Opinion
98 C 7066
February 24, 2000
MEMORANDUM OPINION
This matter comes before the Court on Plaintiff's and Defendant's cross-motions for summary judgment. For the reasons set forth below, the Court grants Plaintiff's motion for summary judgment and denies Defendant's motion for summary judgment.
BACKGROUND
Plaintiff/Counter-Defendant West American Insurance Company ("West American" or the "Plaintiff") issued a Commercial General Liability Insurance policy (the "Policy") to Defendant/Counter-Plaintiff Keno Sons Construction, Inc. ("Keno" or the "Defendant") for the effective policy period of September 1, 1995 to September 1, 1996. Keno was engaged in a contract with the Village of Grayslake ("Grayslake") to construct a water reservoir under the 1.3MG Water Reservoir Expansion Project (the "Project"). As a result of a water main rupture during the construction, Keno and Grayslake were named as defendants in a suit in Illinois State court. Grayslake, in that state court action, filed a cross-claim against Keno for breach of contract (the "Grayslake Claim"). Grayslake alleges that Keno breached its contract with Grayslake because Keno and Keno's subcontractors failed to perform competently and efficiently, thus resulting in the water main rupture. Keno sought West American to defend this suit, and West American declined. West American then filed a complaint in federal court for declaratory judgment against Keno seeking the court to declare that West American had no duty or obligation to defend Keno in the state court cross-claim. Keno answered and counter-claimed against West American, asserting that West American does have a duty or obligation to defend Keno. West American and Keno now cross-move for summary judgment.
West American argues that its Policy does not cover Grayslake's breach of contract cross-claim because that claim does not allege a claim for damages caused by an "occurrence" as defined by the Policy. Also, West American argues that the Grayslake Claim does not allege "property damage" and that the claim is also covered by a Policy exclusion. Keno argues the opposite position on each these issues and maintains that it is entitled to have West American defend the Grayslake Claim.
LEGAL STANDARD
Summary judgment is appropriate when the record, viewed in a light most favorable to the nonmoving party, reveals that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56 (c). The moving party bears the initial burden of showing that no genuine issue of material fact exists. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2458, 91 L.Ed.2d 265 (1986). The burden then shifts to the nonmoving party to show through specific evidence that a triable issue of fact remains on issues on which the nonmovant bears the burden of proof at trial.See id. The nonmovant may not rest upon mere allegations in the pleadings or upon conclusory statements in affidavits. The nonmovant must go beyond the pleadings and support its contentions with proper documentary evidence. See id.
The plain language of Rule 56(c) mandates the entry of summary judgment against a party who fails to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. "In such a situation there can be `no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." See id. at 323.
For cross-motions for summary judgment, each movant must individually fulfill the stringent requirements necessary to obtain summary judgment under Rule 56, such standards still being applicable. See United Transportation Union v. Illinois Central R.R., 998 F. Supp. 874, 880 (N.D. Ill. 1998). By filing cross-motions for summary judgment, the parties do not waive trial by the merits, but each party merely believes that the court should grant it judgment without trial, unless the judge disagrees. See Miller v. LeSea Broadcasting, Inc., 87 F.3d 224, 230 (7th Cir. 1996). Indeed, upon receipt of cross-motions for summary judgment, the court is not required to grant summary judgment as a matter of law for either side. See Brownlee v. City of Chicago, 983 F. Supp. 776, 779 (N.D. Ill. 1997); Boozell v. United States, 979 F. Supp. 670, 674 (N.D. Ill. 1997). Rather, the court will evaluate each motion on its merits, resolving factual uncertainties and drawing all reasonable inferences against the movant. See Brownlee, 983 F. Supp. at 779; Boozell, 979 F. Supp. at 670; United Transportation Union, 998 F. Supp. at 880. With these principles in mind, the Court evaluates the merits of the motions.
