Selective Insurance Company of South Carolina v. Target Corporation et al

Filing 113

Enter MEMORANDUM Opinion and Order Signed by the Honorable Elaine E. Bucklo on 9/15/2015. Mailed notice (jdh)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

SELECTIVE INSURANCE COMPANY OF SOUTH )
CAROLINA,
)
)
Plaintiff,
)
)
v.
) Case 13 CV 5910
)
)
TARGET CORPORATION and ANGELA BROWN, )
)
Defendants.
)
)
MEMORANDUM OPINION AND ORDER
This declaratory action arises out of a lawsuit by defendant
Angela

Brown, 1 who

claims

she

was

injured

when the

door

to a

fitting room at a Target retail store came unhinged and fell on
her head and shoulder.

Target tendered defense of the action to

Selective Insurance Company, claiming to be an additional insured
under a policy Selective had issued to Harbor Industries, Inc.,
the

company

that

supplied

Target

with

its

fitting

rooms.

Selective’s complaint seeks a judgment that it has no duty to
defend or indemnify Target in the underlying action (which has
since settled) because Target does not qualify as an additional
insured

1

under

the

terms

of

Harbor’s

policy

(Count

I).

Brown “is named as a defendant herein because of her status as a
necessary party by virtue of her status as the plaintiff in the
underlying case.” She has not been served in this action, and the
complaint does not seek any relief as to her.

Alternatively,
qualifies
defend

as

or

Selective
an

seeks

additional

indemnify

Target

a

judgment

insured,
because

that

Selective
the

even
has

underlying

if

no

Target

duty

to

lawsuit

is

outside the scope of the policy’s coverage (Count II), or because
the

underlying

action

constitutes

an

“uninsurable

known

risk”

judgment,

which

under the policy (Count III).
Before

me

Target’s

is

motion

for

summary

seeks a ruling that Selective was required to defend and indemnify
it for the underlying action, and Selective’s motion for partial
summary judgment, which seeks a ruling that it had no duty to
defend Target. 2

For the reasons that follow, I deny Selective’s

motion and grant Target’s motion.
I.
The parties’ dispute boils down to two issues: first, whether
three documents--the insurance policy Selective issued to Harbor
(the

“Policy”);

Harbor

and

the

Target

“Supplier

(the

Qualification

“SQA”);

and

the

Agreement”

“Program

between

Agreement

for

Fitting Rooms (2010)” (the “Program Agreement”) under which Harbor
sold

fitting

rooms

to

Target--establish

that

Target

is

an

additional insured under the Policy; and second, assuming that
2

At the time Selective filed its motion, the underlying case was
in the process of settling.
Selective appropriately reserved
argument on whether it owed Target any duty to indemnify until
settlement was complete. See Travelers Inc. Cos. v. Penda Corp.,
974 F.2d 823, 833 (7th Cir. 1992) (duty to indemnify arises only
after insured becomes legally obligated to pay damages in
underlying action).
2

Target is insured by the Policy, whether the underlying lawsuit is
a covered claim.
On the first issue, the effective dates of the agreements and
the timing of Brown’s injury are significant.

The SQA became

effective on April 16, 2007, and it remains in effect by its terms
until

terminated

provisions.

by

the

parties

pursuant

to

Pl.’s L.R. 56.1 Stmt., Exh. M.

its

termination

Selective does not

suggest that either Harbor or Target terminated the SQA pursuant
to those provisions, and as far as the record reveals, it remains
in effect to this day.

The Program Agreement went into effect on

April 23, 2009, and it expired on July 1, 2010.

Id., Exh. L.

The

Policy’s inception date was January 1, 2011, and it expired on
January 1, 2012.

Id., Exh. N at p. 2.

Brown’s injury occurred

on December 17, 2011, Pl.’s L.R. 56.1 Stmt., Exh. D., which is to
say, while the SQA and the Policy were in effect, but after the
Program Agreement had expired.
The

Policy

provides

Commercial

General

Liability

(“CGL”)

Coverage pursuant to terms that include amendments contained in
the

“ELITEPAC

General

Liability

Extension”

endorsement

(“the

ELITEPAC”). Pl.’s L.R. 56.1 Stmt., Exhs. N-3, at 145-60 and N-4,
at

166-72.

