2018 WL 4469017

United States District Court, N.D. Illinois, Eastern Division.
NATIONAL CASUALTY COMPANY, Plaintiff,
v.
SOUTH SHORE IRON WORKS, INC., Defendant.
No. 16-cv-07479
|
Filed: 09/14/2018
Hon. Charles R. Norgle

OPINION AND ORDER
CHARLES RONALD NORGLE, Judge United States District Court
*1 Plaintiff National Casualty Company (“National Casualty”) brings this declaratory judgment action against Defendant South Shore Iron Works, Inc. (“South Shore”), seeking a determination that National Casualty has no duty to defend or indemnify South Shore in a personal injury lawsuit in the Circuit Court of Cook County, Delgado v. South Shore, et al., Case No. 2013 L 013458 (the “Underlying Lawsuit”). National Casualty initially named Julio Delgado (“Delgado”) and GD Carriers, Inc. (“GD Carriers”) as defendants in the instant action; however, by way of the parties’ stipulated agreement, both Delgado and GD Carriers were dismissed from this action, leaving South Shore as the sole defendant. South Shore has filed a three count Counterclaim: Count I seeks a determination that National Casualty has a duty to defend and indemnify South Shore in the Underlying Lawsuit; Count II sets forth a claim for breach of contract; and Count III sets forth a “bad faith” claim under 215 ILCS § 5/155. Before the Court are the parties’ cross-motions for summary judgment. For the following reasons, the Court determines that National Casualty breached its duty to defend South Shore in the Underlying Lawsuit and has a duty to indemnify South Shore for the settlement of the Underlying Lawsuit; however, South Shore’s “bad faith” counterclaim under 215 ILCS § 5/155 is dismissed with prejudice. Accordingly, National Casualty’s motion is granted in part and denied in part; and South Shore’s motion is granted in part and denied in part.

I. BACKGROUND
South Shore is a structural steel company located in Chicago, Illinois. GD Carriers is a trucking company located in Chicago, Illinois. At all times relevant, Delgado was an employee of GD Carriers.

In 2013, South Shore was providing steel components for a job site in Rochelle, Illinois (the “Rochelle Project”). South Shore manufactured the steel components and then loaded the components onto flatbed trailers at its facility in Chicago. South Shore did not transport the loaded trailers to the Rochelle Project. Rather, South Shire hired various trucking companies—including GD Carriers—to transport the loaded trailers.

On November 4, 2013, Delgado drove a tractor owned by GD Carriers to South Shore’s facility to pick up a trailer loaded with steel beams for delivery to the Rochelle Project. After Delgado arrived at South Shore’s premises, he connected GD Carrier’s tractor to the trailer that he was assigned to transport. At the time Delgado connected GD Carrier’s tractor to the trailer, it was still being loaded with steel beams by South Shore employees. Once the trailer was fully loaded, Delgado began securing the load of steel beams for transport to the Rochelle Project. GD Carrier’s tractor remained parked and connected to the trailer while Delgado was attempting to secure the load—the tractor/trailer never moved. While Delgado was attempting to secure the load on the trailer, he fell to the ground and was injured.

On November 25, 2013, Delgado filed the Underlying Lawsuit against South Shore and other parties in the Circuit Court of Cook County. Delgado’s fourth amended complaint in the Underlying Lawsuit, filed on April 15, 2016, alleged that his injury was the result of South Shore’s negligent acts or omissions, including: South Shore “[i]mproperly loaded the flatbed trailer requiring [Delgado] to climb on top of the load in order to secure it; South Shore “[p]ainted the steel beams which [Delgado] was to haul, causing them to become dangerously slippery”; and South Shore “failed to warn [Delgado] of the dangerously slippery condition of the recently painted steel beams.” Pl.’s SOMF ¶¶ 27-28. Ex. C (the “Underlying Complaint”) ¶¶ 5-9. Delgado also alleged that on the date of his injury he was “working as a truck driver employed by GD Carriers…assigned to pick up a trailer of steel beams at…South Shore[’s] plant,” and that he “was a business invitee on the premises of [South Shore] for the benefit of [South Shore].” Id. ¶¶ 2-3.

*2 Prior to Delgado’s injury, National Casualty issued a commercial auto policy to GD Carrier’s, Policy Number OP00042008, effective from July 15, 2013 to July 15, 2014, with a liability coverage limit of $1,000,000 (the “Policy”). The Policy provides as follows, in relevant part:
1. WHO IS AN INSURED
The following are “insureds”:
a. You for any covered “auto”.
b. Anyone else while using with your permission a covered “auto” you own, hire or borrow except:
(4) Anyone other than your “employees”, partners (if you are a partnership), members (if you are a limited liability company), a lessee or borrower of a covered “auto” or any of their “employees”, while moving property to or from a covered “auto”.
d. The owner or anyone else from whom you hire or borrow a covered “auto” that is a “trailer” while the “trailer” is connected to another covered “auto” that is a power unit, or, if not connected, is being used exclusively in your business.
Compl., Ex. A at 64.

By letter dated June 18, 2015, South Shore tendered the Underlying Lawsuit to National Casualty for a defense and indemnification. By letter dated July 31, 2015, National Casualty denied South Shore’s tender of the Underlying Lawsuit on the basis that South Shore did not qualify as an “insured” under the Policy. National Casualty did not defend South Shore in the Underlying Lawsuit based on a reservation of rights or otherwise. National Casualty filed the instant declaratory judgment action on July 22, 2016.

On January 9, 2018, after the parties filed their initial briefs for the present motions, South Shore settled the Underlying Lawsuit with Delgado for $2.5 million. Pl.’s Resp. to Def.’s SOMF, Ex. H. That same day, the Circuit Court of Cook County dismissed the Underlying Lawsuit with prejudice and retained jurisdiction only to effectuate the settlement. Id., Ex. I.

II. DISCUSSION

A. Standard of Review
“Summary judgment is appropriate when ‘the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’ ” Northfield Ins. Co. v. City of Waukegan, 701 F.3d 1124, 1128 (7th Cir. 2012) (quoting Fed. R. Civ. P. 56(a)); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Wells v. Coker, 707 F.3d 756, 760 (7th Cir. 2013) (internal quotation marks and citation omitted). “On summary judgment a court may not make credibility determinations, weigh the evidence, or decide which inferences to draw from the facts; these are jobs for a factfinder.” Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). The Court must view “the record in the light most favorable to the nonmovant and [avoid] the temptation to decide which party’s version of the facts is more likely true.” Id.

Where parties file cross-motions for summary judgment, the standard of decision does not change. Selective Ins. Co. of S.C. v. Target Corp., 845 F.3d 263, 265 (7th Cir. 2016), as amended (Jan. 25, 2017). The Court “take[s] the motions one at a time,” Black Earth Meat Mkt., LLC v. Vill. of Black Earth, 834 F.3d 841, 847 (7th Cir. 2016), and “construe[s] all facts and inferences therefrom in favor of the party against whom the motion under consideration is made.” Target Corp., 845 F.3d at 265 (internal quotation marks and citation omitted).

B. National Casualty Has Breached Its Duty to Defend South Shore and Has a Duty to Indemnify South Shore For the Settlement of the Underlying Lawsuit
*3 The dispositive issue in this case is whether South Shore qualifies as an insured under the language of the Policy. As explained infra, if South Shore qualifies as an insured, National Casualty has breached its duty to defend South Shore and owes a duty to indemnify South Shore, up to the Policy limit of $1,000,000, for the settlement of the Underlying Lawsuit. There is also a secondary issue raised by the parties regarding whether the Court may examine evidence beyond the Underlying Complaint in determining National Casualty’s duty to defend South Shore.

National Casualty argues that South Shore does not qualify as an insured under the Policy because: (1) South was not “using” GD Carrier’s tractor, as required by the Policy; (2) even if South Shore was “using” GD Carrier’s tractor, coverage is precluded by an exception in the Policy that removes insured status for certain persons, including South Shore, while “moving property” to or from a covered auto; and (3) GD Carriers did not “hire” or “borrow” the trailer from South Shore, as required by the Policy. Additionally, accordingly to National Casualty, the Court may properly consider evidence outside of the Underlying Complaint in determining its duty to defend and indemnify.

Conversely, South Shore argues that it does qualify as an insured under the Policy because: (1) South Shore was “using” GD Carrier’s tractor when Delgado was injured; (2) the Policy’s “moving property” exception does not apply; and (3) GD Carriers was “borrowing” the trailer in question from South Shore. Further, according to South Shore, the Court is constrained to examining the Underlying Complaint alone in determining whether National Casualty breached its duty to defend. Finally, South Shore argues that National Casualty is estopped from raising coverage defenses due to its delay in filing this action; or, even if National Casualty is not estopped from raising coverage defenses, it still has a duty to indemnify South Shore based on the undisputed facts.

1. Illinois Law Applies
As an initial matter, there is a choice of law issue to resolve. In diversity cases, federal courts apply federal procedural law and state substantive law. Allen v. Cedar Real Estate Grp., LLP, 236 F.3d 374, 380 (7th Cir.2001) (citing Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938)). “Questions of insurance-policy interpretation are substantive.” Natl. Am. Ins. Co. v. Artisan and Truckers Cas. Co., 796 F.3d 717, 723 (7th Cir. 2015). Here, the parties agree that Illinois law applies in this case, and there is no reason for the Court to conclude otherwise.

2. Duty to Defend
“An insurer’s duty to defend its insured is much broader than its duty to indemnify its insured.” Gen. Agents Ins. Co. of Am., Inc. v. Midwest Sporting Goods Co., 215 Ill. 2d 146, 155 (Ill. 2005). “In a declaratory judgment action… where the issue is whether the insurer has a duty to defend, a court ordinarily looks first to the allegations in the underlying complaint and compares those allegations to the relevant provisions of the insurance policy.” Pekin Ins. Co. v. Wilson, 237 Ill. 2d 446, 455 (Ill. 2010). “If the underlying complaint alleges facts within or potentially within policy coverage, an insurer is obligated to defend its insured even if the allegations are groundless, false or fraudulent.” Midwest Sporting Goods Co., 215 Ill. 2d at 155. “Under Illinois law, courts liberally construe both the terms of an insurance policy and the allegations in the underlying complaint in favor of the insured.” Natl. Am. Ins. Co. v. Artisan and Truckers Cas. Co., 796 F.3d 717, 723 (7th Cir. 2015).

*4 “[U]nder certain circumstances, [a court may] look beyond the underlying complaint in order to determine an insurer’s duty to defend.” Wilson, 237 Ill. 2d at 459. When an insurer files a declaratory proceeding challenging its duty to defend, the court may consider evidence beyond the underlying complaint so long as the court does not determine an issue critical to the underlying action. Id. at 1020 (citing Fid. & Cas. Co. of New York v. Envirodyne Engineers, Inc., 122 Ill. App. 3d 301, 304–05 (1st Dist. 1983)). “To require the trial court to look solely to the complaint in the underlying action to determine coverage would make the declaratory proceeding little more than a useless exercise possessing no attendant benefit and would greatly diminish a declaratory action’s purpose of settling and fixing the rights of the parties.” Id. (quoting Envirodyne Engineers, Inc., 122 Ill. App. 3d at 304–05).

