Substantive Legal Principles
This Court's June 18, 1993 memorandum opinion and order has already upheld diversity jurisdiction here, given (1) the complete diversity of citizenship between the opposing parties and (2) the potential for a jury verdict of more than $ 50,000 in Medlin's underlying lawsuit. Because federal jurisdiction does sound in diversity and the parties have argued Illinois law in their submissions, the proper course for this Court is to apply that substantive law ( Wood v. Mid-Valley Inc., 942 F.2d 425, 426-27 (7th Cir. 1991)).
Under Illinois law the interpretation of an insurance policy is a question of law for the court and is therefore appropriate grist for the summary judgment mill ( Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384, 391, 620 N.E.2d 1073, 1077, 189 Ill. Dec. 756 (1993)). To that end, policy provisions are to be construed in favor of the insured and against the insurer where they are ambiguous--that is, are "subject to more than one reasonable interpretation" ( United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill. 2d 64, 74, 578 N.E.2d 926, 930, 161 Ill. Dec. 280 (1991)). That contra proferentem principle is applied with added rigor in determining the meaning of exclusionary provisions ( Goldblatt Bros., Inc. v. Home Indem. Co., 773 F.2d 121, 125 (7th Cir. 1985), quoting Dawe's Lab. N.V. v. Commercial Ins. Co., 19 Ill. App. 3d 1039, 1049, 313 N.E.2d 218, 225 (1st Dist. 1974)), which will be enforced only "where the terms are clear, definite, and explicit" ( Economy Fire & Casualty Co. v. Kubik, 142 Ill. App. 3d 906, 908, 492 N.E.2d 504, 507, 97 Ill. Dec. 68 (1st Dist. 1986)). On the other hand, no policy language should be rendered meaningless surplusage--instead all the language must be interpreted in accordance with its plain and ordinary meaning ( Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90, 108, 122, 607 N.E.2d 1204, 1212, 1219, 180 Ill. Dec. 691 (1992)).
As an overlay to that general approach to policy construction, Illinois law also teaches that an insurer's obligation to defend its insured is separate from and broader than its contractual obligation to indemnify ( Conway v. Country Casualty Ins. Co., 92 Ill. 2d 388, 394, 442 N.E.2d 245, 247, 65 Ill. Dec. 934 (1982)). There is a duty to defend if the complaint in the underlying action alleges facts that are at least "potentially within" the coverage provided by the insurance policy ( Thornton v. Paul, 74 Ill. 2d 132, 144, 384 N.E.2d 335, 339, 23 Ill. Dec. 541 (1978)). For that purpose it is enough if any one of a complaint's several grounds for recovery comes within the ambit of the policy coverage ( Maryland v. Casualty Co. v. Peppers, 64 Ill. 2d 187, 194, 355 N.E.2d 24, 28 (1976)). By contrast, the duty to indemnify can be determined only after there has been a finding of liability in the underlying suit against the insured and after it has been shown that the injury "actually fall[s] within coverage" ( Crum & Forster, 156 Ill. 2d at 398, 620 N.E.2d at 1081 (emphasis in original); Outboard Marine, 154 Ill. 2d at 127-28, 607 N.E.2d at 1221).
All that being so, summary judgment at this threshold stage could pose some special problems. If Medlin's underlying Complaint does not even potentially allege facts that fall within the Policy's coverage, summary judgment must be granted in Hermitage's favor on both issues (defense and indemnification). If however Medlin's allegations are potentially within such coverage, R.C.D. and Dahms are entitled to summary judgment as to Hermitage's duty to defend Medlin. But in that event the existence or nonexistence of a duty to indemnify cannot be ripe for decision (by summary judgment or otherwise) because Medlin's lawsuit is still unresolved (see, e.g., this Court's opinion in Maryland Ins. Co. v. Attorneys' Liability Assurance Soc'y, Ltd., 748 F. Supp. 627, 629-32 (N.D. Ill. 1990)).
Policy Coverage or Noncoverage?
Despite the parties' almost singular focus on the assault and battery exclusion, it is first appropriate to look at the threshold question whether Medlin's alleged injuries fall within the Policy coverage ( Ludwig Candy Co. v. Iowa Nat'l Mut. Ins. Co., 78 Ill. App. 3d 306, 311, 396 N.E.2d 1329, 1332-33, 33 Ill. Dec. 605 (1st Dist. 1979)). Analysis of both of those issues of course hinges on causation: to what sorts of causes of injuries does the policy extend coverage, and which of those sorts are excluded by the assault and battery provision?
Medlin's Count I P 3 alleges two direct or immediate causes of his injuries. First it points (as does Count II) to those sustained in the assault and battery by the unknown patrons of Ricky D's, and next it addresses (as does Count III) the injuries suffered when Medlin was struck by Rybak's car. Each set of injuries is alleged to flow from an R.C.D.-Dahms-related cause.
As for the assault and battery injuries, they are alleged to be attributable to Ricky D's sale of liquor to intoxicated patrons (Count I P 2 and Count II P 5). Injuries from the car are alleged to depend on a two-step sequence: the sale of liquor to intoxicated patrons leading to the assault, and that in turn forcing Medlin into the path of the car.
Basic Policy Coverage
For bodily injuries to be covered, the Policy imposes a twofold requirement--they must be:
1. "caused by an occurrence"