Southern Illinois Asphalt Company, Inc. v. Turubchuk et al

Filing 80

ORDER: Defendant Liberty Mutual Fire Insurance Company's Motion for Summary Judgment (Doc. 48 ) is GRANTED. Signed by Judge Staci M. Yandle on 1/23/2018. (mah)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS

SOUTHERN ILLINOIS ASPHALT
COMPANY, INC.,
Plaintiff,
vs.
LILIYA TURUBCHUK, Individually and
as Personal Representative of the Estate of
ALEKSEY TURUBCHUK, Deceased,
VLADIMIR NEMTSOV, as Parent and
Guardian of E. NEMTSOVA, a minor and
V. NEMTSOV, a minor;
LUDMILA NEMTSOVA,
IRINA TURUBCHUK,
LIBERTY MUTUAL FIRE INSURANCE
COMPANY; CLARENDON NATIONAL
INSURANCE COMPANY; LIBERTY
INTERNATIONAL UNDERWRITERS,
INC. and ACE AMERICAN INSURANCE
COMPANY
Defendants.

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Case No. 17-CV-405-SMY-DGW

MEMORANDUM AND ORDER
Pending before the Court is Defendant Liberty Mutual Fire Insurance Company's Motion
for Summary Judgment (Doc. 48). Plaintiff Southern Illinois Asphalt Company filed a response
(Doc 66). For the following reasons, the motion is GRANTED.
Background
In 2007, Liliya Turubchuk, individually and as personal representative of the estate of
Aleksey Turubchuk, deceased; Vladimir Nemtsov, as parent and guardian of Elina Nemtsova and
Vladislav Nemstov; Ludmila Nemstova; and Irina Turubchuk (the “underlying Plaintiffs”) filed a
negligence action in this Court against E.T. Simonds Construction Company (“ETS”) and
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Southern Illinois Asphalt Company, Inc. (“SIAC”) seeking to recover for injuries resulting from
a single vehicle accident that occurred on August 21, 2005 (“the underlying action”) (see
Turubchuk v. E.T. Simonds Const. Co., 07-CV-216-WDS). The underlying Plaintiffs settled
their claims against ETS and SIAC for the $1,000,000 policy limits of a Bituminous Casualty
Insurance Company policy covering ETS and SIAC as a joint venture. The case was dismissed
at the parties’ request following the Court’s approval of the minor settlement in February 2008
(see Turubchuk v. E.T. Simonds Const.Co., 07-CV-216-WDS).
In May 2012, the underlying Plaintiffs filed a separate action seeking damages for ETS
and SIAC’s alleged failure to disclose their individual insurance policies in the underlying action
(“the 2012 litigation”) (see Turubchuk et al v. E.T. Simonds Const. Co., et al, 12-CV-594-SMYDGW). At the time of the underlying action, ETS and SIAC were also individual insured by
several policies. However, neither SIAC nor ETS disclosed their individual policies to the
underlying Plaintiffs (see Turubchuk et al v. E.T. Simonds Const. Co., et al, 12-CV-594-SMYDGW at Docs. 106-8, 106-9).
In the 2012 litigation, which is still pending, the underlying Plaintiffs maintain that if
ETS and SIAC had disclosed their individual policies, they would not have settled for the “policy
limits” of the only policy disclosed to them.

They seek damages for intentional

misrepresentation, fraudulent concealment, negligent misrepresentation and constructive fraud
related to the failure of ETS and SIAC to disclose their individual insurance policies:
In Count I, the underlying Plaintiffs allege that they “sustained actual damages
resulting from the misrepresentations of [SIAC and ETS], in an amount to be
proven at trial”
In Count II, the underlying Plaintiffs allege that they “sustained actual damages
resulting from the concealment of material facts by [SIAC and ETS], in an
amount to be proven at trial.”

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In Count III, the underlying Plaintiffs allege that they sustained actual damages
resulting from the misrepresentations of [SIAC and ETS], in an amount to be
proven at trial.”
In Count IV, the underlying Plaintiffs alleged that they sustained actual damages
resulting from the misrepresentations of [SIAC and ETS], in an amount to be
proven at trial.”
(See Turubchuk et al v. E.T. Simonds Const. Co., et al, 12-CV-594-SMY-DGW at Doc.
169, ¶¶ 36, 43, 50, and 56).
On April 19, 2017, SIAC filed the instant declaratory judgment action, seeking a
declaration that each of its individual policy insurers owed a defense and indemnity to SIAC in
connection with the 2012 litigation. In the alternative, SIAC seeks a stay of this matter pending
the resolution of the trial in the 2012 litigation.
The Policy
•

