Westchester Surplus Lines Ins. v. Stonitsch Const.

• Decision Date: 21 August 2008
• Docket Number: No. 07 C 3807.,07 C 3807.
• Citation: 572 F.Supp.2d 946
• Parties: WESTCHESTER SURPLUS LINES INSURANCE COMPANY, Plaintiff, v. STONITSCH CONSTRUCTION, INC., and John Ackeret, Defendants.
• Court: U.S. District Court — Northern District of Illinois

572 F.Supp.2d 946

WESTCHESTER SURPLUS LINES INSURANCE COMPANY, Plaintiff, v. STONITSCH CONSTRUCTION, INC., and John Ackeret, Defendants.

No. 07 C 3807.

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

August 21, 2008.

Richard Thomas Valentino, Vasudev N. Addanki, Smithamundsen LLC, Chicago, IL, for Plaintiff.

Joseph B. Carini, III, Michael A. Pauletto, Johnson & Bell, Ltd., Richard R. Gordon, Johnson & Bell, Ltd., Clifford Wolf Horwitz, Horwitz, Horwitz & Associates, Chicago, IL, Michael Dean Carter, Jr., Michael D. Carter, Esq., Dieterich, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Judge:

This is an insurance dispute. Plaintiff and Defendants have filed cross motions for summary judgment seeking declaratory judgment as to the existence or nonexistence of a contract for insurance between Plaintiff insurance carrier and Defendant Stonitsch Construction, Inc. ("Stonitsch").

BACKGROUND

I. Relevant Facts

John Ackeret filed a lawsuit in state court against his employer A & D Erectors, Inc. ("A & D"), claiming he was injured on December 6, 2004, while performing work building an aircraft hanger. (R. 68-1, at ¶¶ 4, 8; R. 59-1, Ex. 1A, Ackeret Compl.) In his state court lawsuit, Ackeret seeks to recover both from A & D and from Stonitsch, who had subcontracted the hanger project to A & D. (R. 68-1, at ¶ 4; R. 59-10, p. 1-2; R. 69-1, at ¶ 24.) At the time of Ackeret's alleged injuries, Westchester Surplus Lines Insurance Company ("Westchester") insured A & D, pursuant to a general liability insurance policy between those two parties ("the Westchester Policy" or "the Policy"). (R. 68-1, at ¶ 1.)

No party has questioned, at least in this lawsuit, whether Westchester has a duty to defend A & D.¹ Rather, with this lawsuit, the parties have cross-sought judgments declaring that Westchester either does or does not owe Stonitsch a duty to defend against Ackeret's lawsuit.

A. Westchester Policy

Westchester issued a general liability insurance policy to A & D, effective December 1, 2004 through December 1, 2005. (R. 67-1, at ¶ 14.) The Westchester Policy named A & D as the insured, but also contained a provision by which Westchester would insure an additional party named by A & D. (R. 59-10, Westchester Policy, p. 23, FORM B.) Under this provision (referred to as an "endorsement"), the Policy could include as an additional insured any persons or organizations listed in the endorsement who acquire liability in the course of performing work on behalf of A & D. (Id.) The endorsement does not list any persons or organizations by name. Instead, in the place where one would expect such names to be listed, the endorsement states: "As required by contract, provided contract executed prior to loss." (Id.) The crux of the present lawsuit is whether Westchester was "required by contract" to insure Stonitsch as an additional party.

B. Subcontract Agreement

Prior to Mr. Ackeret's injury, on May 20, 2004, Stonitsch and A & D had entered into a subcontract agreement for work on a project involving the erecting of aircraft hangers ("the Subcontract Agreement"). (R. 69-1, at ¶ 25; R. 67-1, at ¶ 8.) Under the Subcontract Agreement, the only contract at issue in this litigation between Stonitsch and A & D, Stonitsch (as a general contractor) employed A & D as a subcontractor for the hanger project. (R. 69-1, at ¶ 25; R. 59-10, p. 1-2.) The Agreement, according to its terms, "has important legal and insurance consequences . . ." (R. 59-10, p. 1.) The Subcontract Agreement also states that "[p]rior to starting Work the Subcontractor shall procure and maintain in force" various types of liability insurance. (Id. at ¶¶ 5.1, 5.2.) Stonitsch admits that the Subcontract Agreement "does not contain a requirement that A & D name Stonitsch as an additional insured on A & D's insurance policy." (R. 68-1, at ¶ 10.) Stonitsch, however, argues that it was the intention of the parties to the Subcontract Agreement to name Stonitsch as an additional insured on the Westchester Policy. (Id.)

C. Certificates

On November 30, 2004, Union Insurance Group, A & D's "up front" insurance company, issued two certificates stating that Stonitsch "is added as additional insured" on a number of insurance policies—including the Westchester Policy—for work performed on the aircraft hangers project. (R. 68-1, at ¶ 45; R. 67-1, at ¶¶ 20-21; R. 15-5, 6.) The certificates state that they were "issued as a matter of information only, and confer[ ] no rights upon the certificate holder." (R. 15-5, 6.) Westchester has no contract or agreement with the Union Insurance Group. (R. 68-1, at ¶ 48.)

