ARMADILLO HOLDINGS, LLC v. TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA

Filing 96

ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT ; Plaintiffs Motion for Partial Summary Judgment Dkt. 61 is DENIED and Defendants Motion for Summary Judgment Dkt. 65 is GRANTED. Final judgment shall issue accordingly. Signed by Judge Sarah Evans Barker on 4/1/2020. (CKM)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
ARMADILLO HOLDINGS, LLC,

)
)
)
)
)
)
)
)
)
)

Plaintiff,
v.
TRAVELERS PROPERTY CASUALTY
COMPANY OF AMERICA,
Defendant.

No. 1:18-cv-00532-SEB-MJD

ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
Now before the Court are Plaintiff’s Motion for Partial Summary Judgment [Dkt.
61] and Defendant’s Cross Motion for Summary Judgment [Dkt. 65]. Plaintiff Armadillo
Holdings, LLC (“Armadillo”) brings this declaratory judgment action against its insurer,
Defendant Travelers Property Casualty Company of America (“Travelers”), alleging that
Travelers breached its contractual obligations to Armadillo as well as its duty of good
faith and fair dealing and that Armadillo was damaged as a result. Plaintiff seeks
summary judgment on its breach of contract claims (Counts I and III of the First
Amended Complaint). Travelers has cross-moved for summary judgment on all claims.
For the reasons detailed below, we DENY Armadillo’s Motion for Partial Summary
Judgment and GRANT Traveler’s Cross Motion for Summary Judgment.
Factual Background
I.

The Underlying Lawsuit

1

Armadillo operates multiple “Texas Roadhouse” franchised restaurants in
Northern California, including one located in Tracy, California (“the Tracy Roadhouse”).
On July 24, 2017, Joaquin Garcia-Vega and his two daughters stopped for dinner at the
Tracy Roadhouse. Mr. Garcia-Vega, who requires the use of a walker, was seated on the
collapsible seat of his walker while one of his daughters pushed him from the parking
area up the handicap accessible ramp toward the entrance of the restaurant. As he was
being pushed up the ramp, one of the wheels of Mr. Garcia-Vega’s walker struck a
broken section of the concrete, causing him to tip over and fall. Following his fall, Mr.
Garcia-Vega retained counsel who, on August 11, 2017, sent a letter to Armadillo stating
that Mr. Garcia-Vega intended to pursue a claim for personal injuries as a result of his
fall at the Tracy Roadhouse.
At the time of the accident, Armadillo was insured by Travelers, which had issued
to Armadillo a CGL Policy, Policy No. P-630-5G009387-TIL-16 (“the Travelers CGL
Policy” or “the Policy”). Thus, on August 16, 2017, Armadillo notified Travelers of the
incident and the notification sent by Mr. Garcia-Vega’s attorney, stating: “Guest Joaquin
Garcia was going to the insured’s restaurant while being pushed on a walker by his
daughter. The front wheel got caught in a hole in the concrete ramp and the guest fell
forward. … Insured just received an attorney rep letter regarding the claim.” Dkt. 63-2 at
1013. Traveler’s assigned Mr. Garcia-Vega’s claim to Claim Professional Joseph
Tancredy, who began investigating the claim.
Several months later, on November 9, 2017, Mr. Garcia-Vega filed a lawsuit titled
Garcia-Vega v. Texas Roadhouse, Inc., et al., in the United States District Court for the
2

Northern District of California, Cause No. 5:17-CV-06516-LHK (“the Garcia-Vega
Action”). Travelers was notified of the filing of the Garcia-Vega Action on November
27, 2017. The original complaint named only Armadillo’s landlord, Pero Margaretic
(“Mr. Margaretic”), and franchisors, Texas Roadhouse, Inc. and Texas Roadhouse
Holdings, LLC, as defendants. Mr. Garcia-Vega amended his complaint on December
11, 2017, adding Armadillo as a defendant. The Garcia-Vega Action alleged 1 that all
defendants were negligent in the design, construction, maintenance, inspection, and/or
modification of the concrete ramp and also that defendants violated the Americans with
Disabilities Act (“ADA”), the California Unruh Civil Rights Act (“Unruh Act”), and the
California Disabled Person’s Act (“DPA”) in denying him access to the Tracy
Roadhouse.
As is discussed in more detail below, Mr. Margaretic tendered his defense to
Armadillo and Armadillo, in turn, tendered to Travelers both its own and Mr.
Margaretic’s defense in the Garcia-Vega Action. This litigation arises from a dispute
regarding Travelers’s handling of its coverage and defense obligations on behalf of
Armadillo and its landlord.
II.

