Scottsdale Ins. Co. v. Columbia Ins. Grp., Inc.

Decision Date26 August 2020
Docket NumberNo. 19-3315,19-3315
Citation972 F.3d 915
Parties SCOTTSDALE INSURANCE COMPANY, Plaintiff-Appellee, v. COLUMBIA INSURANCE GROUP, INC., Defendant-Appellant.
CourtU.S. Court of Appeals — Seventh Circuit

Jonathan L. Schwartz, Attorney, Goldberg Segalla LLP, Chicago, IL, for Plaintiff-Appellee

James D. VanRheeden, Attorney, Quinn, Johnston, Henderson & Pretorius, Peoria, IL, for Defendant-Appellant

Before Manion, Kanne, and Wood Circuit Judges.

Manion, Circuit Judge.

While performing HVAC work at a construction site in Chicago, Eduardo Guzman fell approximately 22 feet through an unguarded opening in the second floor, sustaining serious injuries. Guzman sued Rockwell Properties (the owner), Prairie Management & Development (the manager), and others in state court.

The issue before us is whether Columbia Insurance Group (Guzman's employers’ insurer) owes a duty to defend Rockwell and Prairie. Scottsdale Insurance Company (Rockwell's insurer) wants Columbia to take over the defense. The district court granted Scottsdale judgment on the pleadings, declaring Columbia has a duty to defend Rockwell and Prairie, and ordering Columbia to reimburse prior defense costs. We affirm.

I. Background

We review a ruling on a Rule 12(c) motion for judgment on the pleadings de novo and we construe the facts in the light most favorable to the nonmovant. Buchanan-Moore v. Cty. of Milwaukee , 570 F.3d 824, 827 (7th Cir. 2009).

A. Columbia insures TDH

TDH Mechanical provides heating, ventilation, and air conditioning services. It employed Eduardo Guzman.

TDH bought an insurance policy from Columbia Insurance Group to cover the period from April 12, 2016, to April 12, 2017. The policy contains this "insuring agreement":

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" ... to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages....

The policy also includes an endorsement adding additional insureds under particular circumstances:

The following amends SECTION II—Liability, C. Who Is An Insured:
Who Is An Insured is amended to include as an insured any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy. Such person or organization is an additional insured only with respect to liability arising out of your ongoing operations performed for that insured. Liability for "bodily injury" or "property damage" caused, in whole, or in part, by "your work" arising out of your ongoing operations performed for that additional insured and included in the "products-completed operations hazard".
B. TDH contracts with Prairie and Rockwell

Rockwell Properties owned a piece of property under construction in Chicago. Prairie Management & Development was the construction manager at this property. In February 2017, Prairie and Rockwell contracted with TDH to provide HVAC services at this property. That contract contains two particularly relevant paragraphs:

14. Contractor [TDH] hereby assumes responsibility and liability in and for any and all damages or injury of any kind or nature whatever to all persons and to all property growing out of or resulting from the act or omission of the Subcontractor in the performance of the Work provided for in this Contract.... Contractor [TDH], to the extent permitted by law, agrees to indemnify, defend, save and hold harmless the Owner [Rockwell] against any and all claims, damages, loss or expenses (including court costs and attorney's fees) by reason of the liability imposed by law upon the Contractor, and/or Owner for damages because of bodily injuries, including death at any time there from [sic], sustained by any person or persons; or on account of damage to property arising out of or on account of or in consequence of the performance of this Contract where such injuries to persons or damage to property are due or claimed to be due to any negligence of Contractor's employees, agents or servants. Contractor shall protect and indemnify Owner against any loss or damage suffered by anyone arising through Contractor's negligence, or those employed by Contractor may have by reason thereof, or on account of being charged therewith....
15. Prior to commencing any work, the Contractor shall submit a certification of insurance acceptable to the Owner naming the Owner (Rockwell Properties, LLC) and Prairie Management & Development, Inc. as Additional Insureds for the duration of the job.

The record also includes a Certificate of Liability Insurance dated February 9, 2017, identifying Columbia as the commercial general liability insurer, TDH as the insured, and Rockwell and Prairie as additional insureds.

C. Guzman falls and is injured

On March 13, 2017, Guzman was performing HVAC work at the Chicago building when he fell "through an unguarded opening" in the second floor. He fell 22 feet. He suffered serious injuries, but survived.

