Opinion
Case No.: 14 cv 04268
09-30-2014
SCOTTSDALE INSURANCE COMPANY, Plaintiff, v. CHICAGO SCAFFOLDING, INC., AAA-1 MASONRY & TUCKPOINTING, INC., and EMIL PIEKUTOWSKI, Defendants.
Respectfully submitted, SCOTTSDALE INSURANCE COMPANY Jonathan L. Schwartz One of Its Attorneys Jonathan L. Schwartz, Esq. (ARDC #6287338) Davis J. Kim, Esq. (ARDC #6293122) GOLDBERG SEGALLA LLP 311 S. Wacker Dr., Suite 2450 Chicago, IL 60606 312-572-8411 (phone)/312-572-8401 (fax) jschwartz@goldbergsegalla.com dkim@goldbergsegalla.com
Magistrate Judge: Sidney I. Schenkier
PLAINTIFF'S MOTION FOR JUDGMENT AGAINST DEFAULTED DEFENDANT AAA-1 MASONRY & TUCKPOINTING, INC.
Plaintiff, SCOTTSDALE INSURANCE COMPANY ("Scottsdale"), by and through its attorneys, Goldberg Segalla LLP, submits the following motion for judgment against defaulted defendant AAA-1 Masonry & Tuckpointing, Inc.
Introduction and Procedural History
Scottsdale seeks a judicial declaration that it has no duty to indemnify AAA-1 Masonry & Tuckpointing, Inc. ("AAA-1") for any obligation that AAA-1 allegedly owes to Chicago Scaffolding, Inc. ("CSI") to defend and/or indemnify it in connection with the lawsuit pending in the Circuit Court of Cook County, Illinois, encaptioned Piekutowski v. AAA-1 Masonry & Tuckpointing et al., No. 2013 L 10341 ("Underlying Lawsuit"). This declaratory judgment action arises out of an alleged construction site incident where the underlying plaintiff, Emil Piekutowski, was struck by falling scaffolding.
On September 4, 2014, Scottsdale filed its Motion For Entry Of Order Of Default Against AAA-1 Masonry & Tuckpointing, Inc., which this Court granted by Order dated September 16, 2014. See Dkt. Nos. 21 and 23.
This Court should now enter judgment against AAA-1 because Scottsdaie cannot be obligated to indemnify AAA-1 for any contractual liability it may have to CSI with respect to the Underlying Lawsuit. The indemnity provisions in the subject Swing Stage Scaffold rental contract between AAA-1 and CSI, which are the sole source of AAA-1's purported indemnity obligation to CSI, are void and unenforceable pursuant to the Illinois Construction Contract Indemnification for Negligence Act (740 ILCS 35/1 et seq.) ("Act"), Thus, any contractual liability coverage under the commercial general liability policy Scottsdaie issued to AAA-1, No. BCS0023761, effective from December 31, 2010 to December 31, 2011 ("Policy"), does not apply here.
AAA-1 /CSI Rental Contract
AAA-1 and CSI entered into a contract ("Agreement") for the rental of a Swing Stage Scaffold by AAA-1, as lessee, from CSI, as lessor. See Dkt. No. 1, Exhibit #3. The 2011 Credit Policy, General Usage and Terms & Conditions part of the Agreement contains indemnification provisions which state, in relevant part, as follows:
5. Disclaimer of Warranties and Indemnification By Lessee/Purchaser. . . . [AAA-1] agrees to indemnify and hold [CSI] free and harmless . . . from any and all liability caused or alleged to be caused directly or indirectly by the leased/purchased Equipment, by any inadequacy thereof, or defect therein, or by any incident in connection therewith.
* * *
15. Indemnification. [AAA-1J shall indemnify and defend [CSI] against and hold [CSI] harmless from any and all claims, actions, suits, proceedings, costs, expenses, damages, and liabilities, including attorney's fees which:
(1) Relate to injury or destruction of property, or bodily injury, illness, sickness, disease or death of any person including employees of [AAA-1] and:
(2) Are caused or claimed to be caused, in whole or in part by the Equipment leased herein or by the liability or conduct (including active, passive, primary or secondary) of [CSI], its agents or employees, or anyone for whose acts of them may be liable. The parties agree that [CSI] shall only be liable or responsible for actions of willful misconduct.