Liberty Mutual Fire Insurance Company (Liberty Mutual”) Commercial General Liability
Policy – provides a $2 million (each occurrence) limit. The Liberty Mutual Policy states,
in relevant part:
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. 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.
We may, at our discretion, investigate any “occurrence” and settle any claim or “suit”
that may result. But:
(1)
The amount we will pay for damages is limited as described in Section Ill
- Limits Of Insurance; and
(2)
Our right and duty to defend ends when we have used up the applicable
limit of insurance in the payment of judgments or settlements under
Coverages A or B or medical expenses under Coverage C.
***
COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY
1. Insuring Agreement
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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. However, we will have no duty
to defend the insured against any “suit” seeking damages for “personal
and advertising injury” to which this insurance does not apply.
We may, at our discretion, investigate any offense and settle any claim or “suit” that may
result. But:
(1)
The amount we will pay for damages is limited as described in Section Ill
-Limits Of Insurance; and
(2)
Our right and duty to defend end when we have used up the applicable
limit of insurance in the payment of judgments or settlements under
Coverages A or B or medical expenses under Coverage C.
Bodily injury is defined as: “Bodily injury, sickness or disease sustained by a person
including death resulting from any of these at any time.”
(Doc. 48, p. 9).
Discussion
Summary judgment is proper only if the moving party can demonstrate that there is no
genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also
RuffinThompkins v. Experian Information Solutions, Inc., 422 F.3d 603, 607 (7th Cir. 2005).
The moving party bears the burden of establishing that no material facts are in genuine dispute;
any doubt as to the existence of a genuine issue must be resolved against the moving party.
Lawrence v. Kenosha County, 391 F.3d 837, 841 (7th Cir. 2004). A moving party is entitled to
judgment as a matter of law where the non-moving party “has failed to make a sufficient
showing on an essential element of her case with respect to which she has the burden of proof.”
Celotex, 477 U.S. at 323.
An insurer's duty to defend is determined by comparing the allegations in the underlying
Complaint to the relevant provisions of the insurance policy. Health Care Indus. Liab. Ins.
Program v. Momence Meadows Nursing Ctr., Inc., 566 F.3d 689, 694 (7th Cir. 2009). “An

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insurer is obligated to defend its insured if the underlying complaint contains allegations that
potentially fall within the scope of coverage.” Gen. Agents Ins. Co. of Am., Inc. v. Midwest
Sporting Goods Co., 828 N.E.2d 1092, 1098 (2005). If any portion of the suit potentially falls
within the scope of the coverage, the insurer is obligated to defend. Valley Forge Ins. Co. v.
Swiderski Elecs., Inc., 860 N.E.2d 307, 315 (2006). An insurer may refuse to defend only if “it
is clear from the face of the underlying complaint that the allegations set forth in the complaint
fail to state facts that bring the case within, or potentially within, the coverage of the policy.” Id.
Liberty Mutual asserts that it does not have a duty to defend or indemnify SIAC against
the 2012 Lawsuit based on the language in the policy and the operative Complaint in the 2012
litigation. SIAC maintains, on the other hand, that although the underlying Plaintiffs’ bodily
injury claims were previously dismissed, those dismissed claims still trigger a duty to defend and
potentially a duty to indemnify. SIAC further contends that the policies at issue cover suits
seeking damages “because of bodily injury”, which provides broader coverage than a policy
covering damages “for bodily injury.” SIAC asserts that it is, therefore, covered for the claims in
the 2012 litigation because those claims “because of bodily injury.”
SIAC’s first argument is unavailing. “Once an amended pleading is interposed, the
original pleading no longer performs any function in the case.” Wellness Community-National v.
Wellness House, 70 F.3d 46, 49 (7th Cir. 1995). Although the underlying Plaintiffs’ original
Complaint asserted claims for bodily harm, those claims were dismissed by the Court on
September 18, 2013 (see Turubchuk et al v. E.T. Simonds Const. Co., et al, 12-CV-594-SMYDGW at Doc. 30). The underlying Plaintiffs subsequently filed two amended complaints which
omitted the dismissed claims. The operative complaint in the 2012 litigation asserts only four
causes

of

action:

intentional

misrepresentation,

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fraudulent

concealment;

