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ALTOM TRANSPORT, INC. v. WESTCHESTER FIRE INSURANCE COMPANY et al

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

Case Number: 
1:14-cv-09547 Search Pacer
ACE Group party(s): 
Opposing Party: 
Altom Transport, Inc.
Court Type: 
Federal
US District Court: 
Northern District of Illinois
Date Filed: 
Nov 28 2014

COMPLAINT FOR DECLARATORY JUDGMENT
Plaintiff, ALTOM TRANSPORT, INC. ("Altom Transport"), by and through its
undersigned attorneys, states the following for its Complaint for Declaratory Judgment against
WESTCHESTER FIRE INSURANCE COMPANY ("Westchester") :and MICHAEL
STAMPLEY ("Mr. Stampley"), pursuant to 735 ILCS 5/2-701:
1. Altom Transport is a corporation licensed to do business in the State of Illinois
and does business in Cook County.
2. Westchester is an insurance company licensed to transact business in the State of
Illinois and does business in Cook County. This declaratory action concerns coverage
obligations owed by Westchester to Altom Transport under Westchester insurance policy
number G250209QA 004 with a policy period of August 3, 2013 to August 3, 2014.
3. Mr. Stampley is a resident of Cook County in the State of Illinois. As the Plaintiff
in an underlying lawsuit more fully described below, Mr. Stampley is named as a necessary
party-defendant to this declaratory action.
4. Venue is proper in this Court pursuant to 735 ILCS 5/2-101 and 102.
5. An actual and justiciable controversy exists between Altom Transport and
Westchester as to whether Westchester owes insurance coverage obligations to its policyholder,
Altom Transport.
6. Altom Transpmt is a federally licensed tank-truck motor carrier (U.S. DOT
Number 297572 and MC-187735) and hauls liquid commodities (such as petroleum products and
chemicals) throughout the United States, Mexico and Canada.
7. Altom Transport has both employee drivers and owner-operator drivers. The
owner-operators lease their own trucks and services to Altom Transport as independent
contractor drivers. Altom Transport and the owner-operators enter into lease agreements for
Altom Transport's use ofthe owner-operator's truck and services.
8. Mr. Stampley was an owner-operator driver for Altom Transport from September
28, 2012 to March 24, 2014. As such, Mr. Stampley and Altom Transport entered into a lease
agreement for use of Mr. Stampley's truck and driving services. A copy of the lease agreement
is attached as Exhibit A. An Illinois ICC EL-l Form identifying (a) Mr. Stampley and (b) his
2007 Peterbilt tractor was approved by and filed with the ICC on October 10, 2012 and listed
Stampley's payment as "70% or (sic) gross and/or (other terms)." The lease agreement referred
to the signed and filed EL-l as Appendix A to the lease.
9. The lease agreement with Mr. Stampley was terminated by Altom Transport on
March 24,2014 for service related failures. Three (3) months later, Mr. Stampley filed a lawsuit
against Altom Transport in the United States District Court for the Northern District of Illinois,
Eastern Division, No. 1:14-cv-03747 (the "Stampley Action"). The Complaint was filed on May
21,2014.
2
Case: 1:14-cv-09547 Document #: 1-1 Filed: 11/28/14 Page 6 of 209 PageID #:11
I 0. The Stampley Action was filed by Mr. Stampley individually and on behalf of a
purported class of former and undisclosed Altom Transport owner-operator drivers. The
Complaint was titled "Class Action Complaint for Declaratory and Injunctive Relief and
Damages". The Stampley Complaint is attached as Exhibit B.
II. Pursuant to the lease agreement and ICC EL-l, Mr. Stampley was to be paid 70%
of the gross Altom Transport received from Mr. Stampley's truck and services. In his
Complaint, Mr. Stampley generally claims that he and other owner-operator drivers similarly
situated should have been paid an additional percentage (70%) of funds stemming from expenses
such as internal and external tank-trailer washes and that Altom Transport wrongfully withheld
such payments.
12. In the bulk tank-truck motor carrier industry tank washes are routinely required to
ensure that residue from a prior shipment does not contaminate the subsequent load placed in the
tank trailer. These services are performed by outside vendors --not Altom Transport and not the
drivers. Mr. Stampley makes his claim despite the fact that Altom Transport owns all the tank­
trailers provided to Mr. Stampley and others, and that the tank wash and other tank-trailer related
charges are expenses incurred by Altom Transport that are then passed through to the shipper (or
other party) for reimbursement.
13. Mr. Stampley alleges three causes of action in his Complaint: (I) that the lease
agreement used by Altom Transport was improper and wrongful insofar as it did not conform
with the Federal Motor Carrier Safety Administration Truth-in-Leasing Act, 49 USC 14102 and
49 C.F.R Section 376.12; (2) that Altom Transport wrongfully failed to pay Mr. Stampley and