(3) [AAA-1] shall, at its own cost and expense, defend [CSI] against all suits or proceedings commenced by anyone in which [CSI] is a named party for which [CSI] is alleged to be liable or responsible as a result of or arising out of the Equipment, or any alleged act and/or settlement, judgment or other resolution, in the event that such action is commenced naming [CSI] as a party, [CSI] may elect to defend on its own behalf and [AAA-1] agrees that it shall be liable for all costs, expenses and attorney's fees incurred by [CSI] in such defense.
* * *
The Swing Stage/Hanging Platforms General Conditions for Sale, Lease or Work Performed part of the Agreement contains another indemnification provision which states, in relevant part, as follows:
Liability for injury, disability and death of workmen and other persons caused by operation, handling or transportation shall be assumed by [AAA-1] and [AAA-1] shall indemnify, hold harmless and Name as Additional Insured to [AAA-1's] Liability Policy, [CSI]. [AAA-1] shall also indemnify [CSI] against all losses, damages, expense and penalties arising from any action on account of damage to property occasioned by the operation, handling or transportation of any equipment.
The Terms and Conditions part of the Agreement contains another indemnification provision which states, in relevant part, as follows:
[CSI] shall have no responsibility, direction or control over the manner of erection, maintenance, use or operation of said equipment by [CSI]. [AAA-1] assumes all responsibility for claims asserted by any person [whatsoever] growing out of the erection, and maintenance, use or possession of said equipment and agrees to hold [CSI] harmless from all such claims.
SCOTTSDALE POLICY PROVISIONS
The Policy, a copy of which is attached as Exhibit A to Scottsdale's Complaint for Declaratory Judgment (see Dkt. No. 1), contains the following relevant exclusion:
2. Exclusions
This insurance does not apply to:
* * *
b. Contractual Liability
"Bodily injury" ... for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:
* * *
(2) Assumed in a contract or agreement that is an "insured contract", provided the "bodily injury" ... occurs subsequent to the execution of the contract or agreement. Solely for the purposes of liability assumed in an "insured contract", reasonable attorney fees and necessary litigation expenses incurred by or for a party other than an insured are deemed to be damages because of "bodily injury" ... provided:
(a) Liability to such party for, or for the cost of, that party's defense has also been assumed in the same "insured contract" ...
The Policy as amended by Amendment of Insured Contract Definition Endorsement defines "insured contract" as "[t]hat part of any other contract or agreement pertaining to your business . . . under which you assume the tort liability of another party to pay for "bodily injury" ... [t]ort liability means a liability that would be imposed by law in the absence of any contract or agreement."
LEGAL AUTHORITY IN SUPPORT OF NO DUTY TO INDEMNIFY
AAA-1 UNDER SCOTTSDALE POLICY
The broad, all-encompassing indemnification provisions of the Agreement are void as against public policy because they seek to shift all liability for CSI's own negligence to AAA-1. Accordingly, Scottsdaie cannot be required to indemnify AAA-1 for an unenforceable obligation to CSI. Therefore, AAA-1 has no rights to coverage under the Policy in connection with any tort liability it attempted to assume in the Agreement. Also, given its failure to file an appearance or otherwise participate in this declaratory judgment action, AAA-1 has no rights to contest or challenge any judgment entered by this Court regarding Scottsdale's duties and obligations to CSI.
Standard for Evaluating a Motion for Judgment Against Defaulted Defendants in the Context of a
Declaratory Judgment Action Seeking a Finding of No Coverage
For purposes of whether to enter a default judgment, well-pleaded allegations of a complaint are considered admitted by a defendant when that defendant is held In default for failure to answer the complaint. Dundee Cement Co. v. Howard Pipe & Concrete Prods., Inc., 722 F.2d 1319, 1323 (7th Cir. 1983). A court is vested with the power and authority to enter declaratory default judgments. Nautilus Ins. Co. v. Front Range Env'tl, LLC, 14 CV 50083, 2014 U.S. Dist. LEXIS 124135 at *4 (N.D. Ill. Aug. 6, 2014), citing Tygris Asset Fin., Inc. v. Szollas, No. 09 C 4488, 2010 U.S. Dist. LEXIS 56491 at *6 (N.D. Ill Jun. 7, 2010), and Owners Ins. Co. v. Complete Mech. Servs., Inc., No. C 4201, 2008 U.S. Dist. LEXIS 88753 at *1-2 (N.D. Ill. Oct. 31, 2008) (copies attached).