LEGAL STANDARD

I. Jurisdiction

Both parties seek relief under the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202. "The Declaratory Judgment Act empowers federal courts to give declaratory judgments in `a case of actual controversy within its jurisdiction,' but it is not an independent grant of jurisdiction, rather jurisdiction must be predicated on some other statute." Newell Operating Co. v. Int'l Union of United Auto., Aero., & Agric., Implement Workers of Am., 532 F.3d 583 (7th Cir.2008) (quoting 28 U.S.C. § 2201(a)). The Court has diversity jurisdiction over this action under 28 U.S.C. § 1332, because at the time of the filing of the Complaint Westchester was a Georgia corporation (with its principal place of business in Georgia), Stonitsch and A & D were Illinois Corporations (with their principal places of business in Illinois), and John Ackeret was a citizen of Illinois.

II. Summary Judgment Standard

Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party" Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). In determining summary judgment motions, "facts must be viewed in the light most favorable to the nonmoving party only if there is a `genuine' dispute as to those facts." Scott v. Harris, ___ U.S. ___, 127 S.Ct. 1769, 1776, 167 L.Ed.2d 686 (2007). The party seeking summary judgment has the burden of establishing the lack of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). After "a properly supported motion for summary judgment is made, the adverse party `must set forth specific facts showing that there is a genuine issue for trial.'" Anderson v. Liberty Lobby, 477 U.S. at 255, 106 S.Ct. 2505 (quoting Fed R. Civ. P. 56(e)).

III. Illinois Contract Principles

Under Illinois law,² the Court treats an insurance policy the same as any other contract and utilizes the same rules of construction. Geschke v. Air Force Ass'n, 425 F.3d 337, 342 (7th Cir.2005). Illinois applies the four corners rule of contract interpretation, which bars consideration of extrinsic evidence when the contract is facially unambiguous and fully integrated. See TAS Distributing Co., Inc. v. Cummins Engine Co., Inc., 491 F.3d 625, 636 (7th Cir.2007) (citing Air Safety, Inc. v. Teachers Realty Corp., 185 Ill.2d 457, 236 Ill.Dec. 8, 706 N.E.2d 882 (1999)); see also Brooklyn Bagel Boys, Inc. v. Earthgrains Refrigerated Dough Prods., Inc., 212 F.3d 373, 380 (7th Cir.2000). The Court interprets unambiguous contract terms according to their plain meaning. See Utility Audit, Inc. v. Horace Mann Serv. Corp., 383 F.3d 683, 687 (7th Cir. 2004) (citing Trade Ctr. v. Dominick's Finer Foods, 304 Ill.App.3d 931, 238 Ill.Dec. 230, 711 N.E.2d 333, 335 (1999)); see also PPM Fin., Inc. v. Norandal USA, Inc., 392 F.3d 889, 892 (7th Cir.2004).

ANALYSIS

I. The Westchester Policy

The Court first addresses whether the Westchester Policy requires the existence of a written contract designating a party as an additional insured. The plain meaning of the Policy's terms does not support this argument. Camico Mut. Ins. Co. v. Citizens Bank, 474 F.3d 989, 993 (7th Cir.2007) (Under Illinois law, "contract terms are interpreted according to their plan meaning unless otherwise defined."). The Policy covers an additional insured "[a]s required by contract, provided contract executed prior to loss." The word "written" is not included in the language of this additional insured provision. Nor does the word "executed" necessarily invoke a requirement of a written—as opposed to an oral—contract. In addition to referring to the affixing of a signature to a document, the word "execute" also means "to perform or complete (a contract or duty)." Black's Law Dictionary, Seventh Ed. (1999). Accordingly, the plain meaning of the Policy permits A & D to add an insured by way of either a written contract signed, or an oral or written contract performed, prior to Mr. Ackeret's alleged injury.³ See Commonwealth Ins. Co. v. Titan Tire Corp., 398 F.3d 879, 885 (7th Cir.2004) (holding that contract language was susceptible to only one reasonable interpretation, and therefore not ambiguous); Forest Glen Cmty. Homeowners Ass'n v. Bishof, 321 Ill.App.3d 298, 254 Ill.Dec. 237, 746 N.E.2d 1285, 1289 (Ill. App.Ct.2d Dist.2001).

II. Oral Contract

Stonitsch has argued that A & D and Stonitsch entered into an oral agreement which constitutes the "contract" referenced in the Westchester Policy. Yet, Stonitsch repeatedly references only the parties' intent, expressed orally, to add Stonitsch as an additional party. Intent alone, however, is not enough—the Policy expressly requires a contract. As discussed above, that contract may be in the form of an oral agreement, but Stonitsch has failed to put forth any evidence pointing to the existence of a specific oral agreement. What is more, A & D's undisputed Rule...