Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-14-02009/USCOURTS-ca7-14-02009-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

---

In the 

United States Court of Appeals 

For the Seventh Circuit ____________________

No. 14‐2009

WESTFIELD INSURANCE COMPANY,

an Ohio corporation,

Plaintiff‐Appellee,

v.

SCOT VANDENBERG, et al.,

Defendants‐Appellants.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 1:12‐cv‐00040 — Harry D. Leinenweber, Judge.

____________________

ARGUED DECEMBER 9, 2014 — DECIDED AUGUST 6, 2015

____________________

Before POSNER, RIPPLE, and KANNE, Circuit Judges.

RIPPLE, Circuit Judge. Scot Vandenberg was injured when

he fell from the upper deck of a yacht anchored in Lake

Michigan. He filed suit in Illinois state court, alleging that

the owners and operators of the yacht were negligent. He

eventually settled with the defendants. Under the settlement

agreement, the defendants agreed to pay Mr. Vandenberg

$25 million through the assignment of their claims against

Case: 14-2009 Document: 32 Filed: 08/06/2015 Pages: 20
2 No. 14‐2009

their insurers. Westfield Insurance Company (“Westfield”)

was the insurance provider for Rose Paving Company

(“Rose Paving”), one of the defendants. Westfield disputed

that its insurance policies with Rose Paving covered the

yacht accident and brought a declaratory judgment action in

the district court. Mr. Vandenberg, as the assignee of

Rose Paving, opposed the action. The district court granted

Westfield’s motion for judgment on the pleadings; it decided

that the Westfield policies did not provide coverage for

Mr. Vandenberg’s injury. Mr. Vandenberg asks that we

review that determination. We now hold that the accident

occurring on the yacht is not covered by the insurance

policies and accordingly affirm the district court’s judgment.

I

BACKGROUND

A.

In September 2009, Mr. Vandenberg was attending a five‐

hour cruise on a chartered yacht when he fell from the upper

deck. The accident occurred when he turned to respond to

someone calling his name and, as he shifted his weight, the

bench upon which he was sitting tipped over. The bench

was not secured to the deck, nor did the upper deck have a

railing. The fall left Mr. Vandenberg paralyzed from the

chest down. The yacht was owned by RQM, Inc. (“RQM”), a

closely held corporation owned by Michael Rose, Carl

Quanstrom, and Alan Rose. Mr. Vandenberg alleged that

Rose Paving, a company run by Alan Rose, was a booking

agent that maintained a marketing relationship for the

chartering of the yacht.

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No. 14‐2009 3

At the time of the accident, Rose Paving was insured by

Westfield under a commercial general liability (“CGL”)

policy and by an umbrella policy (collectively “the

policies”). The application for the CGL policy listed as

insureds Rose Paving Co., Rose Paving & Seal Coating Inc.,

and Bridgeview Investments.1 This application included a

“schedule of hazards,” which listed “concrete construction,”

“Contractors Executive Supervisors,” and “subcontractors.”2

The application also asked whether the applicant owned,

hired, or leased any watercraft. Rose Paving marked the

“no” box.3 The umbrella section of the application similarly

asked whether the applicant owned or leased a watercraft.

Rose Paving did not answer that question.

The insurance contract included “common policy decla‐

rations” applicable to both the CGL and umbrella policies,

which listed Rose Paving’s business as “concrete construc‐

tion.”4 The CGL policy declarations also contained a “gen‐

eral liability schedule,” which listed the premises and opera‐

tions covered by the contract and included “contractors” and

“subcontracted work—in connection with construction, re‐

construction, repair or erection of buildings.”5 The CGL and

                                                 

1 Bridgeview Investments was listed as an additional insured in its

capacity as the manager or lessor of Rose Paving’s business premises.

2 R.56‐2 at 49.

3 Id. at 50.  

4 R.56‐1 at 54.

5 Id. at 60. The CGL policy declarations determine the scope of both

policies. Although the umbrella policy did not contain a similar liability

(continued...)

