MEMORANDUM OPINION AND ORDER
Before the Court is Defendant The Burlington Insurance Company’s motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). [10] For the reasons set forth below, the Court grants Defendant’s motion [10].
I. Background 1
Plaintiff Archer Daniels Midland Company (“ADM”) entered into a contract with
On April 10, 2003, IBM Co. employee Miguel Gonzalez was cleaning windows for ADM when the ladder on which he was working slipped, causing him to injure his knee. Mr. Gonzalez filed a lawsuit against ADM on March 3, 2005, asserting negligence and premises liability counts (“the Gonzalez litigation” or “the underlying litigation”). Three months later, ADM tendered the defense of the Gonzalez litigation to TBIC. On June 23, 2005, TBIC accepted ADM’s tender of defense. However, on July 11, 2005, TBIC rescinded its acceptance and disclaimed any duty to provide a defense. ADM settled its lawsuit with Mr. Gonzalez for $150,000 in October 2008, and alleges that it spent $197,648 in attorney’s fees over the course of the litigation.
ADM filed a complaint against TBIC in the Circuit Court of Cook County on January 6, 2010. ADM’s complaint seeks (1) a declaratory judgment that TBIC is liable to indemnify ADM for the Gonzalez settlement, (2) damages in the amount of $347,648, and (3) statutory penalties under 215 ILCS 5/155. TBIC removed the case to this Court on March 9, 2010.
On March 16, 2010, TBIC filed a counterclaim against ADM seeking a declaratory judgment that TBIC had no duty to defend ADM in the Gonzalez litigation because (1) the policy’s “cross liability exclusion” barred coverage for bodily injury to an “employee of any insured” and (2) the “employer’s liability exclusion” barred coverage for bodily injury to an “employee of the insured.”
ADM asserted four affirmative defenses to TBIC’s counterclaim. First, ADM contends that the exclusionary provisions do not apply under the circumstances of this case because of a “separation of insureds” clause in the policy. Second, ADM contends that the TBIC policy is ambiguous and thus should be construed in favor of ADM. Third, ADM contends that TBIC’s counterclaim is barred by the doctrine of estoppel. Finally, ADM contends that if the exclusionary clause does bar coverage for ADM, then TBIC’s policy is illusory and therefore unenforceable.
II. Legal Standard for Deciding a Rule 12(c) Motion for Judgment on the Pleadings
A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) “is designed to provide a means of disposing of cases when the material facts are not in dispute and a judgment on the merits can be achieved by focusing on the content of the pleadings and any facts of which the court will take judicial notice.”
Cincinnati Ins. Co. v. Contemporary Distrib. Inc.,
III. Analysis
The parties agree that there is no dispute concerning the material facts. The Court is called upon only to determine the scope of coverage of the insurance policy, which is a question of law. See
Nicor, Inc. v. Associated Elec. and Gas Ins. Services Ltd.,
A. Insurance Policy Contract Interpretation
As an initial matter, the Court notes that this case comes before it pursuant to its diversity jurisdiction, 28 U.S.C. § 1332(a), and that Illinois law governs. Under Illinois law, an insurance policy is a contract, and the same rules of construction that apply to other types of contracts apply to insxxrance policies. See
Nicor, Inc.,
A coxirt deciding whether an insurer has a duty to defend its insured must compare the factual allegations in the underlying complaint to the pertinent provisions of the policy. See
Valley Forge Ins. Co. v. Swiderski Electronics, Inc.,
When an insurer relies upon an exclusionary provision to deny coverage to an insured, the applicability of the provision must be free and clear from doubt. See
Santa’s Best Craft, LLC v. St. Paul Fire and Marine Ins. Co.,
B. The TBIC Policy
TBIC issued CGL policy number HGL0001965 to IBM Co., the named insured, for the policy period commencing on October 1, 2002, and ending on October 1, 2003. Reduced to its simplest terms, a CGL policy is a policy that is “usually obtained by a business, that covers damages that the insured becomes legally obligated to pay to a third party because of bodily injury or property damage.” Black’s Law Dictionary 809 (7th ed. 1999). A CGL policy generally covers liability for damages that are not covered by more specific types of liability insurance policies
(e.g.,
business, automobile, and employer’s liability). See
Bituminous Cas. Corp. v. Maxey,
The TBIC policy is modified by an additional insured endorsement, which provides that the section of the policy defining “an insured” “is amended to include as an insured any person or organization with whom you [the named insured] agreed, because of a written contract, written agreement or permit, to provide insurance such as is afforded under this Coverage Part, but only with respect to your operations, ‘your work’ or facilities owned or used by you.” [6-2, at 15]. The parties agree that IBM Co., the primary insured under the TBIC policy, added ADM as an additional insured pursuant to this provision in an endorsement to the policy. [See 6-3, at 31.]
