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Cincinnati Insurance Co. v. Shanahan

September 26, 2008

CINCINNATI INSURANCE COMPANY, PLAINTIFF,
v.
THOMAS SHANAHAN AND COLETTE KAUFFMAN, DEFENDANTS.



The opinion of the court was delivered by: Richard Mills United States District Judge

OPINION

RICHARD MILLS, U.S. District Judge

This case is before the Court on the Plaintiff's motion for summary judgment and on Defendant Thomas Shanahan's cross-motion for summary judgment.

This declaratory judgment action was brought pursuant to the Court's diversity of citizenship jurisdiction. Plaintiff Cincinnati Insurance Company seeks a declaration that an insurance policy issued to Thomas Shanahan does not require it to provide coverage to Shanahan for a lawsuit brought by Colette Kauffman. The Kauffman lawsuit asserts claims against Shanahan for defamation, interference with her employment and intentional infliction of emotional distress. Kauffman has been dismissed as a Defendant in this action. The Plaintiff alleges it has no obligation to provide coverage to Shanahan because all of Kauffman's claims are based on intentionally harmful conduct.

I. BACKGROUND

(A)

On November 9, 2006, Colette Kauffman filed her lawsuit against Thomas Shanahan in Sangamon County, Illinois. See Kauffman v. Shanahan, Case Number 2006 L 00292. The Kauffman complaint alleges that Shanahan and Kauffman had a "confrontation" in October of 2005 at a basketball game for Christ the King School, which is part of the Springfield Diocese. The Kauffman complaint alleges that, following that confrontation, Shanahan engaged in a "campaign to discredit Kauffman" and to end her career at the School. It further alleges that "Shanahan engaged in verbal conversations with school representatives and other school parents, in which he made false accusations questioning Kauffman, her ability to perform her work, and certain alleged personal habits and characteristics, including making the false assertion that Kauffman has a drug or alcohol addiction problem."

The Kauffman complaint attached and relied on a letter dated November 10, 2005 from Shanahan to Mrs. Kolb, the School principal, with copies to Monsignor Lantz and School Board Members. It alleges that Shanahan met with the Springfield Diocese and disparaged Kauffman's abilities as athletic director and teacher, and intentionally tried to interfere with her employment by encouraging the Diocese to terminate her employment or not renew her contract following the 2005-2006 school year. Kauffman asserted that "Shanahan had no factual basis to support the claims" and that Shanahan had actual knowledge his statements about Kauffman were false or made with gross disregard as to their truth. The Kauffman complaint alleges that Shanahan's "intentions and purposes, with respect to all activities identified. . . above, were to cause injury and punishment to Kauffman for the October 2005 confrontation, as well as previous disagreements" and that he acted "solely and intentionally for the purpose of causing injury to Kauffman."

Each count of the Kauffman complaint contains allegations that Shanahan acted intentionally to cause harm to Kauffman. It seeks over $500,000 in compensatory damages, plus punitive damages of over $250,000 for Shanahan's "outrageous conduct."

(B)

The Plaintiff issued a Homeowner's insurance policy, No. HR 8392901, to Thomas and Gloria Shanahan , which was in effect during the relevant time. Shanahan also purchased Personal Umbrella Liability Insurance coverage, which was added by endorsement to the Homeowner's policy ("the Umbrella"). The Homeowner's policy and the Umbrella generally provide coverage for bodily injury, property damage, and personal injury, all as defined by the policy provisions. The Homeowner's policy defines "bodily injury" to mean "bodily harm, sickness or disease." The Umbrella defines "bodily injury" to mean "bodily harm, sickness, disease, disability, humiliation, shock, fright, mental anguish or mental injury sustained by a person, including care, loss of services or death arising out of any of these at any time." Both the Homeowner's policy and Umbrella define "property damage" to include "physical injury to or destruction of tangible property" and loss of use of tangible property.

The Homeowner's policy defines "personal injury" to mean "injury to others arising out of libel, slander, defamation of character, false arrest, willful or false detention or imprisonment, wrongful eviction or entry, malicious prosecution, humiliation, or invasion of privacy and, if arising out of any of these, mental anguish, mental injury, or shock. The Umbrella defines "personal injury" to include injury arising out of libel, slander, or defamation of character. The Homeowner's policy provides coverage for a suit brought against any insured for damages because of bodily injury, personal injury or property damage arising out of an occurrence to which this coverage applies.

The Homeowner's policy defines an "occurrence" as an "accident, including continuous or repeated exposure to substantially the same general harmful conditions." The Umbrella defines "occurrence" as (1) an "accident, including continuous, or repeated exposure to substantially the same general harmful conditions" that results in "bodily injury" or "property damage" or (2) an offense that results in "personal injury."

Coverage under the Homeowner's policy is subject to the following "Expected or Intended injury exclusion":

A. Coverage E -- Bodily Injury, Personal Injury and Property Damage Liability and Coverage F -- Medical Payments to Others do not apply to "bodily ...


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