Westfield Ins. Co. v. Vandenberg

• Decision Date: 06 August 2015
• Docket Number: No. 14–2009.,14–2009.
• Citation: 796 F.3d 773
• Parties: WESTFIELD INSURANCE COMPANY, an Ohio corporation, Plaintiff–Appellee, v. Scot VANDENBERG, et al., Defendants–Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

796 F.3d 773

WESTFIELD INSURANCE COMPANY, an Ohio corporation, Plaintiff–Appellee

v.Scot VANDENBERG, et al., Defendants–Appellants.

No. 14–2009.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 9, 2014.

Decided Aug. 6, 2015.

Michael L. Resis, Richard T. Valentino, Smithamundsen, LLC, Chicago, IL, for Plaintiff–Appellee.

Mark E. McNabola, Cogan & McNabola, Peter C. Morse, Morse Bolduc & Dinos, LLC, Chicago, IL, for Defendants–Appellants.

Before POSNER, RIPPLE, and KANNE, Circuit Judges.

Opinion

RIPPLE, Circuit Judge.

Scot Vandenberg was injured when he fell from the upper deck of a yacht anchored in Lake Michigan. He filed suit in Illinois state court, alleging that the owners and operators of the yacht were negligent. He eventually settled with the defendants. Under the settlement agreement, the defendants agreed to pay Mr. Vandenberg $25 million through the assignment of their claims against their insurers. Westfield Insurance Company (“Westfield”) was the insurance provider for Rose Paving Company (“Rose Paving”), one of the defendants. Westfield disputed that its insurance policies with Rose Paving covered the yacht accident and brought a declaratory judgment action in the district court. Mr. Vandenberg, as the assignee of Rose Paving, opposed the action. The district court granted Westfield's motion for judgment on the pleadings; it decided that the Westfield policies did not provide coverage for Mr. Vandenberg's injury. Mr. Vandenberg asks that we review that determination. We now hold that the accident occurring on the yacht is not covered by the insurance policies and accordingly affirm the district court's judgment.

IBACKGROUND

A.

In September 2009, Mr. Vandenberg was attending a five-hour cruise on a chartered yacht when he fell from the upper deck. The accident occurred when he turned to respond to someone calling his name and, as he shifted his weight, the bench upon which he was sitting tipped over. The bench was not secured to the deck, nor did the upper deck have a railing. The fall left Mr. Vandenberg paralyzed from the chest down. The yacht was owned by RQM, Inc. (“RQM”), a closely held corporation owned by Michael Rose, Carl Quanstrom, and Alan Rose. Mr. Vandenberg alleged that Rose Paving, a company run by Alan Rose, was a booking agent that maintained a marketing relationship for the chartering of the yacht.

At the time of the accident, Rose Paving was insured by Westfield under a commercial general liability (“CGL”) policy and by an umbrella policy (collectively “the policies”). The application for the CGL policy listed as insureds Rose Paving Co., Rose Paving & Seal Coating Inc., and Bridgeview Investments.¹ This application included a “schedule of hazards,” which listed “concrete construction,” “Contractors Executive Supervisors,” and “subcontractors.”² The application also asked whether the applicant owned, hired, or leased any watercraft. Rose Paving marked the “no” box.³ The umbrella section of the application similarly asked whether the applicant owned or leased a watercraft. Rose Paving did not answer that question.

The insurance contract included “common policy declarations” applicable to both the CGL and umbrella policies, which listed Rose Paving's business as “concrete construction.”⁴ The CGL policy declarations also contained a “general liability schedule,” which listed the premises and operations covered by the contract and included “contractors” and “subcontracted work—in connection with construction, reconstruction, repair or erection of buildings.”⁵ The CGL and umbrella policies further provided that Westfield would be legally obligated to pay for damages “to which this insurance applies.”⁶ They then listed certain exclusions, including liability that “aris[es] out of the ownership, maintenance, use or entrustment to others of any ... watercraft owned or operated by or rented or loaned to any insured.”⁷ Finally, the policies provided that, by accepting coverage, Rose Paving agreed that “[t]he statements in the Declarations are accurate and complete,” that “[t]hose statements are based upon representations” Rose Paving made to Westfield, and that Westfield “issued th[e] policy in reliance upon [those] representations.”⁸

B.