The coverage form of the policy is also modified by several exclusions, only two of which are at issue here. First, the coverage form states that the policy excludes coverage for:
e. Employer’s Liability
“Bodily injury’ to:
(1) an ‘employee’ of the insured arising out of and in the course of:
(a) Employment of the insured; or
(b) Performing duties related to the conduct of the insured’s business * He *[ ]
This exclusion applies:
(1) Whether the insured may be liable as an employer or in any other capacity; and
(2) To any obligation to share damages with or repay someone else who must pay damages because of the injury.
[6-2, at 28 (emphasis added).]
Second, the policy includes a “cross liability exclusion” endorsement, which provides that:
This insurance does not apply to any actual or alleged ‘bodily injury1, ‘property damage’, ‘personal injury’ or ‘advertising injury to * * *:
3. A present, former, future or prospective partner, officer, director, stockholder or employee of any insured.”
[6-3, at 17 (emphasis added).] The endorsement is prefaced with the admonition that: “This endorsement changes the policy. Please read it carefully.” Id. The endorsement also states that “[a]ll other terms and conditions of this policy remain unchanged.” Id.
In addition to the provisions quoted above, the TBIC policy includes a “separation of insureds clause” (more commonly known as a “severability clause” (see
Thoele v. Aetna Cas. & Sur.,
Except with respect to the Limits of Insurance, and any rights or duties specifically assigned in this Coverage Part to the first Named Insured, this insurance applies:
a. As if each Named Insured were the only Named Insured; and
b. Separately to each insured against whom claim is made or ‘suit’ is brought.
[6-3, at 4].
As discussed below, ADM argues in its complaint that the TBIC policy’s severability clause modified the exclusion provisions of the policy such that ADM is not barred from receiving coverage under the policy for the Gonzalez litigation. Specifically, ADM argues that because Gonzalez was an employee not of ADM but rather of IBM Co., TBIC had a duty to defend ADM in the underlying litigation. ADM argues that TBIC breached its duty to defend, and so should be estopped from relying on the exclusion provisions as defenses in this litigation. Alternatively, ADM argues that the terms of the TBIC policy are at best ambiguous, and thus should be construed as providing coverage and triggering a duty to defend the underlying case. Finally, ADM argues that if the policy is indeed construed as excluding coverage for bodily injury by an employee, then the policy is illusory and unenforceable.
In its motion for judgment on the pleadings [10], TBIC contends that the sever-ability clause has no impact on the cross liability exclusion because the language of the exclusion states that the policy does not cover bodily injury to an employee of “any insured.” TBIC submits that because ADM is excluded from coverage for the Gonzalez litigation, TBIC had no duty to defend and therefore should not be es-topped from asserting coverage defenses. TBIC further contends that application of the cross liability exclusion to ADM under the circumstances of this case does not render the policy illusory. The Court addresses in turn the parties’ arguments as to application of the exclusion provisions, estoppel, and whether the policy is illusory.
C. The Severability Clause Modifies Application of the Employer’s Liability Exclusion But Does Not Modify Application of the Cross Liability Exclusion
In general, severability clauses are intended “to treat each entity covered
1. The Employer’s Liability Exclusion
In
Globe,
the Illinois Supreme Court considered the interplay of a sever-ability clause and an employee exclusionary clause that barred coverage for bodily injury to employees of “the insured.”
After due consideration to the language and intent of the policy, we conclude that the severability clause provides each insured with separate coverage, as if each were separately insured with a distinct policy, subject to the liability limits of the policy. The employee exclusion, therefore, does not exclude protection for an additional insured against an injury suffered by an employee of another insured. The exclusionary clause applies only to the situation where an insured is sued by its own employee.
Id. at 323. The court noted that if the insurer sought also to exclude coverage for an insured who was not the employer of the injured employee, that exclusion “could have been clearly stated.” Id. at 323. The court thus implied — but did not decide — that drafting an exclusion that applied more broadly might be effective in barring coverage for employee’s suits against non-employer-insureds despite the existence of a severability clause. Id.
In addition to the plain language of the policy, the purpose of the employee exclusion — namely, to prevent an employee who is covered by a worker’s compensation program from recovering in a private suit against his employer — supports the rule in
Globe. Id.
at 322. As explained by a district court in the Southern District of New York, an employer’s liability exclusion “recognizes that general liability coverage is unnecessary for an employer whose employee is injured in the course of his employment since the workman’s compensation system (and the required workman’s compensation’s insurance coverage) covers such an injury.”