Case: 14-2009 Document: 32 Filed: 08/06/2015 Pages: 20
4 No. 14‐2009

umbrella policies further provided that Westfield would be

legally obligated to pay for damages “to which this insur‐

ance applies.”6 They then listed certain exclusions, including

liability that “aris[es] out of the ownership, maintenance, use

or entrustment to others of any ... watercraft owned or op‐

erated by or rented or loaned to any insured.”7 Finally, the

policies provided that, by accepting coverage, Rose Paving

agreed that “[t]he statements in the Declarations are accurate

and complete,” that “[t]hose statements are based upon rep‐

resentations” Rose Paving made to Westfield, and that West‐

field “issued th[e] policy in reliance upon [those] representa‐

tions.”8

B.

Before Westfield filed this declaratory action, the parties

had commenced several actions, the particulars of which are

not pertinent to our decision today.9 Mr. Vandenberg

                                                                                                             

(...continued)

schedule, it applied only if Westfield had been “obligated to pay the

‘retained limit’” under the CGL policy. R.56‐2 at 25; see also id. at 29

(“‘Retained limit’ means the available limits of ‘underlying insurance’

scheduled in the Declarations ... .”).

6 R.56‐1 at 68 (CGL policy); R.56‐2 at 13 (umbrella policy).

7 R.56‐1 at 78; R.56‐2 at 15.

8 R.56‐1 at 86; R.56‐2 at 25.

9 To summarize briefly, in March 2010, Mr. Vandenberg filed an action

against RQM in the Circuit Court of Cook County, Illinois, seeking to

recover money damages for his injuries. In August 2010, RQM filed a

maritime action in federal court seeking exoneration from liability for the

(continued...)

Case: 14-2009 Document: 32 Filed: 08/06/2015 Pages: 20
No. 14‐2009 5

ultimately entered into a settlement agreement with the

defendants, disposing of the then‐pending state court and

maritime actions. Under this agreement, Rose Paving, along

with Carl Quanstrom, Michael Rose, Alan Rose,

Dough Management, and Location Finders International,

agreed to pay $25 million, to be satisfied solely through an

assignment of their rights of recovery under their insurance

policies. Rose Paving, Michael Rose, and Alan Rose agreed

to pay an additional $300,000 directly, and RQM’s insurer

agreed to pay $2 million. The settlement agreement was

accepted by the Circuit Court of Cook County, Illinois, on

October 10, 2012.

                                                                                                             

(...continued)

accident or a limitation of liability to the value of the yacht. The district

court enjoined Mr. Vandenberg from pursuing his claims against RQM

and ordered the parties to refrain from filing additional lawsuits.

Mr. Vandenberg then dismissed his first state court action. In August

2011, Mr. Vandenberg filed a second suit in the Circuit Court of Cook

County, Illinois. He alleged that the defendants were negligent because

they failed to provide railing or other protection on the top deck, allowed

Mr. Vandenberg to access the top deck of the yacht, failed to warn about

the lack of railings, and “[a]llowed a bench to be placed inches from the

rear of the unrailed top deck.” R.56‐1 at 41. The district court overseeing

RQM’s maritime action ordered Mr. Vandenberg to stay his state court

action.

Mr. Vandenberg also provided Westfield with an unfiled amended

complaint five months before settlement. The amended complaint

included allegations that Rose Paving negligently owned, maintained, or

used an unstable bench. The stay imposed by the district court in RQM’s

maritime action prevented Mr. Vandenberg from filing the amended

complaint.

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6 No. 14‐2009

In January 2012, Westfield filed this declaratory action. It

sought a determination that it owed no duty under

Rose Paving’s insurance policies to defend or to indemnify

any of the defendants in the state court action. Westfield

alleged that the policies did not cover the underlying

accident because the operation of a seventy‐five‐foot yacht

fell outside the scope of the risks and liabilities for which the

policies provided coverage. Alternatively, Westfield

maintained that the “watercraft exclusion” barred coverage

and that Rose Paving’s conduct released Westfield from

contractual liability under the policies.

