Appeal from the United States District Court for the Southern District of Illinois.
No. 94 C 74--William D. Stiehl, Judge.
Before BAUER, CUDAHY, and FLAUM, Circuit Judges.
This case brings before this court for the second time issues relating to the coverage of an insurance policy issued by Transamerica Insurance Company to Phoenix Home Life Mutual Insurance Company (formerly Home Life Insurance). *fn1 Transamerica's policy insured Phoenix's agents against liability for various acts or omissions committed in the course of their professional activities on behalf of Phoenix. The problems leading to this declaratory judgment action began when one of Phoenix's agents, Ronald South, sold life insurance policies issued by First Columbia Life Insurance Company to various Illinois residents. South had his office in an agency owned by David Domnick, who supervised South's work. South, however, was directly employed by Phoenix. In 1988, First Columbia became insolvent and it was then discovered that, because First Columbia had not been authorized to do business in Illinois, the policies sold by South were not backed by the Illinois Guaranty Fund.
Various lawsuits resulted, including this declaratory judgment action by Transamerica seeking to define the scope of its coverage of negligent acts committed by Phoenix employees. In an earlier opinion in this case, we held that an exclusion in the policy relieved Transamerica of any duty to indemnify South himself against damage claims. Transamerica Ins. Co. v. South, 975 F.2d 321 (7th Cir. 1992) (South I). The relief requested here is a declaratory judgment that Transamerica has no duty to indemnify Domnick or his agencies in any actions involving his supervision of South in the sale of the Columbia Life policies. Transamerica named various defendants, but did not name Phoenix in the suit. Phoenix successfully moved to intervene and filed a counterclaim. The counterclaim precisely mirrored Transamerica's complaint and requested a declaratory judgment that Transamerica does owe a duty to indemnify Domnick and his agencies in the Columbia Life matters.
Transamerica moved to dismiss the counterclaim, alleging that Phoenix lacked standing. Both Phoenix and Transamerica moved for summary judgment, the only issue being whether the policy issued by Transamerica excluded coverage for claims based on Domnick's allegedly negligent supervision of South. The district court denied the motion to dismiss, but granted Transamerica's motion for summary judgment and denied Phoenix's motion on the merits.
We affirm the determination that Phoenix has standing to pursue the claim, but reverse the district court's grant of summary judgment for Transamerica and its denial of summary judgment for Phoenix.
For a period from May 1, 1986, to May 1, 1989, Phoenix agents were covered by a "Life Agents Errors and Omissions Policy" issued by Transamerica. The policy covered "all Agents, General Agents or Managers" of Phoenix for, among other things:
sums which the INSURED shall become legally obligated to pay as DAMAGES because of: A. Any act, error or omission of the INSURED, or any person for whose acts the INSURED is legally liable in rendering or failing to render PROFESSIONAL SERVICES for others. . . .
D. Any actual or alleged failure of a General Agent or Manager covered by this Policy to supervise, manage or train any ...