Shelby Realty LLC v. Nat’l Surety Corp.,
Here, as in Globe, the TBIC CGL policy includes an employer’s liability exclusion that bars coverage for bodily injury to “an ‘employee’ of the insured.” [6-2, at 28 (emphasis added).] The parties do not dispute that, according to the underlying complaint, Mr. Gonzalez was an employee of IBM Co., not ADM. Nor do the parties dispute that Mr. Gonzalez filed a lawsuit against ADM, not IBM Co. Given these undisputed facts, as a matter of law, both the plain language and the underlying purpose of the exclusion militate against a conclusion that the exclusion applies to ADM for purposes of the Gonzalez litigation. Rather, as in Globe, the severability clause modifies the exclusion such that coverage is barred only where the injured person seeks coverage from the employer-insured. Accordingly, the employer’s liability exclusion does not bar coverage to ADM for the Gonzalez litigation.
2. The Cross Liability Exclusion
ADM urges the Court to apply the holding of
Globe
to the cross liability exclusion endorsement in the TBIC policy as well as the employer’s liability exclusion. ADM argues that even though the cross liability exclusion bars coverage to injury of an employee of
“any
insured” and not just
“the
insured,” the severability clause operates to limit the application of the exclusion to IBM Co. only and not to ADM. By contrast, TBIC argues that the severability clause has no effect on the cross liability exclusion in view of that exclusion’s use of the term “any insured.” In other words, TBIC states that the plain language of the cross liability exclusion means that there is not even the potential for coverage for ADM in the underlying Gonzalez litigation, and thus that TBIC had no duty to defend. See
Gould & Ratner v. Vigilant Ins. Co.,
No Seventh Circuit or Illinois Supreme Court case directly addresses the question of how, in a CGL policy, a severability clause affects a cross liability exclusionary endorsement that bars coverage for a suit brought by an employee of “any insured.”
2
In
Atchison,
the court considered the impact of a severability clause on an employer’s liability exclusion that barred coverage for bodily injury to employees of “a protected person.”
Similarly, in
Cook,
the appellate court held that a severability clause modified an employer’s liability exclusion that barred coverage for “bodily injuries sustained by an employee of
an
insured in the course of employment for that insured.”
Cook,
In addition to these Illinois appellate court cases, another judge in this district has considered the interplay of a severability clause and a professional services exclusion as applied to an additional insured. In
United States Fidelity and Guaranty
[T]he Policy’s Separation of Insureds provision must be interpreted as requiring that the coverage of each insured or additional insured be determined separately from other insureds. Under this interpretation, the fact that the professional services exclusion deprives Eckland of coverage under the Policy does not mean that Shorenstein, too, is without coverage. Rather, the professional services exclusion must be applied vis a vis Shorenstein’s own conduct. When it is thus applied, Shorenstein remains covered because it did not perform professional services in connection with the project.
Id. at 1014-15. The court’s rationale rested in part on the fact that the policy in question was a CGL policy and “was not intended to provide coverage to architects and engineers such as Eckland for liability arising specifically out of their performance of professional services.” Id. at 1010.
For two reasons, the Court respectfully declines to follow
Atchison, Cook,
and
Shorenstein
(none of which is binding on this Court or directly on point) in holding that the severability clause at issue in the TBIC policy limits application of the cross liability exclusion to IBM Co. First, a court must give effect to the plain language of an insurance policy’s exclusion provision. See
First Nat’l Bank of Chicago v. Fid. & Cas. Co. of New York,
In this case, the distinction between the terms “the insured” and “any insured” is all the more significant given that the terms are used in different exclusion provisions of the policy; as discussed above, the employer’s liability exclusion refers to “the insured,” whereas the cross liability exclusion refers to “any insured.” According to fundamental principles of contract construction, the difference cannot be meaningless; the Court must accord significance to use of the different articles in the-different exclusions. See 2 Couch on Ins. § 22:43 (stating that “[s]ince it must be assumed that each word contained in an insurance policy is intended to serve a purpose, every term will be given effect if that can be done by any reasonable construction, and every clause will be enforced where that can be done without doing violence to the rights of either party”). And, notably, “[a]n insurance policy may exclude coverage for particular injuries or damages in certain specified circumstances while providing coverage in other circumstances, and thus, an insurer is not absolutely prohibited from drafting and enforcing policy provisions that provide or leave intact coverage for some, but not all, manifestations of a particular peril.”
Id.
at § 22:30 (citing
Julian v. Hartford Underwriters Ins. Co.,
Use of the term “any insured” in the cross liability exclusion “unambiguously expresses a contractual intent to create joint obligations and preclude coverage to innocent co-insureds.”
