Selective Ins. Co. of S.C. v. Target Corp.

• Decision Date: 29 December 2016
• Docket Number: No. 16-1669,16-1669
• Citation: 845 F.3d 263
• Parties: SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA, Plaintiff-Appellant, v. TARGET CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

845 F.3d 263

SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA, Plaintiff-Appellant,

v.TARGET CORPORATION, Defendant-Appellee.

No. 16-1669

United States Court of Appeals, Seventh Circuit.

Argued November 4, 2016

Decided December 29, 2016

Amended January 25, 2017

Kristina M. Beck, Brian O'Gallagher, Attorneys, Cremer, Spina, Shaughnessy, Jansen & Siegert, LLC, Chicago, IL, for Plaintiff-Appellant.

Garrett L. Boehm, Jr., Robert M. Burke, Peter R. Ryndak, Attorneys, Johnson & Bell, Ltd., Chicago, IL, for Defendant-Appellee.

Before Flaum and Kanne, Circuit Judges, and Magnus-Stinson, District Judge.^*

Magnus-Stinson, District Judge.

Plaintiff-Appellant Selective Insurance Company of South Carolina ("Selective") filed a declaratory judgment action, asking the district court to declare that it owed no duty to defend or indemnify Defendant-Appellee Target Corporation ("Target") in a lawsuit initiated by customer Angela Brown, who sued Target after a fitting room door fell on her. The district court granted summary judgment in favor of Target, finding that Target was an additional insured on a commercial general liability insurance policy (the "Policy") that the door supplier, Harbor Industries, Inc. ("Harbor"), had with Selective. The district court further held that Selective had both a duty to defend and indemnify Target for the entire cost Target incurred settling the Brown litigation. Selective appealed the district court's decision and, for the reasons that follow, we affirm.

I. Background

On December 17, 2011, Angela Brown was injured at a Target store in Gurnee, Illinois, when a fitting room door came off its hinges and fell on her. She sued Target in Illinois state court on February 14, 2012, and Target removed the case to federal court. In her complaint, Ms. Brown alleged that Target was negligent for failing to maintain and repair the fitting room door and failing to warn her that the fitting room door was in an unreasonably dangerous and hazardous condition. Target filed a third-party complaint against Harbor—the company that Target had contracted to supply the fitting rooms at the Gurnee store—seeking contribution and indemnification. Discovery during the Brown litigation revealed that the same fitting room door fell on another Target customer approximately one week before it fell on Ms. Brown. Ultimately, both Target and Harbor settled with Ms. Brown.

Target tendered its defense of Ms. Brown's lawsuit to Selective on May 7, 2012, claiming that it was an additional insured on Harbor's Policy with Selective because of a contract with Harbor. On July 30, 2013, Selective filed the underlying declaratory judgment action against Target in Illinois state court, and Target removed it to federal court on the basis of diversity jurisdiction.

The parties filed cross-motions for summary judgment, and the district court granted summary judgment to Target after finding in its favor on three issues. First, the district court found that Target was an additional insured on Harbor's Policy with Selective because of the interaction between a Supplier Qualification Agreement ("Supplier Agreement") that required Harbor to designate Target as an additional insured and their Program Agreement for the fitting rooms. Second, the district court found that Selective had a duty to defend Target because Ms. Brown's allegations fell within the scope of the Policy, since they could reasonably be read to assert a bodily injury caused in whole or in part by Harbor's product. Third, the district court found that Target had settled the lawsuit with Ms. Brown in reasonable anticipation of liability and, thus, Selective had a duty to indemnify Target for costs incurred defending and settling the Brown litigation. Final judgment was entered in favor of Target in the total amount of $714,450.24. Selective now appeals.

II. Analysis

Summary judgment is appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). We review de novo a district court's decision on cross-motions for summary judgment. Calumet River Fleeting, Inc. v. Int'l Union of Operating Eng'rs, Local 150, AFL – CIO , 824 F.3d 645, 647 (7th Cir. 2016) (citations omitted). "The general standards for summary judgment do not change: with cross summary judgment motions, we construe all facts and inferences therefrom in favor of the party against whom the motion under consideration is made." Id. at 647–48 (citations and quotations omitted). Because we are only considering whether it was proper for the district court to grant summary judgment in favor of Target, we resolve any factual disputes in Selective's favor.