DISCUSSION
I. West American's Motion for Summary Judgment
Because Keno provided no response to West American's Local Rule 56.1 statement of facts, the Court takes West American's statement of facts as admitted. See Local Rule 56.1. Local Rule 56.1(b) requires a party opposing a summary judgment motion to file a response listing the factual assertions by the movant with which the opponent disagrees. See Local Rule 56.1(b). This list must be supported with specific references to the evidentiary materials relied upon and must set forth any additional facts that require denial of summary judgment, also supported with specific references to the record. See id.; Bell, Boyd Lloyd v. Tapy, 896 F.2d 1101, 1102 (7th Cir. 1990). The Court will deem admitted any facts asserted by the movant which are not contradicted in the manner specified by Local Rule 56.1(b). See Local Rule 56.1(b); Bell, Boyd Lloyd, 896 F.2d at 1102. Consequently, because Keno has failed to respond to West American's Local Rule 56.1 statement, the Court deems the facts contained therein admitted. Further, the Court notes that Keno's response to West American's summary judgment motion is completely devoid of any legal citations. It is in this backdrop that the Court considers West American's motion.
West American argues that the Grayslake Claim is essentially a breach of contract claim, which does not allege that Keno is liable for some "occurrence" under the Policy. Because Keno has neither disputed any of West American's facts nor adequately rebutted West American's arguments, the Court is sufficiently convinced by West American's evidence and arguments so as to grant it summary judgment on this issue.
In order to determine whether an insurer has a duty to defend the insured, the court must look to the allegations in the underlying complaint and decide whether those alleged facts fall within, or even potentially within, the insurance policy's coverage such that the insurer does have a duty to defend. See Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill.2d 90, 180 Ill. Dec. 691, 607 N.E.2d 1204, 1212 (1992). An insurer may not refuse to defend unless it is clear on the face of the underlying complaint that the alleged facts are not potentially within the policy's coverage. See id. Thus, in order to determine whether West American has a duty to defend Keno, the Court looks to the Grayslake Claim to see if its allegations fall within, or potentially within, the Policy's coverage.
The Policy is a commercial general liability ("CGL") policy. Under Illinois law CGL policies "are intended to provide coverage for injury or damage to their person or property of others; they are not intended to pay costs associated with repairing or replacing an insured's defective work and products which are purely economic losses." American Fire Casualty Co. v. Broeren Russo Construction, Inc., 54 F. Supp.2d 842, 846 (C.D. Ill. 1999), quoting Western Cas. Sur. Co. v. Brochu, 105 Ill.2d 486, 86 Ill. Dec. 493, 475 N.E.2d 872, 877 (1985).
The Policy provides that an "`Occurrence' means an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Although the Policy does not define "accident," when interpreting CGL policies, courts define an accident as "an unforeseen occurrence, usually of an untoward or disastrous character or an undesigned sudden or unexpected event of an inflictive or unfortunate character." Monticello Ins. Co. v. Wil-Freds Construction, Inc., 277 Ill. App.3d 697, 703, 661 N.E.2d 451, 455, 214 Ill. Dec. 597, 601 (2nd Dist. 1996),quoting Aetna Casualty Surety Co. v. Freyer, 89 Ill. App.3d 617, 619, 411 N.E.2d 1157, 44 Ill. Dec. 791 (1st Dist. 1980). The use of the term "occurrence" in a policy rather than accident broadens coverage and eliminates the need to find an exact cause of damages as long as they are neither intended nor expected by the insured. See Bituminous Casualty Corp. v. Gust K. Newberg Construction Co., 218 Ill. App.3d 956, 965, 578 N.E.2d 1003, 1009, 161 Ill. Dec. 357, 363 (1st Dist. 1991).
Nevertheless, the occurrence must still be accidental. See id. The natural and ordinary consequences of an act do not constitute an accident. See id. Moreover, in considering an occurrence provision in a CGL policy, it is the property damage that must be unexpected and unintended. See American Fire Casualty Co., 54 F. Supp. 2d at 846, citing Outboard Marine Corp., 180 Ill. Dec. 691, 607 N.E.2d at 1220; see also Hamilton Die Cast, Inc. v. United States Fidelity and Guaranty Co., 508 F.2d 417, 420 (7th Cir. 1975). The law in Illinois is well settled that the natural results of negligent and unworkmanlike construction do not constitute an "occurrence." See American Fire Casualty Co., 54 F. Supp. 2d at 846 (citations omitted).