negligent

misrepresentation; and constructive fraud. There are no claims for bodily injury and the relief
requested stem from damages related to the alleged misrepresentation and fraud.
For its argument that it is entitled to coverage regarding Plaintiffs’ misrepresentation and
fraud claims because the claims arose “because of bodily injury,” SIAC relies on two cases –
Cincinnati Ins. Co. v. H.D. Smith, L.L.C., 829 F.3d 771, 773-74 (7th Cir. 2016) and Medmarc
Cas. Ins. Co. v. Avent Am., Inc., 612 F.3d 607, 616 (7th Cir. 2010). In H.D. Smith, West Virginia
sued pharmaceutical distributors seeking to hold them liable for contributing to the state's
epidemic of prescription drug abuse. 829 F.3d at 773. West Virginia alleged that the defendant
distributors negligently cost the state millions of dollars every year in money spent caring for
drug-addicted West Virginians who suffer drug-related injuries and could not pay for their own
care. Id. One of the defendant distributors, H.D. Smith, was covered by a general commercial
liability insurance policy issued by Cincinnati Insurance Company. Id. Under the policy,
Cincinnati agreed to cover damages that H.D. Smith became legally obligated to pay “because of
bodily injury.” Cincinnati also agreed to defend H.D. Smith against any suit seeking such
damages. Id. The policy defined “bodily injury” as “bodily injury, sickness or disease sustained
by a person, including death resulting from any of these at any time.” Id. The phrase “damages
because of bodily injury” included “damages claimed by any person or organization for care,
loss of services or death resulting at any time from the bodily injury.” Id. After Cincinnati
refused to defend the suit, it sought a declaration that the policy did not cover the suit. Id. The
Seventh Circuit held that Cincinnati owed H.D. Smith a duty to defend because the West
Virginia suit specifically alleged that West Virginia’s citizens suffered bodily injuries and the
state spent money caring for those injuries due to the defendants’ negligent distribution of drugs.
Id. at 774.

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In Medmarc, the underlying suit alleged that Avent sold baby products that were
contaminated with a toxic chemical. See Medmarc, 612 F.3d at 609. The underlying plaintiffs
sought economic damages based on their alleged overpayment for the unsafe baby products, but
expressly did not seek relief for any physical harm suffered by the products’ users. Id. at 610.
Avent contended that allegations in the underlying lawsuits that plaintiffs would not use the
products out of fear of bodily injury was sufficient to allege a claim for damages “because of
bodily injury,” pursuant to the insurance policies. See Id. The Seventh Circuit rejected Avent’s
argument finding that the underlying plaintiffs sustained purely economic damages unrelated to
bodily injury. The Court noted that the theory of relief in the underlying complaint was that the
plaintiffs would not have purchased the products had Avent made certain information known to
the consumers and therefore the plaintiffs were economically injured. Id. at 616.
Neither H.D. Smith nor Medmarc support SIAC’s assertion that it is entitled to a defense.
Unlike H.D. Smith, here, the underlying Plaintiffs do not assert any bodily injury claims arising
from the failure of SIAC to disclose its individual policies. Rather, they allege that if SIAC had
disclosed its individual policies, they would not have settled for the “policy limits” of the only
policy disclosed to them. The damages sought are purely economic – unrelated to any bodily
injury, but instead arising from the alleged intentional misrepresentation, fraudulent
concealment, negligent misrepresentation and constructive fraud related to the failure of SIAC to
disclose its individual insurance policies. Similar to the Medmarc plaintiffs, the underlying
Plaintiffs “theory of relief” relates to economic damages stemming from alleged fraudulent
actions. Again, the theory of relief is not that a bodily injury occurred and that the damages
sought flow from that bodily injury. See also Momence Meadows, 566 F.3d at 691 (finding no
duty to defend whether the damages sought in the underlying fraud action stemmed from false

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filings and not from any alleged bodily injuries). For these reasons, Liberty Mutual does not owe
SIAC a defense in the 2012 litigation.
Given that Liberty Mutual does not have a duty to defend the 2012 litigation, it is
likewise entitled to summary judgment on the issue of indemnification. The duty to indemnify
“arises only in circumstances of actual coverage; if the insurance policy does not cover what is
alleged in the claim, the insurer will not have a duty to indemnify based on that claim.”
Momence Meadows, 566 F.3d at 693. Finally, given that there is no duty to defend or indemnify,
staying this litigation pending the resolution of the 2012 litigation would be futile. Accordingly,
Plaintiff SIAC’s declaratory judgment action is DISMISSED with prejudice and its request for
a stay is DENIED.
IT IS SO ORDERED.
DATED: January 23, 2018

s/ Staci M. Yandle
STACI M. YANDLE
United States District Judge

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