There

is

no

dispute

that

Target’s

entitlement

to

coverage for the Brown action, if any, arises from its putative
status

as

an

“additional

insured”

states:
3

under

the

ELITEPAC,

which

WHO IS AN INSURED - Amendments
***
Blanket Additional Insureds Including Broad Form Vendors
– As Required by Contract
WHO IS AN INSURED is amended to include as an additional
insured any person or organization whom you [Harbor]
have agreed in a written contract, written agreement or
written permit to add as an additional
insured on your policy. ***
***
The provisions of this coverage extension do not apply
unless the written contract or written agreement has
been executed (executed means signed by the named
insured) or written permit issued prior to the “bodily
injury” or “property damage”.
Id., at 169-70.
The SQA provides 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.”

Pl.’s L.R. 56.1 Stmt., Exh. M at 1.

In a

section captioned “Insurance Requirements,” the SQA states:
[Harbor]’s Commercial General Liability Insurance shall
designate Target as an additional insured by endorsement
acceptable to Target.
Designation of Target as an
additional insured shall include as an insured with
respect to third party claims or actions brought
directly against Target or against Target and [Harbor]
as co-defendants and arising out of this Agreement.
[Harbor]’s
insurance
shall
include
products
and
completed operations liability coverage….
Pl.’s L.R. 56.1 Stmt., Exh. M at 4.
The

Program

Agreement

is

a

requirements

contract

between

Target and Harbor, which provides that as long as Harbor and its

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product comply with certain criteria, “Target agrees to purchase
from [Harbor] all of Target’s needed supply of the Goods during
the Term of this Program Agreement.”

Id. at 3.

The “Goods” are

defined as the “product or item which is a product that meets
Target’s

specifications

for

identified as “Fitting Rooms.”

Target’s

prototype,”

and

are

Pl.’s L.R. 56.1 Stmt., Exh. L at

1.
II.
In support of its claim that it owes no duty to Target,
Selective homes in on the Policy’s requirement that to qualify as
an

additional

insured,

Target

must

have

with

its

insured

“a

written contract, written agreement or written permit to add as an
additional insured.” Selective insists that Target does not meet
this requirement because the Program Agreement between Harbor and
Target had expired before the Policy’s inception and before Brown
was injured.

This argument has no merit.

The “written agreement”

that binds Harbor to add Target as an additional insured is found
in the SQA, not in the Program Agreement.
states

on

insurance]

its
in

face
full

that

Harbor

force

Agreement” (emphasis added).

and

must

effect

Moreover, the SQA

“maintain
during

the

[CGL

and

term

of

other
this

And there is no dispute that the SQA

was in effect at the time of Brown’s accident and throughout the
term of the Policy.

5

Selective points to language in the SQA stating that “[i]n
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.”

Id. at 1.

means

Agreement

that

the

Program

According to Selective, this
“controls

the

issue

of

the

effective dates of the contract,” which I take to mean that in
Selective’s view, the SQA terminated at the term of the Program
Agreement,

regardless

of

whether

the

parties

termination provisions contained in the SQA itself.

invoked

the

That argument

is meritless.
The SQA is a broad agreement “to establish the terms and
conditions of being qualified to do business with Target.”
L.R. 56.1 Stmt., Exh. M at 1.

Pl.’s

It applies, on its face, to “all

agreements” for Target’s purchase on non-retail goods and services
from

Harbor,

and

it

contemplates

that

discrete

purchases

by

Target, if any, would be governed by specific Orders or Program
Agreements.

The Program Agreement at issue here was one such

specific agreement.

Understood in this way, there is no conflict

at all between the termination provisions of the two agreements.
At

the

term

of

the

Program

Agreement,

Target

was

no

longer

obligated to purchase its fitting room requirements from Harbor,
and Harbor was no longer obligated to provide them.

The SQA

remained in effect, however, and would be incorporated into future
program agreements, if any, between the parties.
6

It continued to

require that Harbor’s CGL insurance name Target as an additional
insured, and that such insurance include “products and completed
operations liability coverage.”

Accordingly, Selective’s argument

that “the requirement that Harbor name Target as an additional
insured on its policy expired when the Program Agreement expired”
is unpersuasive.
satisfies

the

Pl.’s Reply, at 3.
Policy’s

requirement

I conclude that the SQA
of

a

“written

contract”

necessary for Target to qualify as an additional insured under the
Policy.
Selective’s next argument is that even if Target qualifies as
an additional insured under the Policy, the underlying action is
outside the scope of the Policy’s coverage.
unavailing.

The

injury’...caused

in

ELITEPAC
whole

or

covers
in

“liability

part,

by...‘your

Pl.’s L.R. 56.1 Stmt., Exh. N-4 at 169.
because

Brown

claimed

that

Target’s

This argument is also

own

for

‘bodily

product’....”