Westfield filed a motion for judgment on the pleadings.

Mr. Vandenberg, as the assignee of Rose Paving, responded

with a combined response and cross‐motion for summary

judgment. The district court granted Westfield’s motion for

judgment on the pleadings and denied Mr. Vandenberg’s

motion for summary judgment. The court concluded that the

insurance policies covered only Rose Paving’s construction

business. The court relied on the business description

provided in the common policy declarations, the “schedule

of hazards” listed in the application, and Rose Paving’s

representation that it did not own, hire, or lease any

watercraft.

The district court later denied Mr. Vandenberg’s motion

to alter the judgment under Federal Rule of Civil

Procedure 59(a). Mr. Vandenberg now appeals the court’s

Case: 14-2009 Document: 32 Filed: 08/06/2015 Pages: 20
No. 14‐2009 7

decision granting Westfield’s motion for judgment on the

pleadings.10

II

DISCUSSION

Mr. Vandenberg asks us to review the district court’s

decision on the scope of the Westfield insurance policies. He

maintains that the policies provide coverage for his injuries

because of the broad terms employed in the text. More

precisely, he takes the view that, because the Westfield

policies do not exclude expressly accidents such as the one

on the yacht, the accident and his injuries are covered.

Westfield responds that the policies apply only to Rose

Paving’s construction business and, in the alternative, that

the accident falls under the watercraft exclusion contained in

the policies.11

The interpretation of an insurance policy is a matter of

state law. See Koransky, Bouwer & Poracky, P.C. v. Bar Plan

Mut. Ins. Co., 712 F.3d 336, 341 (7th Cir. 2013). Because the

parties agree that Illinois law applies, we look to the

                                                 

10 The district court had jurisdiction pursuant to 28 U.S.C. § 1332. We

have jurisdiction under 28 U.S.C. § 1291.

11 Westfield also maintains that it never breached its duty to defend

Rose Paving because it filed a declaratory action and that it is not bound

by the settlement because the settlement was overtly collusive, breached

multiple policy conditions, and forfeited coverage. Because we decide

that Westfield prevails under its first two theories, we do not address its

remaining contentions.

Case: 14-2009 Document: 32 Filed: 08/06/2015 Pages: 20
8 No. 14‐2009

decisions of the Supreme Court of Illinois for guidance. See

id. We review de novo the district court’s decision granting a

Rule 12(c) motion for judgment on the pleadings. See Matrix

IV, Inc. v. Am. Nat’l Bank & Tr. Co., 649 F.3d 539, 547 (7th Cir.

2011). For the reasons set out more fully below, we agree

with the district court that the policies do not provide

coverage for Mr. Vandenberg’s accident. We also conclude

that Rose Paving’s use of the yacht was excluded from

coverage by the policies’ watercraft exclusion.

A.

We first address the scope of the Westfield insurance

policies. Mr. Vandenberg makes two major arguments to

support his interpretation of the policies. First, he submits

that the business designation, on its own, is insufficient to

limit the scope of the policies. Second, he contends that,

under Illinois law, an insurer must “expressly exclude” a

risk from the insurance policy if the insurer does not intend

to insure against that particular risk.12 He therefore

maintains that because the Westfield policies do not

expressly exclude non‐construction‐related injuries, the

policies provide coverage.

Under Illinois law, “[a]n insurance policy is a contract,

and the general rules governing the interpretation of other

types of contracts also govern the interpretation of insurance

policies.” Hobbs v. Hartford Ins. Co. of the Midwest, 823 N.E.2d

561, 564 (Ill. 2005). When interpreting an insurance policy,

                                                 

12 Appellant’s Br. 26.

Case: 14-2009 Document: 32 Filed: 08/06/2015 Pages: 20
No. 14‐2009 9

“our primary objective is to ascertain and give effect to the

intention of the parties, as expressed in the policy language.”