Michael Carbone,
Second,
Atchison, Cook,
and
Shorenstein
are distinguishable in that they concern exclusions whose purposes are distinct from the cross liability exclusion at issue here. A court construing an exclusionary provision of an insurance policy “must examine the purpose of the exclusion, the public policy considerations involved, and the transaction as a whole.” 2 Couch on Ins. § 22:30.
Atchison
and
Cook,
like
Globe,
concerned employer’s liability exclusions. See
Atchison,
A cross liability exclusion, by contrast, bars coverage for claims brought by one insured against another insured. See
Underwriters at Lloyds London v. STD Enter., Inc.,
In sum, in view of the unambiguous language of the exclusion, the policy contract as a whole, the purpose of the exclusions, and the extant case law, the Court concludes that the severability clause limits application of the employer’s liability exclusion provision such that the exclusion does not bar coverage for ADM in the Gonzalez litigation because ADM was not Mr. Gonzalez’s employer. However, the severability clause has no impact on the cross liability exclusion endorsement because the endorsement refers to “any insured” and is intended to prevent coverage in precisely the type of scenario presented by the underlying litigation.
D. Construing the Cross Liability Exclusion as Barring Coverage for ADM for the Gonzalez Litigation Does Not Render the TBIC Policy Illusory
ADM asserts as an affirmative defense to TBIC’s counterclaim for declaratory judgment that if the TBIC policy’s exclusions apply to the circumstances of this case such that TBIC has no duty to defend ADM in the Gonzalez litigation, then the policy is illusory and unenforceable. TBIC counters that despite the exclusions, the policy provides coverage for (1) bodily injury claims brought by an individual who was not an employee of either IBM Co. or ADM, and (2) for certain property damage claims, and thus is not illusory.
Under Illinois law, an insurance policy is illusory if “there is no possibility under any set of facts for coverage.”
Employers’ Fire Ins. Co. v. Berg,
Here, although the cross liability exclusion bars coverage for ADM in the event of bodily injury to an IBM Co. employee (as in the underlying Gonzalez litigation), the exclusion does not preclude any possibility of coverage under other facts. Moreover, the “any insured” language of
E. TBIC Is Not Estopped From Asserting Coverage Defenses
ADM also asserts as an affirmative defense that TBIC should be estopped from arguing that the CGL policy does not provide coverage in the underlying litigation. If, comparing the allegations of the underlying complaint with the insurance policy, any potential for coverage for the lawsuit exists, then an insurer must either (1) seek a declaratory judgment regarding its obligations and rights under the policy or (2) defend the insured under a reservation of rights. See
Pietras v. Sentry Ins. Co.,
Here, as set forth above, the cross liability exclusion unambiguously bars coverage for ADM in the underlying lawsuit. Accordingly, under the plain language of the policy, there was no potential for coverage under the TBIC policy. TBIC thus had no duty to defend ADM in the underlying litigation, and TBIC is not estopped from raising the cross liability exclusion as a defense.
F. Statutory Penalties 215 ILCS 5/155
Finally, ADM asserts a claim for statutory penalties pursuant to 215 ILCS 5/155. TBIC asks the Court to conclude on the basis of the pleadings that, as a matter of law, TBIC is not liable for statutory penalties.
Section 5/155 provides in relevant part that:
(1) In any action by or against a company wherein there is in issue the liability of a company on a policy or policies of insurance or the amount of the loss payable thereunder, or for an unreasonable delay in settling a claim, and it appears to the court that such action or delay is vexatious and unreasonable, the court may allow as part of the taxable costs in the action reasonable attorney fees, other costs, plus an amount not to exceed any one of the following amounts:
(a) 25% of the amount which the court or jury finds such party is entitled to recover against the company, exclusive of all costs;
(b) $25,000;
(c) the excess of the amount which the court or jury finds such party is entitled to recover, exclusive of costs, over the amount, if any, which the company offered to pay in settlement of the claim prior to the action.
215 ILCS 5/155.
Here, the Court can discern no allegation in the pleadings that TBIC acted in a vexatious or unreasonable manner in denying coverage to ADM for the Gonzalez litigation. According to the complaint, TBIC rescinded its initial acceptance of the defense of the Gonzalez litigation within a few weeks. And under the analysis set forth above, TBIC properly declined to
IV. Conclusion
For the reasons above, the Court grants TBIC’s motion [10] for judgment on the pleadings.
Notes
. For purposes of a Rule 12(c) motion, the Court will consider facts set forth in the complaint, answer, and exhibits attached to those pleadings. See
Housing Auth. Risk Retention Group Inc. v. Chicago Housing Auth.,
378
. One Seventh Circuit case has passed on the issue of whether a business pursuits exclusion phrased in terms of "any insured” barred coverage for a negligence action against the husband of a woman who was engaged in a business pursuit. See
Thoele v. Aetna Cas. & Sur.,