Selective argues that
negligence

caused

her

injury, her lawsuit does not assert liability “caused by” Harbor’s
“product.” 3
Insurance policies must be liberally construed in favor of
coverage, and because “the threshold for pleading a duty to defend

3

Selective appears to have abandoned Count III of its complaint,
as its response to Target’s motion argues that Target’s claim
falls outside the Policy’s coverage of liability for “bodily
injury...caused, in whole or in part, by...your product,” but it
does not respond to Target’s argument that the “known loss”
doctrine does not preclude Target’s claim.
7

is low, any doubt with regard to such duty is to be resolved in
favor of the insured.”

Am. Econ. Ins. Co. v. Holabird and Root,

886 N.E. 2d 1166, 1171 (Ill. App. Ct. 2008).

“Whether an insurer

has a duty to defend depends on a comparison of the allegations of
the

underlying

complaint

to

the

relevant

policy

provisions.”

Nat’l Union Fire Ins. Co. v. R. Olson Construction Contractors,
Inc., 769 N.E. 977, 981 (Ill. App. Ct. 2002).

Here, defendant

Brown alleged that Target: a) allowed the door to its fitting room
fall

into

disrepair;

b)

failed

to

maintain

the

door

in

a

reasonably safe condition; c) allowed the door to become loose; d)
failed to repair the door after having notice that it had fallen
into

disrepair;

and

e)

failed

to

warn

its

customers

that

its

fitting room door was in an unreasonably dangerous and hazardous
condition.

Pl.’s L.R. 56.1 Stmt., Exh. D at 2.

Bearing in mind that I must construe the Policy liberally in
favor of coverage, I conclude that Brown’s allegations fall within
the scope of the Policy, as they can reasonably be read to assert
a “bodily injury” that was “caused, in whole or in part,” by
Harbor’s

“product.”

Selective

raises

two

arguments

to

the

contrary: first, that Harbor’s fitting rooms are not “products,”
and second, that because Brown sued only Target, and alleged only
Target’s

negligence,

her

injury

was

not

caused

product.

The first argument borders on frivolous.

by

Harbor’s

Setting aside

that the Program Agreement explicitly identifies “Fitting Rooms”
8

as the “product” to which it relates, Selective points to nothing
in the Policy to indicate that the term “product” as used therein
should be given any other construction than its ordinary one, and
the first entry in the Merriam-Webster dictionary for “product” is
“something that is made or grown to be sold or used.” 4

Plainly the

fitting rooms made by Harbor, sold to Target, and used by Brown
fall well within that definition.
Selective’s next argument is that the Policy’s coverage of
claims for bodily injury “caused...by” Harbor’s products should be
limited

to

claims

in

which

Target’s

alleged

liability

is

vicarious, arising out of Harbor’s own acts.

Selective relies for

this

v.

argument

on

Lincoln

General

Ins.

Co.

Federal

Constr.,

Inc., No. 09 C 6087, 2010 WL 4978852 (N.D. Ill. Dec. 2, 2010)
(Hart, J.), in which the court held that an insurer had no duty to
defend or indemnify Federal Construction, which sought coverage as
an

additional

insured

on

a

policy

subcontractor,

Friedler

Construction,

that

willful

and

asserted

additional

insured

wanton

endorsement

in

for

issued
an

conduct
the

to

Federal’s

underlying
by

policy

at

Federal.
issue

action
The
covered

liability for injuries “caused, in whole or in part, by: 1. Your
[i.e., Friedler’s] acts or omissions; or 2. The acts or omissions
of those acting on your behalf.”

Id. at *2.

4

The court construed

See http://www.merriam-webster.com/dictionary/product,
9/11/2015.
9

accessed

those

provisions

insured’s

as

limited

liability

was

to

based

claims
on

in

which

Friedler’s

the

own

additional

conduct,

or

conduct that could be imputed to Friedler and reasonably concluded
that

the

underlying

allegations

of

intentional

wrongdoing

by

Federal fell outside that scope.
Here, by contrast, the Policy covers “bodily injury” caused
in whole or in part by Harbor’s “product,” and Brown’s allegations
can

reasonably

be

read

to

fall

True, she sued only Target.

potentially

within

this

scope.

But as a practical matter, she may

have had no way of knowing who else might have been responsible
for the allegedly unsafe condition of the door.

Moreover, if the

fitting room door were defectively designed or manufactured by
Harbor,

Target

Brown’s

may

injury,

still

based

be

on

held

her

liable

allegation

for

contributing

that

it

failed

to
to

“maintain” the door in a reasonably safe condition, or to warn
customers

that

it

was

unsafe.

