Northland Insurance Company et al v. Barnhart Crane & Rigging Company et al
Filing
91
Enter MEMORANDUM, OPINION AND ORDER: For the foregoing reasons, NICs motion for summary judgment is granted and denies BCRs motion for summary judgment. Civil case terminated. Signed by the Honorable Virginia M. Kendall on 12/30/2013.Mailed notice(tsa, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
NORTHLAND INSURANCE CO. and
NORTHLAND CASUALTY CO,
Plaintiffs,
v.
BARNHART CRANE & RIGGING CO.,
DIAMOND RING SPECIALIZED, LLC, and
JEFF KERN,
Defendants.
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No. 12 C 5525
Hon. Virginia M. Kendall
MEMORANDUM OPINION AND ORDER
This is an insurance coverage dispute regarding an insurer’s duty under a commercial
general liability (“CGL”) policy and a motor carrier policy to defend and indemnify defendants
in an underlying personal injury case. Jeff Kern (“Kern”) filed a personal injury lawsuit (the
“Underlying Action”) against defendants Barnhart Crane & Rigging Co. (“BCR”), Diamond
Ring Specialized, LLC (“Diamond”), Nelson Manufacturing Co., and All-State Dynamic, LLC
for injuries he allegedly sustained while transporting a crane girder.
Plaintiffs Northland
Insurance Co. (“NIC”) and Northland Casualty Co. (“NCC”) insure Diamond under a
Commercial Insurance Policy and filed the instant suit against BCR and Diamond seeking the
declaratory judgment that they are not obligated to defend or indemnify either in the Underlying
Action. BCR filed a counter-claim against NIC and NCC for the opposite declaration. In its
pleadings, BCR subsequently conceded its claim that Kern’s NCC policy requires NCC to
defend and indemnify BCR in the Underlying Action. (Defendants’ Memorandum of Law
Opposing Plaintiffs’ Motion for Summary Judgment at ¶ 20.) The parties filed cross-motions for
summary judgment on the issues. For the reasons stated below, the Court grants NIC’s motion
and holds that it has no duty to defend or indemnify BCR and Diamond in the Underlying
1
Action; and therefore denies the opposite motion.
BACKGROUND 1
I.
The Underlying Action
On March 31, 2012, Kern filed a lawsuit in the Circuit Court of Cook County naming
BCR, Diamond, and two other parties as defendants. (BCR v. NIC 56.1 Resp. ¶ 8.) The claims
against BCR and Diamond in the Underlying Action are identical and stem from alleged injuries
Kern sustained on June 2, 2011 during the movement of a crane girder. (BCR v. NIC 56.1 Resp.
¶ 9; NIC v. BCR 56.1 Resp. ¶ 10.) The crane girder was transported by a dolly/trailer system
owned by BCR, which was pulled by a tractor and driver BCR leased from Diamond. (NIC v.
BCR 56.1 Resp. ¶ 10.) Kern’s injury allegedly occurred when the tractor pulled the dolly/trailer
system forward and ran him over, severing his leg. (NIC v. BCR 56.1 Resp. ¶ 11.) Diamond
leased the tractor, a 2000 Peterbilt, and a driver to BCR pursuant to a written lease in February
2011. (BCR v. NIC 56.1 Resp. ¶ 10; NIC v. BCR 56.1 Resp. ¶ 14.) At the time of the Kern
incident, neither the tractor nor the dolly/trailer components involved in the incident were leased
to or hired by Diamond. (NIC v. BCR 56.1 Resp. ¶ 22.) The trip that was underway when Kern
was injured was done under BCR’s operating authority. (NIC v. BCR 56.1 Resp. Add. Facts ¶ 5.)
1
This statement lists the facts material to the Court’s analysis. It does not list every undisputed fact that appears in
the parties’ Rule 56.1 statements of undisputed material facts. In the interests of brevity, where the response to one
party's Rule 56.1 statement establishes an undisputed fact, the response to the cross-moving party’s Rule 56.1
statement establishing that same fact is not cited. Throughout this opinion, the Court cites the parties’ Rule 56.1
statements as follows:
1. NIC’s Response to BCR’s Statement of Material Facts [Doc. 68] is (BCR v. NIC 56.1 Resp. ¶ __);
2. BCR’s Response to NIC’s Statement of Material Facts [Doc. 72] is (NIC v. BCR 56.1 Resp. ¶ __);
3. NIC’s Response to BCR’s Statement of Additional Material Facts [Doc. 76] is (BCR v. NIC 56.1 Resp.
Add. Facts ¶ __);
4. BCR’s Response to NIC’s Statement of Additional Material Facts [Doc. 78] is (NIC v. BCR 56.1 Resp.
Add. Facts ¶ __).
2
II.
The Documents at Issue
Three documents govern the present issue: (1) a lease agreement between Diamond and
BCR, (2) Diamond’s insurance policy from NIC, and (3) BCR’s insurance policy from
Amerisure.
A.
BCR’s Independent Contractor Owner Operator Agreement with Diamond
Barnhart’s leasing of the tractor and driver from Diamond was subject to a written
agreement executed on February 7, 2011. (BCR v. NIC 56.1 Resp. Add. Facts ¶ 2.) The Lease
states that, “Diamond Ring Specialized (hereinafter called INDEPENDENT CONTRACTOR)
agrees to provide independent contract transportation services as an Owner/Operator to Barnhart
Crane And Rigging Co. (hereinafter called BCR).” (BCR v. NIC 56.1 Resp. Add. Facts ¶ 3.)
Regarding personnel, Section 12 of the Lease provides that, “Independent Contractor shall
operate equipment covered by this agreement or shall furnish sufficient drivers to operate said
equipment. Any drivers furnished by Independent Contractor [Diamond] shall be his employees
or agents and shall be hired, directed, paid, controlled and discharged by Independent Contractor
[Diamond].” (BCR v. NIC 56.1 Resp. Add. Facts ¶ 4.) Section 13 further states that, “It is
agreed by the parties hereto that Independent Contractor [Diamond] assumes full and complete
responsibility for all employees employed by him/it in the performance of all duties and
obligations under this Agreement.” (BCR v. NIC 56.1 Resp. Add. Facts ¶ 5.)
BCR received the equipment on February 7, 2011. (BCR v. NIC 56.1 Resp. Add. Facts
¶ 2.) Under Section 11 of the Lease, “It is the intent of both parties to comply with [Federal
Highway Administration] regulations. Pursuant to said regulations, BCR shall have exclusive
possession, control, and use of the equipment covered hereby and assumes complete
3
responsibility for operation thereof under this Agreement to the public.” (NIC v. BCR 56.1 Resp.
Add. Facts ¶ 3.) It also states that:
Nothing in the provisions required by 49 C.F.R. 376.12(c)(1) is intended
to affect whether an independent contractor or any driver provided by an
independent contractor is an independent contractor or employee of BCR.
