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Liberty Mutual Insurance Co. v. OSI Industries7/21/2005
FOR PUBLICATION
Case Summary
Liberty Mutual Insurance Company ("Liberty Mutual") appeals from the grant of summary judgment in favor of OSI Industries, Inc., ("OSI") and Beltec International ("Beltec") in their declaratory judgment action alleging that Liberty Mutual breached its duty to defend OSI and Beltec in an underlying lawsuit. OSI cross-appeals the trial court's order that Liberty Mutual pay only half of OSI's legal fees and expenses because OSI was insured by another insurance company. We affirm the grant of summary judgment in favor of OSI and Beltec and in so doing conclude that Liberty Mutual had a duty to defend them in the underlying lawsuit. We also conclude that Liberty Mutual has waived, for failure to make a cogent argument, its argument that OSI and Beltec are precluded from coverage for the underlying complaint's two counts of willful violations of penal statutes; moreover, such argument fails on the merits because other counts in the complaint were for causes of action that would have been covered by the insurance policy, and the duty to defend is broader than the duty to indemnify. On the issue of Liberty Mutual's liability for defense costs prior to the date that OSI and Beltec gave notice of the underlying lawsuit to Liberty Mutual, we find that the trial court erred in awarding these costs. Moreover, we find that public policy does not prevent OSI's and Beltec's recovery against Liberty Mutual and that the pleadings in the underlying lawsuit did not clearly exclude the finding that the events for which OSI sought coverage occurred after OSI's policy had expired with Liberty Mutual. We reverse the trial court's award of OSI's and Beltec's attorneys' fees in the declaratory judgment action because Indiana adheres to the "American Rule" for the allocation of attorneys' fees. We affirm the trial court's award to OSI of 50% of its Thermodyne litigation legal fees and expenses from Liberty Mutual because OSI has been partially compensated for those costs by another insurance company.
Facts and Procedural History
OSI is a company that processes meat and is the exclusive provider of meat products for McDonald's Corporation ("McDonald's"). Beltec developed and licensed the "Temperfect Oven" for manufacture by Taylor Manufacturing ("Taylor"), a food equipment manufacturer. The "Temperfect Oven" was sold for use by fast food restaurants and contained flat, solid aluminum plate shelving for the cooking and holding of food items.
In 1995, OSI, Beltec, and McDonald's, among others, were sued by Thermodyne and AFTEC (collectively "Thermodyne"). Thermodyne, an Indiana corporation with its principal place of business in Fort Wayne, developed, manufactured, and sold the "Thermodyne Oven" to fast food restaurants beginning in May 1987. The oven contained flat, solid aluminum plate shelving, which Thermodyne claimed was unique and a trade secret. The amended complaint reveals the following eight counts: (I) Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 440/1 et seq.; (II) Illinois Trade Secrets Act, 765 ILCS 1065; (III) Unfair Competition; (IV) Breach of Confidence; (V) Interference with Contractual Relations; (VI) Breach of Fiduciary Duty; (VII) Breach of Contract; and (VIII) Conspiracy. Appellant's App. p. 387-93.
Benno Lieberman, the founder of Beltec, worked for Thermodyne at one time and served as its Vice President of Engineering and Senior Vice President of Science and Technology. According to Thermodyne, Lieberman secretly met with OSI, and OSI subsequently recruited and hired Lieberman to work for OSI to develop the "Temperfect Oven" similar to and based upon the "Thermodyne Oven." Also, Thermodyne a
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