Admiral Indemnity Company et al v. 899 Plymouth Court Condominium Association et al

Filing 43

MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 1/24/2017: For the reasons stated in the accompanying Memorandum Opinion and Order, the Court grants summary judgment in favor of plaintiff on count 4 of its complaint but o therwise denies plaintiffs' motion for summary judgment [dkt. no. 29] and grants summary judgment in favor of defendant on counts 1 and 2 of plaintiff's complaint with regard to the issue of duty to defend but otherwise denies defendants� 39; motion for summary judgment [dkt. no. 17]. The case is set for a status hearing on February 8, 2017 at 9:00 a.m., in chambers (Room 2188), to set a schedule for discovery and pretrial proceedings. The parties are directed to confer in advance of the hearing to attempt to agree on a schedule to propose to the Court. (mk)

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

ADMIRAL INDEMNITY COMPANY and
CLERMONT SPECIALTY MANAGERS,
Plaintiffs,
v.
899 PLYMOUTH COURT
CONDOMINIUM ASSOCIATION
D&K REAL ESTATE SERVICE CORP.;
BURTON GILBERG; JAN GILBERG;
BALA GHIMIRE; and ANNAPURNA, INC.,
Defendants.

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Case No. 16 C 5085

MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
There are two pending lawsuits against defendants 899 Plymouth Court
Condominium Association and D&K Real Estate Service Corporation (collectively,
Plymouth), alleging that Plymouth is liable for water damage suffered by a commercial
condominium unit in its building. Plymouth is being defended in both lawsuits by its
liability insurer, plaintiffs Admiral Indemnity Company and its claim manager Clermont
Specialty Managers (collectively, Admiral). Admiral agreed to defend Plymouth under a
reservation of rights. After conducting an investigation, Admiral concluded that the
insurance policy that it issued does not cover the claims asserted against Plymouth.
Admiral filed this lawsuit seeking a declaratory judgment that it has no duty to defend or
indemnify Plymouth as well as reimbursement for expenses that Admiral has paid
defending Plymouth. Both sides have moved for summary judgment.

Background
Plymouth purchased a general commercial liability insurance policy from Admiral
for periods covering November 1, 2010 through November 1, 2013. Plymouth's policy
included coverage for "bodily injury and property damage liability" (Coverage A) and
"personal and advertising injury liability" (Coverage B). Defs.' Ex. A-2 (Plymouth
Policy), §§ A, B. Coverage A provides coverage for bodily injury and property damage
only if the injury or damage is (1) caused by an "occurrence" (2) during the policy
period. Id. § A, ¶ 1(b)(1)-(3). Coverage B provides that Admiral will cover any personal
injury arising from "wrongful eviction from, wrongful entry into, or invasion of the right of
private occupancy of a room, dwelling or premises that a person occupies, committed
by or on behalf of its owner, landlord or lessor." Id. § 5, ¶ 14(c). Relevant sections of
the policy are quoted below:
SECTION I – COVERAGES
COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1.
Insuring Agreement
a.
We 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 . . . .
***
b.
This insurance applies to "bodily injury" and "property damage" only
if:
(1)
The "bodily injury" or "property damage" is caused by an
"occurrence" that takes place in the "coverage territory";
(2)
The "bodily injury" or "property damage" occurs during the policy
period; and
(3)
Prior to the policy period, no insured listed under Paragraph 1. of
Section II – Who Is An Insured and no "employee" authorized by you to
give or receive notice of an "occurrence" or claim, knew that the "bodily
injury" or "property damage" had occurred, in whole or in part. If such a
listed insured or authorized "employee" knew, prior to the policy period,
2

