SEARS ROEBUCK AND COMPANY v. Zurich Insurance Company

• Decision Date: 13 May 1969
• Docket Number: No. 68 C 1942.,68 C 1942.
• Parties: SEARS ROEBUCK AND COMPANY, a corporation, Plaintiff, v. ZURICH INSURANCE COMPANY, an Insurance corporation, Defendant.
• Court: U.S. District Court — Northern District of Illinois

299 F. Supp. 518

SEARS ROEBUCK AND COMPANY, a corporation, Plaintiff, v. ZURICH INSURANCE COMPANY, an Insurance corporation, Defendant.

No. 68 C 1942.

United States District Court N. D. Illinois, E. D.

May 13, 1969.

Michael R. Turoff and B. Y. Weitzenfeld, Chicago, Ill., for plaintiff.

John M. Moelmann and Perry L. Fuller, Chicago Ill., for defendant.

MEMORANDUM OPINION AND ORDER

NAPOLI, District Judge.

Sears Roebuck and Co. has brought this action in diversity under the Declaratory Judgment Act, 28 U.S.C. § 2201, to have its rights determined with respect to the defendant Zurich Insurance Co. The plaintiff alleges that it is within the coverage of a contract of insurance written by the defendant which requires the defendant to provide a defense and indemnify Sears for any damages for which it is held liable in a suit now pending against Sears in the United States District Court for the Northern District of Texas. The matter is before the Court on defendant's motion to dismiss the complaint.

Warwick Electronics, Inc., a manufacturer who supplies Sears with various products for resale, is the insured under a policy written by Zurich Insurance Co. That policy insures Warwick against loss from liability imposed on account of personal injury or property damage caused by products manufactured, sold or distributed by Warwick. Zurich is also required to defend any suit brought on account of an accident covered by the policy. The contract contains a vendors' endorsement which extends defense and liability coverage to Sears.

A Warwick product was sold by Sears in Lubbock, Texas to one Glenn Coulter. After servicing by Sears, the product allegedly caused a fire which resulted in a lawsuit by Coulter against Sears. After refusal by Zurich to defend that suit, Sears brought this action to determine its rights under the vendors' endorsement. As substantive defenses Zurich contends that its policy does not cover occurrences arising out of services or repairs performed by Sears and that notice of the accident was not given as soon as practicable as required by the policy. This motion to dismiss, however, is based on the contention that this Court should not accept jurisdiction.

It is elementary that the question of relief under the Declaratory Judgment Act is addressed to the discretion of the court. Brillhart v. Excess Ins. Co., 316 U.S. 491, 494, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942). It is equally true that the statute should be liberally construed in order to effectuate the purpose for which the Act was intended, specifically to alleviate uncertainty with respect to legal rights and obligations. Aetna Casualty and Surety Co. v. Quarles, 92 F.2d 321, 325 (4th Cir. 1937).

The plaintiff here is seeking a declaration of its rights under a vendors' endorsement of an insurance contract in order to establish that it is entitled to defense and indemnity by the defendant in a property damage action that is now pending against the plaintiff. This case is substantially the same as Sears Roebuck & Co. v. American Mutual Liability Ins. Co., 372 F.2d 435 (7th Cir. 1967). It was there held an improper exercise of discretion for the District Court to dismiss an action for a declaration that an insurer was obliged to provide a defense and pay any judgment in a suit pending against the plaintiff on the basis of a vendors' endorsement in an insurance contract. In examining the scope of judicial discretion the Court stated:

Declaratory judgment should not be granted to try particular issues without settling the entire controversy, or to interfere with an action already instituted. (Citation omitted). But the pendency of another suit is not a sufficient reason to decline declaratory jurisdiction if that suit will not necessarily determine the controversy between the parties. Yellow Cab Co. v. City of Chicago, 7 Cir., 186 F.2d 946, 951 (1951). The standards generally to be applied in exercising discretion to hear a declaratory judgment action are whether a declaratory judgment will settle the particular controversy and clarify the legal relations in issue. Samuel Goldwyn, Inc. v. United Artists Corporation, 3 Cir., 113 F.2d 703,

709 (1940).

* * * Discretion must be exercised for a reason related to the purposes of the Act; it must relate to the clarification of legal issues and the settlement of controversies or to some overriding policy consideration such as abstention in state matters, inconvenience to parties, or improper use of the declaratory judgment action. (Citation omitted). Id. 372 F.2d at 438.

There can be no doubt that the relief sought here is entirely proper under the provisions and intent of the statute. Sears Roebuck & Co. v. American Mutual Liability Ins. Co., supra; Maryland Casualty Co. v. Consumers Finance Service, 101 F.2d 514 (3rd Cir. 1938). The question in controversy is whether the defendant's obligations under an insurance contract extends to the plaintiff in the circumstances which gave rise to the Texas litigation....