Canons of Contract Interpretation
The primary objective in construing the language of a contract, such as an insurance policy, is to ascertain and give effect to the intentions of the parties as expressed by their agreement. BASF AG v. Great Am. Assur. Co., 522 F.3d 813, 819 (7th Cir. 2008). Like any contract, an insurance policy is construed as a whole, giving meaning to every provision because "every provision was intended to serve a purpose." Cent. Ill. Light Co. v. Home Ins. Co., 213 Ill. 2d 141, 821 N.E.2d 206 (2004).
Issues of contract construction, as well as determinations of whether a contract contravenes public policy, are questions of law that are readily susceptible to early judicial resolution by motion. See Liccardi v. Stolt Terminals (Chi.), Inc., 283 Ill. App. 3d 141, 147, 669 N.E.2d 1192 (1st Dist. 1996).
Illinois Construction Contract Indemnification for Negligence Act Voids
the Indemnification Provision of the Agreement
The Act Voids Indemnity Provisions in Construction Contracts
Requiring the Indemnitor To Indemnify the Indemnitee
for the Indemnitee's Own Negligence
At all relevant times, there existed the Illinois Construction Contract Indemnification for Negligence Act, 740 ILCS 35/1 et. seq., which provides, in relevant part, as follows:
With respect to contracts or agreements, either public or private, for the construction, alteration, repair or maintenance of a building, structure, ... or other work dealing with construction ... every covenant, promise or agreement to indemnify or hold harmless another person from that person's own negligence is void as against public policy and wholly unenforceable.
The Act is intended to ensure that a party with control over construction work has a continuing incentive to exercise due care and avoid construction-related injuries. See Ill. Power Co. v. Duke Eng'g & Servs., Inc., 2002 U.S. Dist. LEXIS 5497, at *11-12, 14-15 (N.D. Ill. Mar. 29, 2002) citing Lovellette v. S. Ry. Co., 898 F.2d 1286 (7th Cir. 1990) (copy attached); see also Thompson v. Pizza But of Am., Inc., No. 89 C 6496, 1992 U.S. Dist. LEXIS 8701 (N.D. Ill. Jun. 18, 1992) (the language of the Act is broad and should be construed liberally) (copy attached).
The AAA-1/CSI Agreement for the Rental of the Swing Stage Scaffold
Is a Construction Contract Under the Act
Whether the Act applies to void the indemnification provisions in the Agreement depends first on whether the Agreement is a contract "for the construction, alteration, repair or maintenance of a building, structure, ... or other work dealing with construction." There can be no dispute that it is one, as the Agreement is for the rental of equipment to be used in the construction, alteration, repair, or maintenance of a building. Notably, the Illinois Appellate Court's conclusion in Folkers v. Drott Manufacturing Co., 152 Ill. App. 3d 58, 504 N.E.2d 132 (1st Dist. 1987), that a crane rental agreement constituted a construction contract under the Act, is instructive here. Id. at 67; see also Camper v. Burnside Constr. Co., 2013 IL App (1st) 121589, at *58, 998 N.E.2d 1264 (concluding that the conduct of the indemnitee, by "manufactur[ing] and deliver[ing] a manhole by unloading it from a struck and setting it on the ground at the construction," fell within the scope of the Act; thus, the indemnification clause of the purchase order agreement was void as against public policy).
Most telling of the purpose of the Agreement is the "Rental Contract" part, which references the subject construction project by address (referring to it as a "jobsite") and describes the services to be provided by CSI for the construction project, i.e., provide the "installation, teardown, and the rental of 2) 20' Rolling ... of heavy-duty sidewalk protection canopy and 30 Stage at the above jobsite." Further, it is alleged in the Underlying Lawsuit that Mr. Piekutowski was injured while working on a construction project. The Underlying Lawsuit also alleges that AAA-1 and CSI's negligent operation, placement, erection, provision, securing, and/or construction of the Swing Stage Scaffold, which was being used in furtherance of the construction project, was the cause of Piekutowski's injuries. Taking together the Agreement and the allegations in the Underlying Lawsuit, the connection between the Swing Stage Scaffold and the construction project is manifestly obvious such that the Agreement must be considered "for the construction, alteration, repair or maintenance of a building" or "other work dealing with construction."