The Travelers CGL Policy
The CGL Policy issued by Travelers provides that Travelers will pay “those sums

that the insured becomes legally obligated to pay as damages because of ‘bodily injury.’”
Exh. E at TRAV000759, Sec. I(A)(1)(a). “Bodily injury” is defined by the Policy as

1

As is explained in more detail below, all claims in the Garcia-Vega Action have now been
settled.
3

“bodily injury, sickness or disease sustained by a person ….” Id. at TRAV_000770, Sec.
V(3). Travelers instructs its claims adjusters that damages related to emotional distress,
mental anguish, pain and suffering, and other forms of mental embarrassment are
included within the Policy’s definition of “bodily injury.” Tancredy Dep., Vol. II at 170–
171; Exh. K at TRAV_002430SUPP. The Policy excludes from coverage bodily injury
“resulting from or as a consequence of discrimination, whether intentional or
unintentional, based upon … physical capabilities, characteristics, or condition.” Exh. E
at TRAV_000805.
The Policy also excludes coverage for bodily injury “for which the insured is
obligated to pay damages by reason of the assumption of liability in a contract or
agreement.” Exh. E at TRAV_000760, Sec. I(2)(b). However, the Policy provides that
this exclusion “does not apply to liability … [a]ssumed in a contract or agreement that is
an ‘insured contract.’” Id. at TRAV_000760, Sec. I(2)(b)(2). An “insured contract”
includes “a contract for a lease or premises.” Id. at TRAV_00771, Sec. V(9)(a). The
exception for liability assumed in an “insured contract” provides in relevant part as
follows:
Solely for the purposes of liability assumed in an “insured contract,”
reasonable attorney fees and necessary litigation expenses incurred by or for
a party other than an insured are deemed to be damages because of “bodily
injury” …, provided:
(a) Liability to such party for, or for the cost of, that party’s defense has also
been assumed in the same “insured contract”; and
(b) Such attorney fees and litigation expenses are for defense of that party
against a civil or alternative dispute resolution proceeding in which
damages to which this insurance applies are alleged.
4

Id. at TRAV_000760, Sec. I(2)(b)(2).
The Policy additionally contains an endorsement which provides “additional
insured” status to “[a]ny person or organization that is a premises owner, manager or
lessor and that you have agreed in a written contract or agreement to name as an
additional insured ….” Id. at TRAV_000791, Sec. E. The “additional insured”
endorsement provides that “[t]he insurance provided to such premises owner, manager or
lessor is excess over any valid and collectible other insurance available to such premises
owner, manager or lessor, unless you have agreed in a written contract for this insurance
to apply on a primary or noncontributory basis.” Id. at TRAV_00079, Sec. E(c).
With regard to Armadillo’s duties under the Policy, the Policy contains a
“cooperation clause,” which provides in pertinent part that the insured must “[c]ooperate
with [Travelers] in the investigation or settlement of the claim or defense against the
‘suit’” and “[a]ssist [Travelers] upon [its] request, in the enforcement of any right against
any person or organization which might be liable to the insured because of injury or
damage to which this insurance may also apply.” Dkt. 63-5 at 1047–48. The Policy
further provides that “[n]o insured will, except at that insured’s own cost, voluntarily
make a payment, assume any obligation, or incur any expense, other than for first aid,
without our consent.” Id.
III.

Travelers’s Defense of Armadillo’s Landlord and Settlement of Claims
A.

Armadillo’s Lease Agreement with Mr. Margaretic

5

As referenced above, Armadillo leases the real property from Mr. Margaretic on
which the Tracy Roadhouse sits. The lease agreement between Armadillo and Mr.
Margaretic (“the Lease”) defines the leased “Premises” as the parcel of land described in
the legal description attached to the lease, “together with all buildings, structures, drives,
parking areas and other improvements now or hereafter, from time to time, located
thereon.” Exh. F. Art. 1, ¶ 14. Regarding maintenance of the Premises, the Lease
provides:
Subject to the provisions of Article 9 hereof, Tenant at all times during the
Term, at its expense, shall keep the Building and the Premises in good order,
condition and repair, ordinary wear and tear excepted, and shall promptly
make or cause to be made any and all necessary or appropriate maintenance,
repairs and replacements.
Id. Art. 7, ¶ 7.7.
The Lease also contains the following indemnification provision:
Subject to Section 10.4 and provided that Landlord notifies Tenant in writing
of any such third party claims within five (5) days after Landlord becomes
aware of such claim, Tenant shall defend, protect, indemnify, and hold
Landlord and Landlord’s agents, officers, directors, employees, and
contractors harmless from and against any and all injuries, costs, expenses,
liabilities, losses, damages, injunctions, suits, actions, fines, penalties, and
demands of any kind or nature (including reasonable attorneys’ fees) arising
in connection with any and all third party claims arising out of: (a) injuries
occurring within the Premises; (b) any intentional conduct or negligence of
Tenant or Tenant’s agents, employees, or contractors; (c) any breach or
default in the performance of any obligation on Tenant’s part to be performed
under this Lease; or (d) the failure of any representation or warranty made
by Tenant herein to be true when made. This indemnity does not include the
intentional or negligent acts or omissions of Landlord or its agents, officers,
contractors or employees. This indemnity shall survive termination of this
Lease only as to claims arising out of events that occur during the Term.
Notwithstanding any provision of this Lease to the contrary, the provisions
of this Section 11.1 and Tenant’s covenants to provide insurance as provided
in this Lease shall in no event extend to Landlord’s independent liability.
6