It is agreed by the parties hereto that BCR has no right to and will not
control the manner nor prescribe the method of doing that portion of the
operation which is contracted for in this Agreement by Independent
Contractor, except such control as can reasonably be construed to be
required by said regulations.
(Lease, Schedule A at § 11, admitted by NIC v. BCR 56.1 Resp. Add. Facts ¶ 2.) 49 C.F.R. §
376.12(c)(1) states: “The lease shall provide that the authorized carrier lessee shall have
exclusive possession, control, and use of the equipment for the duration of the lease. The lease
shall further provide that the authorized carrier lessee shall assume complete responsibility for
the operation of the equipment for the duration of the lease.”
The Lease also requires BCR to insure the equipment, stating:
In accordance with applicable [Federal Highway Administration]
rules and regulations, it shall be BCR’s responsibility to provide
public liability, property damage and cargo loss and damage
insurance for the Equipment at all times while the Equipment is
being operated on behalf of BCR provided, however, that
Independent Contractor shall be charged back, up to $1,000 for any
cargo claim, and up to $1,000 for any liability claim, to be
deducted from Independent Contractor’s compensation.
(NIC v. BCR 56.1 Resp. Add. Facts ¶ 4.) BCR added the vehicle involved in the Underlying
Action and its driver, Brett Bernard, to its Amerisure commercial automobile insurance policy on
February 10, 2011, three days after signing the Lease. (NIC v. BCR 56.1 Resp. Add. Facts ¶¶ 6–
7.)
4
B.
Diamond’s NIC Insurance Policy
NIC issued an insurance policy to Diamond for the period of November 10, 2010 to
November 19, 2011 (the “Policy”). (BCR v. NIC 56.1 Resp. ¶ 22.) The Policy contains two
provisions that could possibly give rise to a requirement that NIC provide coverage to BCR and
Diamond in the Underlying Action.
1.
Commercial General Liability Coverage Form
The Commercial General Liability Coverage Form (“CGLC”) states that:
[NIC] 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. We will have
the right and duty to defend the insured against any “suit” seeking
those damages. However, we will have no duty to defend the
insured against any “suit” seeking damages for “bodily injury” or
“property damage” to which this insurance does not apply.
(NIC v. BCR 56.1 Resp. ¶ 33.) It defines “you” and “your” as “the Named Insured shown in the
Declarations, and any other person or organization qualifying as a Named Insured under this
policy” and “insured” as “any person or organization qualifying as such under Section II – Who
Is An Insured.” (NIC v. BCR 56.1 Resp. ¶ 33.) The CGLC excludes coverage for
“Bodily injury” or “property damage” arising out of the ownership,
maintenance, use or entrustment to others of any aircraft, “auto” or
watercraft owned or operated by or rented or loaned to any insured.
Use includes operation and “loading or unloading.”
This exclusion applies even if the claims against any insured allege
negligence or other wrongdoing in the supervision, hiring,
employment, training or monitoring of others by that insured, if the
“occurrence” which caused the “bodily injury” or “property
damage” involved the ownership, maintenance, use or entrustment
to others of any aircraft, “auto” or watercraft owned or operated by
or rented or loaned to any insured.
5
(NIC v. BCR 56.1 Resp. ¶ 34.) An “auto” is a “land motor vehicle, trailer or semitrailer designed
for travel on public roads, including any attached machinery or equipment.” (NIC v. BCR 56.1
Resp. ¶ 35.) “Bodily injury” is “bodily injury, sickness or disease sustained by a person,
including death resulting from any of these at any time.” (Doc. 33, page 85 of 135, admitted via
BCR v. NIC 56.1 Resp. ¶ 22.)
The CGLC also has an endorsement designating BCR as an additional insured. (NIC v.
BCR 56.1 Resp. ¶ 36.) The endorsement modifies the “Who is An Insured” section of the CGLC
(which is different from the “Who is An Insured” in the Motor Carrier Coverage Form, discussed
below) to add that it:
[I]s amended to include as an additional insured the person(s) or
organization(s) shown in [this endorsement’s] Schedule, but only
with respect to liability for “bodily injury,” “property damage” or
“personal and advertising injury” caused in whole or in part, by
your acts or omissions or the acts or omissions of those acting on
your behalf . . . [i]n the performance of your ongoing
operations . . . .
(NIC v. BCR 56.1 Resp. ¶ 36.) “You” and “your” again refer to Diamond, the Named Insured
under the Policy. (Doc. 33, page 2 of 135, admitted via BCR v. NIC 56.1 Resp. ¶ 22.)
2.
Motor Carrier Coverage Form
The “Liability Coverage” section of the Motor Carrier Coverage Form (“MCCF”) states,
in pertinent part, that “[NIC] will pay all sums an ‘insured’ legally must pay as damage because
of ‘bodily injury’ or ‘property damage’ to which this insurance applies, caused by an ‘accident’
and resulting from the ownership, maintenance or use of a covered ‘auto.’” (BCR v. NIC 56.1
Resp. ¶ 25.) Diamond purchased insurance for “covered ‘autos’” as defined by Symbol 67 and
68 in Section I of the Policy. (BCR v. NIC 56.1 Resp. ¶ 26.) Symbol 67 describes “Specifically
Described ‘Autos’,” which are, “Only those ‘autos’ described in Item Three of the Declarations
6
for which a premium charge is shown (and for Liability Coverage any ‘trailers’ you don’t own
while attached to any power unit described in Item Three).” (BCR v. NIC 56.1 Resp. ¶ 27.) The
Peterbilt was listed as a Specifically Described “Auto” as of November 19, 2010 but was
removed on February 9, 2011. (BCR v. NIC 56.1 Resp. ¶¶ 30, 32) The dolly/trailer system was
not listed as a Specifically Described “Auto” as of June 2, 2011, the date of the Kern incident.
(NIC v. BCR 56.1 Resp. ¶ 21.)
Symbol 68 defines “Hired ‘Autos’ Only” as “Only those ‘autos’ you lease, hire, rent or
borrow. This does not include any ‘private passenger type auto’ you lease, hire, rent or borrow
from any member of your household, any of your ‘employees’, partners (if you are a partnership)
members (if you are a limited liability company), or agents or members of their households.”
(BCR v. NIC 56.1 Resp. ¶ 27.) The Policy defines “auto” as a “land motor vehicle, ‘trailer’ or
semitrailer designed for travel on public roads,” and “trailer” as “includ[ing] a semitrailer or a
dolly used to convert a semitrailer into a trailer.” (BCR v. NIC 56.1 Resp. ¶¶ 28–29.)
The “Liability Coverage” section of the MCCF outlines who is covered under that
portion of the Policy. “Who is An Insured” includes “a. You for any covered ‘auto.’” (BCR v.