Our subject matter jurisdiction over this dispute is based on the parties' diversity of citizenship. 28 U.S.C. § 1332. Federal courts deciding state law claims under diversity jurisdiction apply the forum state's choice of law rules to select the applicable state substantive law. McCoy v. Iberdrola Renewables, Inc. , 760 F.3d 674, 684 (7th Cir. 2014) (citations omitted). If no party raises a choice of law issue to the district court, "the federal court may simply apply the forum state's substantive law." Id. Although Selective correctly points out that there is a Minnesota choice-of-law provision in one of the contracts at issue, it admits that Target and Selective have both argued the insurance coverage issues under Illinois law. Thus, we will continue to apply Illinois law to this case.

A. The Contracts at Issue

Three contracts are relevant to addressing the parties' arguments—Target and Harbor's Supplier Agreement, which was executed in April 2007; Target and Harbor's Program Agreement for the fitting rooms, which was executed in April 2009; and Harbor and Selective's Policy, which was in effect when Ms. Brown was injured on December 17, 2011.

Target and Harbor executed the Supplier Agreement in April 2007. It provides, in relevant part, that it

shall apply to and control and shall be deemed incorporated into all agreements relating to the purchase of non-retail (not for resale) goods and/or services from [Harbor] by Target, including, but not limited to, any program agreement (or other agreement specific to the goods or services to be provided) entered into by the parties (Program Agreement).... In the event of any conflict between this Agreement and the specific Order or Program Agreement, the terms of the Order or Program Agreement shall govern.

The Supplier Agreement requires Harbor to maintain commercial general liability ("CGL") insurance "in full force and effect during the term of this Agreement" and to "designate Target as an additional insured by endorsement acceptable to Target." The Supplier Agreement provides that it "shall remain in effect until terminated as provided herein." It is undisputed that neither Target nor Harbor has terminated the Supplier Agreement pursuant to that provision.

In April 2009, Target and Harbor entered into the Program Agreement for Harbor to supply fitting rooms to Target. The Program Agreement incorporates the terms and conditions of the Supplier Agreement and provides that as long as Harbor complies with certain criteria, "Target agrees to purchase from [Harbor] all of Target's needed supply of the Goods [Fitting Rooms] during the Term of this Program Agreement." It identifies specific parts to be provided, including fitting room doors. It further provides that "[t]his Program Agreement shall begin on the Effective Date and end on July 1, 2010 (through the July 2010 cycle) unless otherwise terminated."

Harbor's Policy with Selective that was in effect on the date of Ms. Brown's injury provides, in relevant part, that Selective "will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies." The Policy specifically provides "[p]roducts-completed operations hazard" coverage that "[i]ncludes all ‘bodily injury’ and ‘property damage’ occurring away from premises you own or rent and arising out of ‘your product.’ " An endorsement to the Policy provides as follows:

WHO IS AN INSURED is amended to include as an additional insured any person or organization whom you have agreed in a written contract, written agreement or written permit to add as an additional insured on your policy. Such person or organization is an additional insured only with respect to liability for "bodily injury" or "property damage" or "personal and advertising injury" caused, in whole or in part, by ... "your product"....

B. The Additional Insured Provision of the Selective Policy

The parties dispute whether Target was an additional insured on Harbor's Policy with Selective. Specifically, the parties dispute the interaction between Target and Harbor's Supplier Agreement and Program Agreement and whether the term provisions in those contracts conflict.

Under Illinois law, the goal of contract interpretation is to ascertain the parties' intent and, in doing so, we first look to "the plain and ordinary meaning" of the contract language. Aeroground, Inc. v. CenterPoint Properties Trust , 738 F.3d 810, 813 (7th Cir. 2013) (quoting Gallagher v. Lenart , 226 Ill.2d 208, 314 Ill.Dec. 133, 874 N.E.2d 43, 58 (2007) ). We must construe the contract "as a whole, viewing each part in light of the others." Aeroground , 738 F.3d at 813 (citing Gallagher , 314 Ill.Dec. 133, 874 N.E.2d at 58 ). We also must seek to give effect to each clause and word used, without rendering any terms meaningless. Aeroground , 738 F.3d at 813 (citing Hufford v. Balk , 113 Ill.2d 168, 100 Ill.Dec. 564, 497 N.E.2d 742, 744 (1986) ).

There is no dispute that the Program Agreement for Harbor to supply Target with the fitting rooms terminated in July 2010 before Ms. Brown's injury. The parties dispute, however, whether the Supplier Agreement remained in effect when Ms. Brown was injured, such that it could be a "written contract" rendering Target an...