Id. Art. 11, ¶ 11.1.
Armadillo is required under the terms of the Lease to hold a CGL insurance policy
containing an “Additional Insured—Managers or Landlords of Premises Endorsement.”
Exh. F. at Art. 10.1, TRAV_000244. The Lease does not specify whether the additional
insured coverage Armadillo must provide Mr. Margaretic applies on a primary or
contributory basis.
B.

The Tender of Mr. Margaretic’s Defense

By letter dated December 13, 2017, Mr. Margaretic’s insurer, Liberty Mutual,
tendered the Garcia-Vega Action to Armadillo, pursuant to the indemnification provision
in the Lease. Exh. 3. On December 15, 2017, Mr. Margaretic’s counsel tendered the
defense and indemnity directly to Armadillo through Armadillo’s counsel from Taft
Stettinius & Hollister LLP (“Taft”). Exh. 4.
On December 18, 2017, Michael Meyer from Taft notified Travelers by email that
Armadillo had been named as a defendant in the Garcia-Vega Action and that Armadillo
had retained the Taft firm to represent it in the litigation. Mr. Meyer also notified
Travelers that Liberty Mutual had tendered Mr. Margaretic’s defense to Armadillo. Exh.
5 at TRAV_001698. That same day, Mr. Meyer contacted the other defendants in the
Garcia-Vega Action by email, informing them that he and the Taft firm were defending
Armadillo in the litigation. Exh. 6. Mr. Meyer also contacted Mr. Margaretic’s counsel
via email and stated that Armadillo would be accepting its full defense and

7

indemnification. Travelers was not made aware of these communications at that time.
Exh. 7.
Three days later, by letter dated December 21, 2017, Taft, on behalf of Armadillo,
accepted Liberty Mutual’s tender and agreed to fully defend and indemnify Mr.
Margaretic in the Garcia-Vega Action. However, the letter advised Mr. Margaretic that:
Armadillo Holdings’ acceptance of Mr. Margaretic’s tender of the defense
and indemnity is based on the facts and circumstances presently known
regarding the subject lawsuit. To the extent additional facts are discovered
in the course of litigation to trigger Mr. Margaretic’s indemnification
obligations pursuant to paragraph 11.2 of the Lease, or to negate Armadillo
Holdings’ indemnification and defense obligations under paragraph 11.1 of
the Lease, Armadillo Holdings reserves the right to rescind its acceptance of
Mr. Margaretic’s tender.
Exh. 8. This letter was sent without Travelers’s knowledge or consent and Travelers was
not copied on the letter when it was issued by Taft. Exh. 8; Exh. 9 at 229.
On December 22, 2017, Travelers emailed Liberty Mutual, acknowledging receipt
of its tender on behalf of Mr. Margaretic and requesting a copy of the Lease. Liberty
Mutual sent the Lease to Travelers on January 2, 2018 and notified Travelers that it was
Liberty Mutual’s understanding that Mr. Margaretic’s tender had been accepted by “your
attorney.” Exh. 10 at LM10127. In that email, Liberty Mutual asked Travelers to
confirm that it had accepted Mr. Margaretic’s tender, without reservation, and would
provide him a full defense and indemnification for all claims in the Garcia-Vega Action.
Id. Travelers responded on January 10, 2018, advising Liberty Mutual that it considered
Mr. Margaretic an additional insured under the Travelers CGL Policy and requested that
it be provided Mr. Margaretic’s Liberty Mutual Policy so that it could evaluate the