NIC 56.1 Resp. ¶ 24.) Diamond is the Named Insured referred to as “You” or “you.” (Doc. 33,
page 2 of 135, admitted via BCR v. NIC 56.1 Resp. ¶ 22.) “Who is An Insured” also includes
“Anyone liable for the conduct of an ‘insured’ described above but only to the extent of that
liability.” (BCR v. NIC 56.1 Resp. ¶ 24.) “However, none of the following is an ‘insured’: (1)
Any ‘motor carrier’ for hire or his or her agents or ‘employees’, other than you and your
‘employees’: . . . (b) If the ‘motor carrier’ is not insured for hired ‘autos’ under an ‘auto’ liability
insurance form that insures on a primary basis the owners of the ‘autos’ and their agents and
‘employees’ while the ‘autos’ are leased to that ‘motor carrier’ and used in his or her business.”
7
(NIC v. BCR 56.1 Resp. ¶ 28.) It goes on to say, “However, Paragraph (1) above does not apply
if you have leased an ‘auto’ to the for-hire ‘motor carrier’ under a written lease agreement in
which you have held the ‘motor carrier’ harmless.” (NIC v. BCR 56.1 Resp. ¶ 28.) A “motor
carrier” is “a person or organization providing transportation by ‘auto’ in the furtherance of a
commercial enterprise.” (Doc. 33, page 49 of 135, admitted via BCR v. NIC 56.1 Resp. ¶ 22.)
The Policy also includes a form TL-164 Additional Insured endorsement (the “TL-164”)
naming Barnhart as an additional insured effective as of November 19, 2010. (BCR v. NIC 56.1
Resp. ¶ 22.) The TL-164 endorsement modifies the Motor Carrier Coverage Form to identify
BCR as an “insured,” but “only to the extent that person or organization qualifies as an ‘insured’
under the Who is An Insured Provision contained in Section II of the Coverage Form.” (NIC v.
BCR 56.1 Resp. ¶ 25.)
Finally, in the “Policy Changes – Additional Conditions” amendment to the Motor
Carrier Coverage Form, the “Conformity to Statute” provision states: “Terms of your policy
which are in conflict with the statutes of the state in which the policy is issued are hereby
amended to conform with such statutes.” (Docket 33, page 56 of 135, admitted via BCR v. NIC
56.1 Resp. ¶ 22.)
C.
BCR’s Amerisure Insurance Policy
BCR produced a copy of its commercial automobile insurance policy with Amerisure
(“Amerisure Policy”). 2 (Doc. 69-4 through 69-8, admitted by NIC v. BCR 56.1 Resp. Add. Facts
2
BCR responds to NIC’s statements regarding the Amerisure Policy by labeling them “legal conclusion[s] about
insurance coverage under Amerisure’s policy” and moving to strike them. (NIC v. BCR 56.1 Resp. Add. Facts ¶¶ 7–
8, 10, 11.) The Court denies these motions to strike with regard to paragraphs 7, 8, and 10 because NIC merely cites
portions of the document without drawing any conclusions based on them, in compliance with Local Rule 56.1.
(NIC v. BCR 56.1 Resp. Add. Facts ¶¶ 7–8, 10.) However, the Court grants BCR’s motion to strike paragraph 11
because it draws a legal conclusion regarding the scope of the Amerisure Policy, that it “does not provide coverage
8
¶ 6.) The Amerisure Policy defines an “insured” as “You for any auto” and “Anyone else while
using with your permission a covered “auto” you own, hire or borrow, except: The owner or
anyone else from whom you hire or borrow a covered ‘auto.’” (NIC v. BCR 56.1 Resp. Add.
Facts ¶ 10.) “You” is the “Named Insured,” which is BCR. (Doc. 69-4 at p. 9, admitted by NIC
v. BCR 56.1 Resp. Add. Facts ¶¶ 6, 10).
On February 10, 2011, three days after BCR and Diamond executed the Lease, the
Amerisure Policy was
amended
to
add
the 2000
Peterbilt
truck
(VIN
number
1XP6D69X9YD610855) and Brett Bernard as “Additional Insureds.” (Doc. 69-8 at pp. 22, 24,
admitted by NIC v. BCR 56.1 Resp. Add. Facts ¶¶ 6–7.) The Peterbilt and Mr. Bernard are
respectively the tractor and driver BCR leased from Diamond allegedly involved in the injuries
giving rise to the Underlying Action. (NIC v. BCR 56.1 Resp. Add. Facts ¶ 7.) The addition of
the Peterbilt and Mr. Bernard included a “Lessor – Additional Insured and Loss Payee”
endorsement that modifies the Amerisure Policy’s “Who is An Insured” as follows:
For a “leased auto” designated or described in the Schedule, Who
Is An Insured Is changed to include as an “insured” the lessor
named in the Schedule. However, the lessor is an “insured” only
for “bodily injury” or “property damage” resulting from the acts or
omissions by:
a. You;
b. Any of your “employees” or agents; or
c. Any person, except the lessor or any “employee” or agent
of the lessor, operating a “leased auto” with the permission
of any of the above.
for Diamond.” (NIC v. BCR 56.1 Resp. Add. Facts ¶ 11.) N.D. Ill. L.R. 56.1(a) (“The statement [of material
facts] . . . shall consist of short numbered paragraphs, including within each paragraph specific references to the
affidavits, parts of the record, and other supporting materials relied upon to support the facts set forth in that
paragraph.”)
9
(NIC v. BCR 56.1 Resp. Add. Facts ¶ 7.) “Employee” includes a “leased worker,” which is “a
person leased to you by a labor leasing firm under an agreement between you and the labor
leasing firm, to perform duties related to the conduct of your business.” (Doc. 69-5 at pp. 34–35,
admitted by NIC v. BCR 56.1 Resp. Add. Facts ¶¶ 6, 10.) The Amerisure Policy does not define
“labor leasing firm.” (NIC v. BCR 56.1 Resp. Add. Facts ¶ 10.) Diamond is not listed by name
as an “insured” or anywhere else in the Amerisure Policy. (NIC v. BCR 56.1 Resp. Add. Facts ¶
8.) Amerisure is defending BCR in the Underlying Action. (NIC v. BCR 56.1 Resp. Add. Facts
¶ 9.)
STANDARD OF REVIEW
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 judgment as a matter
of law.” Fed. R. Civ. P. 56(c). In determining whether a genuine issue of fact exists, the Court
must view the evidence and draw all reasonable inferences in favor of the party opposing the
motion. Bennington v. Caterpillar Inc., 275 F.3d 654, 658 (7th Cir. 2001). See also Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513–14 (1986). However, the Court
will “limit its analysis of the facts on summary judgment to evidence that is properly identified
and supported in the parties’ [Local Rule 56.1] statement.” Bordelon v. Chicago Sch. Reform
Bd. Of Trustees, 233 F.3d 524, 529 (7th Cir. 2000). Where a proposed statement of fact is
supported by the record and not adequately rebutted by the opposing party, the Court will accept
that statement as true for the purposes of summary judgment. The non-moving party must
present more than a “bald assertion of the general truth” in the form of “affidavits that cite
10
specific concrete facts establishing the existence of the truth of the matter asserted.” Drake v.
