149 F. Supp. 3d 867
N.D. Ill.2015Background
- Cincinnati Insurance issued a commercial policy to Berkshire Refrigerated Warehousing covering property at “covered locations” and excluding personal property in the insured’s "care, custody, or control" under its CGL and Umbrella parts.
- Gold Standard (through subrogee Charter Oak) sued Berkshire after trailers containing Gold Standard’s equipment were stolen from a location (1250 W. 42nd St.) that Cincinnati alleges was not a "covered location" nor within 1,000 feet of one.
- Cincinnati sued for a declaratory judgment that it owes no duty to defend or indemnify Berkshire under: (1) the Property Coverage Part (equipment off-premises/ >1,000 feet), (2) the CGL Part (care/custody/control exclusion), and (3) the Umbrella Part (same exclusion).
- Berkshire moved to dismiss under Rule 12(b)(6), arguing the underlying complaint does not plausibly show Berkshire had exclusive possessory control or that the equipment was necessary to Berkshire’s work, and that indemnity relief is premature.
- The Court accepted Cincinnati’s factual allegations as true for the 12(b)(6) stage and found the Underlying Complaint plausibly alleges: (a) the equipment was not within a covered location for Property Coverage, and (b) Berkshire exercised possession/accepted custody under a storage agreement (satisfying the care/custody/control exclusion test).
- The Court denied the motion to dismiss on all counts and held the duty-to-indemnify claim was not premature because a finding of no duty to defend would necessarily foreclose the duty to indemnify.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Property Coverage applies to stolen equipment located >1,000 feet from a covered location | Cincinnati: equipment was not within 1,000 feet of a covered location, so Property Coverage doesn’t apply | Berkshire: disputes sufficiency/implication of location facts | Held for Cincinnati at pleading stage — allegations that equipment was >1,000 feet are plausible and state a claim |
| Whether the CGL and Umbrella “care, custody, or control” exclusions apply | Cincinnati: Underlying Complaint alleges Berkshire accepted custody/control under a storage agreement, so exclusions plausibly apply | Berkshire: Underlying Complaint lacks facts of exclusive possessory control or that the property was necessary to its work | Held for Cincinnati at pleading stage — allegations permit reasonable inference of possessory control and necessity to storage business |
| Whether Cincinnati’s claim for declaratory relief re: duty to indemnify is premature | Cincinnati: duty-to-indemnify claim is ripe because duty to defend and indemnify overlap; if no duty to defend, no duty to indemnify | Berkshire: indemnity claim is premature absent resolution of underlying liability and alleged defects in duty-to-defend pleading | Held for Cincinnati — duty to indemnify claim is not premature given overlapping issues with duty to defend |
| Whether the complaint should be dismissed under Rule 12(b)(6) because merits should be considered now | Cincinnati: merits not reached on 12(b)(6); only sufficiency of pleaded facts matters | Berkshire: asks court to resolve applicability of exclusions now and cites cases decided on later stages | Held: Court limits review to sufficiency; dismissal denied because Cincinnati plausibly alleged its theories |
Key Cases Cited
- Bolanowski v. McKinney, 220 Ill. App. 3d 910 (Ill. App. Ct. 1991) (two‑pronged test for care/custody/control exclusion: possessory control and necessity to insured’s work)
- Country Mut. Ins. Co. v. Waldman Mercantile Co., Inc., 103 Ill. App. 3d 39 (Ill. App. Ct. 1982) (possession need not be continuous; exclusive possessory control at time of loss supports exclusion)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility pleading standard governs Rule 12(b)(6))
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (complaint must state a plausible claim to survive dismissal)
- Pekin Ins. Co. v. Wilson, 237 Ill. 2d 446 (Ill. 2010) (insurer must defend if underlying complaint alleges facts that potentially bring claim within coverage)
- Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384 (Ill. 1993) (if no duty to defend and facts cannot potentially fall within coverage, no duty to indemnify)