The AAA-1/CSI Agreement Requires AAA-1
To Indemnify CSI for CSI's Own Negligence
Whether the Act applies to void the indemnification provisions in the Agreement depends also on whether the Agreement requires AAA-1 to indemnify CSI for CSI's own negligence with respect to the Swing Stage Scaffold. The sweeping language of the Agreement establishes unequivocally that AAA-1 must indemnify CSI for CSI's own negligence. Notably, whether CSI is responsible for its "willful misconduct" is immaterial to this question because the Act concerns only the shifting of liability with respect to a party's negligence, i.e., as long as the indemnitor must indemnify the indemnitee for the indemnitee's own negligence, the Act is triggered, and the indemnification provisions are a nullity.
The clearest illustration of the Agreement requiring AAA-1 to indemnify CSI for CSI's own negligence is sub-paragraph 15(2) of the 2011 Credit Policy, General Usage and Terms & Conditions part of the Agreement. That provision states that "[AAA-1] shall indemnify and defend [CSI] against and hold CSI harmless from any and all claims, actions, suits, proceedings, costs, expenses, damages, and liabilities ... which [a]re caused or claimed to be caused, in whole or in part by the Equipment leased herein or by the liability or conduct (including active, passive, primary or secondary) of [CSI], its agents or employees, or anyone for whose acts of them may be liable." Additionally, the Terms and Conditions part of the Agreement states that AAA-1 is responsible for holding CSI harmless from all claims resulting from anything to do with the Swing Stage Scaffold: "[AAA-1] assumes all responsibility for claims asserted by any person [whatsoever] growing out of the erection, and maintenance, use or possession of said equipment and agrees to hold [CSI] harmless from all such claims." Moreover, Paragraph 5 and subparagraph 15(3) of the 2011 Credit Policy, General Usage and Terms & Conditions part of the Agreement, and the Swing Stage/Hanging Platforms General Conditions for Sale, Lease or Work Performed part of the Agreement, contain no limitations on the liability AAA-1 agrees to indemnify and hold CSI free and harmless from.
By its plain terms, the Agreement states that AAA-1 is obligated to indemnify and defend Chicago Scaffolding from all claims and actions caused or claimed to be caused by the Swing Stage Scaffold or by the liability or conduct of CSI, i.e., CSI's own negligence. The above provisions entirely relieve CSI for its own negligence. See Camper, 2013 IL App (1st) 121589, at *58 (indemnification provision seeking to indemnify indemnitee for "any and all claims" included the indemnitee's own negligence and was void as against public policy); Liccardi, 283 Ill. App. 3d at 148 (language calling for full indemnification regardless of the parties' relative fault are void under the Act; there is no requirement that the contract specify that one party must indemnify the other party for the other party's "own negligence"). Because the Agreement, and the indemnification provisions therein are subject to the Act, the indemnification provisions are void and unenforceable. In turn, none of the exceptions to the Policy's Contractual Liability Exclusion apply, as that part of the Agreement wherein AAA-1 assumed the tort liability of CSI is void and does not qualify as an "insured contract" under the Policy.
CONCLUSION
Scottsdale has no duties or obligations to AAA-1 arising out of AAA-1's alleged duty to indemnify CSI pursuant to the Agreement. Because the Agreement is a construction contract and requires AAA-1 to indemnify CSI for CSI's own negligence, the Agreement is void and unenforceable per the Act.
WHEREFORE, Plaintiff Scottsdale respectfully requests that this Court enter default judgment against Defendant AAA-1 Masonry & Tuckpointing, Inc. Dated: September 30, 2014
Respectfully submitted,
SCOTTSDALE INSURANCE COMPANY
/s/ Jonathan L. Schwartz
One of Its Attorneys
Jonathan L. Schwartz, Esq. (ARDC #6287338)
Davis J. Kim, Esq. (ARDC #6293122)
GOLDBERG SEGALLA LLP
311 S. Wacker Dr., Suite 2450
Chicago, IL 60606
312-572-8411 (phone)/312-572-8401 (fax)
jschwartz@goldbergsegalla.com
dkim@goldbergsegalla.com