“The construction of an insurance policy’s provisions is a question of law.” Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90 (Ill. 1992). “When construing the language of an insurance policy, a court’s primary objective is to ascertain and give effect to the intentions of the parties as expressed by the words of the policy.” Rich v. Principal Life Ins. Co., 226 Ill. 2d 359, 371 (Ill. 2007). “Because the court must assume that every provision was intended to serve a purpose, an insurance policy is to be construed as a whole, giving effect to every provision.” Id. “If the words used in the policy are clear and unambiguous, they must be given their plain, ordinary, and popular meaning.” Cent. Illinois Light Co. v. Home Ins. Co., 213 Ill. 2d 141, 153 (Ill. 2004). “However, if the words used in the policy are reasonably susceptible to more than one meaning, they are ambiguous and will be strictly construed against the drafter.” Id.

a. The Court may consider evidence beyond the Underlying Complaint
The Court must first resolve whether it may consider evidence beyond the Underlying Complaint in determining whether National Casualty had a duty to defend South Shore. As discussed above, under Illinois law, the Court may consider evidence beyond the underlying complaint so long as the Court does not determine an issue critical to the Underlying Action. Wilson, 237 Ill. 2d at 459. Here, the Underlying Lawsuit has been settled. Therefore, there is no danger of the Court improperly resolving any issues critical to Underlying Lawsuit. Moreover, as discussed infra, the undisputed material facts at issue in the instant matter concern whether South Shore was “using” GD Carrier’s tractor and whether the loading of the steel beams was complete when Delgado fell—these were not critical issues in the Underlying Lawsuit. Accordingly, contrary to South Shore’s argument, the Court may consider evidence beyond the Underlying Complaint in determining whether National Casualty breached its duty to defend. However, the evidence outside of the Underlying Complaint does not benefit National Casualty, because the undisputed facts show that National Casualty breached its duty to defend South Shore.

b. South Shore was “using” GD Carrier’s tractor
National Casualty argues that it had no duty to defend because South Shore does not qualify as an insured under the Policy. The Policy provides, in relevant part, the following definition for who qualifies as an “insured”: “Anyone…while using with your permission a covered ‘auto’ you own, hire or borrow.” Compl., Ex. A at 64 (emphasis added).

There is no dispute that the tractor driven by Delgado to South Shore’s facility was a covered auto owned by GD Carriers. However, the parties disagree as to whether South Shore was “using” GD Carrier’s tractor at the time of Delgado’s injury. The Policy does not define the term “using.”

*5 Both parties point to Schultz v. Illinois Farmers Ins. Co., 237 Ill. 2d 391, 401 (Ill. 2010) as providing the relevant definition for “using.” In Schultz, the Illinois supreme court held that the plain and ordinary meaning of the word “use” is to “EMPLOY, UTILIZE, APPLY, [and] AVAIL. [.It] is general and indicates any putting to service of a thing.” Id. (emphasis in original). The court explained that “[c]onsistent with this definition, the use of an automobile has been held to denote its employment for some purpose of the user.” Id. Moreover, the court held that “ ‘use’ is not limited to operating or driving a motor vehicle. It also includes riding in one as a passenger.” Id. at 402.

Here, National Casualty argues that because GD Carrier’s tractor remained parked while it was being loaded, it was never “put to service,” and therefore South Shore was not “using” the tractor at time of Delgado’s injury. South Shore, on the other hand, argues that it was “using” the tractor to transport steel beams to the Rochelle Project, which necessarily included the tractor being connected to the trailer and securing the load for transport. The Court agrees with South Shore.

There is no dispute that South Shore hired GD Carriers to provide the tractor to transport a load of steel to the Rochelle Project. There is also no dispute that prior to Delgado’s injury, he connected the tractor to the trailer while it was being loaded at South Shore’s facility and that he was securing the load of steel beams in preparation for transport when he fell and was injured.

In order for GD Carrier’s tractor to transport the steel beams for South Shore, Delgado had to connect the tractor to the trailer; secure the load of the steel beams; and finally, drive the load to the Rochelle Project. Thus, because the tractor was connected to the trailer, it was being “employ[ed] for some purpose of the user”—transporting the load of steel beams for South Shore. National Casualty essentially argues that because the tractor was not being operated while Delgado was injured, it was not being “used.” However, this narrow definition of “use” has been expressly rejected by the Illinois supreme court. Schultz, 237 Ill. 2d at 402 (“ ‘[U]se’ is not limited to operating or driving a motor vehicle.”). Accordingly, consistent with the definition of “use” provided in Schultz, the undisputed facts show that South Shore was “using” GD Carrier’s tractor at the time of Delgado’s injury.

The Court would reach the same conclusion even if it were to consider the Underlying Complaint alone. Delgado alleged in the Underlying Complaint that he was “working as a truck driver employed by GD Carriers…assigned to pick up a trailer of steel beams at…South Shore[’s] plant,” and that he “was a business invitee on the premises of [South Shore] for the benefit of [South Shore].” Underlying Complaint ¶¶ 2-3. The Underlying Complaint also alleged that Delgado was injured while he was securing the load of steel beams for hauling. Id. ¶ 7. While Delgado did not specifically allege that GD Carrier’s tractor was connected to the trailer at the time of his injury, he also did not allege the tractor was not connected to the trailer. Therefore, construing the allegations in favor of South Shore, the Underlying Complaint alleged facts indicating that South Shore was potentially “using” GD Carrier’s tractor at the time of Delgado’s injury, which is sufficient to trigger an insurer’s duty to defend. Midwest Sporting Goods Co., 215 Ill. 2d at 155.

c. The “Moving Property” exception does not apply
Next, National Casualty argues that even if South Shore was “using” GD Carrier’s tractor, South Shore’s insured status would be removed by the “moving property” exception in the Policy. The “moving property” exception provides that an “insured” is:
*6 b. Anyone else while using with your permission a covered “auto” you own, hire or borrow except:
(4) Anyone other than your “employees”, partners (if you are a partnership), members (if you are a limited liability company), a lessee or borrower of a covered “auto” or any of their “employees”, while moving property to or from a covered “auto”.
Comp., Ex. A at 64 (emphasis added). National Casualty contends that this exception applies because Delgado’s injury was caused by South Shore’s negligence in improperly loading, or moving, the steel beams onto the trailer. The Court disagrees.

First, the Court rejects that the proper time frame to consider for insurance coverage is limited to the period during which a negligent act or omission occurs. National Casualty relies on a single case from the Fifth Circuit Court of Appeals in support of this argument. Float-Away Door Co. v. Cont’l Cas. Co., 372 F.2d 701 (5th Cir. 1966). Moreover, National Casualty plainly misrepresents the holding of Float-Away. See id. at 707 (“[T]he extent of…coverage should be measured by the clause obligating [the insurer] to pay damages ‘sustained by any person, caused by accident and arising out of the ownership, maintenance or use of any automobile.”).

Here, it is undisputed that the trailer was not being loaded at the time of Delgado’s injury. South Shore had finished loading the trailer and Delgado was securing the load for transport at the time he was injured. Accordingly, the above exception does not remove South Shore’s insured status because it only applies “while [the insured is] moving property.” Compl., Ex. A at 64 (emphasis added). National Casualty points to no other exception in the policy that would remove South Shore’s insured status as a permissive “user” of GD Carrier’s tractor.

The Court concludes that South Shore was an insured under the Policy because it was “using” GD Carrier’s tractor at the time of Delgado’s injury and because the “moving property” exception does not apply. Thus, there is no need for the Court to consider the parties’ arguments regarding whether GD Carriers was “borrowing” the trailer in question from South Shore, within the meaning of the Policy.

d. National Casualty Breached Its Duty to Defend South Shore
Having established that South Shore is an insured under the Policy, the next issue is whether the Underlying Lawsuit is covered by the Policy. The Policy provides, in relevant part, that:
We will pay all sums that an “insured” legally must pay as damages because of “bodily injury” …to which this insurance applies, caused by an “accident” and resulting from the ownership maintenance or use of a covered “auto.”… We will have the right and duty to defend any “insured” against a “suit” asking for such damages.
Compl., Ex A at 63.

As explained supra, South Shore is an insured under the Policy, because it was “using” GD Carrier’s tractor to transport steel beams at the time of Delgado’s injury. Moreover, it is undisputed that Delgado was injured while he was attempting to secure the load of steel beams for transport. Thus, Delgado’s injury resulted from South Shore’s “use” of GD Carrier’s tractor and National Casualty owed a duty to defend South Shore in the Underlying Lawsuit, wherein Delgado sued South Shore for the injuries he sustained while attempting to secure the load of steel beams. However, it is undisputed that National Casualty denied South Shore’s tender of the Underlying Lawsuit. Therefore, National Casualty breached its duty to defend South Shore.

3. National Casualty is Not Estopped from Raising Coverage Defenses
*7 South Shore argues that National Casualty should be estopped from asserting coverage defenses because it waited thirteen months to file this declaratory judgment action after denying South Shore’s tender of the Underlying Lawsuit. “It is well established under Illinois law that estoppel applies only when there is a duty to defend and that duty has been breached.” Santa’s Best Craft, LLC v. St. Paul Fire & Marine Ins. Co., 353 F. Supp. 2d 966, 971 (N.D. Ill. 2005) (citing Employers Ins. of Wausau v. Ehlco Liquidating Tr., 186 Ill. 2d 127, 154–54 (Ill. 1999)) (emphasis in original). “The general rule of estoppel provides that an insurer which takes the position that a complaint potentially alleging coverage is not covered under a policy that includes a duty to defend may not simply refuse to defend the insured.” Wausau, 186 Ill. 2d at 150. “Rather, the insurer has two options: (1) defend the suit under a reservation of rights or (2) seek a declaratory judgment that there is no coverage.” Id. “If the insurer fails to take either of these steps and is later found to have wrongfully denied coverage, the insurer is estopped from raising policy defenses to coverage.” Id. at 150-51. Moreover, “[w]here an insurer waits to bring its declaratory judgment action until after the underlying action has been resolved by a judgment or a settlement, the insurer’s declaratory judgment action is untimely as a matter of law,” and the insurer is estopped from raising coverage defenses. Id. at 157. However, “[a]n insurer will not be estopped from denying coverage merely because the underlying case proceeds to judgment [or settlement] before the declaratory judgment action is resolved.” State Farm Fire & Cas. Co. v. Martin, 186 Ill. 2d 367, 374 (Ill. 1999).