that the "bodily injury" or "property damage" occurred, then any
continuation, change or resumption of such "bodily injury" or "property
damage" during or after the policy period will be deemed to have been
known prior to the policy period.
***
d.
"Bodily injury" or "property damage" will be deemed to have been
known to have occurred at the earliest time when any insured listed under
Paragraph 1. of Section II – Who Is An Insured or any "employee"
authorized by you to give or receive notice of an "occurrence" or claim:
(1)
Reports all, or any part, of the "bodily injury" or "property damage"
to use or any other insurer;
(2)
Receives a written or verbal demand or claim for damages because
of the "bodily injury" or "property damage"; or
(3)
Becomes aware by any other means that "bodily injury" or "property
damage" has occurred or has begun to occur.
***
2.
Exclusions
This insurance does not apply to:
a.
Expected Or Intended Injury
"Bodily injury" or "property damage" expected or intended from the
standpoint of the insured . . . .
***
j.
Damage to Property
"Property damage" to:
(1)
Property you own, rent, or occupy, including any costs or expenses
incurred by you, or any other person, organization or entity, for repair,
replacement, enhancement, restoration or maintenance of such property
for any reason, including prevention of injury to a person or damage to
another’s property;
***
(4)
Personal property in the care, custody or control of the insured;
(5)
That particular part of real property on which you or any contractors
or subcontractors working directly or indirectly on your behalf are
performing operations, if the "property damage" arises out of those
operations; or
(6)
That particular part of any property that must be restored, repaired,
or replaced because "your work" was incorrectly performed on it.

3

***
COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY
1.
Insuring Agreement
a.
We will pay those sums that the insured becomes legally obligated
to pay as damages because of "personal and advertising injury" to which
this insurance applies. We will have the right and duty to defend the
insured against any "suit" seeking those damages . . . .
b.
This insurance applies to "personal and advertising injury" caused
by an offense arising out of your business but only if the offense was
committed in the "coverage territory" during the policy period.
***
SECTION V – DEFINITIONS
13.
"Occurrence" means an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.
14.
"Personal and advertising injury" means injury, including
consequential "bodily injury," arising out of one or more of the following
offenses:
***
c.
The wrongful eviction from, wrongful entry into, or invasion of the
right of private occupancy of a room, dwelling or premises that a person
occupies, committed by or on behalf of its owner, landlord or lessor;
***
17.
"Property damage" means:
a.
Physical injury to tangible property, including all resulting loss of
use of that property. All such loss of use shall be deemed to occur at the
time of the physical injury that caused it; or
b.
Loss of use of tangible property that is not physically injured. All
such loss of use shall be deemed to occur at the time of the "occurrence"
that caused it.
Plymouth Policy §§ 1, 5.
While insured by Admiral, Plymouth was sued in two separate lawsuits for
damages resulting from water leaks from the building's community pool into Unit G-02, a
commercial condominium unit that houses a restaurant. In 2014, the owner of Unit G4

02, Jan Gilberg, and her husband Burton Gilberg (collectively, Gilberg) filed a six-count
lawsuit against Plymouth. The court in that case dismissed counts 1, 2, and 4, leaving
counts 3 (breach of fiduciary duty), 5 (abatement of private nuisance), and 6 (breach of
covenant). Defs.' Ex. C (Gilberg Fourth Am. Compl.). Counts 3 and 6 are premised on
alleged violations of the Illinois Condominium Property Act and the condominium
declaration and bylaws. Gilberg alleges that she made Plymouth aware of the leaks as
early as 2012. Id. ¶ 31. She also alleges that she attended Plymouth's board meetings
and gave reports on the pool leaks and the damage they were causing. Id. ¶ 34.
Sometime in October 2013, the City of Chicago cited Plymouth for a building code
violation and directed it to "repair all of the leaks . . . from [the] swimming pool." Id. ¶
39. In November 2013, Plymouth's engineers prepared a report stating that "the
underlying waterproofing membrane [for the pool] is in poor condition" and
recommending that Plymouth install a "waterproofing coating at the Pool Mezzanine
floor to minimize water infiltration through the floor into the commercial spaces below."
Id. ¶¶ 46, 48. Sometime in June 2014, Plymouth made repairs to the pool area, but
Gilberg alleges that the repairs did not prevent further leaks. Id. ¶¶ 54-59. Gilberg
contends that because of the "purported 'remedies' that [Plymouth] performed and/or
caused to be performed," the retail and rental value of Unit G-02 decreased, making the
unit "substantially unmarketable." Id. ¶¶ 60, 62. In count 5, a claim alleging nuisance,
Gilberg contends that the "leaking caused by the [ ] Building's pool area substantially
and unreasonably interferes with and invades upon [Gilberg's] right to quiet enjoyment"
to her property. Id. ¶ 78. Gilberg alleges that Plymouth "intentionally and/or negligently
failed to act regarding the leaks . . . after receiving notice of the leaks" and "fail[ed] to