Minnesota Mining & Mfg. Co., 134 F.3d 878, 887 (7th Cir. 1998).
Because the parties agree that Illinois law governs the insurance policies at issue, the
Court will apply Illinois law to its analysis. Auto–Owners Ins. Co. v. Websolv Computing, Inc.,
580 F.3d 543, 547 (7th Cir. 2009) (“Courts do not worry about conflict of laws unless the parties
disagree on which state's law applies.”) (internal citation and quotation marks omitted).
Specifically, the Court will “apply the law that [it] believe[s] the Supreme Court of Illinois
would apply if the case were before that tribunal rather than before this court.” Help at Home,
Inc. v. Med. Capital, L.L.C., 260 F.3d 748, 753 (7th Cir. 2001). Under Illinois law, “[t]he
construction of an insurance policy and a determination of the rights and obligations thereunder
are questions of law for the court which are appropriate subjects for disposition by way of
summary judgment.” Crum & Forster Managers Corp. v. Resolution Trust Corp., 620 N.E.2d
1073, 1079 (Ill. 1998).
DISCUSSION
I.
Duty to Defend
A.
Illinois Standard
“Because an insurance policy is a contract, the rules applicable to contract interpretation
govern the interpretation of an insurance policy.” Founders Ins. Co. v. Munoz, 930 N.E.2d 999,
1003 (Ill. 2010); see also Nicor, Inc. v. Associated Electric & Gas Insurance Services Ltd., 860
N.E.2d 280, 285 (Ill. 2006); Hobbs v. Hartford Ins. Co. of the Midwest, 823 N.E.2d 561, 564 (Ill.
2005). The Court’s primary function is to determine and give effect to the parties’ intent as it is
expressed by the contract’s language. Founders, 930 N.E.2d at 1003; Nicor, 860 N.E.2d at 286.
11
If that language is unambiguous, it will be applied as written, unless doing so contravenes public
policy. Hobbs, 823 N.E.2d at 564.
Under Illinois law, “to determine whether an insurer’s duty to defend has been triggered,
a court must compare the allegations in the underlying complaint with the language in the
insurance policy.” Lagestee-Mulder, Inc. v. Consolidated Ins. Co., 682 F.3d 1054, 1056 (7th Cir.
2012) (citing Gen. Agents Ins. Co. of Am., Inc. v. Midwest Sporting Goods, Inc., 828 N.E.2d
1092, 1098 (Ill. 2005)). The duty to defend is broader than the duty to indemnify because “an
insurance company must defend its insured in actions that are even potentially within coverage.”
Id. (citing CMK Development Corp. v. West Bend Mut. Ins. Co., 917 N.E.2d 1155, 1163 (Ill.
2009)). It is the factual allegations contained in the underlying complaint that determine whether
a duty to defend exists; “if the underlying complaint alleges facts within or potentially within
policy coverage, an insurer is obligated to defend its insured even if the allegations are
groundless, false or fraudulent.” Gen. Agents Ins., 828 N.E.2d at 1098.
Since the duty defend is broad enough to include claims only potentially within coverage,
it must be clear from the face of the underlying complaint that the stated facts do not fall within
the policy’s coverage. Lagestee, 682 F.3d at 1056; see also Amerisure Mutual Ins. Co. v.
Microplastics, Inc., 622 F.3d 806, 815 (7th Cir. 2010). But the duty to defend “should not hinge
on the draftsmanship skills or whims of the plaintiff in the underlying action,” and therefore the
underlying complaint’s factual allegations are “only important insofar as they point to a theory of
recovery.” Medmarc Cas. Ins. Co. v. Avent Am., Inc., 612 F.3d 607, 613 (7th Cir. 2010) (quoting
Int’l Ins. Co. v. Rollprint Packaging Prods., Inc., 728 N.E.2d 680, 688 (Ill. App. 2000) and
Health Care Indus. Liab. Ins. Program v. Momence Meadows Nursing Center, 566 F.3d 689,
12
696 (7th Cir.2009)). According to these standards, the Court considers whether the facts alleged
in the Underlying Action point to a theory of recovery that falls within NIC’s insurance contract
with Diamond.
B.
Commercial General Liability Coverage Form
BCR does not allege that it is covered under the Policy’s CGLC coverage, which NIC
argues is because both BCR and Diamond are excluded from it due to its “Aircraft, Auto Or
Watercraft” exclusion. The CGLC covers “insureds” for defense and damages arising from
“bodily injury.” But it expressly excludes from this coverage “‘[b]odily injury’ . . . arising out of
the ownership, maintenance, use or entrustment to others of any . . . ‘auto’ . . . owned or operated
by or rented or loaned to any insured . . . even if the claims against any insured allege negligence
in the supervision, hiring, employment, training or monitoring of others.” (emphasis added). The
CGLC thus excludes from coverage “autos” being used by “insured” that involves “bodily
injury.” First, the parties agree that the Peterbilt and dolly/trailer are “autos” as defined by the
Policy. Second, Diamond is indisputably an “insured” under the CGLC. And although there is
disagreement as to whether BCR is an “insured” under the CGLC, the Court need not and does
not address this issue because the “Aircraft, Auto Or Watercraft” exclusion would bar coverage
even if BCR is an “insured.” Third, Kern’s complaint in the Underlying Action alleges that he
“sustained severe and permanent injuries, both internally and externally” while “transporting a
crane girder” using a “certain crane girder transport dolly system” that BCR and Diamond
“possessed, operated, managed, maintained and controlled or had a duty to possess, operate,
manage, maintain and control.” (BCR v. NIC 56.1 Resp. ¶ 8.) BCR does not dispute that Kern’s
allegations against BCR and Diamond in the Underlying Action arise from the use of an auto.
See, e.g., United States v. Berkowitz, 927 F.2d 1376, 1384 (7th Cir. 1991) (“[P]erfunctory and
13
undeveloped arguments, and arguments that are unsupported by pertinent authority, are
waived . . . .”). Because the “bodily injury” alleged in the Underlying Action arise from “autos”
used by “insureds,” the Court therefore finds that BCR and Diamond are excluded from the
Policy under its CGLC coverage.
C.
Motor Carrier Coverage Form
1.
NIC Owes No Duty to Defend BCR with Respect to the Underlying
Action
NIC argues that BCR is not covered under the MCCF because it is “motor carrier” that is
expressly excluded from the definition of an “insured.” Specifically, NIC contends that BCR is
not an “insured” because it does not provide reciprocal insurance to Diamond for the Peterbilt as
is required of “motor carriers” under the MCCF. BCR’s counterarguments are that: (1) the TL164 endorsement to the MCCF states that BCR is an “additional insured,” (2) being an
“additional insured” under the TL-164 endorsement required NIC to give BCR notice when the
Peterbilt was removed from the Policy in February 2011, and (3) BCR is an “insured” even
without the TL-164 endorsement because it is “anyone liable for the conduct of an ‘insured’
described above but only to the extent of that liability.” These arguments are discussed in turn.
