Federated Mutual Insurance Company v. Coyle Mechanical Supply Inc. et al

Filing 57

AMENDED ORDER: The Motion for Judgment on the Pleadings filed by Federated Mutual Insurance Company (Doc. 24 ) is GRANTED. Signed by Judge Staci M. Yandle on 3/20/2020. (mah)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
FEDERATED MUTUAL INSURANCE
COMPANY,

)
)
)
Plaintiff,
)
)
vs.
)
)
COYLE MECHANICAL SUPPLY, INC., )
and PRAIRIE STATE GENERATING
)
COMPANY, LLC,
)
)
Defendants.
)
)
------------------------------------------------------- )
COYLE MECHANICAL SUPPLY, INC., )
)
)
Cross/Counterclaim Plaintiff,
)
)
vs.
)
)
PRAIRIE STATE GENERATING
)
COMPANY, LLC, and FEDERATED
)
MUTUAL INSURANCE COMPANY,
)
Cross/Counterclaim Defendants. )

Case No. 17-cv-991-SMY

AMENDED MEMORANDUM AND ORDER
YANDLE, District Judge
Federated Mutual Insurance Company (“Federated”) filed suit against Coyle Mechanical
Supply, Inc. (“Coyle”) and Prairie State Generating Company, LLC (“Prairie”) seeking a
declaration of no insurance coverage with respect to an underlying lawsuit (Doc. 1). Coyle
answered the Complaint and filed a counterclaim and crossclaim against Federated and Prairie,
asserting claims for breach of contract and seeking a declaration of coverage (Doc. 7). Federated
now moves for judgment on the pleadings and requests a declaration that it owes no duty to defend

Page 1 of 9

or indemnify Coyle for the underlying lawsuit (Doc. 24). For the following reasons, the Motion
is GRANTED.
Background
This action derives from a lawsuit pending in the Circuit Court for Washington County,
Illinois, filed by Prairie against Coyle styled Prairie State Generating Co., LLC v. Doyle Supply
Company, Case No. 2017-L-5, Twentieth Judicial Circuit, Washington County, Illinois.
According to the Complaint filed in that case (Doc. 1-1): Prairie operates an electric generation
facility in Washington County, Illinois. Coyle is a distributor, manufacturer’s representative, and
seller of commercial valves and specialty products. In July 2014, Prairie requested bids from
Coyle for two- and four-inch valves. Coyle presented its bid in August 2014 and recommended
valves manufactured by Copeland Industries (“Copeland”).
In September 2014, Prairie purchased sixty-four Copeland valves from Coyle to be
installed on its Unit #1 and Unit #2. Thirty-two valves were installed onto Unit #2 in March 2015.
On April 2, 2015, some of the valves began to fail, by among other things, leaking. Prairie notified
Coyle and Copeland of the failing valves and requested warranty support. Soon after, more valves
began to fail. Due to those failures, the remaining thirty-two valves were not installed onto Unit
#1.
Prairie sued Coyle for breach of contract, breach of implied warranty of merchantability,
and breach of warranty of fitness for a particular purpose (“Prairie Complaint”). Coyle forwarded
the Prairie Complaint to its insurer, Federated, for defense and indemnification. On June 26, 2017,
Federated denied any obligation to defend or indemnify Coyle on the Prairie Complaint.
Federated subsequently filed the instant action seeking a declaratory judgment that it owes
no duty to defend or indemnify Coyle because the Prairie lawsuit is outside the scope of coverage

Page 2 of 9

provided by the insuring agreement.

Coyle filed a counterclaim alleging that Federated’s

declination of coverage constitutes a breach of the insurance contracts between Coyle and
Federated. Coyle further seeks a declaration that the policies at issue provide coverage for the
allegations asserted against it in the Prairie lawsuit and that Federated has a duty to defend and
indemnify it.
Discussion
Rule 12(c) permits a party to move for judgment after the parties have filed the Complaint
and Answer. See F.R.C.P. 12(c). Duty-to-defend questions in insurance-coverage disputes can
sometimes be resolved at the pleadings stage. See Nautilus Insurance. Co. v. 1452–4 N. Milwaukee
Ave., LLC, 562 F.3d 818, 822–24 (7th Cir. 2009).
A motion for judgment on the pleadings under Rule 12(c) is governed by the same
standards as a 12(b)(6) motion to dismiss for failure to state a claim. Adams v. City of Indianapolis,
742 F.3d 720, 727–28 (7th Cir. 2014). That is, facts are viewed in the light most favorable to the
nonmoving party, and the motion will be granted “only if it appears beyond doubt that the
[nonmovant] cannot prove any facts that would support his claim for relief.” Buchanan–Moore v.
Cnty. of Milwaukee, 570 F.3d 824, 827 (7th Cir. 2009). Additionally, the moving party must
demonstrate that there are no material issues of fact to be resolved. Moss v. Martin, 473 F.3d 694,
698 (7th Cir. 2007).
To determine whether an insurer's duty to defend an underlying lawsuit has been triggered,
the Court compares the allegations in the underlying Complaint with the language of the insurance
policy. Lagestee–Mulder, Inc. v. Consolidated Ins. Co., 682 F.3d 1054, 1056 (7th Cir. 2012). The
insurer is not excused from its obligation to defend a suit against its insured unless it is clear from
the underlying Complaint “that the allegations fail to state facts which bring the case within, or

