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March 25, 1991

CHICAGO HOUSING AUTHORITY and DERRICK HALE, a minor by his guardian ad litem and mother, EARLENE HALE, Defendants

The opinion of the court was delivered by: BUA


 Plaintiff in this insurance coverage dispute has filed a three-count complaint for declaratory relief. One of the defendants, the Chicago Housing Authority ("CHA"), moves to dismiss Counts II and III of plaintiff's complaint. For the reasons stated herein, the CHA's motion to dismiss is denied.


 Plaintiff Imperial Casualty and Indemnity Company ("Imperial") provided liability insurance to the CHA for the period encompassing April 1, 1982 to April 1, 1983. Imperial now seeks a declaration that the policy provides no coverage for the injuries sustained by Derrick Hale, a resident of a CHA public housing project.

 In 1981, Derrick Hale and his family moved into the Stateway Gardens Project located in Chicago, Illinois. Hale, who was nine years old at the time his family moved into the CHA building, had been suffering from asthma since 1975. After moving into the building in 1981, Hale began to experience increasingly severe asthma attacks. Due to these asthma attacks, Hale was hospitalized on numerous occasions.

 The doctors who examined Hale concluded that he was allergic to certain unsanitary living conditions, such as incinerator smoke, sewage emanations, mold, and cockroaches. In a letter dated June 1, 1983, Dr. Richard W. Newcomb advised the CHA that Hale's medical condition was "life threatening," and suggested that Hale be provided with housing in which he would not be exposed to the unsanitary conditions. On March 15, 1984, Dr. Javeed Akhter mailed a letter to the CHA in which he expressed similar concerns. Despite the requests of these two doctors, the CHA did not offer a different apartment to the Hales. The CHA's failure to provide more suitable housing prompted Earlene Hale (Derrick's mother) to begin withholding rent in October 1984.

 On January 16, 1985, Derrick Hale had another severe asthma attack. He went into cardiac arrest and lapsed into a coma. As a result of this asthma attack, Derrick Hale incurred disabling injuries, including blindness and paralysis. Earlene Hale subsequently filed suit against the CHA, on behalf of Derrick. The complaint, which was filed in the Circuit Court of Cook County on November 25, 1986, alleges that the CHA breached its lease agreement with the Hale family by failing to provide safe and sanitary housing. Imperial is not a party to that lawsuit.

 More than two years after the complaint was filed, the CHA notified Imperial of Hale's pending lawsuit. In response, Imperial informed the CHA that the insurance policy did not cover the claims asserted in Hale's complaint. On November 13, 1990, while the state court action was still pending, Imperial filed this diversity action against the CHA and Derrick Hale. Imperial asks for a judgment declaring that, under the insurance policy, there is no coverage and no duty to defend or indemnify the CHA for the injuries sustained by Derrick Hale.


 The CHA moves to dismiss Counts II and III of Imperial's three-count complaint. In Count II, Imperial alleges that the CHA should have expected the injuries sustained by Hale and, therefore, there was no "occurrence" *fn1" under the policy. Count III simply alleges that Hale's injuries did not occur within the policy period. In support of its motion to dismiss these two counts, the CHA contends that both counts involve factual issues which are in dispute in the state proceeding. *fn2" This court cannot resolve those issues, the CHA suggests, without unduly interfering with the state court action. Basically, the CHA urges the court to dismiss Counts II and III out of deference to the pending state court litigation.

 The fact that this is a declaratory judgment action is of paramount concern in resolving the motion to dismiss. The district court is vested with discretion in determining whether to entertain a declaration judgment action. Brillhart v. Excess Ins. Co., 316 U.S. 491, 494, 86 L. Ed. 1620, 62 S. Ct. 1173 (1942); A.G. Edwards & Sons, Inc. v. Public Bldg. Comm'n, 921 F.2d 118, 120 (7th Cir. 1990). *fn3" Although declaratory relief is committed to the discretion of the court, the court's discretion is not unbridled. Sears, Roebuck and Co. v. Zurich Ins. Co., 422 F.2d 587, 588 (7th Cir. 1970). Judicial discretion must be exercised in accord with the underlying purpose of the Declaratory Judgment Act "to afford relief from uncertainty and insecurity with respect to legal relations." Sears, Roebuck and Co. v. American Mut. Liab. Ins. Co., 372 F.2d 435, 438 (7th Cir. 1967). Thus, while gratuitous interference with state proceedings should be avoided, Brillhart, 316 U.S. at 495, a district court will not decline jurisdiction over a declaratory judgment action solely because a related proceeding is pending in state court. American Mut. Liab. Ins. Co., 372 F.2d at 438. If a declaratory judgment will resolve the particular dispute and clarify the legal issues involved, and the state court action will not, then it is appropriate to hear the declaratory judgment action. Id.

 With these principles in mind, the court concludes that dismissal would be inappropriate. This proceeding will settle the dispute over Imperial's duty to defend or indemnify the CHA, thereby clarifying the legal issues. See id. at 440; Allstate Ins. Co. v. Green, 825 F.2d 1061, 1066 (6th Cir. 1987). Hale's state court action, in stark contrast, does not involve the coverage issue. The gravamen of Hale's complaint is that the CHA violated the provisions of the lease by failing to provide a safe living environment. Hale will essentially have to establish that the lease mandated certain living conditions and that the CHA did not provide these conditions. The insurance coverage dispute is unique to Hale's cause of action.

 The CHA nonetheless asserts that Counts II and III of Imperial's complaint present factual issues that are pertinent to Hale's cause of action. This court disagrees. The dispositive issue of Count II -- i.e., whether or not the CHA expected an injury to occur -- is not a necessary element of Hale's claim. Similarly, Count III, which alleges that Hale's injuries were not sustained during the policy period (April 1, 1982 to April 1, 1983), will not necessarily be resolved in Hale's case. The state court action focuses on the Hales' contractual relationship with the CHA, not the terms of the policy between the CHA and Imperial. The interest of Derrick Hale, the plaintiff in the state proceeding, and Imperial, the plaintiff in this case, are not coextensive. Hale can recover on his claim without showing that the CHA should have expected his injuries to occur or that the injuries occurred during the policy period. A finding in state court against the CHA will not be determinative of ...

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