatically follow that admiralty law, a body of judge-made legal doctrines tailored to maritime disputes, should govern the substantive issues.” Cont'l Cas. , 189 F.3d at 519

. “A federal court sitting in admiralty can...borrow the law of a state or a foreign country to resolve a dispute that had come into court under the admiralty jurisdiction, especially when dealing with a subject traditionally regulated by the states, such as insurance (including marine insurance).” Id. “[A] federal court before considering whether to borrow a state law to resolve an admiralty dispute must ask whether there is admiralty law on the issue and if so it must apply that law and if not it must decide whether the interest in uniformity should trump the state's regulatory interest and expertise.” Id.

Neither party argues that there is admiralty law that governs interpretation of the scope of a duty to defend under a marine insurance policy. District courts in this circuit have applied state law to such disputes. See Cont'l Ins. Co. v. George J. Beemsterboer, Inc. , 148 F.Supp.3d 770, 778 – 80, 2015 WL 8346997, at *5–6 (N.D.Ind. Dec. 8, 2015)

; Egan Marine Corp. v. Great Am. Ins. Co. of N.Y., 531 F.Supp.2d 949, 953 (N.D.Ill.2007) ; Nat'l-Ben Franklin Ins. Co. of Ill. v. Levernier , 280 F.Supp.2d 851, 859 (E.D.Wis.2003). Based on this authority, and considering the lack of a dispute between the parties on this issue, the Court will apply Illinois law to determine whether the claims against Vantage fall within the scope of Markel's duty to defend.¹

Legal Standard

Summary judgment is appropriate “if the movant shows that 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)

; see also

Celotex Corp. v. Catrett , 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Court considers the entire evidentiary record and must view all of the evidence and draw all reasonable inferences from that evidence in the light most favorable to the nonmovant. Ball v. Kotter , 723 F.3d 813, 821 (7th Cir.2013). To defeat summary judgment, a nonmovant must produce more than “a mere scintilla of evidence” and come forward with “specific facts showing that there is a genuine issue for trial.” Harris N.A. v. Hershey , 711 F.3d 794, 798 (7th Cir.2013). Ultimately, summary judgment is warranted only if a reasonable jury could not return a verdict for the nonmovant. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “Under Illinois law, the interpretation of an insurance policy is a question of law that is properly decided by way of summary judgment.” Nationwide Ins. Co. v. Cent. Laborers' Pension Fund , 704 F.3d 522, 525 (7th Cir.2013) (citing Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill.2d 384, 189 Ill.Dec. 756, 620 N.E.2d 1073, 1077 (1993) ).

Background

Vantage is a boat rental company, “engaged in the commercial trade of taking passengers for hire on pleasure cruises” from a dock located on the Chicago River. R. 49 ¶¶ 4, 6, 11. David Bagger was employed by Vantage during the relevant time period and worked at the dock processing boat rentals and maintaining the boats. Id. ¶¶ 8-9. Vantage owns a boat that is insured by Markel. Id. ¶ 2.

On August 24, 2012, Brian Garland and a group of friends came to the dock expecting to rent a boat. Id. ¶¶ 11-12. Garland and his friends were not able to pay to rent the boat, so as a consolation, Bagger took the group on a boat ride on the river for about 30 minutes himself, using the boat insured by Markel. Id. ¶¶ 13-14. Bagger is not a licensed boat captain or pilot. Id. ¶ 34. Neither Garland nor any of his friends signed a rental agreement to use the boat. Id. ¶¶ 32-33. In the underlying state court action against Vantage, the plaintiffs allege that “after” the boat ride, R. 45-12 at 3 (¶ 8), Bagger “dock [ed] the boat,” id. and then Garland fell into the water and drowned. Id. at 4 (¶¶ 11-12).

Pursuant to the insurance policy covering the boat, Markel is currently paying for Vantage's defense against claims made by Garland's estate in the underlying state court action. Garland's estate alleges that Garland's death was proximately caused by the following “acts and/or omissions” committed by Vantage and Bagger:

a. Failed to properly maintain the boat dock;

b. Failed to ensure the boat dock was in a safe condition for those lawfully on the premises;

c. Failed to inspect the boat deck to ensure it was in a safe condition;

d. Failed to adequately warn individuals, including BRIAN GARLAND, that the boat dock was dangerous or otherwise hazardous;

e. Failed to provide adequate railing along the boat dock;

f. Failed to otherwise have safeguards along the boat dock;

g. Failed to provide any adequate rope, ladder, or other grab device for persons falling into the water to extricate themselves; and

h. Was otherwise careless and/or negligent in the ownership, maintenance and use of the premises.

Id. at 3-4 (¶ 10). In the counts of the complaint against Bagger and Vantage, Garland's estate does not expressly allege how Garland fell into the water. But when making allegations against the owner of the dock (an entity known as MW, which is also a defendant in the state action), Garland's estate expressly alleges that Garland “was caused to fall into the water because of the unsafe dock.” R. 45-12 at 7 (§ IV).

The insurance policy Vantage has with Markel covers liabilities arising from “ownership, maintenance, or use of” the boat at issue. R. 45-1 at 7. The policy also includes the following warranties, exclusions, and definitions relevant to this motion:

[Warranty] B. CONTINUING WARRANTY OF SEAWORTHINESS: [Vantage] warrant[s] that [Vantage's] Insured Property shall be maintained in a Seaworthy condition during the entire Policy period. Any breach of this continuing warranty to exercise reasonable care to maintain the Insured Property in a Seaworthy condition will render coverage void for any damage or loss claimed under this Policy where such condition or conditions of unseaworthiness directly or indirectly caused or contributed to any damage or loss for which [Vantage] makes claim.

[Warranty] C. COMPLIANCE WITH REGULATION: [Vantage] warrant[s] that [it is] in compliance with all federal, state or local regulations concerning [Vantage's] operations; and that [Vantage] possess any and all federal, state or local documentation, permits and licenses required for the Insured's Property's trade or use.

[Warranty] D. RENTAL CONTRACT: [Vantage] warrant[s] that a written rental contract, which has been submitted to and approved by [Markel], is executed between [Vantage] and any person or organization who rents, hires or leases the Insured Watercraft from [Vantage] and any person or organization who uses an Insured Watercraft, with or without an exchange of consideration or payment for use of [Vantage's] Watercraft. A copy of all executed rental agreements will be held on file for no less than three years after the termination of the contract.

SECTION IV. LIABILITY COVERAGE

Exclusions

[Markel] will not pay any amount for:....

K. Bodily injury or property damage caused by the use of [Vantage's] watercraft while it is being used to carry passengers for hire....

O. Bodily injury or property damage caused by [Vantage] when not in the course of [Vantage's] rental business operation, and/or after your normal business hours, or for any person other than an Insured as defined in this endorsement, whom [Vantage has] deemed to have given permission to operate the Insured Property.

SECTION II.—DEFINITIONS (Continued)

....

“Seaworthy” and “Seaworthiness applies not only to the physical condition of the Insured Property, but to all its parts, equipment and gear and includes the assignment of a suitable captain and crew.”

R. 45-1 at 7, 21-22. On the basis of these provisions, Markel seeks a declaratory judgment that it does not have a duty to defend Vantage in the underlying state action because (1) the underlying incident is outside the scope of the policy's coverage, (2) Vantage breached certain policy warranties, and (3) Vantage's conduct leading up to Garland's death falls within certain policy exclusions.

Analysis

I. Scope of Coverage

Markel argues that it does not have a duty to defend Vantage in the state court action because the scope of the insurance policy does not cover the liabilities at issue in that case. “An insurer is obligated to defend its insured...