Illinois appellate courts have expanded upon the standards employed in determining whether a declaratory judgment action is untimely as a matter of law. L.A. Connection v. Penn-Am. Ins. Co., 363 Ill. App. 3d 259, 265 (3rd Dist. 2006) (collecting cases). Some courts have found that a declaratory judgment action is timely as long as it was filed before the underlying lawsuit ends. See Pekin Ins. Co. v. Allstate Ins. Co., 329 Ill. App. 3d 46, 50 (1st Dist. 2002); Farmers Auto. Ins. Ass’n v. Country Mut. Ins. Co., 309 Ill. App. 3d 694, 700 (4th Dist. 2000). Other courts have focused on whether the insurer waited to file a declaratory judgment action “until trial or settlement was imminent” in the underlying lawsuit. See Aetna Cas. & Sur. Co. v. O’Rourke Bros., 333 Ill. App. 3d 871, 880 (3rd Dist. 2002); Westchester Fire Ins. Co. v. G. Heileman Brewing Co., 321 Ill. App. 3d 622, 634 (1st Dist. 2001). Finally, some courts consider whether an insurer has sought declaratory relief within a “reasonable time” of learning of the underlying lawsuit. See W. Am. Ins. Co. v. J.R. Const. Co., 334 Ill. App. 3d 75, 87 (1st Dist. 2002); Employers Reinsurance Corp. v. E. Miller Ins. Agency, Inc., 332 Ill. App. 3d 326, 342 (2002). To be clear, the Illinois supreme court has held only that a declaratory judgment action is untimely as a matter of law when it is filed after the underlying lawsuit has been resolved by a judgment or a settlement. Wausau, 186 Ill. 2d at 156.

South Shore argues that under the “reasonable time” standard, Illinois courts have generally held as untimely a delay of ten months or more between an insurer learning of the underlying lawsuit and filing a declaratory judgment action. See Cent. Mut. Ins. Co. v. Kammerling, 212 Ill. App. 3d 744, 749 (1st Dist. 1991) (holding that a ten month delay was untimely); Korte Const. Co. v. Am. States Ins., 322 Ill. App. 3d 451, 458 (5th Dist. 2001) (holding that twelve month delay was untimely); Country Mut. Ins. Co. v. Ticketsnow.com, No. 1-06-1135, 2007 WL 7595190, at * 11 (1st Dist. 2007) (holding that approximately a year long delay was untimely). However, South Shore also admits that Illinois courts have not adopted a bright line rule in regards to what constitutes a “reasonable time.” Nonetheless, South Shore argues that National Casualty should be estopped from raising coverage defenses because it waited thirteen months to file this declaratory judgment action after South Shore tendered the Underlying Lawsuit.

Here, it is undisputed that National Casualty filed this declaratory judgment action prior to the settlement of the Underlying Lawsuit—in fact, this action was filed more than seventeen months prior to the settlement. Further, National Casualty sought declaratory relief only four months after the fourth amended complaint was filed in the Underlying Lawsuit. Thus, National Casualty did not delay its filing of this declaratory judgment action until the Underlying Lawsuit was resolved or until trial or settlement was imminent.

*8 As for the “reasonable time” standard, the Court rejects that National Casualty waited an unreasonable amount of time to file this action, given the protracted procedural history of the Underlying Lawsuit—South Shore waited nineteen months to tender the Underlying Lawsuit to National Casualty and the fourth amended complaint was filed only four months prior to the filing of this action. Further, the fact that the Underlying Lawsuit was settled prior to the resolution of this action does not make it untimely. Martin, 186 Ill. 2d at 374. Accordingly, following the Illinois supreme court’s holding in Wausau, National Casualty’s filing of this declaratory judgment action was not untimely as a matter of law, and therefore it is not estopped from raising coverage defenses. 186 Ill. 2d at 157. However, as explained infra, even though National Casualty is not estopped from raising coverage defenses, the Court concludes that National Casualty has a duty to indemnify South Shore for the settlement of the Underlying Lawsuit.

4. National Casualty Has a Duty to Indemnify South Shore
“An insurer’s duty to indemnify is narrower than its duty to defend its insured.” Outboard Marine Corp., 154 Ill. 2d at 127. “[T]he duty to indemnify is determined once liability has been affixed.” Nat’l Am. Ins. Co. v. Artisan & Truckers Cas. Co., 796 F.3d 717, 724 (7th Cir. 2015) (Illinois law). “[T]he duty to indemnify arises if the insured’s activity and the resulting loss or damage actually fall within the… policy’s coverage.” Outboard Marine Corp., 154 Ill. 2d 90 at 128 (emphasis in original). “Under Illinois law, construction of insurance policies is a question of law.” Keystone Consol. Industries, Inc. v. Employers Ins. Co. of Wausau, 456 F.3d 758, 762 (7th Cir. 2006) (citing Outboard Marine Corp., 154 Ill. 2d at 90). “Policies will be construed as a whole; if the words used in the policies are clear, then they must be given their plain, ordinary, and popular meaning.” Id. (internal quotation marks omitted).

Here, the parties both argue that the issue of indemnification is ripe for adjudication. The Court agrees, as there is no dispute that the Underlying Lawsuit was settled for $2.5 million. Thus, the Court must consider whether the Underlying Lawsuit and resulting settlement falls within the Policy’s coverage.

National Casualty makes two arguments against indemnification: (1) South Shore is not an insured under the Policy; and (2) the other conditions of indemnification in the Policy have not been satisfied. As previously discussed at length by the Court, South Shore is an insured under the Policy. Therefore, the only remaining issue is whether the conditions of indemnification in the Policy have been satisfied.

The Policy provides in relevant part that: “[National Casualty] will pay all sums that an ‘insured’ legally must pay as damages because of ‘bodily injury’…to which this insurance applies, caused by an ‘accident’ and resulting from the ownership maintenance or use of a covered ‘auto.’ ” Compl., Ex. A at 64. Here, it is undisputed that South Shore settled the Underlying Lawsuit with Delgado for $2.5 million, wherein Delgado claimed that he was injured in an accident caused by South Shore’s negligent acts and omissions. Further, the Court has already concluded that Delgado’s injury resulted from South Shore’s “use” of GD Carrier’s tractor because Delgado was injured while he was attempting to secure the load of steel beams for transport. South Shore argues that “there is nothing in the record before [the] Court that would indicate that [South Shore] is not entitled to be indemnified by [National Casualty.]” Def.’s Mem. in Opp.’n to Pl.’s Mot. for Summ. J. at 12. The Court agrees. Based on the undisputed facts before the Court, National Casualty has a duty to indemnify South Shore for the settlement of the Underlying Lawsuit up to the Policy limit of $1,000,000.

C. South Shore is Not Entitled to “Bad Faith” Damages
Finally, the Court addresses Count III of South Shore’s counterclaim, in which it seeks attorneys fees and sanctions under 215 ILCS § 5/155, based on National Casualty’s alleged unreasonable and vexatious behavior. More specifically, South Shore claims that National Casualty’s actions were unreasonable and vexatious because it had no valid basis to deny South Shore coverage and it failed to file this action in a timely manner. National Casualty argues that South Shore’s bad faith claim fails as matter of law because there was a bona fide dispute concerning coverage and National Casualty filed this action in a timely manner to resolve that dispute. For the following reasons, the Court agrees with National Casualty.

*9 Section 155 of the Illinois Insurance Code states:
(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) 60% of the amount which the court or jury finds such party is entitled to recover against the company, exclusive of all costs;
(b) $60,000;
(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.
However, “where a bona fide dispute concerning coverage exists, costs and sanctions are inappropriate.” State Farm Mut. Auto. Ins. Co. v. Smith, 197 Ill. 2d 369, 380 (Ill. 2001). A bona fide dispute is one that is “[r]eal, genuine, and not feigned.” Med. Protective Co. v. Kim, 507 F.3d 1076, 1087 (7th Cir. 2007) (quoting McGee v. State Farm Fire & Cas. Co., 315 Ill. App. 3d 673, 683 (2nd Dist. 2000)) (alterations in original).

Here, the Court cannot agree that National Casualty’s conduct was vexatious or unreasonable. Notwithstanding that National Casualty has not prevailed on its arguments regarding whether South Shore’s qualifies as an insured, its arguments were “presented with reasoned support,” and therefore raised a bona fide dispute as to coverage. Citizens First Nat. Bank of Princeton v. Cincinnati Ins. Co., 200 F.3d 1102, 1110 (7th Cir. 2000). Moreover, contrary to South Shore’s assertion, the Court has held that National Casualty’s filing of this declaratory judgment action was not untimely as a matter of law. Accordingly, South Shore’s “bad faith” claim, as set forth in Count III of its Counterclaim, is dismissed with prejudice.

III. CONCLUSION
For the aforementioned reasons, South Shore is an “insured” under the Policy and National Casualty has breached its duty to defend South Shore in the Underlying Lawsuit. Moreover, National Casualty has a duty to indemnify South Shore up to the Policy limit of $1,000,000 for the settlement in the Underlying Lawsuit. However, in denying South Shore’s tender of the Underlying Lawsuit, National Casualty’s conduct was not unreasonable or vexatious; therefore, Count III of South Shore’s Counterclaim is dismissed with prejudice. Accordingly, National Casualty’s Motion for Summary Judgment is granted in part and denied in part and South Shore’s Motion for Summary Judgment is granted in part and denied in part.

ENTER:

All Citations
Slip Copy, 2018 WL 4469017

2018 WL 4374073

United States District Court, D. Connecticut.
Eric VEILLEUX, Plaintiff,
v.
PROGRESSIVE NORTHWESTERN INSURANCE COMPANY, et al., Defendants.
No. 3:16cv2116 (MPS)
|
Signed 09/13/2018
Attorneys and Law Firms
Stephen F. McEleney, McEleney & McGrail, Hartford, CT, for Plaintiff.
Jeffrey F. Gostyla, Joseph J. Arcata, III, Elizabeth A. O’Donnell, Halloran & Sage LLP, Hartford, CT, for Defendants.

RULING ON MOTION FOR SUMMARY JUDGMENT
Michael P. Shea, U.S.D.J.

I. Introduction
*1 This case involves an injured party’s suit to collect a judgment obtained against two tortfeasors from their insurers. The plaintiff, Eric Veilleux, brought suit against the defendants, Progressive Insurance Company (“Progressive”) and Nautilus Insurance Company (“Nautilus”), to collect on a stipulated judgment entered against Central Auto & Transport, LLC (“Central Auto”) and Central Rigging & Transfer, LLC (“Central Rigging”). This Court previously approved a stipulation of dismissal with respect to the claims against Nautilus (see ECF No. 78; ECF No. 76); hence, Progressive is the lone remaining defendant. Veilleux’s remaining claims against Progressive include the following: (i) a direct action under Conn. Gen. Stat. § 38a-321 against Progressive for the full amount of a $750,000 insurance policy provided to Central Auto (count one); (ii) a common law claim for the same amount advanced under an assignment of rights from Central Auto to Veilleux (count two); (iii) a common law claim for the same amount as a judgment creditor of Central Auto and/or as a third party beneficiary of the policy between Central Auto and Progressive (count three); (iv) a claim for breach of the implied covenant of good faith and fair dealing on the basis of Progressive’s failure to honor Central Auto’s policy (count four); (v) a direct action under Conn. Gen. Stat. § 38a-321 against Progressive for the full amount of a $1,000,000 insurance policy provided to Central Rigging (count five); (vi) a common law claim for the same amount advanced under the assignment of rights from Central Rigging to Veilleux (count six); and (vii) a claim for breach of the implied covenant of good faith and fair dealing on the basis of Progressive’s failure to honor Central Rigging’s policy (count seven). Now before me is Progressive’s motion for summary judgment. (ECF No. 81.) For the following reasons, this motion is denied.

