National American Insurance v. Progressive Corp.
43 F. Supp. 3d 873
N.D. Ill.2014Background
- On Aug. 23, 2010 a Volvo tractor owned by Michael Barengolts (placarded with Unlimited Carrier’s USDOT number) collided with the Bernals’ vehicle; Gustavo and Maria Bernal sued the drivers (Viktor Barengolts or Eduard Gaidishev), owner Michael, and Unlimited Carrier in Will County, Illinois.
- Two potentially responsive policies existed: NAICO insured Unlimited Carrier (Dec. 2009–Dec. 2010) and Artisan insured Viktor (and specifically listed Michael’s Volvo on its declarations). Artisan’s policy contains a Contingent Liability Endorsement excluding coverage when an insured auto is operated "for or on behalf of anyone else or any organization."
- NAICO defended the underlying suit (under reservation of rights) and paid ~ $98,750 to settle the Bernals’ claims and additional defense costs; Artisan repeatedly refused tendered defenses, relying on its Contingent Liability Endorsement.
- Factual disputes: photos show Unlimited placards on the truck at the time of the crash, but the written lease between Unlimited Carrier and Michael was not signed until Aug. 31, 2010 (after the accident); witness testimony presented conflicting accounts whether the truck was being operated on behalf of Unlimited Carrier at the time.
- NAICO sued Artisan in federal court seeking declaratory relief and reimbursement (contractual subrogation, equitable subrogation, and contribution) for defense and indemnity costs; cross-motions for summary judgment followed.
Issues
| Issue | NAICO’s Argument | Artisan’s Argument | Held |
|---|---|---|---|
| Did Artisan have a duty to defend under its policy? | Bernal complaint alleged alternative theories (driver acting for Michael or for Unlimited); allegations that could fall within coverage trigger Artisan’s duty to defend. | The Contingent Liability Endorsement unambiguously excludes any claim where the auto was operated on behalf of another (Unlimited), so no duty to defend. | Court: Duty to defend was triggered because some counts (alleging operation on behalf of Michael) potentially fell within coverage; Artisan’s blanket refusal was unreasonable. |
| Did Artisan have a duty to indemnify? | NAICO contends indemnity follows because Artisan breached duty to defend and is estopped from denying coverage; also policy structure and facts may make Artisan primary. | Artisan relies on placard (logo) liability and the endorsement to argue no indemnity exposure. | Court: Whether Artisan must indemnify depends on facts (genuine factual dispute whether vehicle was operated for Unlimited). But because Artisan wrongfully refused defense, it is estopped from asserting coverage defenses and thus liable for indemnity. |
| Can NAICO recover defense and settlement amounts from Artisan? | Yes — NAICO seeks reimbursement via contractual subrogation/equitable remedies; assignment and policy provisions support recovery (Artisan’s policy listed the truck as insured and could be primary). | Denies any duty so denies reimbursement obligation. | Court: NAICO entitled to reimbursement for all defense and settlement costs; contractual subrogation prerequisites met given policy terms and assignment. |
| Effect of “placard liability” on NAICO’s claim against Artisan | NAICO: Placard liability makes Unlimited Carrier liable to Bernals but does not preclude NAICO (as subrogee/insurer) from seeking reimbursement from Artisan. | Artisan: Placard liability and the endorsement absolve Artisan of responsibility for defense/indemnity/reimbursement. | Court: Placard liability does not affect NAICO’s subrogation rights; it ensures plaintiff recovery but does not bar NAICO from pursuing Artisan. |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard under Rule 56)
- Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90 (Illinois rule that duty to defend is broader than duty to indemnify)
- Maryland Casualty Co. v. Peppers, 64 Ill.2d 187 (duty to defend triggered if any theory in complaint potentially within coverage)
- General Agents Ins. Co. of America v. Midwest Sporting Goods Co., 215 Ill.2d 146 (compare allegations to policy language to determine duty to defend)
- Menard, Inc. v. Country Preferred Ins. Co., 992 N.E.2d 643 (duty to defend when complaint potentially alleges coverage)
- Northfield Ins. Co. v. City of Waukegan, 701 F.3d 1124 (Seventh Circuit on interpreting complaint against policy to decide duty to defend)
- U.S. Bank v. Lindsey, 397 Ill.App.3d 437 ("placard" or "logo" liability doctrine)
- Amerisure Mut. Ins. Co. v. Microplastics, Inc., 622 F.3d 806 (construe policy and complaint liberally for insured)