8

priority of coverage for him as an additional insured. In that same communication,
Travelers also advised Liberty Mutual that the indemnity provision in the Lease did not
require Armadillo to indemnify Mr. Margaretic for his own negligence. Id. at LMI0125–
127. After they exchanged policies, Liberty Mutual emailed Travelers on January 19,
2018, stating that it “look[ed] forward to [Travelers’s] confirmation of the full acceptance
under the additional insured coverage and the previously accepted contractual indemnity
tender.” Id. at LMI0124.
On January 29, 2018, Travelers reiterated to Liberty Mutual its position that
neither Travelers nor Armadillo owed Mr. Margaretic a full defense and indemnity
because Travelers believed he had a nondelegable duty to maintain the property “in a safe
compliant condition,” and, if he had breached that duty, the Lease did not require
Armadillo to defend or indemnify Mr. Margaretic for his own negligence. Id. at
LMI0121.
In that same email Travelers also confirmed that Mr. Margaretic qualified as an
additional insured under the Travelers CGL Policy, but informed Liberty Mutual that,
because the Lease did not contain a provision requiring Armadillo to provide Mr.
Margaretic additional insured coverage on a primary and noncontributory basis, the
Policy would provide only excess coverage over any other collectible insurance available
to him. However, Travelers went on to explain that, based on conflicting “other
insurance” provisions in the Liberty Mutual and Travelers policies, it believed Travelers
and Liberty Mutual had a duty to defend and indemnify Mr. Margaretic on a co-primary
insurance basis and therefore agreed to split his defense and indemnification equally with
9

Liberty Mutual. Id. at LMI0121–0123. Travelers then assigned a separate adjuster,
Kimberly Bouman, to handle Mr. Margaretic’s defense.
On January 31, 2018, Liberty Mutual informed Travelers that it did not agree to a
split of the defense and indemnification, citing the “insured contract” provision in the
Travelers CGL Policy as well as the fact that “your defense attorney [Taft] sent a tender
acceptance letter under the contractual indemnity provision to defend and indemnify ….”
Id. at LMI0118–0119. Over the next two weeks, between January 31 and February 13,
2018, Travelers and Liberty Mutual continued to exchange emails regarding these issues,
each side maintaining its previously stated position on its respective obligations.
During this same time period, Mr. Meyer from Taft was separately communicating
on Armadillo’s behalf with counsel that Liberty Mutual had retained to defend Mr.
Margaretic regarding Margaretic’s defense and indemnity in the Garcia-Vega Action. By
email dated February 13, 2018, Liberty Mutual’s counsel confirmed that Armadillo was
agreeing to accept the other 50% share of Mr. Margaretic’s defense and indemnity.
Travelers was not included or consulted about these communications.
On February 19, 2018, Liberty Mutual emailed Travelers to confirm that it would
not pay half of the defense and indemnification of Mr. Margaretic because Armadillo,
through Taft, had already agreed to fully defend and indemnify him. Exh. 10 at
LMI0117–0118. Over the next few months, Travelers made further attempts to obtain
Liberty Mutual’s coordination in Mr. Maragretic’s defense, but Liberty Mutual
maintained its position. According to Travelers, it did not learn that Armadillo was
indeed paying the portions of Mr. Margaretic’s defense and indemnification that
10

Travelers had refused to pay until the amended complaint was filed in this action and
communications regarding the Garcia-Vega Action were disclosed in the course of
discovery in this lawsuit.
C.

Settlement of Claims Against Mr. Margaretic

A first mediation of the Garcia-Vega Action was held on June 25, 2018. At
mediation, Mr. Garcia-Vega agreed to dismiss Mr. Margaretic and the Texas Roadhouse
entities for $95,000. Of that settlement, Travelers paid $60,000 and Armadillo paid the
remaining $35,000 on behalf of Mr. Margaretic and agreed to remediate certain
outstanding ADA violations. Armadillo requested that Travelers reimburse it for the cost
of Mr. Margaretic’s defense and indemnity under the “insured contract” provision of the
Policy but Travelers refused, maintaining its position that the “additional insured”
endorsement applied to limit its coverage to fifty percent of Mr. Margeretic’s defense and
indemnification.
After this settlement, Armadillo was the only defendant remaining in the GarciaVega Action.
IV.

Travelers’s Defense of Armadillo and Settlement of Claims
A.

The Tender of Armadillo’s Defense

As noted above, Armadillo was added as a defendant in the Garcia-Vega Action
on December 11, 2017. One week later, on December 18, 2017, Mr. Meyer from Taft
notified Travelers’s Claim Professional, Mr. Tancredy, that Armadillo had been named as
a defendant in the Garcia-Vega Action and that Armadillo had retained the Taft firm to
represent it in the litigation. Exh. 5 at TRAV_001698. On December 27, 2017, Travelers
11