II. Background

A. Factual Background1
The following facts, which are taken from the parties’ Local Rule 56(a) Statements and the exhibits, are undisputed unless otherwise indicated. Progressive issued a “Commercial Auto Policy … to Central Auto & Transport, LLC (“Central Auto”), with effective dates of June 2, 2006, to June 2, 2007” (“Policy 1”). (ECF No. 83, Defendant’s Local Rule 56(a)1 Statement (“Def.’s L.R. 56(a)1 Stmt.”) at ¶ 1); ECF No. 87, Plaintiff’s Local Rule 56(a)2 Statement (“Pl.’s L.R. 56(a)2 Stmt.”) at ¶ 1.) Progressive issued a “commercial Auto Policy … to Central Rigging & Transfer, LLC (“Central Rigging”), with effective dates of March 10, 2006 to March 10, 2007” (“Policy 2”). (Def.’s L.R. 56(a)1 Stmt. at ¶ 11; Pl.’s L.R. 56(a)2 Stmt. at ¶ 11.) At the time of Veilleux’s accident, Central Rigging, Central Auto, and “Central Construction Services, LLC, each conducted business under the name of ‘Central Group’ as well as under each of their separate corporate names.” (Def’s L.R. 56(a)1 Stmt. at ¶ 21; Pl.’s L.R. 56(a)2 Stmt. at ¶ 21.) All three entities “acted in concert, in a joint venture and as a commingled, single entity in regards to the acts and omissions described in the plaintiff’s operative complaint.” (Def’s L.R. 56(a)1 Stmt. at ¶ 22; Pl.’s L.R. 56(a)2 Stmt. at ¶ 22.)

*2 Veilleux “alleges that on September 8, 2006, he was employed by GDS Contracting, LLC (‘GDS’) in Berlin, Connecticut, and was working on GDS’s premises.” (Def’s L.R. 56(a)1 Stmt. at ¶ 24; Pl.’s L.R. 56(a)2 Stmt. at ¶ 24.) On that day, according to Veilleux’s complaint, “Joseph Cunningham was acting as the agent, servant and/or employee of Central Rigging.” (Def’s L.R. 56(a)1 Stmt. at ¶ 25; Pl.’s L.R. 56(a)2 Stmt. at ¶ 25.) Cunningham allegedly “drove onto GDS’[s] premises in a tractor labeled ‘Central Rigging,’ pulling a trailer labeled ‘Central Auto and Transport’ ….” (Def’s L.R. 56(a)1 Stmt. at ¶ 26; Pl.’s L.R. 56(a)2 Stmt. at ¶ 26.) Cunningham, who had arrived on the premises “to deliver an aerial lift,” either asked or directed that Veilleux “assist him in unloading the aerial lift from the trailer.” (Def’s L.R. 56(a)1 Stmt. at ¶ 28 (“[Veilleux] alleges that on September 8, 2006, Joseph Cunningham asked [Veilleux] to assist [Cunningham] in unloading the aerial lift from the trailer.”); Pl.’s L.R. 56(a)2 Stmt. at ¶ 28 (“Denied, that Joseph Cunningham ‘asked’ [Veilleux] to assist him in unloading the aerial lift from the trailer. Whether it was a ‘request’ or a ‘directive’ based upon the instruction to [Veilleux] by his boss to assist the driver is a question of fact.”).) This task required Veilleux “to get into the bucket of the aerial lift”; “when he was in the bucket, Joseph Cunningham raised the trailer portion of the flatbed trailer and, at that time, the chain securing the aerial lift broke and the lift rolled off the trailer and crashed into a building adjacent to the GDS premises.” (Def’s L.R. 56(a)1 Stmt. at ¶¶ 29-30; Pl.’s L.R. 56(a)2 Stmt. at ¶¶ 29-30.) According to Veilleux’s complaint, this resulted in him being “pinned between the bucket of the lift and the wall and sustain[ing] severe injuries.” (Def’s L.R. 56(a)1 Stmt. at ¶ 31; Pl.’s L.R. 56(a)2 Stmt. at ¶ 31.)

“On or about November 27, 2007, Louis N. George, Esq. of Hassett & George, P.C., sent a letter to Howland & Sargent” inquiring as to coverage for “Central Auto & Transport, LLC and its related entities.” (Def’s L.R. 56(a)1 Stmt. at ¶ 35; Pl.’s L.R. 56(a)2 Stmt. at ¶ 35; ECF No. 83-5 at 77 (“George Letter”) ) The “Howland & Sargent Group sent a Memo to [Progressive] (the ‘Howland Memo’)” containing the letter on December 5, 2007. (Def’s L.R. 56(a)1 Stmt. at ¶ 36; Pl.’s L.R. 56(a)2 Stmt. at ¶ 36.) “On December 10, 2007, Margaret Bertone of Progressive sent a letter to Central Rigging regarding a possible claim under [Policy 2] arising from the September 8, 2006 incident involving [Veilleux.].” (Def’s L.R. 56(a)1 Stmt. at ¶ 37; Pl.’s L.R. 56(a)2 Stmt. at ¶ 37.)2 On that same day, she also “sent a letter to Attorney Steve McEleney regarding a possible claim under [Policy 2] arising from the September 8, 2006 incident involving [Veilleux].” (Def’s L.R. 56(a)1 Stmt. at ¶ 38; Pl.’s L.R. 56(a)2 Stmt. at ¶ 38.) “On February 26, 2008, Lawrence D. Leeders of Progressive sent a letter to Attorney Louis George regarding a possible claim under [Policy 2] arising from the September 8, 2006 incident involving [Veilleux].” (Def’s L.R. 56(a)1 Stmt. at ¶ 39; Pl.’s L.R. 56(a)2 Stmt. at ¶ 39.) A day later, Leeders “sent a letter to Tony Crane of Central Rigging regarding a possible claim under [Policy 2] arising from the September 8, 2006 incident….” (Def’s L.R. 56(a)1 Stmt. at ¶ 40; Pl.’s L.R. 56(a)2 Stmt. at ¶ 40.)

“On May 20, 2008, [Leeders] sent a letter to [Attorney George] regarding Progressive’s coverage position with respect to any potential claims under [Policy 2]”; the letter denied coverage under Policy 2. (Def’s L.R. 56(a)1 Stmt. at ¶ 41; Pl.’s L.R. 56(a)2 Stmt. at ¶ 41; ECF No. 83-5, Def.’s Ex. 21 (“Denial of Coverage Letter”) at 4.) “On or about October 30, 2008, Progressive received a letter from [Attorney George] regarding a lawsuit filed by [Veilleux] against Central Rigging.” (Def’s L.R. 56(a)1 Stmt. at ¶ 42; Pl.’s L.R. 56(a)2 Stmt. at ¶ 42.) “On or about February 12, 2015, [Progressive] received a letter from John P. Clifford, Jr., Esq. regarding a claim against Central Auto under [Policy 1].” (Def’s L.R. 56(a)1 Stmt. at ¶ 43; Pl.’s L.R. 56(a)2 Stmt. at ¶ 43.) On that same day, Progressive received another letter from Attorney Clifford “regarding a claim against Central Rigging under [Policy 2].” (Def’s L.R. 56(a)1 Stmt. at ¶ 45; Pl.’s L.R. 56(a)2 Stmt. at ¶ 45.)

B. Veilleux’s Complaint
Veilleux makes the following allegations in his complaint. (See ECF No. 17-1 (“Complaint”).) He alleges that he filed suit in Hartford Superior Court “[o]n or about September 3, 2008 … seeking recovery from [Central Auto and Central Rigging] for the severe, serious, and disabling injuries” he suffered. (Id. at Count 1, at ¶ 53.) On March 30, 2016, Veilleux entered into a stipulation with Central Auto and Central Rigging, “upon which judgment entered on said date, wherein [both companies] stipulated to liability for the injuries suffered by [Veilleux] as aforesaid, and to judgment in favor of [Veilleux] in the amount of Three Million Seven Hundred and Fifty Thousand Dollars ($3,750,000), plus costs.” (Id. at Count One, at ¶ 6; id. at Count Five, at ¶ 7). Veilleux contends that Central Auto and Central Rigging were both insured for liability for such injuries by Progressive at the time of his accident, and that Progressive “neglected and/or refused to provide coverage” to Central Auto and Central Rigging despite its obligation to “insure and defend” them. (Id. at Count One, at ¶¶ 7-11; id. at Count Five, ¶¶ 7-11.)

*3 Veilleux’s claims against Progressive include the following: (i) a direct action under Conn. Gen. Stat. § 38a-321 against Progressive for the full amount of a $750,000 insurance policy provided to Central Auto; (ii) a common law claim for the same amount advanced under the assignment of rights from Central Auto to Veilleux; (iii) a common law claim for the same amount as a judgment creditor of Central Auto and/or as a third party beneficiary of the policy between Central Auto and Progressive; (iv) a claim for breach of the implied covenant of good faith and fair dealing on the basis of Progressive’s failure to honor Central Auto’s policy; (v) a direct action under Conn. Gen. Stat. § 38a-321 against Progressive for the full amount of a $1,000,000 insurance policy provided to Central Rigging; (vi) a common law claim for the same amount advanced under the assignment of rights from Central Rigging to Veilleux; and (vii) a claim for breach of the implied covenant of good faith and fair dealing on the basis of Progressive’s failure to honor Central Rigging’s policy. (See generally id.)

III. Standard of Review
Summary judgment is appropriate only when the moving party “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “In making that determination, a court must view the evidence in the light most favorable to the opposing party.” Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (internal quotation marks omitted). “A fact is material if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 202 (2d Cir. 2007) (internal quotation marks omitted). The moving party bears the burden “of showing that no genuine factual dispute exists …, and in assessing the record to determine whether there is a genuine issue as to any material fact, the court is required to resolve all ambiguities and draw all factual inferences” in favor of the non-moving party. Cronin v. Aetna Life Ins. Co., 46 F.3d 196, 203 (2d Cir. 1995).