Id.; accord Crum & Forster Managers Corp. v. Resolution Tr.

Corp., 620 N.E.2d 1073, 1078 (Ill. 1993) (“[T]he primary

function of the court is to ascertain and enforce the

intentions of the parties as expressed in the agreement.”). To

achieve that goal, we “must construe the policy as a whole,

taking into account the type of insurance for which the

parties have contracted, the risks undertaken and purchased,

the subject matter that is insured and the purposes of the

entire contract.” Crum & Forster Managers Corp., 620 N.E.2d

at 1078; accord Oakley Transp., Inc. v. Zurich Ins. Co., 648

N.E.2d 1099, 1106 (Ill. App. Ct. 1995) (noting that “an

insurance policy is not to be interpreted in a factual vacuum

and without regard to the purpose for which the insurance

was written”).

After reviewing the insurance application and the terms

of the policies, we conclude that the district court correctly

determined that Westfield and Rose Paving intended to

enter into an insurance agreement under which Westfield

provided coverage only for Rose Paving’s construction‐

related business. We begin with the actual text of the

policies. In that respect, we first note that the policies’

“common policy declarations” list Rose Paving’s business as

“concrete construction.”13 The “general liability schedule”

also explains that Westfield is providing coverage for work

done “in connection with construction, reconstruction, repair

                                                 

13 R.56‐1 at 54.

Case: 14-2009 Document: 32 Filed: 08/06/2015 Pages: 20
10 No. 14‐2009

or erection of buildings.”14 The policies thus reflect,

explicitly, the parties’ intent to insure only Rose Paving’s

construction business.

The situation before us today is closely akin to the one

before the Appellate Court of Illinois in Heritage Insurance

Co. v. Bucaro, 428 N.E.2d 979 (Ill. App. Ct. 1981). There, the

court determined that similar representations were sufficient

to limit the scope of an insurance policy. The court

determined that the underlying insurance policy did not

cover automobile acquisitions because “[t]he activities

enumerated in the policy concern[ed] operations relating to

automobile dismantling.” Id. at 982 (emphasis in original).

The court relied on the description of hazards, which

“include[d] salvage or junking of parts, and store

operations,” and that the policy listed the insured’s business

as “Automobile Dismantling.” Id. at 981. “Due to the limited

nature of the policy purchased,” the court concluded that it

was “implausible to assume that protection was expected for

liability of the type that has been created here.” Id. at 982.

The Illinois court’s methodology and conclusion reinforces

our view of the proper interpretation of the Westfield

policies.

The insurance application also supports our

interpretation. See Dash Messenger Serv., Inc. v. Hartford Ins.

Co. of Ill., 582 N.E.2d 1257, 1263 (Ill. App. Ct. 1991) (relying

on the insurance application to determine the risks for which

the parties contracted); see also A.D. Desmond Co. v. Jackson

Nat’l Life Ins. Co., 585 N.E.2d 1120, 1122 (Ill. App. Ct. 1992)

                                                 

14 Id. at 60.

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No. 14‐2009 11

(“When, as in this case, an insurance policy is issued which

makes the application for insurance part of the policy, the

application becomes and is construed as part of the entire

insurance contract.”). The policies at issue here provide that

Rose Paving agreed that “[t]he statements in the

Declarations are accurate and complete,” that “[t]hose

statements are based upon representations” Rose Paving

made to Westfield, and that Westfield “issued th[e] policy in

reliance upon [those] representations.”15 Rose Paving stated

in its application that it was engaged in the construction

business. Consistent with that representation, the parties

listed in the schedule of hazards the risks that they intended

to cover, including “concrete construction,” ”Contractors

Executive Supervisors,” and “subcontractors.”16 Rose

Paving’s representations in the insurance application

therefore reinforce our construction of the text of the

insurance policies and our conclusion that the parties did

not intend to cover an accident occurring on the yacht.