notified Armadillo’s Taft counsel that it had retained attorney Joseph Strella of the law
firm Clapp, Moroney, Vucinich, Beeman & Scheley, which is panel defense counsel for
Travelers, to defend Armadillo in the Garcia-Vega Action. Id. at TRAV_001697.
On January 4, 2018, Travelers issued a reservation of rights letter to Armadillo
stating that certain statutory damages alleged in the underlying litigation might be
excluded from coverage by the exclusion in the Policy related to bodily injury resulting
from discrimination. Specifically, Travelers informed Armadillo that the exclusion might
bar coverage for “any of [Mr. Garcia-Vega’s] damages that may arise or flow from any
alleged discrimination due to the Insureds’ failure to provide equal and safe access to
handicapped persons in accordance with statutory requirements.” Exh. I at
TRAV_000958. In other words, Travelers reserved its right to deny coverage arising
from violations of the ADA, the Unruh Act, or the DPA. Despite these potential
coverage issues, Travelers agreed to fully defend Armadillo against all causes of action in
the Garcia-Vegas Action, but advised Armadillo that “since there are damages alleged
that may not be covered under the Policy, the Insured has the right to associate counsel of
choice, at their own expense, to represent them with respect to any personal exposure,
should they so desire.” Id. at TRAV_00958.
On January 17, 2018, Armadillo, through Taft counsel, objected to Traveler’s
reservation of rights on grounds that it created an “inherent conflict of interest” that
required Travelers to pay for independent counsel of Armadillo’s choosing. In response,
Mr. Tancredy, the Claims Professional assigned to Armadillo’s defense, advised
Armadillo’s Taft counsel that Travelers was evaluating the objection and would respond
12

accordingly. Meanwhile, Travelers continued to fully defend Armadillo in the GarciaVega Action.
On February 26, 2018, Armadillo filed the instant action, seeking an order
enjoining Travelers from retaining panel counsel to defend Armadillo and requiring
Travelers to pay for independent counsel to defend Armadillo in the Garcia-Vega Action.
On March 5, 2018, Travelers revised its reservation of rights and informed
Armadillo that it would pay for all bodily injury damages in the Garcia-Vega Action,
regardless of whether such damages arose out of negligence or a violation of the ADA or
the California anti-discrimination statutes. Travelers maintained its reservation of rights
for non-bodily injury damages arising from violations of those statutes, such as attorney
fees and statutory penalties. Exh. J at TRAV_000629. Specifically, the reservation of
rights letter provided in relevant part as follows:
As you are aware, the complaint filed by [Mr. Garcia-Vega] alleges injury
based upon premises liability … and violations of the ADA—which is a law
based upon discrimination against the handicapped. [Mr. Garcia-Vega]
could prevail on the bodily injury claim by showing only a premises defect
without showing the Insured acted with discriminatory intent. Such a claim
would clearly be covered under the policy. If [Mr. Garcia-Vega] were also
able to prove that the insured acted with discriminatory intent, then he would
be able to recover not only damages for his bodily injury but also penalties
under the ADA, such as attorney fees and other statutory penalties that arise
from discrimination. Damages flowing from discrimination would not be
covered. However, Travelers will cover all claims for “bodily injury”
damages, and is not reserving its rights regarding those damages.
Id.
A few days after receiving this communication, Mr. Meyer and Blake Burgan of
Taft appeared for Armadillo in the Garcia-Vega Action. On March 9, 2018, Armadillo,

13

through Taft, advised Travelers that it would not consider the conflict of interest issue
resolved unless Travelers would agree to “cover all damages for ‘bodily injury,’ even
those damages awarded pursuant only to a violation of the California Disabled Person’s
Act and the Unruh Civil Rights Act (which incorporate violations of the ADA)” and to
define “discrimination” to “include only a violation of the ADA, California Disabled
Person’s Act, and the Unruh Civil Rights Act ….” Exh. 17. Although Travelers
informed Taft that it would agree to both, Taft attorneys continued to participate in
Armadillo’s defense in the Garcia-Vega Action until the case was settled.
B.

Settlement of Claims Against Armadillo

A second mediation in the Garcia-Vega Action was conducted on September 26,
2018, in an effort to settle all outstanding bodily injury and ADA claims against
Armadillo, including Mr. Garcia-Vega’s claim for attorney fees. In addition to Travelers,
Zurich American Insurance Company (“Zurich”) also attended the mediation because it
had issued Armadillo a management liability insurance policy, Policy No. MPL 008328903 (“the Zurich Policy”), that provided coverage for third-party discrimination liability,
including all related statutory damages. To trigger coverage under the Zurich Policy,
Armadillo was required to satisfy a self-insured retention of $100,000.00, which Zurich’s
records show was exhausted by Taft’s defense costs in the Garcia-Vega Action as well as
the $35,000.00 Armadillo paid toward settlement of Mr. Garcia-Vega’s claims against
Mr. Margaretic. The Garcia-Vega Action settled shortly after mediation for $360,000.00,
with Travelers and Zurich each paying $180,000.00.