IV. Discussion

A. Claims Concerning Coverage
Conn. Gen. Stat. § 38a-321, otherwise known as the “direct action statute,” see Tucker v. Am. Int’l Grp., Inc., 936 F. Supp. 2d 1, 13 (D. Conn. 2013), provides in relevant part as follows:
Each insurance company which issues a policy to any person, firm or corporation, insuring against loss or damage on account of the bodily injury or death by accident of any person, or damage to the property of any person, for which loss or damage such person, firm or corporation is legally responsible, shall, whenever a loss occurs under such policy, become absolutely liable, and the payment of such loss shall not depend upon the satisfaction by the assured of a final judgment against him for loss, damage or death occasioned by such casualty…. Upon the recovery of a final judgment against any person, firm or corporation by any person, including administrators or executors, for loss or damage on account of bodily injury or death or damage to property, if the defendant in such action was insured against such loss or damage at the time when the right of action arose and if such judgment is not satisfied within thirty days after the date when it was rendered, such judgment creditor shall be subrogated to all the rights of the defendant and shall have a right of action against the insurer to the same extent that the defendant in such action could have enforced his claim against such insurer had such defendant paid such judgment.
Conn. Gen. Stat. § 38a-321. A plaintiff must make three showings to set out a cause of action under this statute: “(1) that the plaintiff has recovered a final judgment; (2) that the judgment is against a person who was insured by the defendant against liability on it; and (3) that the judgment remains unsatisfied.” Tucker, 936 F. Supp. 2d at 8, quoting Skut v. Hartford Accident & Indemnity Co., 142 Conn. 388, 393 (1955). If the judgment remains unsatisfied “for more than 30 days, the injured party is subrogated to the rights of the insured defendant and may proceed with the action to the same extent that the defendant could have enforced his claim against the insurer.” Id. In its motion for summary judgment, Progressive contends that neither Policy 1 nor Policy 2 provide coverage for Veilleux’s judgment against Central Auto and Central Rigging. (See ECF No. 81 at 1-2.)

*4 An insurance policy is to be interpreted by the same general rules that govern the construction of any written contract….” Connecticut Medical Ins. Co. v. Kulikowski, 286 Conn. 1, 5 (2008) (internal quotation marks omitted). Thus, “[t]he determinative question is the intent of the parties, that is, what coverage the … [insured] expected to receive and what the [insurer] was to provide, as disclosed by the provisions of the policy…. If the terms of the policy are clear and unambiguous, then the language, from which the intention of the parties is to be deduced, must be accorded its natural and ordinary meaning.” Id. (internal quotation marks omitted). “When interpreting [an insurance policy], [a court] must look at the contract as a whole, consider all relevant portions together and, if possible, give operative effect to every provision in order to reach a reasonable overall result.” Johnson v. Connecticut Ins. Guar. Ass’n, 302 Conn. 639, 643 (2011) (internal quotation marks omitted). “In determining whether the terms of an insurance policy are clear and unambiguous, [a] court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity…. Similarly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party’s subjective perception of the terms.” Id. An insurance policy “is ambiguous when it is reasonably susceptible to more than one reading.” Id. In such circumstances, “any ambiguity in the terms of an insurance policy must be construed in favor of the insured because the insurance company drafted the policy.” Id. at 643 (internal quotation marks omitted).

Progressive makes several arguments in favor of its contention that neither of its Policies cover Veilleux’s claim against Central Auto and Central Rigging. I address each of these arguments in turn.

1. The Applicability of the Motor Carrier Act Endorsement
The parties dispute whether the Motor Carrier Act Endorsement (“MCS-90 endorsement”) provides coverage for Veilleux’s claim against Central Auto under Policy 1. In 1980, Congress enacted the Motor Carrier Act (“MCA”), which, among other things, directed the “Secretary of Transportation [to] prescribe regulations [requiring] minimum levels of financial responsibility” for motor carriers engaged in interstate commerce “sufficient to satisfy liability amounts established by the Secretary covering public liability, property damage, and environmental restoration….” 49 U.S.C. § 31139(b). “Such financial responsibility could be established by evidence of insurance … reflected in an insurance policy endorsement on ‘Form MCS-90B’ ….” Lyons v. Lancer Ins. Co., 681 F.3d 50, 53 (2d Cir. 2012) (citing 49 C.F.R. § 387.31(d)(1) ). The parties are in agreement that Policy 1 contains an MCS-90 endorsement in satisfaction of Progressive’s obligations under the MCA. (See Def’s L.R. 56(a)1 Stmt. at ¶ 4; Pl.’s L.R. 56(a)2 Stmt. at ¶ 4; ECF No. 83-1 at 16 (the MCS-90 endorsement).) The parties’ sole dispute is whether the MCS-90 could apply to the incident in this case, which both parties agree took place as a result of intrastate travel. (Compare ECF No. 82 at 15 (arguing that MCS-90 endorsement does not cover intrastate trips) with ECF No. 86 at 12-16 (conceding trip that resulted in Veilleux’s injuries involved only intrastate travel but arguing that MCS-90 endorsement applied anyway).)

As noted above, the MCA requires only those carriers engaged in interstate commerce to demonstrate the “financial responsibility” encapsulated in the MCS-90 endorsement. See 49 U.S.C. § 31139(b); Lyons v. Lancer Ins. Co., 681 F.3d 50, 58 (2d Cir. 2012) (discussing the “requisite interstate nexus” for the application of the MCS-90 endorsement). The majority of courts, including the Second Circuit and the Connecticut Supreme Court, apply a “trip-specific approach” to determine whether this “requisite interstate nexus” exists in a case—i.e., they look to see if the specific trip that resulted in the loss at issue was interstate in nature. See Lyons, 681 F.3d at 60 (rejecting coverage claim under MCS-90 on basis that trip that resulted in loss was entirely intrastate in nature); Martinez v. Empire Fire & Marine Ins. Co., 322 Conn. 47, 59, 62 (2016) (adopting the “trip-specific approach” used by the Second Circuit in Lyons and listing cases from other Circuits adopting the same approach). Here, as noted, the parties agree that the trip resulting in Veilleux’s injuries was intrastate.

This does not resolve the matter, however, as there remains the question of whether Connecticut law has expanded coverage under the MCS-90 endorsement. In Martinez, the Connecticut Supreme Court noted that “although the ‘trip-specific’ interpretation limits the application of federally mandated insurance coverage to trips that are interstate in nature, the states nevertheless remain free to create their own regulations governing insurance requirements for motor carrier transportation within their state borders.” See Martinez, 322 Conn. at 63 (citing Thomas Hershewe, Hiding in Plain Sight, Trial, February 2015, at 46, 48). The Martinez court went on to note that “Connecticut has adopted regulations that generally mirror the federal regulations and that apply to motor carriers engaging in intrastate travel.” Id. (citing Con. Agencies Regs. § 14-163c-1 et seq.). The cited regulations adopt portions of the MCA, including the “financial responsibility” provision noted above, “as regulations of the Department of Motor Vehicles.” See Conn. Agencies Regs. 14-163c-1 (adopting “Part 387 [of the MCA], Minimum Levels of Financial Responsibility for Motor Carriers”); see also Chmura v. Connecticut Dep’t of Motor Vehicles, No. CV084020932S, 2010 WL 6496184, at *3 (Conn. Super. Ct. Aug. 31, 2010) (“Pursuant to Regulation § 14-163c-1, parts of the Code of Federal Regulations, were incorporated by reference as regulations of the [Department of Motor Vehicles]….”).

*5 Connecticut regulations in turn apply the federal regulations, including the MCS-90 endorsement, to “[a]ny motor vehicle in intrastate commerce that has a gross vehicle weight rating, or gross combination rating, or gross vehicle or gross combination weight, of eighteen thousand one (18,001) or more pounds….” See Conn. Agencies Regs. 14-163c-2 (emphasis added) (noting that the “regulations adopted in accordance with [Conn. Agencies Regs. 14-163-1] shall apply to [various categories of vehicles]”); Conn. Gen. Stat. § 14-163c(a) (authorizing the Commissioner of Motor Vehicles to adopt regulations incorporating federal regulations, including the one specifying the MCS-90 endorsement, and to make them applicable to certain motor vehicles or carriers “in intrastate commerce”); Thomas Hershewe, Hiding in Plain Sight, Trial, February 2015, at 46, 48-49 (noting that some states, including Connecticut, have adopted the federal motor carrier regulations—including the MCS-90 endorsement—into state law and that “[b]y virtue of the state’s incorporation, … intrastate vehicle[s] [are] subject to the financial responsibility requirements, and the MCS-90 should apply”). Thus, although the federal regulations permitting use of the MCS-90 apply only to interstate travel, the State of Connecticut has expanded liability under the MCS-90 to certain types of intrastate travel.

Progressive argues that “it is irrelevant that the State of Connecticut, in promulgating state regulations regarding intrastate commerce, has adopted certain sections of the Code of Federal Regulations” and that this legislation “does not preempt or otherwise alter the federal minimum levels of financial responsibility,” including the MCS-90 endorsement. (See ECF No. 88 at 2.) This argument misses the mark. While Progressive is correct that Connecticut’s regulations do not alter the federal minimum level of coverage provided by the MCS-90 endorsement, the regulations do alter the level of protection afforded under state law. Thus, even if the MCS-90 endorsement does not apply to intrastate travel as a matter of federal law, it does apply to certain types of intrastate travel under Connecticut law. Progressive also argues that the Martinez court suggested otherwise, noting that the court stated, “we observe that, although the ‘trip-specific’ interpretation limits the application of federally mandated insurance coverage to trips that are interstate in nature, the states nevertheless remain free to create their own regulation governing insurance requirements for motor carrier transportation within their state borders.” (See ECF No. 88 at 3 (emphasis in original) (citing Martinez, 322 Conn. at 63).) This argument, like Progressive’s previous argument, misses the fact that Connecticut has adopted the federally mandated insurance coverage of the MCS-90 and expanded it to certain intrastate carriers. Thus, the MCS-90 endorsement applies to certain categories of intrastate travel as a matter of Connecticut state law.

Veilleux asserts in his Local Rule 56(a) Statement that the tractor involved in this case weighed more than 18,001 pounds. (See Pl.’s L.R. 56(a)2 Stmt. at ¶ 7 (“The 1988 Volvo Aero tractor … is a vehicle with an unladen weight of 18,500 pounds….”). If so, that would make the MCS-90 applicable to this case. Progressive is therefore not entitled to summary judgment on its claim that the MCS-90 does not apply.

2. The Applicability of the Hired Auto Coverage Endorsement
The parties disagree on whether the so-called “Hired Auto Coverage Endorsement” could provide coverage for Veilleux’s claims under Policy 2. The Hired Auto Coverage Endorsement contained in Policy 2 provides, in relevant part, as follows:
Except as specifically modified in this endorsement, all provisions of the Commercial Auto Policy Apply. We agree with you that the insurance provided under your Commercial Auto Policy is modified as follows:
…
When used in this Endorsement, whether in the singular, plural, or possessive: 1. “Hired auto” means an auto you lease, hire, rent or borrow. This does not include any auto you lease, hire, rent or borrow from any of your employees, partners (if you are a partnership), members (if you are a limited liability company) or member of their households.
*6 …
When used in Part I – Liability to Others, the definition of insured auto is amended to include hired auto.
…
The premium for this Hired Auto Coverage is based on the cost of hire, and is subject to a minimum cost of hire as listed below. We may audit the cost of hire and charge appropriately for additional premium for up to three (3) years after the policy expiration.
(ECF No. 83-1 at 70 (“Hired Auto Coverage Endorsement”) (internal emphases omitted).) Progressive advances several arguments in favor of the contention that the Hired Auto Coverage Endorsement cannot apply to Veilleux’s claims.

