Nat'l Cas. Co. v. S. Shore Iron Works, Inc.
341 F. Supp. 3d 884
E.D. Ill.2018Background
- South Shore (steel fabricator) loaded steel onto a trailer at its Chicago facility and contracted GD Carriers to transport the load to a job site; GD driver Julio Delgado connected his tractor to the trailer while it was being loaded and later fell while securing the load, sustaining injury.
- Delgado sued South Shore in Cook County alleging South Shore negligently loaded and painted beams and failed to warn (Underlying Lawsuit); South Shore tendered defense to GD Carriers’ insurer, National Casualty.
- National Casualty (insurer of GD Carriers) denied coverage and refused to defend South Shore, then filed this declaratory-judgment action seeking a ruling that it had no duty to defend or indemnify.
- Policy language at issue confers insured status to “anyone … while using with your permission a covered ‘auto’ you own, hire or borrow” but excludes certain persons “while moving property to or from a covered ‘auto.’”
- While this declaratory action was pending, South Shore settled the Underlying Lawsuit for $2.5 million and the state court dismissed the case with prejudice; here the federal court determined coverage questions and remedies.
Issues
| Issue | Plaintiff's Argument (National Casualty) | Defendant's Argument (South Shore) | Held |
|---|---|---|---|
| Whether South Shore was an "insured" (was it "using" the GD tractor) | Not "using" because tractor was parked and not being operated | Was "using": tractor was connected and being employed to transport South Shore's load and securing load is part of use | South Shore was an insured; "use" includes employing the vehicle for the user’s purpose (court adopts Schultz definition) |
| Applicability of the "moving property" exception (exclusion while moving property to/from a covered auto) | Exception applies because South Shore was involved in loading/moving the beams | Exception does not apply because loading was complete and Delgado was securing an already-loaded trailer (not "moving" property) | Exception does not apply; insured status not negated by that clause |
| Duty to defend and indemnify | No duty because no insured status / exclusions apply | Duty exists because underlying allegations fall within potential coverage and South Shore was an insured | National Casualty breached duty to defend and must indemnify South Shore for settlement up to the $1,000,000 policy limit |
| Timeliness / estoppel (did insurer’s delay bar coverage defenses) | Filing was timely; sought declaratory relief before settlement | Insurer waited unreasonably (13 months) and should be estopped from raising defenses | Not estopped: insurer filed declaratory action before underlying settlement and delay was not unreasonable given procedural history |
| Bad-faith claim under 215 ILCS § 5/155 | N/A — denies bad faith | Seeks fees/sanctions for unreasonable, vexatious denial and delay | Dismissed with prejudice: insurer raised bona fide coverage dispute and filing was not untimely, so no vexatious conduct |
Key Cases Cited
- Northfield Ins. Co. v. City of Waukegan, 701 F.3d 1124 (7th Cir.) (summary-judgment standard)
- Schultz v. Illinois Farmers Ins. Co., 237 Ill. 2d 391 (Ill.) (definition of "use" of an automobile)
- Gen. Agents Ins. Co. of Am. v. Midwest Sporting Goods Co., 215 Ill. 2d 146 (Ill.) (duty to defend broader than duty to indemnify)
- Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90 (Ill.) (construction of insurance policies; duty-to-indemnify principles)
- Employers Ins. of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127 (Ill.) (estoppel when insurer wrongfully denies defense and files declaratory action after underlying resolution)
- State Farm Mut. Auto. Ins. Co. v. Martin, 186 Ill. 2d 367 (Ill.) (insurer not estopped merely because declaratory action resolves after underlying case settled)