14

The final settlement and release of the Garcia-Vega Action was signed by all
parties and their counsel, including the Taft firm, and the lawsuit was dismissed, with
prejudice, on December 14, 2018.
V.

The Instant Litigation
This action was litigated contemporaneously with the Garcia-Vega Action until

the latter case settled. Armadillo filed its original complaint in this action on February
23, 2018, alleging that Travelers had breached its obligations under the Policy and
breached its duty of good faith and fair dealing by failing to authorize Armadillo to select
its own counsel at Traveler’s expense following Traveler’s election to defend under a
reservation of rights. In response, Travelers revised its reservation of rights, clarifying
that it would pay all “bodily injury” damages, but reserving its right to deny coverage on
non-bodily injury damages, such as statutory penalties and attorney fees, arising from
discriminatory conduct.
After Travelers revised its reservation of rights, Armadillo then amended its
complaint on May 8, 2018, eliminating any claim that it was entitled to independent
counsel based upon a conflict of interest and adding the following claims: (1) that
Travelers breached its obligations under the Policy by failing to recognize the Lease as an
“insured contract” that required Travelers to fully defend and indemnify Mr. Margaretic;
(2) that Travelers breached its obligations under the Policy by reserving its right to deny
coverage as to non-bodily injury statutory damages; and (3) that Travelers breached its
duty of good faith and fair dealing by unreasonably refusing to defend Mr. Margaretic in

15

full and unreasonably denying coverage for statutory damages in the Garcia-Vega
Action.
Now before the Court is Armadillo’s motion for partial summary judgment on its
breach of contract claims and Travelers’s cross-motion for summary judgment on all
claims.
Legal Analysis
I.

Summary Judgment Standard
Summary judgment is appropriate where there are no genuine disputes of 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, 322–23 (1986). A court must grant a motion for
summary judgment if it appears that no reasonable trier of fact could find in favor of the
nonmovant on the basis of the designated admissible evidence. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247–48 (1986). We neither weigh the evidence nor evaluate
the credibility of witnesses, id. at 255, but view the facts and the reasonable inferences
flowing from them in the light most favorable to the nonmovant. McConnell v. McKillip,
573 F. Supp. 2d 1090, 1097 (S.D. Ind. 2008).
Because these are cross-motions for summary judgment and the same Rule 56
standards apply, our review of the record requires us to draw all inferences in favor of the
party against whom a particular issue in the motion under consideration is asserted. See
O’Regan v. Arbitration Forums, Inc., 246 F.3d 975, 983 (7th Cir. 2001) (citing
Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir. 1998)).

16

II.

Discussion
A.

Breach of Contract – Mr. Margaretic’s Defense

We turn first to Armadillo’s claim that Travelers breached the Policy by failing to
reimburse Armadillo for the full defense and indemnity of its landlord, Mr. Margaretic.
Specifically, Armadillo argues that Mr. Margaretic was entitled to coverage not only as
an additional insured, as recognized by Travelers, but also as a party to an “insured
contract,” to wit, the Lease, which contained an indemnification provision requiring
Armadillo to defend and indemnify Mr. Margaretic for all injuries occurring on the
Property, other than those caused by the intentional or negligent acts or omissions of the
landlord and his employees. Armadillo claims that, because no such intentional or
negligent acts or omissions on the part of Mr. Margaretic caused Mr. Garcia-Vega’s
injuries, Travelers should have fully defended and indemnified Mr. Margaretic pursuant
to the “insured contract” provision of the Policy but instead breached the Policy by
failing to recognize the Lease as an “insured contract” and instead provided coverage for
Mr. Margaretic only as an additional insured.
The facts adduced here show that Travelers did not fail to recognize that the Lease
constituted an “insured contract” under the Policy. Rather, Travelers properly
acknowledged its duty to recognize Mr. Margaretic as an additional insured under the
Policy and proceeded to assess priority of coverage issues related to that provision,
having determined that, based on conflicting “other insurance” provisions in the
Travelers’ Policy and Mr. Margaretic’s primary insurer, Liberty Mutual’s Policy, the two
insurance companies were obligated to provide coverage on a co-primary basis. We do
17

