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W. World Ins. Co. v. Wendy Frieden & Frieden Prop. Mgmt., LLC

United States District Court for the Central District of Illinois, Rock Island Division

July 18, 2018, Decided; July 18, 2018, E-Filed

Case No. 4:16-cv-04038-SLD-JEH

Opinion

ORDER

Plaintiff Western World Insurance Company ("WWIC") filed a Motion for Default Judgment, ECF No. 38.1 On May 24, 2018, it filed a Supplemental Brief in Support of its Motion for Default Judgment, ECF No. 42. For the reasons that follow, the motion as supplemented is GRANTED.

BACKGROUND2

This is a declaratory judgment action concerning whether WWIC has a duty to defend and indemnify its insureds, Wendy Frieden ("Wendy") and Frieden Property Management, LLC ("Frieden Property"), in two Illinois state lawsuits. Wendy is a property manager in the Quad Cities and the sole member of Frieden Property. Unless the distinction is relevant, the Court will refer to Defendants together as one entity, Frieden, since Wendy operates her property management business as Frieden Property. WWIC issued an Errors and Omissions Insurance Coverage Policy ("the Policy") to Frieden, for professional negligence claims arising out of its property management business.

I. Underlying State Lawsuits and Denial of Coverage

On October [*2]  6, 2015, Black Box Equities, LLC and five other entities (collectively, the "Black Box plaintiffs") filed a complaint against Frieden in the Circuit Court of Rock Island County. Black Box Compl., Second Am. Compl. Ex. B, ECF No. 31 at 48-58. The Black Box plaintiffs, who own rental properties, allege that they had a property management agreement with Wendy. Under the agreement, Wendy was responsible for acquiring tenants, maintaining units, collecting rent and security deposits, and promptly paying the Black Box plaintiffs net proceeds minus expenses accrued in executing her responsibilities. In exchange, she was to receive six percent of gross rents. They allege that in 2013, Wendy formed Frieden Property, moved her business into that entity, and that the agreement was orally extended under essentially the same terms with Frieden Property. They allege that Frieden failed to make timely payments of the net proceeds. After Frieden allegedly refused to turn over those funds, the Black Box plaintiffs terminated the agreement and demanded the return of all funds held for their benefit.

Carpathian Capital Fund I, LLC ("Carpathian"), Carpathian investors, and tenants in Carpathian-owned buildings [*3]  (collectively, the "Carpathian plaintiffs") filed a separate action against Frieden in February 2016.3 Carpathian Compl., Second Am. Compl. Ex. C, ECF No. 31 at 59-78; Suppl. Br. Supp. 6-7. The Carpathian Complaint alleges that Frieden and Carpathian entered into a contract for property management services for seventy-two Carpathian-owned rental properties. Frieden was to collect rents and security deposits and hold them in trust for the benefit of either tenants or Carpathian. The Carpathian Complaint alleges that Frieden failed to forward required rent payments and, as of the date of filing, owed Carpathian more than $129,000.

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2018 U.S. Dist. LEXIS 230533 *; 2018 WL 9880231

WESTERN WORLD INSURANCE COMPANY, Plaintiff, v. WENDY FRIEDEN and FRIEDEN PROPERTY MANAGEMENT, LLC, Defendants.

Prior History: W. World Ins. Co. v. Wendy Frieden & Frieden Prop. Mgmt., LLC, 2018 U.S. Dist. LEXIS 230536 (C.D. Ill., Jan. 31, 2018)

CORE TERMS

insured, state court, coverage, indemnify, allegations, parties, joined, no duty, complaints, inconsistent obligations, property management, feasible, courts, Default, joinder, lawsuit, insurance company, plaintiffs', funds, injured party, argues, impair, theft, declaratory judgment action, injunctive relief, default judgment, punitive damages, duty to defend, wrongful act, conversion