other owner-operators a 70% share of tank-related expense items-including tank wash charges;
(3) and that Altom Transport purportedly wrongfully enriched itself by not paying Mr. Stampley
and other drivers the 70% of these charges. Mr. Stampley is seeking monetary damages, non­
monetary damages and/or injunctive relief. Altom Transport has denied all of Mr. Stampley's
claims.
14. On May 23, 2014 Altom Transport immediately tendered the Stampley Action to
Westchester, requesting that Westchester provide it with a defense and indemnity.
15. Westchester denied Altom Transport's tender and request in correspondence of
July 14,2014. Westchester relied upon various exclusions in its policy as grounds for its refusal
to defend or indemnify Altom Transport. Westchester's denial letter is attached as Exhibit C.
16. Westchester has neither defended Altom Transport under a reservation of rights
nor filed a declaratory judgment action seeking a judicial determination of its obligations to
Altom Transport.
17. As a result of Westchester's refusal to defend, Altom Transport retained counsel,
has funded its own defense in the Stampley Action, and has now been forced to initiate this
declaratory action.
18. On October, 14, 2014, Mr. Stampley's counsel made a written "final" time-
demand for settlement in the amount of$1.9 million. A copy of this letter is attached as Exhibit
D.
19. The $1.9 million settlement demand was within Westchester's policy limits and
was set to expire on October 17, 2014 at 9:00a.m.
20. In correspondence dated October 15, 2014, Altom Transport tendered the $1.9
settlement demand from Mr. Stampley to Westchester requesting that Westchester reconsider its
denial of coverage and immediately settle the claim within limits on Altom Transport's behalf.
A copy of Altom Transport's letter is attached as Exhibit E.
21. Remarkably, Westchester did not respond substantively to the demand--or even
acknowledge receipt of Altom Transport's request --thereby squandering any opportunity to
settle within limits.
22. On October 21, 2014 Altom Transport advised Westchester that Mr. Stampley
had withdrawn his settlement demand. See correspondence attached as Exhibit F.
23. On October 27, 2014, Mr. Stampley advised that the settlement demand had
increased to $2.3 million with an expiration date of October 31, 20 14.
24. Altom Transport advised Westchester of the increased demand on October 28,
2014 and requested that Westchester act now to settle the Stampley Action. This communication
is attached as Exhibit G.
25. As of the date of the filing of this Complaint, Westchester has failed to
communicate with Altom Transport in any way.
26. Altom Transport is an insured under Westchester policy bearing policy number
G2502090A 004 and with a policy period of August 3, 2013 to August 3, 2014. This policy is
called an ACE Express Private Company Management Indemnity Package Insurance
Policy ("Westchester policy"). A copy of the Westchester policy is attached as Exhibit H.
27. This Westchester policy has a Directors & Officers and Company coverage part
which applies to allegations that the Company (Altom Transport), its principals and/or officers
are liable for wrongful conduct.
28. The Westchester policy is a "claims made" policy, meaning it covers claims made
during the policy period.
29. The Westchester policy contains the following insuring agreement:
3. The Insurer [Westchester] shall pay the Loss of the Company
[Altom Transport] which the Company becomes legally obligated
to pay by reason of a Claim first made against the Company
during the Policy Period or, if applicable, the Extended Period,
and reported to the Insurer pursuant to subsection E 1 herein, for
any Wrongful Act taking place prior to the end of the Policy
Period.
30. The Westchester policy includes the following relevant definitions:
1. Claim means:
*
* *
c) A civil proceeding against any Insured seeking
monetary damages or non-monetary or injunctive
relief, commenced by the service of a complaint
or similar pleading;
* *
*
9. Wrongful Act means any actual or alleged error, omission,
misleading statement, misstatement, neglect, breach of duty
or act allegedly committed or attempted by:
*
*
*
c) the Company, but only with respect to Insuring Clause 3
of this Coverage Section.
Endorsement No. 14 to the Westchester policy amends the definition of Loss in
relevant part as follows:
Loss means damages, judgments, settlements, pre-judgment or
post-judgment interest awarded by a court ....
31. The Westchester policy includes the following relevant duty to defend coverage:
I. It shall be the duty of the Insurer and not the duty of the
Insureds to defend any Claim. Such duty shall exist even
if any of the allegations are groundless, false or fraudulent.
The Insurer's duty to defend any Claim shall cease when
the Limits of Liability have been exhausted by the payment
of Loss including Costs, Charges and Expenses.

