The opinion of the court was delivered by: Napoli, District Judge.
MEMORANDUM OPINION AND ORDER
This action was brought by Stern, Walter & Simmons, an
advertising agency, against its insurer, Seaboard Surety Company,
to recover amounts it was forced to expend in defending and
settling two law suits. The plaintiff asserts that the claims
against it were within the policy coverage and that the defendant
wrongfully failed to defend. Seaboard denies liability and the
parties have filed cross motions for summary judgment. The facts
are not in dispute.
The action arises out of an insurance policy issued to the
plaintiff by Seaboard covering, among other things, liability for
libel, slander, defamation and invasion of privacy. Stern, Walter
& Simmons prepared a presentation as part of a successful effort
to obtain the account of the United States Suzuki Motorcycle
Corporation. The presentation included a photograph of two female
models seated on a Suzuki Motorcycle on which was superimposed
the legend "You Get More Nookie on a Suzuki." This photograph was
distributed to certain officers and agents of the prospective
client. A copy of the print was somehow obtained by a California
firm who solicited Suzuki dealers to purchase the picture for
advertising purposes and for sale to the public.
As a result of these facts the two models who posed for the
photograph brought suits against Stern, Walter & Simmons alleging
that the publication of the photograph with the inscription
tended to expose them to public contempt and disgrace, tended to
injure their reputation and show a want of chastity and to
impeach their honesty, integrity and virtue "by reason of its
smutty and pornographic implication and innuendoes; all of which
conduct of the defendants was done in deliberate and malicious
violation of [their] right of privacy." The plaintiff made demand
upon Seaboard to defend these actions and Seaboard refused. This
action was brought to recover the plaintiff's costs in defending
and settling the claims against it and for reasonable attorney's
fees in this suit.
The indemnity and service provisions of the policy state as
1. To indemnify the Insured against loss from the
liability imposed on him by law, or assumed by him
under contract as defined herein, as the result of
any final judgment for money damages resulting from
(a) libel, slander, defamation or
(b) any infringement of copyright or of title or of
(c) piracy, or unfair competition or idea
misappropriation under implied contract or
(d) any invasion of rights of privacy committed or
alleged to have been committed in any advertisement,
publicity article, broadcast or telecast and arising
out of the Insured's business of Advertising Agents.
The plaintiff contends that under Illinois law, which is
applicable here, if an insurer fails to defend an action stating
a claim covered by its policy, it is in breach of its contract
and liable for damages resulting therefrom including the amount
of any judgment or settlement and the cost of the defense. This
is true even if it becomes apparent from matter outside the
complaint against the insured that coverage is excluded by some
other clause of the policy. George H. Wolff Sons, Inc. v. Aetna
Casualty & Surety Co., 286 F.2d 862 (7th Cir. 1961); Palmer v.
Sunberg, 71 Ill. App.2d 22, 217 N.E.2d 463 (1966); Stein v.
Lindquist, 69 Ill. App.2d 340, 217 N.E.2d 438 (1966); McFadyen v.
North River Ins. Co., 62 Ill. App.2d 164, 209 N.E.2d 833 (1965);
Sims v. Illinois National Casualty Co. of Springfield,
43 Ill. App.2d 184, 193 N.E.2d 123 (1963); Gould v. County Mutual
Casualty Co., 37 Ill. App.2d 265, 185 N.E.2d 603 (1962); Rom v.
Gephart, 30 Ill. App.2d 199, 173 N.E.2d 828 (1961). Perhaps the
most concise statement of this rule is found in McFadyen v. North
River Ins. Co., supra, 62 Ill.App.2d at 170-171, 209 N.E.2d at
The insurer's duty to defend is predicated not upon
information in its possession which indicates or even
proves non-coverage. Rather, it is predicated upon
the allegations in the complaint in an action brought
against the insured and when such allegations state
facts which bring the case within, or potentially
within, the coverage of the policy, the insurer is
from this time on unjustified in not defending the
This doctrine does not dispose of the issue before this Court.
The defendant relies on an exclusionary clause of the policy,
arguing that the allegations of the complaints charging
deliberate and malicious conduct take the claims outside ...