Kmart Corp. v. Footstar, Inc., No. 14-1359 (7th Cir. 2015)Annotate this Case
Footstar operated the footwear departments in various Kmart stores as though they were islands. Footstar employees could only work in those departments unless they had written permission from Kmart. In 2005, a Footstar employee tried to help a customer get an infant carrier off a shelf outside the footwear department and the customer was injured. She sued. Kmart sought indemnification from Footstar and its insurer, Liberty Mutual. A magistrate judge found that Footstar and Liberty Mutual both had a duty to defend beginning the day Kmart formally requested coverage since the injury was potentially coverable under the agreement between Kmart and Footstar and the insurance policy. The Seventh Circuit reversed, holding that neither Liberty Mutual nor Footstar had a duty to indemnify Kmart because the injury did not occur “pursuant to” or “under” the agreement between Kmart and Footstar. That agreement specifically precluded Footstar employees from working outside of the footwear department, where the injury occurred, and actions taken in contravention of the agreement were not “pursuant to” or “under” it. Liberty Mutual did not deny coverage in bad faith and that Kmart did not breach the relevant notice provisions such that Liberty Mutual and Footstar could withhold defense costs.