Guzman sued Prairie, Rockwell, and others for negligence ("underlying suit").1 He claims, among other things, that Prairie and Rockwell "carelessly and negligently failed to supervise, inspect, monitor, and coordinate the work of the subcontractors on the construction site in order to prevent and protect Plaintiff from falling through the unprotected opening in the floor.... " He also claims that Prairie and Rockwell "carelessly and negligently failed to properly supervise the construction site and monitor work of [their] subcontractors, and thereby allowed [their] subcontractors to engage in the unsafe practice of not covering or guarding the unmarked opening in the floor with appropriate protection which exposed Plaintiff to the risk of falling through the opening." Guzman did not sue TDH, and his suit does not specifically mention it.

Several defendants in the underlying suit (besides Prairie and Rockwell) filed third-party complaints against TDH for contribution, alleging TDH negligently failed to train its employees on multiple issues, failed to maintain a safe workplace, failed to provide proper safety equipment, allowed the opening to remain open and unprotected, failed to supervise or inspect the construction site, failed to supervise or inspect the work of subcontractors, failed to warn Guzman of the opening, failed to provide adequate illumination, failed to supervise the HVAC work of its employees including Guzman, failed to enforce its own safety rules, and failed to provide adequate safeguards to prevent the injury.

Scottsdale insured Rockwell. Scottsdale has defended Rockwell and Prairie in the underlying suit. Columbia refuses to defend them. Scottsdale wants Columbia to take over their defense, and to reimburse Scottsdale for the defense costs thus incurred. Scottsdale filed this suit, seeking a declaration that Columbia has a duty to defend and indemnify Rockwell and Prairie. Scottsdale moved for judgment on the pleadings. The district court granted this motion in part, declaring Columbia owes a duty to defend Prairie and Rockwell, ordering Columbia to pay Scottsdale over $50,000 for defense costs through August 2019, and leaving the issue of indemnity for another day. Columbia appeals.

II. Discussion
A. Law

Procedurally, we review a judgment on the pleadings de novo . When a plaintiff moves for judgment on the pleadings, the motion should not be granted unless it appears beyond doubt that the nonmovant cannot prove facts sufficient to support its position, and that the plaintiff is entitled to relief. See Housing Auth. Risk Retention Grp. v. Chicago Housing Auth. , 378 F.3d 596, 600 (7th Cir. 2004).

Substantively, the parties agree Illinois law applies. Insurance policies are contracts. Under Illinois law, "the general rules governing the interpretation of other types of contracts also govern the interpretation of insurance policies." Hobbs v. Hartford Ins. Co. of the Midwest , 214 Ill.2d 11, 291 Ill.Dec. 269, 823 N.E.2d 561, 564 (2005). The goal in interpreting an insurance policy "is to ascertain and give effect to the intention of the parties, as expressed in the policy language." Id.

An insurer's duty to defend is broader than its duty to indemnify. Outboard Marine Corp. v. Liberty Mut. Ins. Co. , 154 Ill.2d 90, 180 Ill.Dec. 691, 607 N.E.2d 1204, 1220 (1992). To determine whether an insurer has a duty to defend, a court compares the underlying complaint's allegations (liberally construed in the insured's favor) to the policy's language. Id. If the underlying complaint "alleges facts within or potentially within policy coverage, an insurer is obligated to defend its insured even if the allegations are groundless, false or fraudulent." General Agents Ins. Co. of Am. v. Midwest Sporting Goods Co. , 215 Ill.2d 146, 293 Ill.Dec. 594, 828 N.E.2d 1092, 1098 (2005).

"An insurer can only refuse to defend if the allegations of the underlying complaint preclude any possibility of coverage." Illinois Tool Works, Inc. v. Travelers Cas. & Sur. Co. , 389 Ill.Dec. 331, 26 N.E.3d 421, 428 (Ill. App. Ct. 2015). An insurer must defend when "the underlying allegations do not foreclose coverage." Id. When an insurer relies on a provision that it contends excludes coverage, courts "review the applicability of the provision to ensure it is clear and free from doubt that the policy's exclusion prevents coverage." National Fire Ins. of Hartford v. Walsh Const. Co. , 392 Ill.App.3d 312, 330 Ill.Dec. 572, 909 N.E.2d 285, 288 (2009) (internal quotation marks omitted).

A court may look beyond the underlying complaint to third-party complaints when determining whether there is a duty to defend, so long as the third-party complaints are not "self-serving" or filed by the additional insured seeking coverage. See Farmers Auto. Ins. Ass'n v. Neumann , 390 Ill.Dec. 177, 28 N.E.3d 830, 834 (Ill. App....

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