First, it argues that Central Auto, Central Rigging, and Central Construction acted together as a partnership. (ECF No. 82 at 22.) The existence of such a partnership, it contends, would foreclose coverage under the Hired Auto Coverage Endorsement because the vehicles that caused Veilleux’s injuries were procured by Central Rigging from Central Auto (see ECF No. 86 at 21-22 (Veilleux concedes that “Central Rigging hired, rented, or borrowed the Aero Tractor and Landoll Trailer from Central Auto”) ). The language of Policy 2, however, undercuts Progressive’s argument. The terms “[y]ou,” “your,” and “yours” in Policy 2 are defined as “the named insured shown on the Declarations Page” of the policy. (See ECF No. 83-1 at 81.) The Declarations Page lists the named insured as “Central Rigging & Trans.” (See id. at 69.) Thus, for all intents and purposes, the Hired Auto Coverage Endorsement reads as follows: “ ‘Hired auto’ means an auto [Central Rigging] lease[s], hire[s], rent[s] or borrow[s]. This does not include any auto [Central Rigging] lease[s], hire[s], rent[s] or borrow[s] from any of [its] employees, partners (if [Central Rigging] [is] a partnership), members (if [Central Rigging is] a limited liability company) or member of their households.” (Hired Auto Coverage Endorsement.) Read literally, this provision forecloses coverage only if Central Rigging itself is a partnership—something even Progressive does not claim—and borrows an auto from its partner. While Progressive’s alternative reading—that coverage is foreclosed if Central Rigging is a partner in a partnership—may also be reasonable, that would, at best, make the provision ambiguous. In either event, since all ambiguities must be construed against Progressive, see Johnson, 302 Conn. at 643, Progressive’s argument fails.

Progressive also contends that the Hired Auto Coverage Endorsement does not apply because Robert Greco is the sole member of Central Auto and Central Rigging; to the extent any auto “was borrowed,” Progressive contends, “it was clearly borrowed by the members of the limited liability company.” (See ECF No. 88 at 8-9.) This argument misses the mark for several reasons. First, Progressive waived this argument by raising it for the first time in its reply brief. See ABN Amro Verzekeringen BV v. Geologistics Ams., Inc., 485 F.3d 85, 97 n.12 (2d Cir. 2007) (“We decline to consider an argument raised for the first time in a reply brief.”). Second, the provision Progressive cites forecloses coverage only for autos leased, hired, rented, or borrowed by the limited liability company from its members. It does not preclude coverage for autos procured by a limited liability company’s members. Third, the record shows that Central Rigging did not obtain the equipment at issue in this case from Robert Greco but rather from Central Auto. Progressive has presented no evidence that Central Rigging obtained the equipment from Greco personally.

*7 Finally, Progressive contends that Veilleux’s claim fails because the equipment at issue did not meet the $5,000 “Minimum cost of hire” provision of the Hired Auto Coverage Endorsement. (See ECF No. 82 at 23.) This argument misconstrues the language of the policy. As demonstrated by the language quoted above, the “cost of hire” section of the Hired Auto Coverage Endorsement does not regulate coverage but rather the amount of premium to be paid for such coverage. (See Hired Auto Coverage Endorsement (“The premium for this Hired Auto Coverage is based on the cost of hire, and is subject to a minimum cost of hire as listed below.” (emphasis added).) This understanding is confirmed by the fact that the Hired Auto Coverage Endorsement defines “hired auto” as, amongst other things, an “auto you … borrow.” (Hired Auto Coverage Endorsement.)

For these reasons, I conclude there is at least a genuine issue of material fact concerning whether the Hired Auto Coverage Endorsement provides coverage for Veilleux’s claims under Policy 2.

3. Notice Requirement
Progressive contends that Veilleux’s claims under both policies are barred due to Central Auto’s and Central Rigging’s failure to provide timely notice of a claim under the policies. (See ECF No. 82 at 17.) Both Policy 1 and Policy 2 contain the following provision noting the insured’s duties under the policies:
YOUR DUTIES IN THE EVENT OF AN ACCIDENT, CLAIM, LOSS OR SUIT
Notify Us As Soon As Practicable After An Accident Or Loss
If an insured or insured auto is involved in an accident or loss for which this Insurance may apply, the accident or loss must be reported to us as soon as practicable by calling claims service, even if the insured is not at fault.
(ECF No. 83-1 at 22 (Policy 1) (some emphases omitted); ECF No. 83-1 at 76 (Policy 2) (some emphases omitted).) Under Connecticut law, two conditions must “be satisfied before an insurer’s duties can be discharged pursuant to the ‘notice’ provision of a policy: (1) an unexcused, unreasonable delay in notification by the insured; and (2) resulting material prejudice to the insurer.” Arrowood Indem. Co. v. King, 304 Conn. 179, 198 (2012) (quoting Arrowood Indem. Co. v. King, 605 F.3d 62, 77 (2d Cir. 2010) ). The burden of proving material prejudice falls upon the insurer. See id. at 201 (“[W]e hold that the insurer bears the burden of proving, by a preponderance of evidence, that it has been prejudiced by the insured’s failure to comply with a notice provision.”). “In determining whether a delay in notification is unreasonable and, thereby, untimely, a court must remain cognizant that an insured’s duty to give notice does not arise unless and until facts develop which would suggest to a person of ordinary and reasonable prudence that liability may have been incurred, and is complied with if notice is given within a reasonable time after the situation so assumes an aspect suggestive of a possible claim for damages.” Arrowood, 605 F.3d at 77.

Here, the parties dispute when notice of Veilleux’s accident was provided to Progressive. As noted above, they do not dispute that Attorney Louis George sent a letter to Howland & Sargent, the insurance agent, on November 27, 2007. (Def’s L.R. 56(a)1 Stmt. at ¶ 35; Pl.’s L.R. 56(a)2 Stmt. at ¶ 35.) The letter, which had a subject heading of “Progressive Insurance” and listed the policy number for Policy 2, stated as follows:
Please be advised that this law firm represents the interests of Central Auto & Transport, LLC and its related entities. It is our understanding that you are the insurance agent procuring the insurance for these entities for all pertinent times. On September 8, 2006, there was an accident which occurred on the Berlin Turnpike, Berlin, Connecticut. The injured party was Eric Veilleux. Although Nationwide Insurance has been involved in adjusting this claim, they are now requesting copies of any and all insurance policies with regard to the related entities to determine whether there may be additional coverage. This is an important step in that any additional coverage would help to protect our mutual client.
*8 (George Letter.) The “Howland & Sargent Group sent a Memo to [Progressive] … containing the letter on December 5, 2007. (Def’s L.R. 56(a)1 Stmt. at ¶ 36; Pl.’s L.R. 56(a)2 Stmt. at ¶ 36.) Thus, Progressive had notice of a potential claim under Policy 2 at that time. This conclusion is supported by Progressive’s subsequent transfer of the matter to a “Commercial Casualty Specialist” and a letter from said specialist dated December 10, 2007 to Central Rigging identifying the matter with a “Claim Number.” (See ECF No. 83-5 at 81.)4 The parties dispute whether Attorney George’s letter provided notice to Progressive of a potential claim by Central Auto under Policy 1.

For the following reasons, I conclude there is a genuine issue of material fact concerning whether the letter provided notice to Progressive of a potential claim by Central Auto under Policy 1. First, as noted above, the letter notes that Attorney George’s “law firm represents the interests of Central Auto & Transport, LLC and its related entities, and asks for “copies of any and all insurance policies with regard to the related entities to determine whether there may be additional coverage.” (George Letter (emphasis added).) Thus, the letter implies that Attorney George was inquiring into the existence of insurance policies for all of the Central Group entities, including Central Auto. Second, there are contemporaneous notations contained in the record from Progressive’s claims agents dating from the time of the receipt of the George letter noting an awareness that Central Auto was involved in Veilleux’s accident and that it may have incurred liability. (See ECF No. 87-1 at 24 (December 5, 2007 notation from Progressive claims agent Emily R. Wilmes stating that “Central Auto owns [vehicle] involved” in the accident), 26 (December 6, 2007 notation from Wilmes stating “[letter] … from Central Auto’s [attorney] putting us on notice as [possible] excess carrier”), 33 (February 25, 2008 notation from Progressive claims agent Lawrence Leeders stating: “Action Plan: 1. F/U [with] [attorney] for Central Auto & Transfer: get status of any claims”), 34 (February 27, 2008 notation from Leeders mentioning Attorney George’s discussion of “the contention against primarily [Central Auto]”).) These factors, when construed in Veilleux’s favor, support the notion that George’s letter provided Progressive with knowledge that “would suggest to a person of ordinary and reasonably prudence that liability may have been incurred” on behalf of Central Auto. Arrowood, 605 F.3d at 77.

*9 Progressive contends that the fourteen month lag period between Veilleux’s accident and George’s letter did not constitute reasonable notice. Even if that is true, however, Progressive has failed to demonstrate a lack of a genuine dispute of material fact regarding whether it was materially prejudiced by any unreasonably delay in providing notice. Progressive contends it was prejudiced by Veilleux’s alleged lack of timely notice in the following ways: (1) it did not get a chance to investigate the accident scene; (2) “Mr. Cunningham had already given a statement concerning the accident”; (3) “the tractor and the trailer involved in the accident were no longer available for any reasonable inspection; and (4) “Mr. Veilleux had gone through extensive medical treatment.” (ECF No. 82 at 20.)5

None of these arguments warrants granting Progressive judgment as a matter of law. First, Progressive was able to purchase the police report documenting the accident, which contained a total of eight pages and forty-nine photographs of the scene. (See ECF No. 87-1 at 27 (December 6, 2007 notation from Wilmes noting that the police report was eight pages long and contained forty-nine photographs).) Progressive does not explain how its own investigation would have materially improved upon such a report. Second, Progressive does not explain how Mr. Cunningham’s statement would have meaningfully differed had Progressive had earlier notice of its potential liability. Third, Progressive fails to present any evidence that it did not have access to the equipment that caused Veilleux’s injuries at the time of the George letter. Since Progressive bears the burden of demonstrating prejudice, this failure undermines its argument on this point. Finally, it is unclear what the relevance of Veilleux’s medical treatment is to Progressive’s argument—presumably, Veilleux’s medical treatment would not have differed had Progressive received earlier notice of its potential liability.

