Starr Indemnity & Liability Company v. Technology Insurance Company, Inc.
1:16-cv-09553
N.D. Ill.Sep 30, 2017Background
- River Point construction project: Lend Lease hired Cives; Cives hired Midwest; Midwest had an existing subcontract with AES under which AES agreed to provide employment services and workers’ compensation for AES employees assigned to Midwest.
- Lend Lease procured a contractor-controlled insurance program (CCIP) from Starr; Starr issued a workers’ compensation and employers liability policy to Midwest (subject to a $500,000 deductible reimbursable by Lend Lease).
- AES separately obtained a workers’ compensation policy from TIC; the TIC policy did not explicitly list Midwest as a covered lessee on the face of the policy.
- Four ironworkers who were co-employed by Midwest and AES were injured on the project; Starr (Midwest’s insurer) accepted coverage and paid benefits under a reservation of rights.
- Starr sued AES and TIC seeking: (1) equitable contribution from TIC (co-insurer), (2) recovery under 820 ILCS 305/1(a)(3) (Illinois Workers’ Compensation Act) from AES and TIC, and (3) declaratory relief clarifying insurers’ obligations and the effect of Lend Lease’s deductible.
- Procedural posture: AES and TIC moved to dismiss under Rule 12(b)(6). The court granted AES’s motion (dismissing all Starr claims against AES with prejudice) and granted in part/denied in part TIC’s motion (allowing contribution and declaratory claims against TIC to proceed; dismissing IWCA claim as to TIC).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity/effect of subcontract waiver of subrogation as a bar to Starr’s subrogation/Section 1(a)(3) claim against AES | Starr: waiver doesn’t apply because AES failed to carry workers’ compensation insurance for Midwest, so the condition for the waiver wasn’t met | AES: subcontract contains a clear waiver of subrogation that releases parties for losses covered by the insurer providing the waiver; waiver bars Starr’s subrogation claim | Court: Waiver applies because Midwest (the party suffering the loss) had Starr coverage at the time of loss; waiver precludes Starr’s claims against AES — claims dismissed with prejudice |
| Motion to strike AES’s new arguments in reply / leave to file surreply | Starr: AES raised new indemnity/subrogation arguments in reply; request to strike or file surreply | AES: raised waiver argument in reply (defendants normally may present arguments in reply) | Court: Denied motion to strike; granted Starr leave to file a surreply and considered it |
| Equitable contribution against TIC (are policies coextensive re: risks/injuries?) | Starr: TIC and Starr are concurrent insurers covering the same injured workers/risks; contribution claim plausible | TIC: Starr failed to allege the policies cover the same parties/risks (no mutual insured/identity of interests) | Court: Complaint plausibly alleges overlapping coverage of same workers and risks; contribution claim survives 12(b)(6) |
| Section 1(a)(3) IWCA claim against TIC; declaratory relief against TIC | Starr: sought recovery under Section 1(a)(3) from AES or TIC and asked for declaratory relief re: obligations and deductible | TIC: IWCA does not create a private cause of action against an insurer; without viable underlying claims, declaratory relief fails | Court: Starr effectively withdrew Section 1(a)(3) claim against TIC; IWCA claim dismissed as to TIC. Declaratory-judgment claim survives as it is tied to the viable contribution dispute against TIC |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: plausibility required)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading requires more than labels and conclusions)
- Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440 (7th Cir. 2009) (motion-to-dismiss standard in Seventh Circuit)
- Adams v. City of Indianapolis, 742 F.3d 720 (7th Cir. 2014) (pleading plausibility and reasonable inference explanation)
- Dix Mut. Ins. Co. v. LaFramboise, 597 N.E.2d 622 (Ill. 1992) (subrogation as an equitable principle in Illinois)
- Empress Casino Joliet Corp. v. W.E. O’Neil Constr. Co., 68 N.E.3d 856 (Ill. App. Ct. 2016) (purpose and enforcement of construction contract subrogation waivers)
- Home Indem. Co. v. Gen. Accident Ins. Co. of Am., 572 N.E.2d 962 (Ill. App. Ct. 1991) (identity of policies/insurable interests for contribution)
- Liberty Mut. Ins. Co. v. Westfield Ins. Co., 703 N.E.2d 439 (Ill. App. Ct. 1998) (equitable contribution among insurers)