First, NIC alleges that the “Who is An Insured” provision in the MCCF excludes from
coverage a “‘motor carrier’ for hire” if that motor carrier “is not insured for hired ‘autos’ under
an ‘auto’ liability insurance form that insures on a primary basis the owners of the ‘autos’ and
their agents and ‘employees’ while the ‘autos’ are leased to that ‘motor carrier’ and used in his or
her business.” NIC calls this a “reciprocal coverage provision” in which BCR is required to
insure owners of autos it leases, in this case Diamond, if it is to be covered as an “insured” under
the MCCF. See Zurich Am. Ins. Co. v. Key Cartage, Inc., 923 N.E.2d 710, 715–16 (Ill. 2009)
14
(holding that reciprocal coverage provisions do not violate public policy). A “motor carrier” is
defined in the MCCF as “a person or organization providing transportation by ‘auto’ in the
furtherance of a commercial enterprise,” and BCR admits that it is “in the business of
transporting the goods or property of others for compensation and at the time of the KERN
incident, BRC was transporting the property of Whiting Corporation.” (NIC v. BCR 56.1 Resp. ¶
29.)
The remaining question is whether BCR provides reciprocal coverage to Diamond under
the Amerisure Policy such that the MCCF exclusion does not apply.
BCR provided an
authenticated copy of its commercial automobile insurance policy with Amerisure during
discovery. (NIC v. BCR 56.1 Resp. Add. Facts ¶ 6.) See United States v. Brown, 688 F.2d 1112,
1116 (7th Cir. 1982) (The “very act of production [is] implicit authentication.”). The Amerisure
policy provides coverage to BCR and “anyone else” using a “covered ‘auto’ you [BCR] own,
rent or borrow, except . . . [t]he owner or anyone else from whom you hire or borrow a covered
‘auto.’” BCR does not dispute that the plain reading of this passage excludes Diamond from the
definition of an “insured” because it is the “owner . . . from whom” BCR leased the covered
autos. 3 Instead, BCR argues that it falls under the exception to the “motor carrier’ exclusion that
states, “[the ‘motor carrier’ exclusion] does not apply if you [Diamond] have leased an ‘auto’ to
the for-hire ‘motor carrier’ under a written lease agreement in which you [Diamond] have held
that ‘motor carrier’ harmless.”
Section 13 of the Lease contains the following indemnity
language:
“Independent Contractor [Diamond] agrees to defend, indemnify
and hold BCR harmless for any claims, suits, or actions, including
3
The Peterbilt and dolly/trailer are “covered autos” under the Amerisure Policy.
15
reasonable attorney fees incurred in protecting BCR’s interests,
against any claim brought by Independent Contractor’s employees,
any union, the public, or state or federal agencies, arising out of the
operation of the Equipment pursuant to this Agreement.”
(Lease at § 13, admitted by NIC v. BCR 56.1 Resp. Add. Facts ¶ 2.) However, NIC correctly
notes that indemnity agreements in motor carrier transportation contract are “void and
unenforceable” under Illinois law. 625 ILCS § 5/18c-4105; K. Miller Const. Co. v. McGinnis,
938 N.E.2d 471, 480 (Ill. 2010). The Court therefore finds that BCR is not an insured covered
by the “Who is An Insured” section of the MCCF.
Second, BCR argues that the TL-164 Policy endorsement naming it an “Additional
Insured” renders it an “insured” under the Policy. The TL-164 endorsement states that BCR is
an “insured” for coverage under the Policy, but “only to the extent that person or organization
qualifies as an ‘insured’ under the Who is An Insured Provision contained in Section II of the
Coverage Form.” As discussed above, however, the “‘motor carrier’ exclusion” prevents BCR
from being labeled an “insured” under the “Who is An Insured” provision of the MCCF.
Therefore, the Court finds that BCR is not covered under the MCCF via the TL-164
endorsement.
Third, BCR argues that even if it is not itself an “insured” under the MCCF, the Peterbilt
was scheduled as a “specifically described ‘auto’” under the Policy but then removed prior to the
accident. It urges that the TL-164 endorsement entitled it to notice of the Peterbilt’s removal,
and that NIC’s failure to provide notice voids the removal such that it is still required to cover
the Peterbilt. 4 The TL-164 endorsement states, “If we cancel or nonrenew the policy, a copy of
4
Although BCR alleges that it was due notice of the Peterbilt’s removal from the Policy, the only possible outcome
of the Court agreeing with its position is that Diamond—and not BCR—retains coverage under the Policy. This is
16
the written notice of cancellation will be mailed by us to that person(s) or organization(s),” and
then lists a contact address for BCR several lines below. BCR admits that the Policy was not
canceled and that nonrenewal is not an issue in this case because the incident in the Underlying
Action took place during the Policy’s term. (NIC v. BCR 56.1 Resp. Add. Facts ¶ 18.) It argues
that it was nevertheless entitled to notice of the Peterbilit’s removal because: (1) Illinois law
prohibits removal of a motor vehicle from insurance coverage by a motor carrier, (2) removing
the Peterbilt “materially diminished” BCR’s coverage under the Policy, and (3) NIC gave notice
of the Peterbilt’s removal to a “loss payee.”
The parties do not dispute that the Illinois Commercial Transportation Act
(“Transportation Act”) governs the motor carrier insurance contracts presently at issue. The
Transportation Act regulates insurance for “motor carriers of property.” 625 ILCS §§ 5/18c4901 – 5/18c-4905. BCR argues that reading Sections 5/18c-4901 and 5/18c-4903 together
prove that it was required to receive notice of the Peterbilt’s deletion under Illinois law. Section
5/18c-4901 is titled “Insurance Coverage as a Prerequisite to Operations” and states: “No motor
carrier of property shall operate within this State unless it has on file with the [Illinois
Commerce] Commission or its agent proof of continuous insurance or surety coverage in
accordance with Commission regulations.” (emphasis added). Section 5/18c-4903 is titled
“Implied Terms of Insurance Coverage” and states, in pertinent part:
Each . . . proof of insurance . . . coverage shall have, as an implied
term, that the insurance . . . coverage will remain in effect
because BCR is not an “insured” under the MCCF. Be that as it may, this is a distinction without a difference under
Illinois law because the complaint in the Underlying Action makes the same allegations against both BCR and
Diamond, and once the duty to defend has been triggered under one part of the complaint, it is triggered to all parts.
Santa's Best Craft, LLC v. St. Paul Fire & Marine Ins. Co., 611 F.3d 339, 346 (7th Cir. 2010) (“If the underlying
complaints allege several theories of recovery against the insured, the duty to defend arises even if only one such
theory is within the potential coverage of the policy.” (citations omitted)).
