Like the court in Argento, this court finds that under the terms of the pertinent policy, defendant State Farm is clearly responsible for paying attorney's fees as part of the costs assessed against defendant McGuffey. As already noted, Section 1988 is extremely clear that attorney's fees constitute costs in civil rights suits and Argento demonstrates that Section 1988's rule applies to insurance policies such as the policy at issue in this case. In addition, as the plaintiff suggests, "statutes in existence at the time a contract is entered are considered as much a part of the contract as if they were expressly incorporated, and the contracting parties are deemed to accept these laws as part of the agreement." Local 165, International Brotherhood of Electric Workers v. Bradley, 149 Ill. App. 3d 193, 499 N.E.2d 577, 589, 102 Ill. Dec. 20 (1st Dist. 1986). Section 1988 was in force at the time State Farm and McGuffey entered into their insurance contract. Therefore, the court holds that State Farm's insurance contract with McGuffey requires it to pay the attorney's fees and expenses awarded to Littlefield.
The defendant also argues that it cannot be held responsible for paying the fees and expenses assessed against defendant McGuffey because it did not provide McGuffey with his defense. Instead, State Farm claims that it merely funded McGuffey's defense. State Farm claims that it only funded the defense in this case because it had a potential fundamental conflict of interest which prevented it from controlling McGuffey's defense.
The court disagrees, however, with State Farm's interpretation of its actions. The court does not see a difference in this case between electing to defend McGuffey's case and funding the defense of McGuffey's case as State Farm suggests. Defendant State Farm obtained the law firm of Querrey & Harrow to represent McGuffey. State Farm also paid for their services. Moreover, as the plaintiff notes, in a letter written by State Farm to McGuffey explaining its role in the case, State Farm stated:
The defense of this action by our attorney in your behalf is not to be considered a waiver of such policy defense or of any policy defense which may be involved in this case. If we do not hear from you to the contrary, we will assume that it is acceptable for us to continue handling the case on these terms. State Farm Memorandum, Exhibit C, p.4 (emphasis added).
Thus, even its letter suggests that State Farm believed it was responsible for McGuffey's defense. And, as already noted, since responsibility for the defense of the case is the mechanism for invoking coverage of "costs taxed against any insured in any suit we defend," the court finds that State Farm is responsible for paying the fees and expenses awarded to Littlefield because it handled McGuffey's defense.
Finally, State Farm argues that it should not be held responsible for paying fees and expenses assessed against McGuffey because it is against public policy to allow insurance coverage for attorney's fees awarded under Section 1988. State Farm asserts that the payment of attorney's fees in this instance constitutes the payment of punitive damages which under Illinois law is not permitted to be covered by insurance. See Beaver v. Country Mutual Insurance Co., 95 Ill. App. 3d 1122, 420 N.E.2d 1058, 51 Ill. Dec. 500 (5th Dist. 1981). Contrary to the defendant's contention, the court does not find that the award of attorney's fees in this instance constitutes punitive damages. The legislative history of Section 1988 indicates that the award of attorney's fees may be used to penalize defendants as well as to encourage the enforcement of Section 1988 by compensating those persons who bring meritorious actions. County of Suffolk v. Royal Globe Insurance Co., CCH 1981 Fire Casualty Cases 1457, 1460 (E.D.N.Y. 1981). As the court stated in County of Suffolk, "Unlike punitive damages, however, the purpose of awarding attorney's fees to a successful plaintiff is not to punish a defendant for abusive or outrageous conduct. On the contrary, attorney's fees could be awarded even . . . where a defendant has acted in clear good faith, but simply in violation of the Constitution." Id. Given that the defendant provides no other evidence to support its reading of the statute and the fact that the plaintiff in this case received a separate award of punitive damages from the jury, the court finds that the award of attorney's fees in this instance does not violate public policy.
Indeed, the court believes that to preclude the payment of attorney's fees in this instance actually would controvert public policy. Parties might be chilled from protecting their rights if they must worry about paying mounting attorney's fees for the prosecution of their civil rights actions. As already noted, Section 1988 was enacted to avoid just this problem. Thus, to deny Littlefield the recovery of her attorney's fees would controvert the public policy, established by Section 1988, of compensating individuals who prosecute meritorious civil rights violations.
In addition, the court notes that State Farm easily could have avoided responsibility for the payment of the fees and expenses assessed against McGuffey. For example, State Farm, the party responsible for the drafting of its contract with McGuffey, could have excluded the Section II provision which provided coverage for costs assessed against the defendant in suits State Farm defends. State Farm also could have chosen not to defendant the instant lawsuit. As State Farm emphasizes, due its potential conflict of interest with defendant McGuffey in this case, and the possibility that insurance coverage would be precluded by the intentional act exclusion provision in the policy or McGuffey's failure to promptly notify State Farm about the instant suit, State Farm was not automatically required to defend this suit on McGuffey's behalf. As State Farm suggests, for example, it could have declined to defend the suit and awaited judgment, or sought a declaratory judgment against McGuffey to clarify that it was not responsible in this case. Therefore, the court grants plaintiff Littlefield's motion for summary judgment and denies garnishee-defendant State Farm's cross motion for summary judgment.
For the reasons stated above, the court grants Littlefield's motion for summary judgment and denies State Farm's cross motion for summary judgment. State Farm is ordered to pay the plaintiff the attorney's fees and expenses already assessed against defendant McGuffey in this case.
Ann Claire Williams, Judge, United States District Court
Dated: FEB 6 1992