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adequately repair and/or maintain these areas . . . ." Id. ¶¶ 82, 83.
Shortly after Gilberg filed her lawsuit, her tenants Bala Ghimire and Annapurna
Inc. (collectively, Annapurna) filed a lawsuit against Gilberg and Plymouth. Annapurna
has been the tenant of Unit G-02 since 2008 and has used the space to run its
restaurant, Chicago Curry House. Annapurna asserts several claims against Plymouth,
including claims for private nuisance, trespass, and negligence. See Pls.' Ex. G
(Annapurna Am. Compl.). Annapurna asserts that it had to close the restaurant on
several occasions over a six-year period due to water damage from the building's
swimming pool. Annapurna alleges that "water leaks were a condition that was known
to [Plymouth and Gilberg] since at least 2009, and which continued to occur between
2010 and 2014 because of the neglect of [Plymouth], and its ongoing negligently
shoddy maintenance of the condominium pool and its associated mechanical
structures." Id. Ct. 5, ¶ 24. Annapurna claims that it "lost in excess of $500,000 in the
combined costs of lost business income, and paid repair costs, property damage and
inventory loss." Id. Ct. 1, ¶ 14.
For the last two years, Admiral has been defending Plymouth in both the Gilberg
and Annapurna lawsuits under a reservation of rights. Compl. ¶ 43. Admiral now
contends, however, that the claims in the underlying lawsuits are not covered by
Plymouth's insurance policy. Admiral has filed a five-count complaint. In count 1,
Admiral contends that Plymouth is not entitled to coverage under the insurance policy's
property damage provision because the underlying lawsuits do not allege property
damage caused by an "occurrence" within the meaning of the policy. In count 2,
Admiral contends that the underlying lawsuits are excluded from coverage because the

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damage was expected or intended from Plymouth's standpoint. In count 3, Admiral
asserts that even if the property damage identified in the underlying lawsuits was
caused by an "occurrence," Plymouth is not entitled to indemnification under various
policy exclusions. In count 4, Admiral alleges that there is no coverage under the
insurance policy's personal / advertising injury provision because the water leaks
described by Annapurna do not constitute a "wrongful entry or invasion" within the
meaning of the policy. Admiral further alleges that, to the extent that Annapurna does
allege a wrongful entry, for coverage purposes the policy requires the wrongful entry to
be committed "by the owner, landlord or lessor of the unit," which is Gilberg, not
Plymouth. Id. ¶ 74. And in count 5, Admiral alleges that Plymouth is not entitled to
coverage under any provision of the insurance policy based on the known loss doctrine,
because Plymouth "knew or had reason to know" that Unit G-02 was undergoing
damage from leaks prior to the inception of its insurance policy. Id. ¶ 84.
Plymouth contends that Admiral owes it a duty to defend and indemnity; it has
moved for summary judgment on all of its claims on the issue of duty to defend.
Admiral has filed a cross-motion for summary judgment on counts 1, 2, and 4, and it
asks the Court to deny Plymouth's motion for summary judgment on counts 3 and 5,
arguing that any decision while the underlying litigation is still pending would be
inappropriately premature.
Discussion
Summary judgment is warranted where "the pleadings, the discovery, and
disclosure materials on file, and any affidavits show that there is no genuine issue as to
any material fact and that the movant is entitled to judgment as a matter of law." Fed.