17
continuously until notice of cancellation is filed in accordance
with Commission regulations, and that all motor vehicles operated
by or under authority of the carrier will be covered, whether or not
such vehicles have been reported to the insurance, surety, or other
company. Filing proof of insurance with the Commission shall
constitute acceptance of this implied term, and such acceptance
may not thereafter be withdrawn except on withdrawal of all proof
of insurance or surety coverage.
(emphasis added). The thrust of BCR’s claim is that § 5/18c-4903 requires that “all motor
vehicles operated by or under the authority of” Diamond “will be covered” “until notice of
cancellation is filed in accordance with Commission regulations.” BCR concludes that NIC’s
failure to notify BCR that the Peterbilt was removed therefore violates the statute and invalidates
the deletion.
NIC replies that the Peterbilt was not “operated by or under the authority of” Diamond.
According to the Commission’s regulations, in any motor carrier lease of equipment, “The lessee
[BCR] shall have exclusive possession and control of leased equipment during all periods when
the equipment is operated under the lease.” 92 Ill. Admin. Code § 1360.40(b)(1). This provision
is implied if not stated in the lease, and any contrary provision is void. 92 Ill. Admin. Code §
1360.40(b). The Commission also saw fit to state the same requirement a second time in another
section: “The lessee of equipment used under authority of a license issued by the Commission
shall have exclusive possession and control of the equipment while it is so used. Failure to
exercise supervision and control of the equipment constitutes an illegal transfer of
authority . . . .” 92 Ill. Admin. Code § 1360.55. The statutes BCR cites are both qualified with
the phrase “in accordance with Commission regulations,” and Commission regulations require
that the lessee—BCR—has exclusive possession and control of the leased vehicle, the Peterbilt.
The Court therefore finds that the Peterbilt was not “operated by or under the authority of”
18
Diamond under § 5/18c-4903, and that its notice requirement does not apply to NIC’s deletion of
the Peterbilt from the Policy.
NIC further counters that BCR’s argument is incomplete because it fails to consider §
5/18c-4902, titled, “Commission to Set Insurance Coverage Limits and Establish Procedures,”
which states:
The Commission shall prescribe the amounts of insurance or surety
coverage required as a minimum, the maximum allowable
deductible limits, procedures for the filing and rejection or return
of filings, and such other reasonable regulations regarding
insurance or surety coverage as are necessary to protect the
travelling and shipping or receiving public.
Because the Commission prescribes the coverage required, NIC argues that its regulations
regarding insurance must also be considered. 5 Regulations promulgated by the Commission
have the force and effect of statutes. See, e.g., Sawyer Realty Group, Inc. v. Jarvis Corp., 432
N.E.2d 849, 851 (Ill. 1982). The Commission requires that motor carrier equipment leases
include a “supplemental insurance coverage” term: “The lease must specify which party is
responsible for securing and paying for, either directly or indirectly, any other insurance or
surety coverage in addition to amounts required by [625 ILCS 5/18c-4401 to 18c-4905] or 92 Ill.
Adm. Code 1425.” 92 Ill. Admin. Code § 1360.40(a)(5). It also states that: “The following
terms, if not stated in a lease, shall be implied. Any contrary provisions in the lease shall be
void. . . . The lessee [BCR] shall have the responsibility for securing insurance or surety
coverage in compliance with Sub-chapter 4 of the Law and 92 Ill. Adm. Code 1425.” 92 Ill.
5
Section 92 Ill. Admin. Code § 1360.10(b)(2) states, “This Part [the Commission’s Regulation of Motor Carrier
Equipment Leases] does not apply to the . . . leasing of equipment for use in interstate commerce.” However, the
parties do not argue or provide any evidence that the Lease of the Peterbilt was “for use in interstate commerce.”
Although the Lease was signed in and governed by the laws of Tennessee, nothing within its text indicates that the
use of the Peterbilt would be used anywhere other than Illinois, the state in which BCR received the Peterbilt on
February 2, 2011. (Lease at ¶ 5, admitted by NIC v. BCR 56.1 Resp. Add. Facts ¶ 2.)
19
Admin. Code § 1360.40(b)(2). NIC argues that notice was therefore not required because
Illinois law requires BCR—not Diamond—to insure the Peterbilt.
Even if BCR did not receive notice of the Peterbilt’s removal from the Policy, it did
appear to fully understand its obligations to insure the tractor on its own. In compliance with
Illinois law, the Lease requires BCR to obtain insurance coverage for the Peterbilt. (NIC v. BCR
56.1 Resp. Add. Facts ¶ 4.) The parties subsequently followed through with the terms of the
Lease when Diamond removed the Peterbilt from the Policy’s “Specifically Described ‘Auto’”
schedule on February 9, 2011, and BCR added the it and its driver to BCR’s Amerisure Policy
on February 10, 2011.
BCR then argues that removal of the Peterbilt required notice because it “materially
diminished” BCR’s coverage under the Policy. The only case BCR cites for this argument is
Guillen ex rel. Guillen v. Potomac Ins. Co. of Ill., 785 N.E.2d 1 (Ill. 2003). There, Guillen was
injured because her apartment was coated with lead paint. Id. at 143. She sued her landlords,
who subsequently tendered the claim to Potomac, their insurance company. Id. Potomac refused
to defend or indemnify the landlords and did not participate in the lawsuit because it allegedly
added a “lead exclusion” to the landlords’ policy. Id. Guillen settled with the landlords shortly
thereafter, but the landlords conditioned payment of the settlement amount on their right to
payment from Potomac. Id. Guillen sued Potomac for a declaratory judgment that it was
required to pay the settlement amount because, among other reasons, it did not comply with the
Illinois statutory notice requirements governing the addition of the lead exclusion. Id. at 144–45
(citing 215 ILCS § 5/143.17a(b)). In holding that Potomac the lead exclusion modification was
invalid because Potomac failed to provide “proof of mailing” that it notified Guillen of the
20
change, the court stated that, “[it] has previously recognized the importance of the insurer’s
obligation to provide notice to its insured of changes that materially diminish insurance
coverage.” Id. at 10.
BCR argues Guillen is evidence that BCR was entitled to notice that the Peterbilt was
removed from Diamond’s insurance policy. Yet, Guillen defines a “material modification” of an
insurance policy as “one that makes significant changes to that policy,” and that a “material
alteration of an insurance policy is an important transaction that may have a serious effect on the
interests of the insured.” Id. at 9. The Guillen court found that an insurance company adding a
provision that excludes injuries related to lead poisoning was “material” because it left her
uninsured for her lead poisoning injuries, and that such a change was subject to the “proof of
mailing” requirement in 215 ILCS § 5/143.17a(a), (b). Id. Guillen differs significantly from the
present situation. Here, BCR leased the Peterbilt from Diamond and subsequently added it to
BCR’s own motor carrier insurance policy with Amerisure because it was required to do so by
Illinois law. Illinois requires BCR to “possess” and insure tractors it leases “to prevent licensed
carriers from escaping liability to injured members of the public by claiming that their lessordrivers were independent contractors rather than employees.” St. Paul Fire & Marine Ins. Co. v.