Page 3 of 9

potentially within, the policy’s coverage.” Employers Ins. of Wausau v. Ehlco Liquidating Trust,
186 Ill.2d 127, 237 Ill.Dec. 82, 708 N.E.2d 1122, 1136 (1999). If the Complaint contains
allegations “that are even potentially within policy coverage, the insurer is obligated to defend the
insured.” American Fam. Mut. Ins. Co. v. W.H. McNaughton, 363 Ill.App.3d 505, 300 Ill.Dec.
234, 843 N.E.2d 492, 510 (2006). Any doubts as to whether particular claims fall within the policy
are resolved in favor of coverage. Del Monte Fresh Produce N.A., Inc. v. Transp. Ins. Co., 500
F.3d 640, 643 (7th Cir. 2007).
For its Motion, Federated argues: (1) there is no property damage alleged in the Prairie
Complaint as defined by the Federated insurance policies and as interpreted by Illinois law; (2)
there is no occurrence alleged in the Prairie Complaint as defined by the Federated insurance
policies and interpreted by Illinois law; and (3) there is no personal advertising injury alleged in
the Prairie Complaint as defined by the Federated insurance policies and interpreted by Illinois
law. Coyle contends that when the Prairie Complaint is read in its favor, the allegations potentially
fall within the policy’s coverage.
The policy in dispute (Doc. 1-2) provides in relevant part:
BUSINESSOWNERS LIABILITY COVERAGE FORM
A. COVERAGES
1.

Business Liability
a.

We will pay those sums that the insured becomes legally obligated
to pay as damages because of "bodily injury", "property damage",
or "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 "bodily injury", "property damage", or "personal and
advertising injury" to which this insurance does not apply. We may,
at our discretion, investigate any "occurrence" or any offense and
settle any claim or "suit" that may result. But:
Page 4 of 9

(1)

The amount we will pay for damages is limited as
described in Paragraph D - Liability 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.

No other obligation or liability to pay sums or perform acts or
services is covered unless explicitly provided for under the
Coverage Extensions.
b.

This insurance applies:
(1)

To “bodily injury” and “property damage” only if:
(a)
The “bodily injury” or “property damage” is
caused by an “occurrence” that takes place in
the “coverage territory”;
(b)

The "bodily injury" or "property damage" occurs
during the policy period;
Property Damage

The policy defines property damage as:
a.

b.

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.
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.

Federated asserts there is no property damage claim because the Prairie Complaint seeks only
damages for the repair and replacement of defective products. Coyle points to a sentence in the
Prairie Complaint which states, “[a]fter Prairie installed the thirty-two valves, it placed Unit #2
back into service” (See Doc. 1-1). It then argues, unpersuasively, that the obvious implication is
that Prairie’s power plant was not operating at its full capacity which constitutes a loss of tangible
property under the policy.
The Prairie Complaint clearly alleges that the valves were faulty/defective. Moreover,

Page 5 of 9

during a hearing before Magistrate Judge Stephen C. Williams, Prairie’s Counsel clarified that
Prairie was not making a claim for loss of use but rather for the costs of replacing the allegedly
defective valves and the associated piping linking the valves (See Doc. 33). An allegation of
defective or faulty workmanship in the insured's products does not implicate ‘property damage’
under a standard commercial general liability policy.” Amerisure Mut. Ins. Co. v. Microplastics,
Inc., 622 F.3d 806, 811 (7th Cir. 2010). These policies “are intended to protect the insured from
liability for injury or damage to the persons or property of others; they are not intended to pay the
costs associated with repairing or replacing the insured's defective work and products, which are
purely economic losses.” Id. (citing West Bend Mutual Ins. Co. v. People of Illinois, 929 N.E.2d
606, 614–15 (2010)). Even reading the Prairie Complaint in the light most favorable to Coyle, this
Court does not find an alleged property damage claim as defined in the Federated Policy.
Occurrence
“Occurrence” is defined in the policy as “an accident including continuous or repeated
exposure to the same general harmful conditions (Doc 1-2). “Accident” is not defined in the
policy. However, under Illinois law, “an accident” is defined as “an unforeseen occurrence, usually
of an untoward or disastrous character, or an undersigned, sudden or unexpected event of an
inflictive or unfortunate character.” Massachusetts Bay Ins. Co. v. Vic Koening Leasing Co., 136
F.3d 1116, 1124 (7th Cir. 1998). Federated contends that there was no occurrence and thus,
coverage is precluded. For its part, Coyle argues there was an occurrence because it could not
foresee that the valves would be defective (Doc. 31). “The mere failure of a product to perform as
warranted is not beyond the realm of expectation and is foreseeable by the parties.” Diamond State
Ins. Co. v. Chester-Jensen Co., Inc., 611 N.E.2d at 1092 (1993). As such, the alleged failure of
the valves does not constitute an occurrence under the Policy.