Mr. Vandenberg submits that it is inappropriate to rely

on the business designation in the insurance contract. We

need not determine whether, in all cases, Illinois courts

would consider a business designation contained in an

insurance policy, standing alone, to be a sufficient indication

of party intent to circumscribe the scope of an insurance

agreement. Here, our decision need not rely solely on the

business designation. As we have noted earlier, the business

designation and the general liability schedule contained in

                                                 

15 R.56‐1 at 86; R.56‐2 at 25.

16 R.56‐2 at 49.

Case: 14-2009 Document: 32 Filed: 08/06/2015 Pages: 20
12 No. 14‐2009

the contract, as well as the incorporated representations in

the insurance application, express, uniformly, the parties’

intent to limit the scope of the insurance policies to Rose

Paving’s known business, construction. See Heritage Ins. Co.,

428 N.E.2d at 981–82 (holding that, because the description

of hazards included only “Automobile Dismantling” and the

business of the insured was listed as “Automobile

Dismantling,” “it is evident that the policy provides

coverage only for occurrences arising out of specified

activities [automobile dismantling] taking place on the

insured premises”). The district court correctly recognized

that Rose Paving “operated multiple independent businesses

(paving and yacht charters), purchased insurance for only

one of those businesses (paving), and later sought coverage

for a different business (yacht charters).”17 In this case,

therefore, the business designation contained in the

insurance contract, when read with the other evidence of the

parties’ intent, substantiates forcefully that the parties

entered into an agreement to insure only Rose Paving’s

construction business.

Nor can we accept Mr. Vandenberg’s contention that the

policies provide coverage for any and all liabilities unless

they are explicitly excluded. In assessing this submission,

our task is, of course, to determine the intent of the parties,

as expressed by the insurance policy. See Hobbs, 823 N.E.2d

at 564; Crum & Forster Managers Corp., 620 N.E.2d at 1078.

Here, we believe that the text and structure of the policies

makes clear that the parties intended to insure against the

                                                 

17 R.89 at 10.

Case: 14-2009 Document: 32 Filed: 08/06/2015 Pages: 20
No. 14‐2009 13

risks of operating a construction company. If the parties

intended to exclude a risk associated with running such a

business, we would expect them to have recited that

exclusion in the contract. A policy does not need to exclude

from coverage liability that was not contemplated by the

parties and not intended to be covered under their

agreement. See Dash Messenger Serv., Inc., 582 N.E.2d at 1263

(noting that an insurer should expressly exclude a risk from

coverage “if an insurer does not intend to insure against a

risk likely to be inherent in the insured’s business” (emphasis

added)). Because Rose Paving’s policies were manifestly

designed to cover only its construction business, however,

we would not expect those policies to address risks not

inherent in that business.18 To hold otherwise would require

                                                 

18 Other courts, when faced with analogous circumstances, have adopted

similar interpretations. See Steadfast Ins. Co. v. Dobbas, No. CIV. S‐05‐0632

FCD JFM, 2008 WL 324023, at *6 (E.D. Cal. Feb. 5, 2008) (holding that,

because the policy describes the business of the insured as “Railroad

Contractor” and “[t]he Declarations page tailored for this particular

policy limited the coverage of the policy based upon the business

description,” the “policy unambiguously provide[d] coverage ... only for

injuries relating to the business of ‘Railroad Contractor’” (emphasis in

original)); Gemini Ins. Co v. S & J Diving, Inc., 464 F. Supp. 2d 641, 650

(S.D. Tex. 2006) (holding that the insurance policy applied “only to

marine survey operations” and not to the company’s involvement with

an outdoor rock concert because it would be unreasonable “to conclude

that the policy covers any and all activity, not specifically excluded,

when the insured negotiated as, and described itself to be, a marine

operation”); Cooper v. RLI Ins. Co., No. CV 9403617128, 1996 WL 367721,

at *8 (Conn. Super. Ct. June 3, 1996) (holding that the CGL policy “does

not provide coverage for accidents associated with business activity

different from the business activity for which coverage was initially

sought”); cf. Phila. Indem. Ins. Co. v. 1801 W. Irving Park, LLC, No. 11 C

(continued...)