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R. Civ. P. 56(c)(2); see also Brengettcy v. Horton, 423 F.3d 674, 680 (7th Cir. 2005).
On cross-motions for summary judgment, the court considers each motion separately
and construes "all inferences in favor of the party against whom the motion under
consideration is made." Metro. Life Ins. Co. v. Johnson, 297 F.3d 558, 561-62 (7th Cir.
2002).
The construction of an insurance policy is a question of law that can be
appropriately decided via summary judgment. Stoneridge Dev. Co. v. Essex Ins. Co.,
382 Ill. App. 3d 731, 748-49, 888 N.E.2d 633, 650 (2008). An insurance policy "is to be
construed as a whole, giving effect to every provision, if possible, because it must be
assumed that every provision was intended to serve a purpose." Id. at 749. If the
language of the policy is clear and unambiguous, it must be given its plain, ordinary,
and popular meaning. Rich v. Principal Life Ins. Co., 226 Ill. 2d 359, 371, 875 N.E.2d
1082, 1090 (2007). If, however, the words used in the policy are susceptible to more
than one reasonable interpretation, the ambiguity must be resolved in favor of coverage.
Id.
A court determines whether an insurer has a duty to defend by examining the
underlying complaint and the language of the insurance policy. Gen. Agents Ins. Co. of
Am. v. Midwest Sporting Goods Co., 215 Ill. 2d 146, 155, 828 N.E.2d 1092, 1098
(2005). If the underlying complaint "alleges facts within or potentially within the policy's
coverage, the insurer's duty to defend arises even if the allegations are groundless,
false or fraudulent." United Nat'l Ins. Co. v. 200 N. Dearborn P'ship, 2012 IL App (1st)
100569, ¶ 17, 979 N.E.2d 920, 925. And if the "duty to defend is found to exist with
respect to one or some of the theories of recovery advanced in the underlying litigation,

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the insurer must defend the insured with regard to the remaining theories of recovery as
well." Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Glenview Park Dist., 158 Ill. 2d 116,
124, 632 N.E.2d 1039, 1042-43 (1994).
A.

Coverage for "occurrence" under property damage insurance
First, Plymouth argues that the plain language of Coverage A, the policy's bodily

injury / property damage provision, entitles it to coverage. The policy provides coverage
for an "occurrence," defined as "an accident, including continuous or repeated exposure
to substantially the same general harmful conditions." Plymouth Policy § 5, ¶ 13.
Admiral says that what is at issue in the underlying case does not involve an
"accident." Illinois courts have defined "accident" to mean "an unforeseen occurrence,
usually of an untoward or disastrous character or an undesigned, sudden, or
unexpected event of an inflictive or unfortunate character." Stoneridge Dev. Co, 382 Ill.
App. 3d at 749, 888 N.E.2d at 650. Admiral argues that the damage in question was
foreseeable; it relies in part on allegations in the underlying complaints that Plymouth
was aware of the damage from the pool leaks but did not take proper actions to prevent
future leaks.
The insurance policy in this case, however, expressly defines "accident" to
include "continuous or repeated exposure" to the same harmful conditions. The
plaintiffs in the underlying lawsuits allege exactly this; they say that there was repeated
leakage of water from the pool that caused damage to the restaurant. As Plymouth
argues, "[i]f continuous leaks could never be covered, it would render the provision
allowing for continuous or repeated exposure superfluous." Defs.' Mem. in Supp. for
Summ. J. at 8. Based on the plain language of Coverage A in Plymouth's policy, the

9

damage alleged in the underlying lawsuits meets the policy's definition of an
occurrence.
Even if the common law definition of "accident" were controlling, Plymouth would
be entitled to a defense in the underlying lawsuits. Admiral argues that the facts as
alleged in those lawsuits reflect a conscious failure by Plymouth to make necessary
repairs to the pool despite being on notice of leaks and that, as a result, the damage
was not an unforeseen occurrence. See generally Cambridge Mut. Fire Ins. Co. v.
1347-49 N. Sedgwick Condo. Ass'n, No. 12 C 878, 2013 WL 271222, at *4 (N.D. Ill. Jan.
23, 2013). But the suits also include allegations consistent with the view that Plymouth
did not ignore the problem but rather attempted to fix it, albeit unsuccessfully. Because
the law requires construing the underlying claims in favor of coverage, see Ins. Co. of
Hanover v. Shelborne Assocs., 389 Ill. App. 3d 795, 799, 905 N.E.2d 976, 981 (2009),
these allegations are sufficient to require Admiral to continue to defend the suits.
Under established Illinois insurance law, "economic losses sustained as a result
of defects in or damage to the insured's own work or product are not covered by a
comprehensive general liability insurance policy." Ohio Cas. Ins. Co. v. Bazzi Const.
Co., 815 F.2d 1146, 1148 (7th Cir. 1987). The reason is that such policies "'are
intended to protect the insured from liability for injury or damage to the property of
others,'" not the cost of repairing or replacing the insured's defective work. Id. (quoting
Qualls v. Country Mut. Ins. Co., 123 Ill. App. 3d 831, 833-34, 462 N.E.2d 1288, 1291
(1984)). But "damage to something other than the project itself does constitute an
'occurrence' under a CGL policy." Milwaukee Mut. Ins. Co. v. J.P. Larsen, Inc., 2011 IL
App (1st) 101316, 956 N.E.2d 524, ¶ 27 (emphasis in original). This is the situation