“The

duty

to

defend

does

not

require that the complaint allege or use language affirmatively
bringing the claims within the scope of the policy. The question
of coverage should not hinge on the draftsmanship skills or whims
of the plaintiff in the underlying action.” Holabird & Root, 886
N.E.

2d.

at

1171

citation omitted).

(alterations,

internal

quotation

marks,

and

I am satisfied that Brown’s complaint alleges,

on its face, facts “within or potentially within policy coverage,”
sufficient

to

trigger

Selective’s
10

duty

to

defend.

Id.

Accordingly, I need not reach the parties’ additional arguments
relating to whether it is appropriate to consider Target’s thirdparty complaint against Harbor, or true but unpled facts outside
Brown’s complaint, in determining whether Target’s insurance claim
falls within the scope of coverage.
This brings me to the final issue, which is whether Selective
has a duty to indemnify Target for its costs in settling the
underlying action.
duty

to

defend,

The duty to indemnify is narrower than the
arising

only

when

the

facts

alleged

in

the

underlying complaint actually (not just potentially) fall within
the

scope

of

coverage.

Crum

and

Forster

Managers

Corp.

Resolution Trust Corp., 620 N.E. 2d 1073, 1081 (Ill. 1993).

v.
In

cases such as this, where the underlying action settles prior to
verdict,
otherwise

the

insured

covered

liability.”

must

loss

in

demonstrate
reasonable

“that

it

anticipation

settled
of

an

personal

United States Gypsum Co. v. Admiral Insurance Co.,

643 N.E. 2d 1226, 1240

(1994).

To establish that Target settled the underlying action in
reasonable anticipation of liability, Target offers the affidavit
of its outside counsel, Robert Burke, who represented Target both
in the underlying action and in this coverage dispute.
has

moved

to

strike

the

Burke

affidavit

on

various

Selective
grounds,

including that Mr. Burke was not disclosed as a witness, is not a
corporate representative of Target, and offers evidence only of
11

his opinions and legal conclusions, not of facts.

Target responds

that any failure to disclose Mr. Burke was harmless, that he is
competent

to

underlying

testify

lawsuit

as

to

based

Target’s

on

his

reasons

personal

for

settling

knowledge,

and

the
that

Target need not offer “de novo proof” of facts establishing its
potential

liability

to

show

that

it

settled

in

reasonable

anticipation of liability.
Target is correct that it need not offer “de novo proof” of
its potential liability.

Still, U.S. Gypsum--the leading Illinois

case on this issue, and the authority on which Target primarily
relies--plainly
underlying

contemplated

case

(as

opposed

that
to

ex

some
post

evidence
statements

from
by

the

counsel)

would be offered to support the insured’s argument that it settled
in reasonable anticipation of liability.

See id. at 1245 (holding

that the insured may offer “testimony, evidence or depositions
obtained

or

adduced

in

the

underlying

cases”

because

“whether

Gypsum’s anticipation of liability was reasonable would naturally
turn

on

expect

the
to

(Emphasis

be

quality

and

offered

added).

quantity

against

Indeed,

it

neither

of

proof

in

the

Gypsum

which

Gypsum

underlying
nor

any

would

action.”)
other

case

Target cites concluded that the insured carried its burden based
solely on an affidavit of outside counsel.

Cf. Federal Ins. Co.

v. Binney & Smith, Inc., 913 N.E. 2d 43 (Ill. App. Ct. 2009)
(relying

on

affidavits

of

in-house
12

and

outside

counsel).

Ultimately, however, I need not decide whether to consider the
Burke affidavit, or whether, if considered, it is sufficient to
establish that Target settled the underlying case in reasonable
anticipation of liability. I am satisfied, based on my own review
of

the

record,

which

includes

Brown’s

deposition

testimony

describing how her injury occurred, Pl.’s L.R. 56.1 Stmt., Exh. F
at 29 (DN 72-6), and evidence that Target was aware of similar
incidents that occurred shortly before Brown’s, id., Exh. I, that
it

contains

sufficient

evidence

anticipation of liability.

to

support

a

reasonable

And because Selective’s substantive

arguments on this issue essentially just reiterate its coverage
position, it fails to rebut the inference raised by the factual
record.
III.
For

the

foregoing

reasons,

I

grant

Target’s

motion

for

summary judgment and deny Selective’s motion for partial summary
judgment.
ENTER ORDER:

_____________________________
Elaine E. Bucklo
United States District Judge
Dated: September 15, 2015

13