Frankart, 370 N.E.2d 1058, 1060 (Ill. 1977). Even if deleting the Peterbilt from the Policy
“materially modified” BCR’s rights under that policy, it did not “materially alter” BCR’s
interests because it was required to insure the Peterbilt under Illinois law, thereby ensuring
continuity of insurance coverage. The Court therefore rejects BCR’s argument that deleting the
Peterbilt from the Policy “materially diminished” its rights requiring notification under Illinois
law.
21
BCR contends that it was entitled to notification because a “loss payee” to the Policy,
Commercial Credit Group Inc (“CCG”), received notice of the Peterbilt’s deletion. But BCR
does not point to any part of the Policy stating that its rights as an “additional insured” under the
TL-164 are the same as CCG’s as a “loss payee.” In fact, their rights are not the same. Subject
to certain exceptions, BCR’s “additional insured” endorsement entitles it to all the same
coverage as the “named insured,” Diamond, for all the same autos as Diamond. This coverage
includes damages for “bodily injury” and the duty to defend. In contrast, CCG’s coverage as a
“loss payee” is limited to “loss” for only the autos listed in its endorsement, where “loss” is
“direct and accidental loss or damage.” (Doc. 33, page 48 of 135, admitted via BCR v. NIC 56.1
Resp. ¶ 22.) CCG’s rights as a “loss payee” are far narrower than BCR’s as an “additional
insured” – if only one vehicle were listed for CCG, removing that vehicle from the overall Policy
would effectively cancel CCG’s coverage. See Posner v. Firemen's Ins. Co., 199 N.E.2d 44, 48
(Ill. App. Ct. 1964) (“[A] loss payee’s rights are subject to every act or omission of the insured
which would prevent the insured from collecting under the policy.”). This is likely the reason
that the “Illinois Changes – Cancellation and Nonrenewal” endorsement adds the additional
protection of a notice requirement for a “loss payee” in the event of cancellation, which
combined with the provision in the “loss payee” endorsement leaves no doubt that notice must be
provided. (Docket 33, page 63 of 135, admitted via BCR v. NIC 56.1 Resp. ¶ 22.) Because the
rights of CCG as a “loss payee” differ substantially from BCR’s as an “additional insured,” the
Court is not persuaded that BCR not receiving the same notice as CCG invalidates the Peterbilt’s
deletion as to BCR.
22
Third, BCR argues that it falls within the “Who is An Insured” provision as “e. Anyone
liable for the conduct of an ‘insured’ [Diamond] described above but only to the extent of that
liability.” It cites as evidence its admission that, “The shipment which was underway way the
time of the incident alleged in the Underlying Complaint was done under the operating authority
of Barnhart.” Yet, the very evidence BCR cites, that it had “operating authority” over the
shipment, is proof that the conduct was BCR’s, not Diamond’s. This evidence also serves to
undermine BCR’s arguments below that Diamond “borrowed” the dolly/trailer from BCR
because it is implausible that Diamond could “borrow” something over which it did not have
“operating authority.”
For these reasons, the Court finds that NIC has no duty to defend BCR in the Underlying
Action pursuant to the MCCF.
2.
NIC Owes No Duty to Defend Diamond with Respect to the
Underlying Action
BCR’s final argument is that NIC owes Diamond a duty to defend in the Underlying
Action because Diamond “borrowed” the dolly carrying the crane girder from BCR, rendering it
a Hired “Auto” as defined by and covered under the MCCF. 6 The MCCF covers “hired ‘autos’,”
which are “only those ‘autos’ you [Diamond] lease, hire, rent or borrow.” 7 Thus, BCR argues,
Diamond is covered if the Peterbilt or dolly/trailer are “autos” it leases, hires, rents, or borrows.
6
That BCR makes this argument is surprising because Diamond admits in its Response to NIC’s First Set of
Requests to Admit that, “On June 2, 20122, the tractor and trailer involved in the Incident alleged in the Kern
Complaint [Underlying Action] were not borrowed by Diamond.” (Doc. 55-3, p. 4.) Frank Dottore, the President of
Diamond Ring Specialized, LLC signed the admission on November 12, 2012. (Id. at p. 5.)
7
One plausible reading of this sentence would insure “autos” that Diamond leases to another party. However, the
parties do not argue this point. Even if they had, the next sentence suggests that leases from is the proper
interpretation: “This does not include any ‘private passenger type’ ‘auto’ you lease, hire, rent or borrow from any
member of your household, any of your ‘employees’, partners (if you are a partnership), members (if you are a
limited liability company), or agents or members of their households.” (BCR v. NIC 56.1 Resp. ¶ 27.)
23
An “auto” is a “land motor vehicle, ‘trailer’ or semitrailer designed for travel on public roads,”
and a “‘trailer’ includes a semitrailer or a dolly used to convert a semitrailer into a trailer.” The
parties do not dispute that Diamond did not lease, hire, or rent the Peterbilt or dolly/trailer.
Rather, BCR alleges Diamond “borrowed” the dolly/trailer from BCR. The Policy does not
define “borrow,” so the Court looks to Illinois law for its meaning.
The interpretation of an insurance policy is an appropriate question for a court to answer
on a motion for summary judgment. See Conn. Indem. Co. v. DER Travel Serv., Inc., 328 F.3d
347, 349 (7th Cir. 2003) (citing Crum & Forster Managers Corp. v. Resolution Trust Corp., 620
N.E.2d 1073, 1077 (Ill. 1993)). Policy provisions limiting an insurer’s liability will be construed
liberally in favor of coverage when those provisions are ambiguous, but a disagreement between
the parties as to a provision’s meaning does not create ambiguity. Rich v. Principal Life Ins. Co.,
875 N.E.2d 1082, 1090 (Ill. 2007). The Court will consider “only reasonable interpretations” of
the policy and will not strain to find ambiguity where none exists. Id.
BCR cites three Illinois cases that examine the meaning of “borrow.” The first is Home
Ins. Co. v. U.S. Fid. & Guar. Co., 755 N.E.2d 122 (Ill. App. Ct. 2001). The Home court
considered a declaratory judgment filed by Home Insurance Company (“Home”) seeking a
declaration that another insurance company, United States Fidelity and Guaranty Company
(“USF&G”) had a duty to defend Prestess Engineering Corporation (“PEC”) in a wrongful death
action. Id. at 124. In the wrongful death action, PEC was allegedly hired to manufacture and
deliver concrete beams for use in constructing a bridge. Id. at 125. PEC subsequently hired
“A&M Cartage of Tinley Park, Inc. ‘and/or’ Tri Sons Transportation, Inc.” (“Tractor Lessors”)
to supply tractors and drivers to deliver the beams, who in turn hired Transmedical, Inc.
24
(“Transmedical”) to supply the drivers.
Id.