Most significantly, Progressive fails to explain how its actions would have materially differed had it received notice earlier. It denied Central Rigging’s claim on the basis that the equipment that caused the accident was not covered by Policy 2. Progressive makes a similar argument in its motion for summary judgment with respect to coverage under Policy 1. Given that most of these arguments do not in any way rely upon the details of Veilleux’s accident, they do not suggest that Progressive would have benefitted from conducting an earlier investigation of the claim. Further, Progressive does not point to any indeterminate facets of the accident that an earlier investigation could have determined to its benefit. For example, Progressive does not suggest that the issue of fault was unclear or that any of the details of the accident were in dispute. Finally, the record demonstrates that Progressive received notice of Veilleux’s lawsuit against Central Rigging on October 30, 2008, and declined to provide a defense. (See ECF No. 83-5 at 96 (October 30, 2008 letter from Attorney George noting that Veilleux had filed suit against Central Rigging and requesting a defense).) Further, Progressive received a similar request for a defense and indemnification from Central Auto approximately nine months before the scheduled trial date, and apparently failed to respond—at the very least, the record does not contain any such response. (See ECF No. 83-5 at 98 (February 12, 2015 letter from Attorney Clifford, Jr. noting that Veilleux’s case against Central Auto was scheduled for trial on November 17, 2015 and requesting a defense and indemnification).) Thus, Progressive had a chance to defend its insureds in the litigation against Veilleux but chose not to. As such, there is a genuine issue of material fact regarding whether Progressive was materially prejudiced by the timing of the notice it received of Veilleux’s accident.

4. Other Grounds For Denial of Coverage
*10 Progressive presents several other potential grounds for denial of coverage that require only brief mention. I address these grounds in turn.

a) Voluntary Payment Clauses
Progressive contends that the “Voluntary Payment Clauses” present in both policies preclude coverage. The clauses state as follows:
YOUR DUTIES IN THE EVENT OF AN ACCIDENT, CLAIM, LOSS OR SUIT
* * *
You and any person or organization claiming coverage as an insured must:
• assume no obligation, make no payment, or incur no expense without our consent, except at the insured’s own cost;
(ECF No. 83-1 at 22 (Policy 1) (some emphases omitted); ECF No. 83-1 at 76 (Policy 2) (some emphases omitted).) I conclude that Progressive has not shown that it is entitled to judgment as a matter of law as to this issue. As noted above, the direct action statute provides a cause of action predicated upon the following three elements: “(1) that the plaintiff has recovered a final judgment; (2) that the judgment is against a person who was insured by the defendant against liability on it; and (3) that the judgment remains unsatisfied.” Tucker, 936 F. Supp. 2d at 8-9 (internal quotation marks omitted). Progressive’s suggested application of the “Voluntary Payment Clauses” would effectively vitiate such an action by allowing an insurer to refuse improperly to defend its insured and then elude liability for a subsequent judgment against the insured on the basis of lack of consent. This application would defy the Connecticut Supreme Court’s edict that an insurer that wrongfully refuses to defend its insured cannot avail itself of the other portions of its policy in avoidance of its indemnity obligations. See Missionaries of Co. of Mary v. Aetna Cas. & Sur. Co., 155 Conn. 104, 114 (1967) (“The defendant, after breaking the contract by its unqualified refusal to defend, should not thereafter be permitted to seek the protection of that contract in avoidance of its indemnity provisions.”).

The Connecticut Superior Court’s decision in Soria v. Necatera, No. FSTCV136017134S, 2015 WL 9911485 (Conn. Super. Ct. Dec. 29, 2015) is instructive on this point. Soria concerned an insured’s attempt to recover the cost of a de facto settlement6 from an insurer that had refused to defend the insured. See id. at *1-2. The insurer argued that the following clause in the insured’s policy foreclosed coverage: “No insured will, except at that insured’s own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for the first aid, without consent.” Id. at *7. The Soria court rejected this argument, noting that such an argument would imply that a “court should accept the circular or bootstrap argument that if an insured pays a claim after the carrier denies coverage for the claim, that that payment itself justifies the carrier’s denial of the claim….” Id. at *8. The court concluded instead that “[o]nce there is a total denial of the claim (duty to defend and indemnify), and assuming that the denial were otherwise wrongful (as been claimed by the plaintiffs), the plaintiffs would have a valid and viable claim against the carrier for the amount of any reasonable settlement.” Id. Thus, “the voluntary payment provision necessarily loses essentially all of its potential applicability, once the claim has been denied.” Id.

*11 This reasoning is directly applicable to the present case. There is no dispute that Central Auto and Central Rigging entered into their settlement with Veilleux after Progressive denied coverage under both policies. (See ECF No. 83-5 at 18 (Stipulated Judgment between Veilleux, Central Rigging, and Central Auto dated March 30, 2016).) As such, assuming Progressive’s denial of coverage was wrongful, the Voluntary Payment Clauses are unenforceable. Progressive cites extensively to the Connecticut Supreme Court’s decision in Interface Flooring Sys., Inc. v. Aetna Cas. & Sur. Co., 261 Conn. 601, 604 (2002). (See ECF No. 82 at 28-31.) In Interface, the Connecticut Supreme Court held, applying Georgia law, that a voluntary payment clause similar to the ones at issue here absolved an insurer from reimbursing its insured for expenses the insured incurred before notifying the insurer of the lawsuit. See id. at 615-16. As the Soria court noted, however, this decision—even if it reflected Connecticut law—applies only to pre-tender expenses. See Soria, 2015 WL 9911485 at *7 (“The issue in Interface and related cases is the liability of an insurer for pre-tender expenses incurred by the insured…. Thus, the Supreme Court’s discussion of other cases … recognized a distinction between expenses incurred prior to tender of the defense (notice of the claim) and expenses that were incurred after the tender.”). The expenses at issue in this case occurred after notice was tendered to Progressive of the potential claims under both policies. As noted above, Progressive declined coverage at that time. Thus, Interface does not move the needle for Progressive.

b) The Suit Against Us Provisions
Progressive argues that the “Suit Against Us” provisions of the policies foreclose coverage. (ECF No. 82 at 32.) These provisions provide as follows:
5. Suit Against Us.
We may not be sued unless there is full compliance by you or an insured with all of the terms of this policy. We may not be sued under PART I – LIABILITY TO OTHERS until the obligation of an insured to pay is finally determined by judgment against that insured after actual trial or by written agreement of the insured, the claimant, and us.
(ECF No. 83-1 at 41 (Policy 1) (some emphases omitted); ECF No. 83-1 at 95 (Policy 2) (some emphases omitted).) As with the “Voluntary Payment Clauses,” the “Suit Against Us” provisions fly in the face of the direct action statute and the Connecticut Supreme Court’s precedent holding that an insurer that wrongfully refuses to defend its insured may not shirk its indemnity obligations by relying upon other portions of the policy. See Missionaries, 155 Conn. at 114. If Progressive wrongfully failed to defend its insureds in this case, it cannot then refuse to pay their subsequent settlement on the basis that it did not consent to said settlement.7

c) Contractual Liability Provisions
*12 Progressive avers that the “Contractual Liability Provisions” in the policies preclude coverage. The “Contractual Liability Provisions” provide, in relevant part, that Progressive’s duty to defend does not include:
Any liability assumed by an insured under any contract or agreement, unless the agreement is an insured contract that was executed prior to the occurrence of any bodily injury or property damage. However, this exclusion does not apply to liability for damages that an insured would have in the absence of the contract or agreement.

(ECF No. 83-1 at 30 (Policy 1) (emphases omitted); ECF No. 83-1 at 84 (Policy 2) (emphases omitted).) This provision does not dispel any genuine issue of material fact concerning coverage. As an initial matter, the provision does not preclude coverage on its face, as there is a genuine issue of material fact regarding whether Central Auto and Central Rigging would have incurred the damages allotted in the settlement “in the absence of the contract or agreement”—i.e., if they had gone to trial. Second, the use of the term “contract or agreement” in the provision does not unambiguously include a settlement—let alone one entered as a stipulated judgment of the court.

Even if the provision did nominally preclude coverage, however, it would not help Progressive. As noted above, Connecticut law provides an insured with a right to collect from an insurer that wrongly refuses to defend it. An insurer that wrongly refuses to defend cannot “thereafter be permitted to seek the protection of [the policy] in avoidance of its indemnity provisions.” Missionaries, 155 Conn. at 114. Here, Progressive is arguing that its insureds breached the policies by entering into the stipulated judgment after it wrongfully refused to defend them. Missionaries forecloses such an argument.

d) Movement of Property by Mechanical Device Exclusions
Progressive argues that Veilleux’s claims are barred by the “Movement of Property by Mechanical Device” provisions of the policies. The provisions in question provide that coverage is precluded for:
Bodily injury or property damage resulting from or caused by the movement of property by a mechanical device, other than a hand truck, not attached to an insured auto.
(ECF No. 83-1 at 31 (Policy 1) (emphases omitted); ECF No. 83-1 at 86 (Policy 2) (emphases omitted).) This provision does not apply in this case, however, as the record demonstrates that Veilleux alleged in the underlying action that the accident was caused by the rupture of a chain attached to the tractor-trailer driven by Cunningham. (See ECF No. 83-3 at 129, Veilleux’s Amended Complaint against Central Auto and Central Rigging (alleging that the accident occurred due to the breaking of the chain attached to the tractor-trailer).) As noted above, there is a genuine issue of material fact concerning whether the policies at issue in this case provide coverage for these vehicles. Thus, summary judgment under this provision cannot issue.

e) Handling of Property Exclusions
*13 Progressive contends that the “Handling of Property” exclusions in the policies foreclose coverage. (ECF No. 82 at 35-36.) These provisions provide that Progressive does not cover claims for:
Bodily injury or property damage resulting from or caused by the handling of property:
a. before it is moved from the place where is it is accepted by the insured for movement into or onto your insured auto; or
b. after it has been moved from your insured auto to the place where it is finally delivered by the insured.
(ECF No. 83-1 at 31 (Policy 1) (emphases omitted); ECF No. 83-1 at 86 (Policy 2) (omitted).) In particular Progressive contends that the second portion of this provision applies. (ECF No. 82 at 36.) There is a genuine dispute of material fact, however, concerning whether the accident that caused Veilleux’s injuries took place after the property to be delivered—i.e., the aerial lift—had been moved to the place where it was finally delivered. As noted above, the accident allegedly occurred as Veilleux was helping unload the tractor. Thus, there is a genuine dispute of material fact concerning whether the aerial lift had been taken “to the place where it [was] finally delivered by the insured” at the time the accident took place.

f) Operation of Certain Machinery or Equipment Exclusions
Progressive avers that the “Operation of Certain Machinery or Equipment” exclusions in the policies forestall coverage. (ECF No. 82 at 36.) Those provisions provide that Progressive will not cover claims for:
Bodily injury, property damage, or covered pollution cost or expense arising out of the operation of:
…
a. machinery or equipment that is on, attached to, or part of, a land vehicle that would qualify under the definition of mobile equipment if it were not subject to a compulsory or financial responsibility law where it is licensed or principally garaged.
(ECF No. 83-1 at 32 (Policy 1) (emphases omitted); ECF No. 83-1 at 86 (Policy 2) (emphases omitted).) Progressive contends that the “aerial lift involved in the subject accident would qualify as ‘mobile equipment.’ ” (ECF No. 82 at 36.) There is a genuine dispute of material fact, however, regarding whether the accident occurred due to the operation of the “aerial lift” as opposed to the breaking of the chain attached to the tractor-trailer.

g) Two or More Policies Issued by Us Provisions
Progressive argues that coverage under at least one of the policies is precluded by the “Two or More Policies Issued by Us” provisions in the policies. These provisions provide as follows:
4 Two or More Policies Issued by Us
If any applicable insurance other than this policy is used to you by us, or any company affiliated with us, and applies to the same accident or loss, the total amount payable among all such policies shall not exceed the limits provided by the single policy with the highest limits of liability.
(ECF No. 83-1 at 41 (Policy 1) (emphases omitted); ECF No. 83-1 at 95 (Policy 2) (emphases omitted).) The policies in question, however, cover two different insureds—Central Auto and Central Rigging. Thus, this provision is inapplicable.

