Westfield Insurance Company v. Scot Vandenberg
2015 U.S. App. LEXIS 13768
7th Cir.2015Background
- Scot Vandenberg fell from the unrailed upper deck of a chartered 75-foot yacht and was rendered paraplegic; he sued defendants alleging negligence in failing to provide railings, warnings, and by placing an unsecured bench.
- The yacht was owned by RQM, Inc.; Rose Paving (run by Alan Rose) was alleged to be a booking/marketing agent for the chartering.
- Rose Paving was insured by Westfield under a commercial general liability (CGL) policy and an umbrella policy; the common declarations described Rose Paving’s business as "concrete construction" and the application listed construction-related hazards; Rose Paving answered "no" to whether it owned, hired, or leased watercraft.
- Vandenberg settled for $25 million to be satisfied by assignments of the defendants’ insurance claims; Westfield sued for a declaratory judgment that it owed no duty to defend or indemnify under the policies.
- The district court granted Westfield’s Rule 12(c) motion, holding the policies covered only Rose Paving’s construction business and that the policies’ watercraft exclusion barred coverage; the Seventh Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of coverage — whether policies cover yacht accident | Vandenberg: Broad policy language covers injuries unless expressly excluded; policies provide general coverage for bodily injury. | Westfield: Policies were purchased for Rose Paving’s construction business; declarations and application limit coverage to construction-related risks. | Court: Policies, read as whole (declarations, schedule of hazards, application), unambiguously limit coverage to Rose Paving’s construction business; no coverage for yacht accident. |
| Effect of business designation and application statements | Vandenberg: Business designation insufficient to limit scope; insurer must expressly exclude unintentional risks. | Westfield: Declarations and application representations show parties intended coverage only for construction operations. | Court: Declarations + application incorporated into policy demonstrate mutual intent to insure construction risks only; insurer need not exclude every unrelated activity. |
| Watercraft exclusion — whether it bars coverage for alleged bench/railing negligence | Vandenberg: Negligent maintenance/use of a bench is a concurrent, independent cause; exclusion shouldn’t apply. | Westfield: Injury arose out of ownership/use/maintenance of watercraft; watercraft exclusion applies because claims are intertwined with yacht use. | Court: Following Illinois law, the allegations are not wholly independent of yacht operation/use; watercraft exclusion bars coverage. |
| Duty to defend based on pleadings and unfiled allegations | Vandenberg: Presented an unfiled amended complaint alleging bench defect. | Westfield: Duty to defend determined by operative (filed) complaint; unfiled, self-serving allegations cannot create duty. | Court: Duty to defend is judged by the operative complaint; unfiled allegations are not considered. |
Key Cases Cited
- Koransky, Bouwer & Poracky, P.C. v. Bar Plan Mut. Ins. Co., 712 F.3d 336 (7th Cir. 2013) (choice-of-law and contract interpretation principles apply to insurance policies)
- Matrix IV, Inc. v. Am. Nat’l Bank & Tr. Co., 649 F.3d 539 (7th Cir. 2011) (standard of review for Rule 12(c) judgment on the pleadings)
- Hobbs v. Hartford Ins. Co. of the Midwest, 823 N.E.2d 561 (Ill. 2005) (primary objective is to give effect to parties’ intent as expressed in policy language)
- Crum & Forster Managers Corp. v. Resolution Tr. Corp., 620 N.E.2d 1073 (Ill. 1993) (policy construed as whole; consider risks undertaken and purpose of contract)
- Heritage Ins. Co. v. Bucaro, 428 N.E.2d 979 (Ill. App. Ct. 1981) (policy limited to enumerated operations where declarations described specific business)
- Dash Messenger Serv., Inc. v. Hartford Ins. Co. of Ill., 582 N.E.2d 1257 (Ill. App. Ct. 1991) (insurance application may be incorporated and construed as part of the policy)
- Northbrook Prop. & Cas. Co. v. Transp. Joint Agreement, 741 N.E.2d 253 (Ill. 2000) (exclusion bars coverage for injuries not wholly independent of excluded conduct)
- Nautilus Ins. Co. v. 1452-4 N. Milwaukee Ave., LLC, 562 F.3d 818 (7th Cir. 2009) (alternative theories insufficient where alleged injury is not independent of excluded conduct)