Westfield Insurance Company v. Indemnity Insurance Company of North America et al
Filing
118
OPINION: Indemnity Insurance Company of North Americas Motion for Reconsideration Under Rule 59(e) Regarding (I) Finding of Equitable Contribution Liability During Period of Deactivation; and (II) Findings Pertaining to Star's Duty to Defend (Case No. 16-3298 d/e 112 , Case No. 14-3040 d/e 122 ) is DENIED. SEE WRITTEN OPINION. Entered by Judge Sue E. Myerscough on 01/15/2020. (SKN, ilcd)
E-FILED
Wednesday, 15 January, 2020 12:33:35 PM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
WESTFIELD INSURANCE
COMPANY,
Plaintiff,
v.
INDEMNITY INSURANCE
COMPANY OF
NORTH AMERICA, et al.,
Defendants.
INDEMNITY INSURANCE
COMPANY OF
NORTH AMERICA,
Plaintiff,
v.
HOLLIS SHAFER et al.,
Defendants.
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No. 16-cv-3298
No. 14-cv-3040
OPINION
SUE E. MYERSCOUGH, U.S. DISTRICT JUDGE:
This matter comes before the Court on Indemnity Insurance
Company of North America’s (Indemnity) Motion for Reconsideration
Under Rule 59(e) Regarding (I) Finding of Equitable Contribution
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Liability During Period of Deactivation; and (II) Findings Pertaining
to Star’s Duty to Defend (Case No. 16-3298 d/e 112, Case No. 143040 d/e 122) (Motion). To prevail, Indemnity must demonstrate a
manifest error of law or fact, or present newly discovered evidence.
Fed. R. Civ. P. 59(e); LB Credit Corp. v. Resolution Trust Corp., 49
F.3d 1263, 1267 (7th Cir. 1995). Indemnity argues that the Court
made manifest errors and does not present any newly discovered
evidence. For the reasons set forth below, the Court sees no
manifest error of law or fact. The Motion is DENIED.
BACKGROUND
Brian Bradshaw, Eric Bradshaw, and Hollis Shafer owned
confined area feeding operations (Hog Facilities or CAFO) in Scott
County, Illinois, known as Sandstone North, LLC, and Sandstone
South, LLC (collectively Sandstone). At various times, Indemnity
and Westfield issued insurance policies to Sandstone. Westfield
issued policies that covered Sandstone up to November 12, 2008.
Thereafter, Sandstone switched its coverage to Indemnity. On
August 2, 2009, Sandstone was also made an additional insured on
a policy issued by Star to a company called Red Oak Hill. Brian
Bradshaw also owned Red Oak Hill. In 2010, Sandstone’s
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neighbors brought a nuisance suit against Sandstone in Scott
County, Illinois Circuit Court, Alvin Marsh, et al. v. Brian
Bradshaw, et al., Scott County Case No. 2010-L-3 (Underlying
Action). See Opinion entered October 28, 2019 (Case No. 16-3298
d/e 111, Case No. 14-3040 d/e 121) (Summary Judgment Opinion),
at 2-3, 14-15. The Complaint in the Underlying Action (Underlying
Action Complaint) alleged various injuries to the neighbors from the
wrongful operations of the Hog Facilities from 2007 onward.
On August 6, 2010, Sandstone tendered the defense of the
Underlying Action to the Indemnity, Westfield, and Star. On
November 2, 2010, Sandstone withdrew the tender to Indemnity of
the defense of the Underlying Action. On December 17, 2013,
Sandstone re-tendered the defense to Indemnity. This Court
determined at summary judgment that Sandstone could re-tender
the defense to Indemnity and that Sandstone’s re-tender in this
case was effective because it was within a reasonable time under
the circumstances. As a result, Indemnity owed Sandstone a duty
to defend the Underlying Action. Summary Judgment Opinion, at
15-23, 57-58.
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Sandstone’s attorneys secured a complete dismissal of all
claims against Sandstone. Westfield and Star paid for the defense
of the Underlying Action. Westfield and Star asked this Court to
require Indemnity to pay a pro rata share of the defense costs. The
Court determined Indemnity was required to pay a pro rata of the
defense costs because the re-tender was effective and was made
within a reasonable time. Summary Judgment Opinion, at 57-62.
