Hanover Insurance Company v. Northern Building Company
2014 U.S. App. LEXIS 8684
| 7th Cir. | 2014Background
- Northern entered an Illinois-domiciled indemnity agreement with Hanover as a condition of Hanover issuing surety bonds for Northern's Midway Airport project.
- The FAA-financed project was managed by Parsons; subcontractors McDaniel Fire Systems and Rex Electric claimed nonpayment and Parsons claimed delays.
- Hanover settled McDaniel and Rex Electric claims with Northern's funds, then resolved Parsons' performance claim by completing the project, recovering $127,086.00 from Northern via Parsons/FAA arrangements.
- Northern refused to post collateral or indemnify Hanover, triggering Hanover to pursue indemnity under the Agreement and seek to recover costs and fees.
- The district court granted summary judgment for Hanover; Northern challenged subject-matter jurisdiction, enforceability defenses, and fee award amount.
- The Seventh Circuit affirmed, holding the Agreement unambiguous, Hanover acted within its rights, and Northern breached the Agreement with no viable defenses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Northern in breach of the Indemnity Agreement? | Northern breached by refusing to indemnify. | Agreement improperly construed; Hanover's actions not authorized without actual liability. | Yes; Northern breached the Agreement. |
| Are Northern's challenges to enforceability (unconscionability or bad faith) valid? | Agreement is clear; Hanover acted within terms; no unconscionability or bad faith. | Agreement was unconscionable or Hanover acted in bad faith. | No; enforceability defenses fail. |
| Are Hanover's contractual damages including attorneys' fees properly awardable on summary judgment? | Fees were clearly contemplated by the indemnity provisions. | A detailed evidentiary foundation or jury determination is required. | Yes; summary judgment on fees proper; affidavits sufficed. |
| Does the amount and method of the fee award require a jury or further trial procedure? | Damages can be determined on summary judgment. | Jury determination required for appellate-fee context. | No; summary judgment appropriate for contractual damages. |
| Did the district court possess subject-matter jurisdiction under 28 U.S.C. § 1332(a)? | Funds claimed were in controversy; diversity existed. | Mere settlement does not affect jurisdiction. | Yes; jurisdiction proper. |
Key Cases Cited
- Swetlik v. Crawford, 738 F.3d 818 (7th Cir. 2013) (de novo review of summary judgment)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (defining genuine issue of material fact)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (U.S. 1986) (existence of material fact; summary judgment standard)
- Sahagian v. Dickey, 827 F.2d 90 (7th Cir. 1987) (proper assessment of damages via summary judgment)
- Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (U.S. 2010) (fee-shifting context distinctions)
- Kinkel v. Cingular Wireless, LLC, 857 N.E.2d 250 (Ill. 2006) (procedural unconscionability; meaningful choice)