10

here. Gilberg and Annapurna allege that Plymouth's faulty repairs caused damage to
Unit G-02. Specifically, Annapurna alleges that its lost profits were the result of
Plymouth's "ongoing negligently shoddy maintenance of the condominium pool and its
associated mechanical structures." Annapurna Am. Compl., Ct. 6, ¶¶ 24, 29. Similarly,
Gilberg alleges that Plymouth attempted to repair the pool leaks in October 2013 and
June 2014, intending to prevent future leaks, but that due to the "purported 'remedies'
that [Plymouth] performed and/or caused to be performed" to the pool, the retail and
rental value of Unit G-02 decreased, making the unit "substantially unmarketable."
Gilberg Fourth Am. Compl. ¶¶ 40, 54, 55, 60, 62. Even if some water damage occurred
before the allegedly faulty repairs, this would not alter Admiral's duty to defend. When
there is a duty to defend under only one of the theories of recovery advanced in the
underlying suits, Admiral "must defend the insured with regard to the remaining theories
of recovery as well." Glenview Park, 158 Ill. 2d at 123-24, 632 N.E.2d at 1042-43.
B.

Exclusion for expected or intended damage
Admiral next asserts that Plymouth is not entitled to coverage because its policy

excludes coverage for bodily injury or property damage that is "expected or intended
from the standpoint of the insured," Plymouth Policy § 1, ¶ 2(a), and the damage to Unit
G-02 was expected from Plymouth's standpoint. Gilberg alleges in her complaint that
she notified Plymouth of the leaks on a "regular basis between July 2012 and May
2013," and Annapurna alleges in its complaint that "water leaks were a condition that
was known to [Plymouth] since at least 2009." Gilberg Fourth Am. Compl. ¶ 31;
Annapurna Am. Compl. Ct. 4, ¶ 24.
Those allegations are certainly there, but as discussed in the previous section,

11

both Gilberg and Annapurna make allegations of and consistent with negligence on the
part of Plymouth. "If the underlying complaints allege facts within or potentially within
policy coverage, the insurer is obliged to defend its insured even if the allegations are
groundless, false, or fraudulent." Northbrook Prop. & Cas. Co. v. Transp. Joint
Agreement, 194 Ill. 2d 96, 98, 741 N.E.2d 253, 254 (2000). A duty to defend exists
”unless it is clear from the face of the underlying complaints that the allegations fail to
state facts which bring the case within, or potentially within, the policy's coverage," id.,
which is not the case here.
Once the insured meets its burden of showing coverage applies, as Plymouth
has, the insurer bears the burden of proving that an exclusion applies. See, e.g.,
Santa's Best Craft, LLC v. St. Paul Fire & Marine Ins. Co., 611 F.3d 339, 347 (7th Cir.
2010). Admiral has not met this burden. Though Gilberg and Annapurna make
allegations of knowing conduct by Plymouth, they also allege negligence. "While the
allegation of intentional [conduct] would remain outside the coverage, the duty to defend
is not extinguished when negligence is also alleged." Skolnik v. Allied Prop. & Cas. Ins.
Co., 2015 IL App (1st) 142438, ¶ 29, 45 N.E.3d 1161, 1167. And Admiral presents no
evidence to suggest that Gilberg and Annapurna's asserted claims are baseless. See,
e.g., Allstate Ins. Co. v. Carioto, 194 Ill. App. 3d 767, 775, 551 N.E.2d 382, 386 (1990)
(finding allegations of negligence "facetious" where the underlying conduct was plainly
willful).
C.