The Court determined that Westfield and Star were entitled to
prejudgment interest from the date that Sandstone re-tendered the
defense to Indemnity, December 17, 2013. The Court directed the
parties to meet and confer to submit an agreed calculation of
Indemnity’s share of the defense costs and prejudgment interest.
Summary Judgment Opinion, at 64.
Indemnity asks the Court to reconsider two aspects of the
decision. Indemnity asks the Court to reconsider its decision that
Indemnity is liable for defense costs that occurred before the retender on December 17, 2013. Second, Indemnity asks the Court
to reconsider its findings regarding whether Star had a duty to
defend.
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ANALYSIS
The Court sees no error in its determination that Indemnity
had a duty to defend the entire Underlying Action. The Court
determined as a matter of first impression that an insured that had
relieved an insurer of the obligation to defend a lawsuit under
Illinois law’s “targeted tender doctrine” could re-tender the lawsuit
to the insurer and require the insurer to defend. The Court
explained that the targeted tender doctrine existed to protect the
insured’s right to decide which insurer should provide a defense to
a particular lawsuit. In order to protect an insured’s right to so
choose, the Court determined that the insured must be entitled to
re-tender a defense to an insurer. Summary Judgment Opinion, at
47-49.
The Court further determined that the re-tender must be made
within a reasonable time under existing principles of Illinois for the
tender of a defense to an insured. The Court applied the principles
for determining the timeliness of a tender approved by the Illinois
Supreme Court in West American Ins. Co. v. Yorkville Nat. Bank,
238 Ill.2d 177, 185, 939, 939 N.E.2d 288, 293 (Ill. 2010), and
determined that Sandstone’s re-tender to Indemnity was within a
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reasonable time under the circumstances. Summary Judgment
Opinion, at 49-58. Because the re-tender was within a reasonable
time under the circumstances, Indemnity had a duty to defend the
Underlying Action. A tender of a defense within a reasonable time
effectively requires an insurer to pay all the defense costs, even
those incurred before the date of the tender of the defense. See
West American Ins. Co. v. Yorkville Nat. Bank, 939 N.E.2d at 292,
296. Indemnity’s duty to defend Sandstone, therefore, extended to
all of Sandstone’s costs in the Underlying Action, not just those
after December 17, 2013. Because Indemnity had a duty to
Sandstone to pay all the defense costs, Westfield and Star were
entitled to require Indemnity to pay a pro rata share of the costs.
There was no error.
Indemnity argues that the Court erred because the Illinois
Supreme Court held that under the targeted tender doctrine an
insurer relieved of the duty to defend, such as Indemnity, could not
be required to pay contribution to other insurers that also had
duties to defend, such as Westfield and Star. Indemnity cites as
support for its argument the Illinois Supreme Court decisions in
Kajima Const. Servs., Inc. v. St. Paul Fire & Marine Ins. Co., 227 Ill.
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2d 102, 108, 879 N.E.2d 305, 310 (2007); John Burns Const. Co. v.
Indiana Ins. Co., 189 Ill. 2d 570, 578, 727 N.E.2d 211, 217 (2000).
The insureds in Kajima and John Burns Const. selected one insurer
to provide the defense of the underlying lawsuit and relieved
another insurer from paying those costs. The Kajima and John
Burns Const. decisions stated the insured had the right to choose
which insurer would pay for the defense. The Kajima and John
Burns Const. decisions also stated that allowing the insurer
selected to pay defense costs to seek contribution would interfere
with the insured’s right to choose. Summary Judgment Opinion, at
37; see John Burns Const., 189 Ill.2d at 577, 727 N.E.2d at 217
(“In the present case, however, Burns [the insured] made clear that
it did not want Royal [insurer] to become involved in the matter and
that the defense was being tendered solely to Indiana [the other
insurer]. Therefore, Indiana was foreclosed from seeking equitable
contribution from Royal.”).
In this case, the insured, Sandstone, effectively re-tendered
the defense to Indemnity. Sandstone chose Indemnity to defend the
Underlying Action along with Westfield and Star. Allowing Westfield
and Star to recover a pro rata share of all the costs from Indemnity
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furthered the insured Sandstone’s decision that all three companies
should provide the defense. The Court’s ruling is consistent with
Kajima and John Burns Const. because the outcome protects the
insured’s right to decide which insurance company will provide the
defense to a lawsuit. There was no error.