Case: 14-2009 Document: 32 Filed: 08/06/2015 Pages: 20
14 No. 14‐2009

the parties to conjure up and exclude explicitly any and all

activities in which Rose Paving might engage. Such a

speculative exercise in hypotheticals would be nonsensical.

In sum, Mr. Vandenberg has not provided a cogent

rationale to support his conclusion that Westfield and

Rose Paving intended to enter into an insurance contract of

endless scope, covering any and all businesses operated by

Rose Paving. Construing the policies as a whole, we

conclude that both Westfield and Rose Paving intended that

the insurance policies provide coverage only for Rose

Paving’s construction‐related business. Accordingly, the

policies do not provide coverage for Mr. Vandenberg’s

injury on the yacht.19

                                                                                                             

(...continued)

1710, 2012 WL 3482260, at *5 (N.D. Ill. Aug. 13, 2012) (holding that the

insurance policy provided coverage because the insured “was a single

entity that performed multiple services as a part of its condominium

development business—which was a named insured on the Policies”).

19 Mr. Vandenberg also submits that, because the umbrella policy does

not have the same limitations as the CGL policy, it was intended to apply

beyond Rose Paving’s construction business. He relies on the absence of

a business description in the separate umbrella policy document. But, as

Westfield points out, the identification of Rose Paving’s business is

contained in a document labeled “common policy declarations” that

summarizes the entire agreement. R.56‐1 at 54. Specifically, the

document states that “this policy consists of the following coverage

parts” and lists the “commercial umbrella coverage part.” Id.

Mr. Vandenberg fails to invite our attention to any documentation that

would support a determination that Westfield, through the umbrella

policy, intended to insure activities beyond Rose Paving’s construction

business.

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No. 14‐2009 15

B.

The policies’ watercraft exclusion provides an

independent basis for affirming the district court’s

judgment. The Westfield policies exclude from coverage

“‘[b]odily injury’ ... arising out of the ownership,

maintenance, use or entrustment to others of

any ... watercraft owned or operated by or rented or loaned

to any insured.”20 In his state court complaint,

Mr. Vandenberg alleged that Rose Paving negligently had

“[f]ailed to provide railing or equivalent protection of the

top deck peripheral areas which were accessible to

passengers,” “[f]ailed to prevent

SCOT VANDENBERG ... from accessing the top deck of the

yacht,” “[a]llowed ... SCOT VANDENBERG[] to access

areas of the top deck which did not have railings or

equivalent protection,” “[f]ailed to warn ... SCOT

VANDENBERG[] of the lack of railings or equivalent

protection on the top peripheral areas of the top deck,” and

“[a]llowed a bench to be placed inches from the rear of the

unrailed top deck.”21

                                                 

20 Id. at 78; R.56‐2 at 15.

21 R.45‐1 at 8–9. In his unfiled amended complaint, Mr. Vandenberg

alleged that Rose Paving negligently “[p]rovided a wobbly bench to be

used by SCOT VANDENBERG from which he fell.” R.13‐1 at 4.

However, an insurer’s duty to defend is limited to those allegations

contained in the operative complaint. See Mass. Bay Ins. Co. v. Unique

Presort Servs., Inc., 679 N.E.2d 476, 478 (Ill. App. Ct. 1997) (“It is well

settled that the allegations of the complaint are dispositive of the

insurer’s duty to defend and not the findings of the underlying

(continued...)

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16 No. 14‐2009

Mr. Vandenberg submits that, under Illinois law, the

negligent maintenance, ownership, and use of the bench was

a concurrent cause of his injuries and, therefore, the

watercraft exclusion does not preclude coverage. Westfield

maintains that the watercraft exclusion bars coverage under

the policies because the use of the yacht was intertwined

inextricably with all theories of recovery.  