Coverage under personal and advertising injury endorsement
Plymouth argues that even if the bodily injury / property damage coverage does

not apply, the policy's coverage for damages because of "personal and advertising

12

injury" (Coverage B) applies. Plymouth Policy § B, ¶ 1(a). Personal and advertising
injury "means injury, including consequential 'bodily injury,' arising out of one or more of
the following offenses . . . . (c) The wrongful eviction from, wrongful entry into, or
invasion of the right of private occupancy of a room, dwelling or premises that a person
occupies, committed by or on behalf of its owner, landlord or lessor." Id. § 5, ¶ 14(c).
Plymouth argues that the underlying suits both allege what amounts to an "invasion" of
water or "wrongful entry" affecting the restaurant.
Admiral contends that this coverage does not apply for two reasons. First, it
argues that the underlying complaints do not allege an injury within the meaning of this
provision of the policy and thus and do not trigger a duty to defend. Second, Admiral
argues that even if the underlying complaints do allege a covered injury, the coverage
does not apply because the policy requires the entry or invasion to be "committed by or
on behalf of [the unit's] owner, landlord or lessor," namely, Gilberg. Plymouth contends
that the claims of nuisance and trespass in the underlying complaints satisfy the policy's
injury requirement. It also argues (among other things) that the policy language is
ambiguous and reasonably can be interpreted in favor of coverage and alternatively that
it has a sufficient ownership interest for the coverage to apply.
The complaints allege injuries that fit the definition in Coverage B. Claims based
on allegations of private nuisance and trespass entail a "wrongful entry or eviction or
other invasion of the right of private occupancy." Great Am. Ins. Co. of N.Y. v. Helwig,
419 F. Supp. 2d 1017, 1025 (N.D. Ill. 2006) (citing Pipefitters Welfare Educ. Fund v.
Westchester Fire Ins. Co., 976 F.2d 1037, 1041 (7th Cir. 1992); Scottish Guar. Ins. Co.
v. Dwyer, 19 F.3d 307, 312 (7th Cir. 1994); Illinois Tool Works Inc. v. Home Indem. Co.,

13

998 F. Supp. 868, 872 (N.D. Ill. 1998); Millers Mut. Ins. Ass'n of Illinois v. Graham Oil
Co., 282 Ill. App. 3d 129, 140, 668 N.E.2d 223, 231(1996)). The underlying complaints
here include claims of this sort. Gilberg Fourth Am. Compl. ¶ 79; Annapurna Am.
Compl. Ct. 4, ¶ 13.
On the second question, Admiral argues that the policy language requiring
"wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy
of a room, dwelling or premises that a person occupies, committed by or on behalf of its
owner, landlord or lessor," Plymouth Policy § 5, ¶ 14(c) (emphasis added), requires the
wrongful entry or invasion to be committed by the owner, landlord, or lessor. Admiral
argues the coverage does not apply because Plymouth does not own the unit—Gilberg
is the owner.
The Court rejects Plymouth's argument that the policy term is ambiguous. It
relies on cases that considered a similar provision with different language. In both
Lexington Ins. Co. v. Bernard Parish Gov't, 548 F. App'x 176, 179 (5th Cir. 2013), and
Lakeland Vill. Homeowners Ass'n v. Great Am. Ins. Grp., 727 F. Supp. 2d 887, 893
(E.D. Cal. 2010), the policy language covered injuries arising from "invasion of the right
of private occupancy of a room, dwelling or premises that a person occupies by or on
behalf of its owner, landlord or lessor." The courts in those cases said that the phrase
did not necessarily require the invasion to be committed by the owner; rather it required
the injured person to be occupying the premises on behalf of the owner. The ambiguity
required reading the policy language in the insured's favor. The policy issued by
Admiral does not contain this ambiguity. Language that requires "wrongful eviction
from, wrongful entry into, or invasion of the right of private occupancy of a room,

14

dwelling or premises that a person occupies, committed by or on behalf of its owner,
landlord or lessor" quite plainly requires the invasion to be committed by the owner.
Unless Plymouth may be considered an "owner, landlord or lessor" of the "room,
dwelling or premises" where the invasion has occurred, Coverage B does not apply.
Plymouth argues that it has an interest in the walls, floors, and ceiling surrounding the
unit. But Plymouth cites no authority that this is sufficient to trigger coverage, and the
argument is contrary to the policy's language. The "room, dwelling, or premises" that
the restaurant occupies is, quite obviously, the unit itself, not the area surrounding it.
The Court concludes that Coverage B does not apply.
D.