not understand Armadillo to take issue with these actions in and of themselves as
Armadillo puts forth no developed argument that it was improper for Travelers to
recognize its duties to Mr. Margaretic as an additional insured or that Travelers
improperly assessed the priority of coverage issues related to the additional insured
endorsement.
Rather, Armadillo claims that Travelers breached the Policy by failing to
recognize its separate duties to Mr. Margaretic in relation to contractual indemnity. We
disagree. Travelers never expressed that it was not recognizing the Lease as an “insured
contract” under the Policy, only that that fact alone was not dispositive of Travelers’s
defense and coverage obligations and that it believed that Armadillo had potentially
viable defenses against Mr. Margaretic’s contractual indemnity claim that it wanted to
investigate. However, when it attempted to raise these potential liability defenses to
Liberty Mutual and Mr. Margaretic’s counsel, Travelers was advised that Armadillo had
already accepted Mr. Margaretic’s full defense and indemnity. Although Armadillo
initially reserved its rights to rescind its acceptance if new facts were discovered that
might negate its obligations, it subsequently informed both Mr. Margaretic’s counsel and
Liberty Mutual, again without Travelers’s knowledge or consent, that it would cover all
of Mr. Margaretic’s defense and indemnification costs not covered by Travelers.
While it is not clear whether the potential liability defenses raised by Travelers
(namely, that Mr. Margaretic may have had a nondelegable duty to ensure that the
Property maintained compliance with ADA and California anti-discrimination statutes,
any breach of which Armadillo would not have been responsible for indemnifying) would
18

have ultimately proved successful, by its own actions, Armadillo effectively waived any
potential liability defenses that might have limited its own and Travelers’s exposure,
without consulting Travelers. Accordingly, Travelers lost its opportunity to explore and
pursue such options. Under these circumstances, Armadillo cannot now hold Travelers
liable for unilateral choices Armadillo itself made, particularly given its duty under the
Policy to consult and cooperate with Travelers in the conduct of its defense and to refrain
from voluntarily assuming any obligation or incurring any expense without Travelers’s
consent. See Dkt. 63-5 at 1047–48. Travelers is therefore entitled to summary judgment
on Armadillo’s claim that Travelers breached the Policy by failing to reimburse more
than 50% of Mr. Margaretic’s defense and indemnification costs.
B.

Breach of Contract – Revised Reservation of Rights

Armadillo next claims that Travelers breached the Policy by refusing to provide
coverage for statutory damages, other than actual damages for bodily injury, awarded in
the Garcia-Vega Action. Specifically, Armadillo argues that the only access violation at
the Tracy Roadhouse that Mr. Garcia-Vega alleged he had personally encountered or by
which he was “deterred” was the hole in the concrete of the accessible ramp where he fell
after the wheel of his walker became stuck. He sought damages for the physical injury he
suffered as a result of the fall as well as a trebling of the amount of his compensatory
damages under the anti-discrimination statutes. Armadillo argues that any statutory
damages to which Mr. Garcia-Vega was entitled pursuant to the ADA and/or California
anti-discrimination statutes were therefore directly tied to the personal injury he suffered
from his fall and constituted “damages because of … bodily injury” under the Travelers
19

CGL Policy. Accordingly, Armadillo claims that Travelers’s reservation of rights as to
statutory damages constituted a breach of its obligations under the Policy and rendered
coverage under the Policy illusory.
The allegations in the Garcia-Vega Action were broader than Armadillo portrays
here, however. In addition to the hole in the accessible ramp, Mr. Garcia-Vega alleged
that he was “informed and believes, and based thereon alleges, that there are other
inaccessible facilities, features, elements, and conditions on or near The Property all of
which prevent [him] from returning in violation of State and federal law.” Dkt. 63-1 ¶ 1.
Mr. Garcia-Vega further alleged that he was “denied full and equal enjoyment of and
access to Defendants’ goods, services, facilities, privileges, advantages or
accommodations” in violation of the ADA based upon the existence of “specific
barriers,” including the hole in the accessible ramp, and “other barriers” at the Tracy
Roadhouse. Id. ¶¶ 29, 32, 36. He claimed that he “has been deterred from returning to
The Restaurant due to the lack of accessible paths of travel and other access violations
and thus continues to suffer denial of his civil rights to full and equal access to The
Restaurant.” Id. ¶ 26. Mr. Garcia-Vega also alleged that each ADA violation constituted
a violation under the California anti-discrimination statutes, “independently justifying an
award of damages and injunctive relief pursuant to California law.” Id. ¶ 48. Finally,
Mr. Garcia-Vega alleged that “[o]ther access barriers may exist” at the Property and that
he would seek leave to amend his complaint after a site survey of the premises was
conducted by his access consultant. Id. ¶ 36.