Page 6 of 9

Personal and Advertising Injury
The Policy defines “Personal and Advertising Injury” as follows:
“Personal and advertising injury” means injury, including consequential “bodily
injury” arising out of one or more of the following offenses:
a. False arrest, detention or imprisonment;
b. Malicious prosecution;
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;
d. Oral or written publication, in any manner, of material that slanders or libels
a person or organization, or disparages a person’s or organization’s goods,
products or services;
e. Oral or written publication, in any manner, of material that violates a person’s
right of privacy;
f. The use of another’s advertising idea in your “advertisement” or
g. Infringing upon another’s copyright, trade dress or slogan in your
“advertisement”. (Doc. 1-2).
The term “Advertisement” is defined in the following manner:
1. “Advertisement” means a notice that is broadcast or published to the general public
or specific market segments about your goods, products or services for the purpose
of attracting customers or supporters. For the purposes of this definition:
a. Notices that are published include material placed on the
Internet or similar electronic means of communication; and
b. Regarding web-sites, only that part of a web-site that is about
your goods, products or services for the purposes of attracting
customers or supporters is considered an advertisement. Id.
Coyle argues that there is a potential advertising injury because Prairie relied on
representations Coyle made regarding the Copeland valves that it took from Copeland’s
representations, testimonials, and website. Specifically, Coyle argues the representations and
testimonials on Copeland’s website qualify as an advertisement under the policy provision stating

Page 7 of 9

that “Notices that are published include material placed on the internet…” (Doc 1-4, p. 74). This
is a stretch the Court cannot abide. Coyle did not broadcast the representations in question to the
general public; thus, there was no “advertisement” and no claimed personal and advertising injury
under the Policy.
Coyle’s Counterclaim/Crossclaims
Coyle asserts a counterclaim against Federated for breach of contract and estoppel. Coyle
also seeks a declaratory judgment against Federated and Prairie that (1) the policies at issue provide
coverage for the allegations asserted against Coyle in the Prairie lawsuit and (2) Federated has a
duty to defend and indemnify Coyle.
In the insurance context, a breach of contract claim alleges the insurer failed to provide
benefits as called for by the policy without legal excuse. See Patrick Schaumburg Automobiles,
Inc. v. Hanover Ins. Co., 452 F. Supp. 2d 857, 867 (N.D. Ill. 2006). Here, Coyle’s breach of
contract claim against Federated fails as a matter of law given the Court’s determination that the
Prairie lawsuit is outside the scope of coverage provided by the policies.
As for Coyle’s estoppel claim, the doctrine only applies when there is a duty to defend and
that duty has been breached. Employers Ins. of Wausau., 186 Ill. 2d at 151–54. In this case, there
is no duty to defend nor has there been a breach, as a matter of law. Accordingly, Coyle’s
counterclaims/crossclaims for breach of contract and declaratory judgment are DISMISSED with
prejudice.
Conclusion
For the foregoing reasons, Federated Mutual Insurance Company’s Motion for Judgment
on the Pleadings (Doc. 24) is GRANTED. The Court DECLARES that the General Liability and
Excess/Umbrella Liability Policy Numbers 9405819 and 9405822 do not provide coverage for the

Page 8 of 9

allegations asserted against Coyle Mechanical Supply, Inc. in the Complaint in Prairie State
Generating Co., LLC v. Doyle Supply Company, Case No. 2017-L-5, Twentieth Judicial Circuit,
Washington County, Illinois.
The Court further DECLARES that Federated Mutual Insurance Company has no duty to
defend or indemnify Coyle Mechanical Supply, Inc. under the General Liability and/or
Excess/Umbrella Liability Policy Numbers 9405819 and 9405822 with respect to any of the
allegations in the Prairie lawsuit.
Because the Court's ruling is dispositive of the matter, Coyle’s Counterclaims/Crossclaim
for breach of contract and declaratory relief (Doc. 7) are DISMISSED with prejudice. The Clerk
of Court is DIRECTED to enter judgment accordingly and to close the case.
IT IS SO ORDERED.
DATED: March 20, 2020

STACI M. YANDLE
United States District Judge

Page 9 of 9