The wrongful death action alleged that
Transmedical’s driver was killed when the concrete beam dislodged from PEC’s trailer and
crashed into the operator’s cab of the Tractor Lessor’s tractor. Id. Home insured PEC, while
USF&G insured the Tractor Lessors. Id. at 126. The Home court considered whether USF&G
had a duty to defend PEC in the wrongful death action where PEC was not expressly identified
as a named or additional insured in the Tractor Lessor’s USF&G insurance policy. Id. at 126–
27. The USF&G policy defined an “insured” as “The owner or anyone else from whom you
[Tractor Lessors] hire or borrow a covered ‘auto’ that is a ‘trailer’ while the ‘trailer’ is connected
to another covered ‘auto’ that is a power unit . . . .” Id. The Home court defined “borrow” as “to
solicit and receive from another any article of property, money or thing of value with the
intention and promise to repay or return it or its equivalent.” Id. at 130 (quoting Brile for Brile v.
Estate of Brile, 695 N.E.2d 1309, 1313 (Ill. App. Ct. 1998)). The court held that USF&G had a
duty to defend PEC in the wrongful death action by concluding that the Tractor Lessors received
a “thing of value” because they “used PEC’s trailer to haul the concrete beam to the jobsite.” Id.
at 130, 136.
The second case BCR cites is Brile, 695 N.E.2d 1309 (Ill. App. Ct. 1998), the case Home
cited to define “borrow.” In Brile, an employer asked an employee to relocate from its Illinois
office to its Colorado office. Id. at 1310. As part of the request, the employer offered to pay to
move the employee’s personal belongings if the employee also moved items from the Illinois
office. Id. at 1311. The employee agreed and subsequently rented a truck and began the
relocation. Id. As the employee was driving himself, his son, his personal belongings, and the
employer’s office materials to Colorado, he was involved in an accident that killed both him and
his son. Id. The Brile court found that the employer had “borrowed” the rental truck for the
25
purposes of being covered under the employer’s insurance contract because the employer
“received a thing of value in that it obtained the means to transport its office items and customer
files across country in a cheaper and more convenient manner.” Id. at 1313.
Finally, BCR cites Metzger v. Country Mut. Ins. Co., 986 N.E.2d 756 (Ill. App. Ct. 2013).
There, plaintiff was involved in a car accident with Brian McKee, then the vice-president of
McKee Custom Masonry. Id. at 758. McKee Custom Masonry had an insurance policy with the
defendant that provided liability coverage, including a duty to defend, for any “non-owned”
vehicle operated in the business. Id. at 759. A “non-owned” auto is “any ‘auto’ you [McKee
Custom Masonry] do not own, lease, hire or borrow which is used in connection with your
business.” Id. at 762. Plaintiff sued for a declaratory judgment that the insurance policy covered
the vehicle involved in the accident. Id. The court defined “borrow” as “to take something for
temporary use” or “receive temporarily from another, implying or expressing the intention either
of returning the thing received or of giving its equivalent to the lender: obtain the temporary use
of.”
Id. (citing Black’s Law Dictionary 178 (7th ed. 1999) and Webster’s Third New
International Dictionary 256 (1993), respectively). In holding that the vehicle involved in the
accident was not covered by the defendant’s insurance policy and that there was no
corresponding duty to defend, the court found that McKee Custom Masonry “borrowed” the
vehicle from McKee and was therefore not a “non-owned” auto. Id. at 763.
NIC argues, and the Court agrees, that the definitions of “borrow” in these three cases
each have an element of receipt or possession of property. Home, 755 N.E.2d at 130 (“[T]o
solicit and receive from another any article of property . . . .” (quoting Brile, 695 N.E.2d at 1313)
(emphasis added)); Metzger, 986 N.E.2d at 763 (“[B]orrow is to take something for temporary
26
use or to receive temporarily from another . . . [or] obtain the temporary use of.” (emphasis
added)). Merriam Webster’s Collegiate Dictionary 975 (10th ed. 1996) defines “receive” as “to
come into possession of.” All of Federal law, Illinois law, and the Lease itself require BCR to
maintain “exclusive possession” and “control” over the Peterbilt and its driver, and BCR has
failed to explain how Diamond could “borrow” the dolly/trailer while BCR possesses and
controls the tractor pulling it.
The Court first addresses possession and control with regard to the Peterbilt and driver.
The Lease itself states, “It is the intent of both parties to comply with [Federal Highway
Administration] regulations.” Federal regulations require that, “The lease shall provide that the
authorized carrier lessee [BCR] shall have exclusive possession, control, and use of the
equipment for the duration of the lease. The lease shall further provide that the authorized
carrier lessee [BCR] shall assume complete responsibility for the operation of the equipment for
the duration of the lease.”
49 C.F.R. § 376.12(c)(1) (emphasis added).
Under Illinois
regulations, as discussed above, require the lessee to “have exclusive possession and control” of
leased equipment. 92 Ill. Admin. Code §§ 1360.40(b)(1), 1360.55 (emphasis added). The
regulations add that any lease provisions contrary to this requirement are void, and any failure by
a lessee to exercise this exclusive possession and control “constitutes illegal transfer of
authority.” 92 Ill. Admin. Code § 1360.40(b)(1), 1360.55 (emphasis added).
The Lease complies with both Federal and Illinois law: “BCR shall have exclusive
possession, control, and use of the equipment covered hereby [the Peterbilt] and assumes
complete responsibility for operation thereof under this Agreement to the public.” (emphasis
added). BCR cannot argue that any of the Lease provisions suggest that BCR did not have
exclusive possession and control of the Peterbilt because any such provisions are void under
27
Illinois law. The Court therefore finds, as a matter of law, that the Peterbilt and its driver were
operating under BCR’s control. Because Diamond did not control or possess the Peterbilt or its
driver, it could not have controlled or possessed the dolly/trailer the Peterbilt pulled. As such,
the Court finds Diamond did not “borrow” the dolly/trailer and is therefore not covered under the
Policy’s MCCF provision.
For the avoidance of doubt, the Court’s determination that BCR had legal possession and
control over the Peterbilt and its driver such that Diamond could not possibly have borrowed the
dolly/trailer from BCR does not resolve any factual issues regarding liability that may be
pending in state court.
II.
Duty to Indemnify
“An insurer’s duty to defend its insured is broader than its duty to indemnify. If an
insurer has no duty to defend, it has no duty to indemnify.” Nat’l Cas. Co. v. McFatridge, 604
F.3d 335, 338 (7th Cir. 2010). Because the Court has found that NIC has no duty to defend BCR
or Diamond in the Underlying Action, it also finds that it has no duty to indemnify either party
for any liability that may be assigned them.
CONCLUSION
For the foregoing reasons, NIC’s motion for summary judgment is granted and denies
BCR’s motion for summary judgment.
____________________________________
Hon. Virginia M. Kendall
United States District Court Judge
Northern District of Illinois
Date: December 30, 2013
28
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