Indemnity argues that starting the accrual of prejudgment
interest on the date of the re-tender, December 17, 2013, was
inconsistent with finding that Indemnity was liable for a share of all
defense costs from the beginning of the Underlying Action.
Indemnity is mistaken. The right to prejudgment interest accrues
when the right to payment is liquidated and easily ascertainable.
See New Hampshire Ins. Co. v. Hanover Ins. Co., 296 Ill.App.3d
701, 709, 696 N.E.2d 22, 28 (Ill. App. 1st Dist. 1998). Westfield and
Star’s right to contribution was not liquidated until Sandstone
made a re-tender to Indemnity. That occurred on December 17,
2013. Prejudgment interest properly accrued from that date. There
was no inconsistency or error in the Summary Judgment Opinion.
Indemnity also asks the Court to reconsider its analysis of
Indemnity’s Other Insurance provisions and its impact on
Indemnity’s duty to defend. An insurer has a duty to defend if the
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complaint in the underlying lawsuit alleges fact which, if proven,
could give rise to coverage under the insurer’s policy. Summary
Judgment Opinion, at 31, (citing Outboard Marine Corp. v. Liberty
Mut. Ins. Co., 154 Ill.2d 90, 108, 607 N.E.2d 1204, 1212 (Ill.
1992)). Indemnity’s Other Insurance provisions excluded coverage
for certain circumstances when other insurance applied to cover the
claims alleged in a lawsuit. The Court determined that the
Underlying Action Complaint alleged facts, which if proven, could
have established liability that was not subject to Indemnity’s Other
Insurance provisions. The Underlying Action Complaint alleged
continuing wrongful acts from 2007 onward. Indemnity was the
only insurer that issued policies to Sandstone covering the claims
in the Underlying Action for alleged wrongful acts that occurred
from November 12, 2008 until August 2, 2009. Because Indemnity
was the only insurer during this period, the Underlying Action
Complaint alleged wrongful acts that were only covered by
Indemnity’s policies. The Other Insurance provision did not apply
to these alleged wrongs. As a result, Indemnity had a duty to
defend. Summary Judgment Opinion, at 33-34.
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The Underlying Action Complaint also alleged wrongful acts by
Sandstone after August 2, 2009. After August 2, 2009, Sandstone
was named as an additional insured for policies issued by Star.
The Star policies provided insurance for the actions taken by
employees and agents of a third party Red Oak Hill, also owned by
Brian Bradshaw. The Underlying Action Complaint alleged
wrongful conduct by Sandstone, not Red Oak Hill. The allegations
in the Underlying Action Complaint, therefore, could have resulted
in liability covered by the Indemnity policies alone. Because the
Underlying Action Complaint alleged facts that could have resulted
in liability covered by Indemnity alone, the Other Insurance
provision did not apply, and Indemnity had a duty to defend.
Summary Judgment Opinion, at 34-35.
Indemnity argues that the Court erroneously discussed the
possible outcomes of findings of liability if the plaintiffs in the
Underlying Action proved some of their claims. Indemnity argues
that the Court should have only looked at the allegations in the
Complaint and the language of the Indemnity policies. The Court
discussed the possible outcomes only to explain that the Underlying
Action Complaint alleged facts, which if true, could have resulted in
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liability that would have been covered by Indemnity’s policies alone.
The Court determined Indemnity’s duty to defend based only on the
possibility of coverage of the facts alleged in the Underlying Action
Complaint and the terms of the Indemnity policies. See Outboard
Marine Corp., 154 Ill.2d at 108, 607 N.E.2d at 1212. There was no
error.
CONCLUSION
THEREFORE, Indemnity Insurance Company of North
America’s Motion for Reconsideration Under Rule 59(e)
Regarding (I) Finding of Equitable Contribution Liability During
Period of Deactivation; and (II) Findings Pertaining to Star’s
Duty to Defend (Case No. 16-3298 d/e 112, Case No. 14-3040
d/e 122) is DENIED.
ENTER:
January 15, 2020
s/ Sue Myerscough
UNITED STATES DISTRICT JUDGE
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