20

We agree with Armadillo that the hole in the concrete of the accessible ramp is the
only access barrier that Mr. Garcia-Vega alleged he personally encountered. However,
under the Unruh Act, “statutory damages for construction-related violations are available
under two circumstances: (1) if a plaintiff encountered the violation on a particular
occasion or (2) if a plaintiff was deterred from accessing a place of public
accommodation on a particular occasion.” Yates v. Vishal Corp., No. 11-cv-00643-JCS,
2013 WL 6073516, at *3 (N.D. Cal. Nov. 18, 2013) (citing Cal. Civ. Code § 55.56(b))
(emphasis added). While Armadillo is correct that, as to the first circumstance, a plaintiff
must have experienced “difficulty, discomfort, or embarrassment” as a result of the
violation in order to recover damages, all of which would be considered “bodily injury”
under the Policy, we find no such requirement for recovery under the second
circumstance. See id. Because Mr. Garcia-Vega’s complaint alleges violations based not
simply on encountered barriers, to wit, the hole in the concrete, but also on grounds of
deterrence and “other barriers” at the Property which he did not personally encounter and
which do not appear to require proof of “difficulty, discomfort, or embarrassment” for
recovery, Travelers’s reservation of rights as to statutory damages separate from “bodily
injury” damages was not unreasonable or a breach of the Policy, given the breadth of the
allegations in the Garcia-Vega Action.
The Garcia-Vega Action eventually settled with Travelers paying half of the
settlement proceeds and Zurich, with whom Armadillo held a management life insurance
policy that included coverage for discrimination claims, including related statutory
damages, contributing the other half. Armadillo argues that, because Mr. Garcia-Vega
21

never amended his complaint to specifically identify any access barriers beyond the hole
in the concrete, any potential violations related to unencountered barriers ultimately were
not actionable. Thus, Armadillo claims that Travelers should have been responsible for
fully indemnifying Armadillo in the settlement of the Garcia-Vega Action, preventing it
from having to satisfy the Zurich policy’s $100,000 self-insured retention. This
argument, however, is belied by the fact that more than 140 access violations were
discovered at the Property in addition to the barrier that Mr. Garcia-Vega personally
encountered, and those violations were considered and addressed in the ongoing
investigation and negotiation of the settlements in the Garcia-Vega Action. Moreover,
Armadillo’s independent defense counsel were themselves aware of and involved with
these negotiations and ultimately signed off on the settlement. Because the settlement
funds were never apportioned or allocated between “bodily injury” or “statutory”
damages, it is an impossible task for the court to now attempt to parse what types of
damages were considered in settling the Garcia-Vega Action. In any event, given the
broad allegations set forth in Mr. Garcia-Vega’s complaint in the underlying litigation,
we hold that Travelers did not breach the Policy by reserving its rights as to statutory
damages. Travelers is therefore entitled to summary judgment on this breach of contract
claim.
C.

Breach of Duty of Good Faith and Fair Dealing

Travelers has moved for summary judgment on Armadillo’s breach of duty of
good faith and fair dealing claim. Having found for the reasons detailed above that
Travelers did not breach the Policy, in similar fashion we find that Travelers did not
22

make an “unfounded refusal to pay policy proceeds” or otherwise take an “untenable
coverage position” with regard to coverage for either Mr. Margaretic or Armadillo.
Armadillo also claims that Travelers’s handling of the Garcia-Vega Action was “fraught
with missteps” and that Travelers did not dedicate the appropriate time and analysis to the
defense and coverage issues. The facts, however, establish that Travelers was involved in
the full defense, investigation and evaluation of the Garcia-Vega Action, attended the
mediations and participated in all settlement negotiations, and settled the case with
Armadillo’s and its independent defense counsel’s consent and approval. This extensive
participation does not support Armadillo’s claimed breach of the duty of good faith and
fair dealing by Travelers. Accordingly, Travelers is entitled to summary judgment on
Armadillo’s bad faith claim.
III.

Conclusion
For the reasons detailed above, Plaintiff’s Motion for Partial Summary Judgment

[Dkt. 61] is DENIED and Defendant’s Motion for Summary Judgment [Dkt. 65] is
GRANTED. Final judgment shall issue accordingly.
IT IS SO ORDERED.

4/1/2020
Date: ________________________

_______________________________
SARAH EVANS BARKER, JUDGE
United States District Court
Southern District of Indiana

23

Distribution:
Blake J. Burgan
TAFT STETTINIUS & HOLLISTER LLP (Indianapolis)
[e-mail]
Ann O. McCready
TAFT STETTINIUS & HOLLISTER LLP (Indianapolis)
[e-mail]
Michael Lawrence Meyer
TAFT STETTINIUS & HOLLISTER LLP (Cincinnati)
[e-mail]
Meghan Eileen Ruesch
LEWIS WAGNER LLP
[e-mail]
John Carl Trimble
LEWIS WAGNER LLP
[e-mail]

24