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Wendy's International, Inc. v. Illinois Union Insurance Co.

March 6, 2007


The opinion of the court was delivered by: Judge Graham

Plaintiffs Wendy's International, Inc. ("Wendy's") and its wholly-owned subsidiary, Triune Corporation ("Triune") (collectively, "Plaintiffs") seek a declaratory judgment pursuant to 28 U.S.C. § 2201, and damages for breach of contract and insurer bad faith against Defendant Illinois Union Insurance Company ("Illinois Union"). Plaintiffs assert that Illinois Union was obligated to defend, indemnify and reimburse them for all sums and losses incurred from an arbitration in which Triune was a respondent, and pay all judgments or settlements that Plaintiffs paid or would be obligated to pay resulting from that arbitration. This matter is before the Court on Illinois Union's Motion for Summary Judgment (Doc. 27).

Pursuant to an Agreed Order dated April 14, 2006, Illinois Union's Motion pertains only to its third affirmative defense, namely that Plaintiffs' failure to satisfy the notice requirement in the insurance policy bars their claims in this action (Doc. 25).

Opinion and Order

I. Summary Judgment Standard

Under Fed. R. Civ. P. 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." LaPointe v. United Autoworkers Local 600, 8 F.3d 376, 378 (6th Cir. 1993). The movant must show that there are no genuine issues of material fact in the case. Id. The moving party may meet its burden by showing that the nonmoving party lacks evidence to support an essential element of its case. Barnhart v. Pickrel, Schaeffer & Ebeling Co., L.P.A., 12 F.3d 1382, 1389 (6th Cir. 1993).

In response, the nonmoving party "cannot rely on the hope that the trier of fact will disbelieve the movant's denial of a disputed fact, but must 'present affirmative evidence in order to defeat a properly supported motion for summary judgment.'" Street v. J. C. Bradford & Co., 886 F.2d 1472, 1476 (6th Cir. 1989) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986)). The Court must view the evidence, all facts, and any inferences that may permissibly be drawn from the facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). See also Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 456 (1992).

In reviewing a motion for summary judgment, "this Court must determine whether 'the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Patton v. Bearden, 8 F.3d 343, 346 (6th Cir. 1993)(quoting Anderson, 477 U.S. at 251-52). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson, 477 U.S. at 247-48 (emphasis in original); see generally Booker v. Brown & Williamson Tobacco Co., Inc., 879 F.2d 1304, 1310 (6th Cir. 1989).

Thus, "[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Anderson, 477 U.S. at 252. See also Gregory v. Hunt, 24 F.3d 781, 784 (6th Cir. 1994). A district court considering a motion for summary judgment may not weigh evidence or determine credibility. Adams v. Metiva, 31 F.3d 375, 379 (6th Cir. 1994).

II. Facts

The facts in this insurance coverage case are largely undisputed. Wendy's is an Ohio corporation with its principal place of business in Dublin, Ohio. In June of 2002, Wendy's acquired all of the shares of Fresh Enterprises, Inc. ("Fresh Enterprises"), a California corporation and a wholly-owned subsidiary of Wendy's. Triune, also a California corporation with its principal place of business in Thousand Oaks, California, is a wholly-owned subsidiary of Fresh Enterprises. Illinois Union is an insurance company eligible as a surplus-lines insurer in Ohio and organized, incorporated, and domiciled in Illinois.

A. The Insurance Policy

The subject of this dispute is a "Miscellaneous Errors and Omissions Liability Insurance" policy, numbered EON G21639175 002 ("the Policy") that Wendy's purchased from Illinois Union. The Policy was effective from June 30, 2003 through June 30, 2004 and lists Wendy's as the "Named Insured." Wendy's paid a $280,225.00 premium for the Policy. The Policy was a renewal of policy number EON G21639175 001. Wendy's renewed the Policy with policy number EON G21639175 003, covering June 30, 2004 through June 30, 2005.

The Policy offered coverage of up to $15 million on sums in excess of the $500,000 per claim deductible "that the Insured shall become legally obligated to pay as Damages and Claims Expenses because of a Claim first made against the Insured during the Policy Period by reason of a Wrongful Act*fn1 in the performance of or failure to perform Professional Services by the Insured or by any other person or entity for whom the Insured is legally liable[,]" where the "Wrongful Acts [were] . . . committed on or subsequent to the Retroactive Date specified in Item 6 of the Declarations and before the end of the Policy Period." The Retroactive Date listed in Item 6 is May 21, 1996.

The Policy defines a Claim as "a written demand for money, including any civil proceeding against the Insured for a Wrongful Act, in the performance of or failure to perform Professional Services." The Policy defines a "Related Claim" as "all Claims arising out of a single Wrongful Act or a series of Related Wrongful Acts in the performance of or failure to perform Professional Services." Related Wrongful Acts are defined as "all Wrongful Acts that are temporally, logically or causally connected by any common fact, circumstance, situation, transaction, event, advice or decision." According to the Policy, "[a]ll Related Claims shall be deemed a single Claim, and such Claim shall be deemed to be first made on the date the earliest such Related Claim is first made against the Insured, regardless of whether such date is before or during the Policy Period."

The Policy also states that, "[t]he Company shall have the right and duty to defend any covered Claim brought against the Insured even if the Claim is groundless, false or fraudulent . . . . [t]he Insured shall not admit or assume liability or settle or negotiate to settle any Claim or incur any Claims Expense without the prior written consent of the Company and the Company shall have the right to appoint counsel and to make such investigation and defense of a Claim as it deems necessary."

The Policy states on the declarations page and again on the first page of the Policy: "NOTICE: THIS IS A CLAIMS MADE POLICY. THIS POLICY APPLIES ONLY TO THOSE CLAIMS THAT ARE FIRST MADE AGAINST THE INSURED DURING THE POLICY PERIOD AND ARE THE RESULT OF WRONGFUL ACTS COMMITTED ON OR SUBSEQUENT TO THE RETROACTIVE DATE SPECIFIED IN ITEM 6 OF THE DECELERATIONS AND BEROE THE END OF THE POLICY PERIOD." The Policy states it is, "subject to the Declarations and the limitations, conditions, provisions and other terms of the Policy[.]"

In a section labeled "Conditions, Notice of Claims," the Policy states, "[t]he Insured, as a condition precedent to the obligations of the Company under this Policy, shall give written notice to the Company immediately, but in no event later than 60 days after the end of the Policy Period of any Claim made against the Insured."

Finally, the Policy provides, "[n]o action shall be brought against the Company, unless, as a condition precedent thereto, the Insured shall have fully ...

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