We have recognized previously that, under Illinois law,

an insurance policy does not provide coverage for claims

that are “intertwined” with an excluded liability. See

Nautilus Ins. Co. v. 1452‐4 N. Milwaukee Ave., LLC, 562 F.3d

818, 822 (7th Cir. 2009). In Nautilus, we addressed whether a

claim seeking compensation for property damage was

barred by the insurance policy’s contractor‐subcontractor

exclusion. See id. at 821–23. We concluded that “the presence

of an alternative theory of relief ... is insufficient to trigger

coverage” when the plaintiff does not allege an “injury

independent of the” injury sustained as a result of the

excluded liability. Id. at 823. Thus, we found it determinative

                                                                                                             

(...continued)

litigation.”); Oakley Transp., Inc. v. Zurich Ins. Co., 648 N.E.2d 1099, 1102

(Ill. App. Ct. 1995) (noting that a “court must ordinarily confine its

inquiry to a comparison of the allegations of the underlying complaint

and the relevant provisions of the insurance policy in determining a duty

to defend”). Indeed, the Appellate Court of Illinois recently decided that

Mr. Vandenberg’s unfiled complaint should not be considered under the

doctrine of “true but unpleaded facts.” See Md. Cas. Co. v. Dough Mgmt.

Co., No. 1‐14‐1520, 2015 WL 4002569, at *9 (Ill. App. Ct. June 30, 2015).

The court held “that the self‐serving allegations in an unfiled amended

complaint cannot be presumed true and are not the type of facts

intended to be covered by the true but unpleaded facts doctrine.” Id.

Case: 14-2009 Document: 32 Filed: 08/06/2015 Pages: 20
No. 14‐2009 17

that “the statutory claims in the underlying complaints

[sought] recovery for the same loss as all the other claims—

the property damage arising out of the faulty excavation

performed by [the defendant’s] contractors and

subcontractor—and coverage for that property damage is

excluded by the contractor‐subcontractor exclusion.” Id. at

822 (emphasis in original).

In reaching our conclusion in Nautilus, we relied, in part,

on the decision of the Supreme Court of Illinois in Northbrook

Property & Casualty Co. v. Transportation Joint Agreement, 741

N.E.2d 253 (Ill. 2000). In Northbrook, the court held that a

policy exclusion bars coverage for injuries associated with

excluded conduct, even if a plaintiff proceeds under an

alternative theory of recovery that implicates the excluded

conduct only indirectly. The Illinois court explained:

The policy excludes injuries arising from the

school districts’ use or operation of a motor

vehicle. Allegations that the school districts

inadequately planned and inspected bus routes

or failed to warn bus drivers of potential

hazards along the routes are nothing more

than rephrasings of the fact that the students’

injuries arose from the school districts’ use or

operation of a motor vehicle. Contrary to the

appellate court’s holding, the students’

complaints failed to allege that the injuries

arose from events wholly independent of any

negligent operation of the bus. Northbrook

therefore has no duty to defend the school

districts in the underlying lawsuits.

Case: 14-2009 Document: 32 Filed: 08/06/2015 Pages: 20
18 No. 14‐2009

Id. at 254–55 (citation omitted) (internal quotation marks

omitted). Thus, in order to succeed, the allegations in

Mr. Vandenberg’s complaint must be “wholly independent

of any negligent operation of the [watercraft].”22 Id. at 254

(internal quotation marks omitted).

                                                 

22 The decisions of the Appellate Court of Illinois reflect the distinction

between dependent and independent claims. Compare Mass. Bay Ins. Co.,

679 N.E.2d at 479 (“In this case, the underlying plaintiffs’ count XXVII is

specifically dependent upon the fact that their injuries occurred in a

vehicle accident. This drug‐testing regulation would not apply to the

underlying plaintiffs’ negligence action if their injuries had been caused

by some instrumentality other than a vehicle. Thus, the negligence

alleged in count XXVII is inextricably intertwined with the policy’s

excluded instrumentality, namely, the vehicle.”), with Mount Vernon Fire

Ins. Co. v. Heaven’s Little Hands Day Care, 795 N.E.2d 1034, 1043 (Ill. App.