COUNT I
(Wrongful Refits a! of Duty to Defend)
32. Altom Transport re-alleges the allegations contained in Paragraphs 1 through 31
of its Complaint for Declaratory Judgment as if fully set forth herein.
33. The Stampley Action alleges a Loss by the Company as those terms are defined
in the Westchester policy.
34. The Stampley Action alleges a Claim as that term is defined in the Westchester
policy, and the Claim was made within the Policy Period.
35. The Stampley Action alleges a Wrongful Act by the Company as those terms are
defined in the Westchester policy.
36. The allegations of the underlying Complaint fall within, or potentially within, the
coverage provided by the Westchester policy. Therefore it is the mandatory duty of Westchester
("not the duty of the Insured") to defend any Claim. Under the express language of the policy,
Westchester has this duty to defend even if the underlying allegations are groundless, false or
fraudulent.
37. To the extent Westchester relies on policy exclusions to deny coverage, it is
Westchester's burden of establishing that the applicability of those exclusion(s) is clear and free
from doubt. Westchester has not met this burden.
38. The allegations contained in the Stampley Action are covered, or at the very least
potentially covered, by the Westchester policy and, as such, Westchester owes a duty to defend
Altom Transport in the Stampley action.
WHEREFORE, Altom Transport respectfully requests that this Court find that the
Westchester policy provides coverage for the Stampley Action; that Westchester owed Altom
Transport a duty to defend; that Westchester breached its contractual obligation to defend Altom
Transport, and that Westchester is obligated to reimburse Altom Tranport its defense costs paid
to date to be incurred in the future.

Count II
(Imposition of Estoppel)
39. Altom Transport re-alleges the allegations contained in Paragraphs 1 through 38
of its Complaint for Declaratory Judgment as if fully set forth herein.
40. The allegations contained in the Stampley Action fall within or potentially within
the coverage afforded to Altom Transport under the Westchester policy. As such Westchester
owed Altom Transport a duty to defend.
41. However, on July 14,2014, Westchester denied it owed any coverage obligations
to Altom Transport stemming from the Stampley Action.
42. Westchester did not defend Altom Transport under a reservation of rights or file a
declaratory judgment action to secure a determination of any coverage obligations, as required
under Illinois law.
43. Westchester's denial of coverage was incorrect and it wrongfully failed to initiate
a declaratory judgment action to conclusively determine its coverage obligations to Altom
Transport. As such, under clear and unequivocal Illinois law, Westchester is now estopped from
asserting any defenses to coverage for the Stampley Action.
WHEREFORE, Altom Transport respectfully requests that this Court find that
Westchester has breached its duty to defend the Stampley action, and that it is estopped from
asserting any coverage defenses now or in the future.

COUNT III
(Section 215 ILCS 5/155 Claim)
44. Altom Transport re-alleges the allegations contained in Paragraphs 1 through 43
of its Complaint for Declaratory Judgment as if fully set forth herein.
45. Westchester's (1) wrongful denial of coverage; (2) failure to defend under a
reservation of rights or file a declaratory judgment action; (3) complete disregard of Altom
Transport's communication requesting a reconsideration of the denial of coverage and settlement
within the policy limits; ( 4) forfeiture of the oppmtunity to settle within the policy limits on
behalf of Altom Tranport; and (5) exposing its insured to an excess settlement or judgment,
constitute unfair and improper claim practices pursuant to Section 215 ILCS 51155 of the Illinois
Insurance Code and entitles Altom Transport to all available relief thereunder.
WHEREFORE, Altom Transport respectfully requests that this Court find that
Westchester has engaged in unfair claims practices and is liable for damages under 215 ILCS
5/155 including, but not limited to, an award of its attorney's fees and costs.

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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