B. Punitive Damages
Progressive contends that even if it had a duty to defend or indemnify the claims at issue in this matter, it cannot be liable “for any punitive, exemplary or statutory multiple damages.” (ECF No. 82 at 38.) In support of this contention, Progressive points to a policy provision in both policies providing, in pertinent part, as follows:
*14 Subject to the Limits of Liability, if you pay the premium for liability coverage, we will pay damages, OTHER THAN PUNITIVE, EXEMPLARY, OR STATUTORY MULTIPLE DAMAGES, for bodily injury, property damage, and covered pollution cost or expense, for which an insured becomes legally responsible because of an accident arising out of the ownership, maintenance or use of that insured auto. However, we will only pay for the covered pollution cost or expense if the same accident also caused bodily injury or property damage to which this insurance applies.
(ECF No. 83-1 at 27 (Policy 1) (some emphases omitted); ECF No. 83-1 at 81 (Policy 2) (some emphases omitted).) Nothing in Veilleux’s complaint suggests, however, that he is seeking coverage for punitive, exemplary or statutory multiple damages incurred by Central Auto and Central Rigging. Rather, his complaint suggests he is seeking compensatory damages up to the policy limits, attorney’s fees and costs incurred by Central Auto and Central Rigging in defense of the underlying action against Veilleux, and punitive damages against Progressive for alleged bad faith. (See Complaint at 10 (seeking “1. “[c]ompensatory damages in the form of the policy limits as described in the Complaint; 2. [a]ttorney’s fees and costs incurred by [Central Auto] and [Central Rigging] in defense of the previous action brought by [Veilleux]; and 3. [p]unitive [d]amages”).) Thus, Progressive’s argument lacks merit.

C. Breach of the Covenant of Good Faith and Fair Dealing
Progressive argues that there is no evidence to support Veilleux’s claims for breach of the implied covenant of good faith and fair dealing. (See ECF No. 82 at 39.) “[T]he duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship.” Nwachukwu v. Liberty Bank, 257 F. Supp. 3d 280, 295 (D. Conn. 2017) (quoting De La Concha of Hartford, Inc. v. Aetna Life Ins. Co., 269 Conn. 424, 432 (2004) ). This duty “requir[es] that neither party do anything that will injure the right of the other to receive the benefits of the agreement.” Id. To set out “a cognizable claim of breach of the implied covenant of good faith and fair dealing, [the plaintiff must allege that] ‘the acts by which a defendant allegedly impedes the plaintiff’s right to receive benefits that he or she reasonably expected to receive under the contract [were] taken in bad faith.’ ” Calhoun v. Providence Mut. Fire Ins. Co., 204 F. Supp. 3d 436, 442 (D. Conn. 2016) (quoting De La Concha of Hartford, Inc., 269 Conn. at 433). Bad faith encompasses “both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one’s rights or duties, but by some interested or sinister motive.” Habetz v. Condon, 224 Conn. 231, 237 (1992), quoting Black’s Law dictionary (5th ed. 1979). In essence, then, “[bad] faith means more than mere negligence, it involves a dishonest purpose.” De La Concha of Hartford, Inc., 269 Conn. at 433. Although an insurer’s “failure to conduct an adequate investigation of a claim, when accompanied by other evidence, reflecting an improper motive, properly may be considered as evidence of bad faith,” Karas v. Liberty Ins. Corp., 33 F. Supp. 3d 110, 116 (D. Conn. 2014), “[a]llegations of a mere coverage dispute or negligence by an insurer in conducting an investigation will not state a claim for bad faith against an insurer.” Martin v. American Equity Ins. Co., 185 F. Supp. 2d 162, 165 (D. Conn. 2002).

*15 Progressive contends that Veilleux’s breach of the covenant of good faith and fair dealing claims fails because Veilleux has failed to present any evidence of bad faith. (ECF No. 82 at 39.) Veilleux points to the following pieces of evidence in defense of his claim: (1) that Progressive knew in December 2007 that Central Auto owned one of the vehicles involved in the accident and was asked to locate Central Auto’s insurance policy but did not; (2) that Progressive refused to respond to Attorney Clifford, Jr.’s letters in February 2015 inquiring about coverage for Central Rigging and Central Auto; (3) that Progressive knew that the Central Auto tractor had the logo of “Central Rigging” on it as early as December 5, 2007; (4) that Progressive did not obtain the police report regarding Veilleux’s accident until February 28, 2008; (5) that Progressive never sent anyone to investigate Central Rigging’s claim before denying it on May 20, 2008; (6) that Progressive tried to convince Greco there was no coverage provided by Progressive for Central Rigging’s loss before denying the claim; (7) that Progressive denied coverage under Policy 2 under the “hired auto” endorsement without any basis; and (8) that Progressive denied coverage under Policy 1 on the basis that the MCS-90 Endorsement did not apply “when Connecticut law provided otherwise.” (See ECF No. 86 at 37-38.)

While almost all of Veilleux’s claims suggest negligence rather than bad faith on the part of Progressive, the sixth allegation—that Progressive tried to convince Greco to agree that there was no coverage—gives rise to a genuine dispute of material fact concerning whether Progressive acted with bad faith. The evidence on this point consists of a notation made by Progressive employee Margaret F. Bertone, dated December 14, 2007, stating as follows: “Left another message for NI [attorney], Louis George…. Need to discuss as had gotten NI, Rob Greco to understand and agree that there is no coverage provided by Progressive, for this loss.” While this notation is, admittedly, somewhat cryptic, it is clear enough, when construed in Veilleux’s favor, to suggest that Progressive was attempting to pressure Greco into dropping Central Rigging’s coverage claim outside the presence of his counsel. A reasonable juror could find that such an action constituted bad faith.

As such, I deny Progressive’s motion for summary judgment with respect to Veilleux’s bad faith claim.

V. Conclusion
For the reasons set forth above, Progressive’s motion for summary judgment (ECF No. 81) is hereby DENIED.

IT IS SO ORDERED.

All Citations
Slip Copy, 2018 WL 4374073

Footnotes

1
The Court presumes the parties’ familiarity with the details of the underlying case and therefore limits this factual background to those facts necessary to resolve the defendants’ motion. Other facts will be discussed as necessary in the Discussion Section below.

2
Veilleux objects that the letter concerns “a claim,” not a “ ‘possible claim,’ ” but otherwise admits the allegation. (See Pl.’s L.R. 56(a)2 Stmt. at ¶ 37.) He repeats this objection several times in reference to Progressive’s factual assertions concerning this claim. I do not address these objections since they do not affect my ultimate ruling.

3
Since Veilleux includes all of his factual allegations in the counts set out in his complaint and restarts the numbering of his paragraphs with each count, I cite his factual allegations using the particular count under which they fall.

4
Progressive contends that George’s letter in question “merely identified [Policy 2], indicated there was a claim pending being adjusted by [another insurance company] and requested a copy of [Policy 2]”; as such, it contends that the letter “did not state that a claim was being made under [Policy 2].” (ECF No. 82 at 20.) This argument is undermined by the information listed above. In any event, any doubt on the matter is removed by Progressive’s Denial of Coverage Letter to Attorney George, which notes that “[o]n December 5, 2005, Progressive received your correspondence, dated November 27, 2007 … advis[ing] the agent that there was [an] accident that occurred on September 8, 2006 in Berlin, Connecticut, from which Eric [Veilleux] was seriously injured.” (See Denial of Coverage Letter at 4.) I presume that the “2005” date is a typo and that the author of the letter meant to write “December, 2007” instead. In any event, the letter undermines any contention that Attorney George’s November 27, 2007 letter failed to apprise Progressive of any claim against the company resulting from Veilleux’s accident.

5
Progressive added in its reply brief that it was particularly prejudiced under Policy 1 given that the “underlying state court action had already been litigated for six (6) years and five (5) months” by the time it received notice of a potential claim under the policy. (ECF No. 88 at 8.) My conclusion that there is a genuine issue of material fact concerning whether Progressive received notice of a potential claim under Policy 1 via the George letter moots this point.

6
The insured in Soria faced a demand for various damages backed up with a threat of withholding of payments for other work performed by the insured; the insured paid the amount demanded rather than risk losing the payments after the insurer refused to defend. Soria, 2015 WL 9911485 at *2.

7
Progressive cites, albeit indirectly through a citation to a Connecticut Superior Court case, a Connecticut Insurance Department regulation providing that an insurance policy “may contain in substance the following conditions: … a provision that no action shall lie against the insurer until all the terms of the policy have been complied with or, under the liability coverage, until the amount of the insured’s obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the insurer, and a further provision that the insurer shall not be joined or impleaded in any action against the insured brought to determine his liability.” Connecticut Insurance Regulations § 38–334–8(b)(1)(E) (“Regulation 8(b)(1)(E)”). The very case that Progressive cites undermines its argument. (See ECF No. 82 at 33 (citing Shaw v. Geico Gen. Ins. Co., No. AANCV156019614S, 2016 WL 4203044, at *8 (Conn. Super. Ct. July 7, 2016) ).) In Shaw, an insurer argued that Regulation 8(b)(1)(E) foreclosed an insured’s suit against it because the insurance policy at issue contained the type of clause described in that regulation. Id. at *8. The Shaw court rejected that contention, noting that “[t]his regulation merely states that such a provision may be added to automobile insurance policies.” Id. “By placing the ‘condition of suit’ provision in its policy, [the insurer] has done what the regulation has authorized. That provision may now be interpreted and applied under the contract law of this state. That law is controlled by the Supreme Court[ ]….” Id. Here, Progressive undoubtedly had authorization to use the “Suit Against Us” provisions in its policies. The interpretation of these policies, however, is governed by the Connecticut Supreme Court’s decision in Missionaries. As such, Progressive’s citation to Regulation 8(b)(1)(E) does not help its argument.