West American argues that it has no duty to defend Keno against the Grayslake Claim because the claim does not allege facts that would constitute an "occurrence" under the Policy. The underlying Grayslake Claim alleges that:
. . . 6. Keno, through its own conduct and through the conduct of its subcontractors, failed to competently and efficiently perform the work on the Project in accordance with the Contract. As a result, a water main rupture occurred that caused extensive damage to the work, delays in the completion of the Project, and direct and foreseeable damages to Grayslake.
7. Keno's failure to competently and efficiently perform the work on the Project in accordance with the Contract was a material breach of its obligations.
8. As a direct and foreseeable result of Keno's breach, Grayslake suffered damages in the form of additional expenses, personnel time, and engineering costs incurred while Keno repaired the work, and to protect Grayslake's property.
The Court agrees that the instant case involves underlying allegations of a breach of contract resulting in foreseeable damages, rather than an occurrence falling within the Policy. Grayslake claims that Keno and its subcontractors breached its contract with Grayslake by failing to work competently and efficiently. As a result, a water main ruptured. In its cross-claim, Grayslake poses the water main rupture, as well as the damages resulting therefrom, as foreseeable consequences of the incompetent and inefficient work of Keno and its subcontractors. Keno argues that because the water main rupture was not the result of an intentional or expected act, but was instead the result of negligence, it should be considered an accident and thus an "occurrence" under the Policy. However, an underlying claim in Illinois such as the Grayslake Claim, which alleges damages that are the natural results of negligent and unworkmanlike construction do not constitute an occurrence. See e.g., American Fire Casualty Co., 54 F. Supp.2d at 847;Hamilton Die Cast, Inc., 508 F.2d at 420; Monticello Ins. Co., 277 Ill. App.3d at 703, 661 N.E.2d at 455; Hydra Corp., 245 Ill. App.3d at 929-30, 615 N.E.2d at 73; Bituminous Casualty Corp., 218 Ill. App.3d at 964-65, 578 N.E.2d at 1008-1009.
It is the Grayslake Claim that controls whether West American must tender a defense. See Hamilton Die Cast, 508 F.2d at 420. Because that claim does not allege an occurrence under the Policy, West American is not obligated to defend Keno in that suit. As such, the Court grants West American's motion for summary judgment. Because the Court grants summary judgment to West American on this basis, it will not consider West American's alternative arguments.
II. Keno's Motion for Summary Judgment
Keno moves for summary judgment arguing that the undisputed facts demonstrate that West American has a duty to defend Keno in the underlying Grayslake Claim. Keno's memorandum of law in support of its motion is the same memorandum that responds to West American's motion for summary judgment. Keno fares no better when considering the memorandum as a motion for summary judgment in its favor than when considering it merely as an opposition to a summary judgment motion.
Keno fails to demonstrate that the Grayslake Claim contains allegations that constitute an "occurrence" under the Policy. Rather, Keno focuses on the fact that the water main rupture was not deliberate or intentional, but was the result of negligence. By equating negligence with accident, Keno asserts that it has demonstrated that the Grayslake Claim potentially constitutes an occurrence under the Policy. Nevertheless, Keno misunderstands what constitutes an occurrence. It is not whether the water main rupture was the result of negligence or an intentional act, but rather, Keno must demonstrate that the Grayslake Claim alleges that the water main rupture was unforeseeable or unexpected. Cf. American Fire Casualty Co., 54 F. Supp.2d at 846. This, Keno has not done. As such, the Court denies Keno's motion for summary judgment.
CONCLUSION
For the reasons set forth above, the Court grants West American's motion for summary judgment and denies Keno's motion for summary judgment.