The opinion of the court was delivered by: DUFF
BRIAN BARNETT DUFF, UNITED STATES DISTRICT JUDGE
This case presents an interesting example of how inattention to the words of a contract can thwart a municipality's attempt to shift risks for liability under 42 U.S.C. § 1983 (1982). Cities and counties would be well advised to monitor such arrangements carefully, or else avoid accepting responsibilities for which the law of municipal liability is not well-established.
Before the court is a motion for judgment on the pleadings pursuant to Rule 12(c), Fed.R.Civ.P., from American Liberty Insurance Company. Also pending is a motion for summary judgment under Rule 56 filed by the City of Joliet; Frederick W. Breen, Joliet's Chief of Police; and ten Joliet police officers. These motions come in a declaratory judgment action filed by American Liberty under 28 U.S.C. § 2201 (1982). This court has jurisdiction over this suit under 28 U.S.C. § 1332, as American Liberty is an Iowa corporation whose principal place of business in Iowa, while all of the defendants are persons or corporations who are citizens of other states. American Liberty seeks a declaration of its rights and obligations under an insurance contract; if found to be liable under that contract, American Liberty submits that it could owe upwards of $ 1 million.
Lots of things can happen in one day, or so Mark M. Jonas, Jack M. Tannehill, and Charles W. Struve, Jr. allege. Jonas, Tannehill, and Struve are the plaintiffs in case No. 87 C 7191 (hereafter the "Jonas suit"), which is also before this court. In their First Amended Complaint,
these individuals allege that after having attended the Spectacular, they were unlawfully beaten and arrested by a group of eight Joliet police officers. Thereafter the police took them to a cell at the Joliet police station, where two other officers unlawfully denied them medical attention. Later some of these officers testified against the Jonas plaintiffs at trial, allegedly falsely. The Jonas plaintiffs were acquitted.
The Jonas plaintiffs contend that these actions were the product of a conspiracy among the officers and the unlawful policies of the City of Joliet and Chief Breen. They have filed a complaint which alleges seven counts. Count 1 is a § 1983 claim against the ten officers in their individual capacities. Count 2 is a claim of unlawful conspiracy, also against the ten officers. Count 3 is a § 1983 claim against the City and Chief Breen in his official capacity. In this count, the Jonas plaintiffs allege that the City and Breen proximately caused the officers to deprive them of their constitutional rights by either knowingly or recklessly encouraging such conduct or failing to train the officers properly. Count 4 is a § 1983 claim against Chief Breen in his individual capacity, alleging reckless or grossly negligent indifference to the rights of the Jonas plaintiffs. Counts 5, 6, and 8
are state law claims against the ten officers for assault and battery, intentional breach of a duty to render medical aid, and malicious prosecution/false arrest; they include the City and Chief Breen on a respondeat superior theory of liability.
Once the Jonas plaintiffs filed their suit, the City, Chief Breen, and the officers tendered their defense to American Liberty, believing that the company had to defend them under an insurance policy. American Liberty subsequently filed its declaratory judgment action here, seeking rulings that (1) the ten officers are not covered under the policy, as they are not named insureds; (2) the actions alleged are intentional, and thus are outside the policy; (3) the activities alleged were not incidental to the Spectacular, and thus fall outside the scope of American Liberty's policy; and (4) American Liberty is not liable for punitive damages under its policy. American Liberty now seeks judgment on the pleadings;
the City, Chief Breen, and the officers want summary judgment and a declaration of their right to demand that American Liberty defend them.
As an initial matter, the court must state which law applies to these motions. Such questions inevitably arise -- and are almost as inevitably neglected, for better or worse -- in diversity actions, as by their nature they involve actors from different states. Here the parties include Iowa, Delaware, and Illinois corporations; companies doing business in Iowa and Illinois; and persons residing in Illinois. There also is a contract signed by what appear to be Iowa, Illinois, and Delaware citizens to cover risks attending an event in Illinois. Nevertheless, the parties imply in their briefs that Illinois law covers the dispute here; this court will treat this as a stipulation. See City of Clinton, Ill. v. Moffitt, 812 F.2d 341, 342 (7th Cir. 1987) (parties may stipulate to applicable law, within broad limits).
A second preliminary point, one which places this case and the present motions in context, has to do with an insurer's duty to defend its insured under Illinois law. In an exhaustive description of this duty, the court in Reis v. Aetna Casualty & Surety Co., 69 Ill. App. 3d 777, 782-84, 387 N.E.2d 700, 704-06, 25 Ill. Dec. 824 (1978) (citations omitted; emphasis in original), wrote:
In Illinois, a liability insurer in doubt over whether it has a duty to defend its insured, cannot simply stand on the sidelines and wait until the tort action is completed before contesting the question of coverage. In a case where there is potential coverage so that the insurer has a duty to defend, but the insurer believes that it has a valid exclusionary defense, it must either (1) secure a declaratory judgment as to its rights and obligations before or pending trial of the original tort action or (2) defend the tort action under a reservation of rights. Where a duty to defend exists, but the insurer fails to take either course of action, its failure to defend is unjustified . . . .
It is well established in Illinois that the liability insurer's duty to defend a tort allegation is determined by the allegations of the tort complaint. When the allegations of that complaint "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 insured." The insurer can safely and justifiably refuse to defend only when the allegations of the complaint clearly show that the claim is beyond the policy coverage.
See also Zurich Insurance v. Raymark Industries, 118 Ill. 2d 23, 41, 514 N.E.2d 150, 163, 112 Ill. Dec. 684 (1987) (insurer's duty to defend determined by comparing the allegations of complaint in underlying action with the language of the policy; complaint that alleges facts within the coverage or potential coverage of the policy triggers duty to defend).
Guided by these statements of the Illinois law, the court turns to the disputes raised in the present motions. American ...