Duty to indemnify
In count 3 of the complaint, Admiral alleges that: (1) any indemnity obligation for

the underlying lawsuits under Coverage A is limited to property damage that took place
during the policy periods; (2) any indemnity for damage to the pool and common
elements is excluded from coverage under Exclusions j.(1), j.(4), j.(5) and/or j.(6); and
(3) Admiral has no obligation to indemnify for any “property damage” to the
pool/common elements. Pls.' Resp. and Mem. in Supp. of Mot. for Summ. J. at 16.
Although Plymouth initially moved for summary judgment on count 3, Plymouth
effectively withdrew its motion in its combined reply/response brief, stating that "the
parties appear to be in agreement that any declaration regarding the duty to indemnify
is premature." Defs.' Reply and Resp. at 10. The Court agrees and therefore will not
address this claim.
E.

Known loss doctrine
Plymouth seeks summary judgment on Admiral's defense to coverage based on

15

the known loss doctrine. A known loss occurs when "the insured knows or has reason
to know, when it purchases a policy, that there is a substantial probability that it will
suffer or has already suffered a loss." Grey Direct, Inc. v. Erie Ins. Exch., 460 F.3d 895,
899 (7th Cir. 2006) (internal quotation marks omitted). An insurer has "no duty to
defend or indemnify the insured with respect to [a] known loss . . . unless the parties
intended the known loss to be covered." Sagar Megh Corp. v. United Nat'l Ins. Co., 999
F. Supp. 2d 1018, 1025 (N.D. Ill. 2013) (citing Outboard Marine Corp. v. Liberty Mut.
Ins. Co., 154 Ill. 2d 90, 104, 607 N.E.2d 1204, 1210 (1992)). Plymouth argues that
Admiral cannot show that Plymouth was aware of the water damage to Unit G-02 before
it purchased the policy for the periods of November 1, 2010 to November 1, 2013.
Admiral argues that no factual determination can be made at present.
The Court agrees with Admiral. The Court is unable to determine, and cannot
appropriately determine at this juncture, when Plymouth first became aware of the water
leaks causing damage to Unit G-02. The Gilberg complaint alleges that in 2012,
"structural problems in the Pool and/or the lining of the Pool caused leaks to occur."
Gilberg Fourth Am. Compl. ¶ 26. Plymouth reads this allegation to mean that the leaks
began in 2012 and thus that the damage from the leaks occurred after it first purchased
insurance from Admiral. Annapurna's complaint, on the other hand, alleges that "[p]rior
to May 2008, [Plymouth and Gilberg] knew that the condominium pool leaked into Unit
G-02 and into the adjacent units . . . ." Annapurna Am. Compl. Ct. 1, ¶ 16. If
Annapurna is right, then Admiral may be correct that the known loss doctrine applies.
But "[i]n a declaratory-judgment action, the court may not determine an insured's actual
liability nor determine any facts that may form the basis of an insured's liability."

16

Skolnik, 2015 IL App (1st) 142438, ¶ 49, 45 N.E.3d at 1172. Thus the Court cannot
determine the applicability of the known loss doctrine at this time.
Conclusion
For the aforementioned reasons, the Court grants summary judgment in favor of
plaintiff on count 4 of its complaint but otherwise denies plaintiffs' motion for summary
judgment [dkt. no. 29] and grants summary judgment in favor of defendant on counts 1
and 2 of plaintiff's complaint with regard to the issue of duty to defend but otherwise
denies defendants' motion for summary judgment [dkt. no. 17]. The case is set for a
status hearing on February 8, 2017 at 9:00 a.m., in chambers (Room 2188), to set a
schedule for discovery and pretrial proceedings. The parties are directed to confer in
advance of the hearing to attempt to agree on a schedule to propose to the Court.

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MATTHEW F. KENNELLY
United States District Judge
Date: January 24, 2017

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