Ct. 2003) (“[W]e find after reviewing the allegations in the underlying

complaint that the victim’s death resulted from nonvehicular conduct on

the part of Heaven’s Little Hands and its employees. The allegations in

the complaint assert multiple theories of negligence including a failure to

maintain a proper census of the children attending the day‐care facility.

Had Leon kept an accurate head count of the children inside the van or if

someone inside Heaven’s Little Hands had noticed Tyrelle’s absence

soon after the van in question had arrived at the day care facility, Tyrelle

would not have died. In short, the van is the situs, rather than the cause,

of Tyrelle’s death.”), and Louis Marsch, Inc. v. Pekin Ins. Co., 491 N.E.2d

432, 437 (Ill. App. Ct. 1985) (“Thus if a trier of fact concluded that Marsch

had failed in its duty to Chizmar under the Road Construction Injuries

Act, the fact that the dump truck was the instrumentality which

ultimately injured Chizmar would be but one of two concurrent causes

of the injury, one excluded under the Aetna policy, the other not so

excluded. If the liability of an insured arises from negligent acts which

constitute non‐auto‐related conduct, the policy should be applicable

regardless of the automobile exclusion or the fact that an automobile was

involved in the occurrence.”), and U.S. Fid. & Guar. Co. v. State Farm Mut.

Auto. Ins. Co., 437 N.E.2d 663, 666 (Ill. App. Ct. 1982) (“In the present

(continued...)

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No. 14‐2009 19

The Appellate Court of Illinois recently reaffirmed these

principles and applied them to the same state court

complaint at issue here. In Maryland Casualty Co. v. Dough

Management Co., No. 1‐14‐1520, 2015 WL 4002569 (Ill. App.

Ct. June 30, 2015), the court addressed whether an

identically worded watercraft exclusion in an insurance

contract barred coverage for the injuries that

Mr. Vandenberg sustained on the yacht. See id. at *7. In that

action, Maryland Casualty Co., the insurer that had

provided coverage to Dough Management, maintained that

it had no duty to defend or indemnify Dough Management

under its insurance policy. See id. at *2–3. The court noted

that the “policy specifically exclude[d] coverage for any

bodily injury ‘arising out of the ownership, maintenance,

use, or entrustment to others of any ... watercraft owned or

operated by or rented or loaned to any insured.’” Id. at *7

(second alteration in original). The court concluded that “the

Vandenbergs only alleged [in their state court complaint]

that the insureds failed to properly maintain the yacht by

failing to provide a railing on the top deck, allegations that

fall squarely under the watercraft exclusion.” Id. “Therefore,

based on the personal injury complaint,” the court

continued, “the Vandenbergs’ claims are excluded under the

CGL policy.” Id.

                                                                                                             

(...continued)

case, the complaint alleges negligent acts which are potentially within

the coverage of the policy, such as the failure to adequately supervise the

children and the negligent operation of the day care center. These

alleged acts are separate and distinct from any allegations relating to the

negligent operation of the automobile.”).

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20 No. 14‐2009

With the guidance of the Appellate Court of Illinois, we

reach the same conclusion. Mr. Vandenberg fell from the top

deck of the yacht after the bench on which he was sitting

tipped over. Because the top deck of the yacht did not have a

railing, he fell a substantial distance, resulting in his injuries

and paralysis. In his state court complaint, Mr. Vandenberg

recognized that his injury would not have occurred if

Rose Paving had provided a railing or prevented him from

accessing the top deck of the yacht. Thus, the accident and

Mr. Vandenberg’s resulting injuries were not “wholly

independent of” the negligent operation, maintenance, or

use of the yacht. Northbrook Prop. & Cas. Co., 741 N.E.2d at

254 (internal quotation marks omitted). Mr. Vandenberg’s

injuries therefore come under the policies’ watercraft

exclusion, and the policies do not provide coverage.

Conclusion

The judgment of the district court is affirmed.

AFFIRMED

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