Willow West devised and promulgated discriminatory rules and procedures regarding approval of the sale to Paul and Kirk. Id. P 18. Finally, Wojcik, who worked for Image Control, "adopted and took steps to advance" Willow West's discriminatory rulemaking, and "undertook to disguise discriminatory statements, treatment and acts." Id. P 20. The alleged discrimination prevented Paul and Kirk from closing on the purchase. Id. P 21.
On January 23, 1995, the Oreses and Niemer filed a second amended complaint against Willow West, individual residents of Willow West, Image Control, and Wojcik, alleging violations of the Fair Housing Act of 1968, 42 U.S.C. §§ 3604(c), (f), 3617. Commercial Union, a Massachusetts corporation, had issued a commercial general liability insurance policy to Image Control effective for one year starting December 14, 1993. Pursuant to the policy, Image Control demanded coverage for itself and Wojcik. However, Commercial Union rejected coverage, filed this declaratory judgment action, and now moves for summary judgment. Commercial Union argues that the allegations in the Ores complaint do not fall within the policy's coverage; Image Control cross-moves for summary judgment, contending that the allegations fall within the policy's coverage. We address their arguments in turn.
II. Standard for Reviewing Motion for Summary Judgment
Under the Federal Rules of Civil Procedure, summary judgment is appropriate if "there is no genuine issue as to any material fact, and ... . the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). This standard places the initial burden on the moving party to identify "those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986) (quoting Fed. R. Civ. P. 56(c)). Once the moving party has done this, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). In deciding a motion for summary judgment, the court must read all facts in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Griffin v. Thomas, 929 F.2d 1210, 1212 (7th Cir. 1991).
In determining whether an insurer owes its insured a duty to defend against particular suits, "the court must look to the allegations of the underlying complaints. If the underlying complaints allege facts within or potentially within policy coverage, the insurer is obliged to defend its insured even if the allegations are groundless, false, or fraudulent." United States Fidelity & Guar. Co. v. Wilkin Insulation Co., 144 Ill. 2d 64, 578 N.E.2d 926, 930, 161 Ill. Dec. 280 (Ill. 1991) (emphasis in original). In order for the insurer to justifiably refuse to defend the insured, it must be "clear from the face of the underlying complaints that the allegations fail to state facts" bringing the case within or potentially within coverage, id. (emphasis in original), or if the insurer relies on an exclusionary provision, it must be "clear and free from doubt that the policy's exclusion prevents coverage," Travelers Ins. Cos. v. Penda Corp., 974 F.2d 823, 833 (7th Cir. 1992); Bituminous Cas. Corp. v. Fulkerson, 156 Ill. Dec. 669, 571 N.E.2d 256, 262 (Ill. App. Ct. 1991). In addition, we must liberally construe the underlying complaints and the insurance policy in favor of the insured. Wilkin Insulation Co., 578 N.E.2d at 930. Finally, "if the underlying complaints allege several theories of recovery against the insured, the duty to defend arises even if only one such theory is within the potential coverage of the policy." Id.
First, Image Control contends that the allegations in the Ores complaint fall within the insurance policy's coverage for "bodily injury and property damage liability." Pl.'s 12(M), Ex. B, Policy § I(A). Commercial Union points out, however, that the policy provides for such coverage only if the "'bodily injury' or 'property damage' is caused by an 'occurrence.'" Id. § I(A)(1)(b)(1) (emphasis added). Assuming for the moment that the Ores complaint alleges "bodily injury" or "property damage," Commercial Union argues that the alleged cause, intentional disability discrimination, fails to meet the policy's definition of "occurrence" as an "accident":
"Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
Id. § V(9).
In determining whether a complaint sufficiently alleges an "occurrence," "the focus at all times, under Illinois law, is whether the injury was expected or intended by the [defendants], not whether the acts of the [defendants] were performed intentionally." Calvert Ins. Co. v. Western Ins. Co., 874 F.2d 396, 399 (7th Cir. 1989) (emphasis in original). Accordingly, an intentional act that causes an "unexpected or unintended result" may qualify for coverage under an occurrence clause. Argento v. Village of Melrose Park, 838 F.2d 1483, 1497 (7th Cir. 1988).
Specifically, "civil rights claims for intentional violations can fall under the definition of occurrence as long as the injuries incurred were not specifically intended or expected." Id. at 1498 (citing Illinois Farmers Ins, Co. v. Preston, 153 Ill. App. 3d 644, 505 N.E.2d 1343, 106 Ill. Dec. 552 (Ill. App. Ct. 1987)). In Preston, a school administrator alleged that a school official violated his constitutional rights by falsely accusing the administrator of misusing state funds and of being a "bad administrator." Preston, 505 N.E.2d at 1345. In holding that the school official's actions could constitute an "accident" under the insurance policy, the court examined whether the administrator's alleged injuries were "unintended and unforeseen," that is, were "the natural and probable result of the insured's conduct." Id. Ultimately, the court concluded that a reasonable juror could find that the administrator's injuries--"severe emotional distress and high blood pressure"--were not the natural and probable result of the school official's conduct. Id. at 1346. Preston suggests that if a "fair-minded person" could infer that the injuries "were not the natural and probable result" of the insured's conduct, there exists a potential for coverage, and the duty to defend is triggered. See id.
In light of Preston, we conclude that the Ores complaint sufficiently alleges injuries caused by an "occurrence." Specifically, the Ores complaint alleges that Image Control and Wojcik committed intentional acts--"adopted and took steps to advance the illegal actions of Willow West . . . and undertook to disguise discriminatory statements, treatment and acts," Ores Compl. P 20--that resulted in unexpected injuries. However, it was not Paul and Kirk Ores who suffered unexpected injuries
; the unexpected injuries alleged in the Ores complaint were inflicted on Warren Ores, Louise Ores, and Niemer. According to the complaint, Warren and Louise
lost physical, financial and emotional independence and the opportunity to have piece [sic] of mind by knowing that their sons would be able to live independently and experience their own version of the American dream of home ownership because of the discriminatory actions of all Defendants . . . .