Before Westfield filed this declaratory action, the parties had commenced several actions, the particulars of which are not pertinent to our decision today.⁹ Mr. Vandenberg ultimately entered into a settlement agreement with the defendants, disposing of the then-pending state court and maritime actions. Under this agreement, Rose Paving, along with Carl Quanstrom, Michael Rose, Alan Rose, Dough Management, and Location Finders International, agreed to pay $25 million, to be satisfied solely through an assignment of their rights of recovery under their insurance policies. Rose Paving, Michael Rose, and Alan Rose agreed to pay an additional $300,000 directly, and RQM's insurer agreed to pay $2 million. The settlement agreement was accepted by the Circuit Court of Cook County, Illinois, on October 10, 2012.

In January 2012, Westfield filed this declaratory action. It sought a determination that it owed no duty under Rose Paving's insurance policies to defend or to indemnify any of the defendants in the state court action. Westfield alleged that the policies did not cover the underlying accident because the operation of a seventy-five-foot yacht fell outside the scope of the risks and liabilities for which the policies provided coverage. Alternatively, Westfield maintained that the “watercraft exclusion” barred coverage and that Rose Paving's conduct released Westfield from contractual liability under the policies.

Westfield filed a motion for judgment on the pleadings. Mr. Vandenberg, as the assignee of Rose Paving, responded with a combined response and cross-motion for summary judgment. The district court granted Westfield's motion for judgment on the pleadings and denied Mr. Vandenberg's motion for summary judgment.

The court concluded that the insurance policies covered only Rose Paving's construction business. The court relied on the business description provided in the common policy declarations, the “schedule of hazards” listed in the application, and Rose Paving's representation that it did not own, hire, or lease any watercraft.

The district court later denied Mr. Vandenberg's motion to alter the judgment under Federal Rule of Civil Procedure 59(a). Mr. Vandenberg now appeals the court's decision granting Westfield's motion for judgment on the pleadings.¹⁰

IIDISCUSSION

Mr. Vandenberg asks us to review the district court's decision on the scope of the Westfield insurance policies. He maintains that the policies provide coverage for his injuries because of the broad terms employed in the text. More precisely, he takes the view that, because the Westfield policies do not exclude expressly accidents such as the one on the yacht, the accident and his injuries are covered. Westfield responds that the policies apply only to Rose Paving's construction business and, in the alternative, that the accident falls under the watercraft exclusion contained in the policies.¹¹

The interpretation of an insurance policy is a matter of state law. See Koransky, Bouwer & Poracky, P.C. v. Bar Plan Mut. Ins. Co., 712 F.3d 336, 341 (7th Cir.2013). Because the parties agree that Illinois law applies, we look to the decisions of the Supreme Court of Illinois for guidance. See id. We review de novo the district court's decision granting a Rule 12(c) motion for judgment on the pleadings. See Matrix IV, Inc. v. Am. Nat'l Bank & Tr. Co., 649 F.3d 539, 547 (7th Cir.2011). For the reasons set out more fully below, we agree with the district court that the policies do not provide coverage for Mr. Vandenberg's accident. We also conclude that Rose Paving's use of the yacht was excluded from coverage by the policies' watercraft exclusion.

A.

We first address the scope of the Westfield insurance policies. Mr. Vandenberg makes two major arguments to support his interpretation of the policies. First, he submits that the business designation, on its own, is insufficient to limit the scope of the policies. Second, he contends that, under Illinois law, an insurer must “expressly exclude” a risk from the insurance policy if the insurer does not intend to insure against that particular risk.¹² He therefore maintains that because the Westfield policies do not expressly exclude non-construction-related injuries, the policies provide coverage.

Under Illinois law, “[a]n insurance policy is a contract, and 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). When interpreting an insurance policy, “our primary objective is to ascertain and give effect to the intention of the parties, as expressed in the policy language.” Id.; accord Crum & Forster Managers Corp. v. Resolution Tr. Corp., 156 Ill.2d 384, 189 Ill.Dec. 756, 620 N.E.2d 1073, 1078 (1993) (“[T]he primary function of the court is to ascertain and enforce the intentions of the parties as expressed in the agreement.”). To achieve that goal, we “must construe the policy as a whole, taking into account the type of insurance for which the parties have contracted, the risks undertaken and purchased, the subject matter that is insured and the purposes of the entire contract.” Crum & Forster Managers Corp., 189 Ill.Dec. 756, 620 N.E.2d at 1078 ; accord Oakley Transp., Inc. v. Zurich Ins. Co., 271 Ill.App.3d 716, 208 Ill.Dec. 177, 648 N.E.2d 1099, 1106 (1995) (noting that “an insurance policy is not to be interpreted in a factual vacuum and without regard to the purpose for which the insurance was written”).

After reviewing the insurance application and the terms of the policies, we conclude that the district court correctly determined that Westfield and Rose Paving intended to...