Appeal from the Circuit Court of Cook County 09 CH 35410 Honorable Richard J. Billik, Jr., Judge Presiding.
The opinion of the court was delivered by: Justice McBRIDE
delivered the judgment of the court, with opinion.
Presiding Justice Epstein and Justice J. Gordon concurred in the judgment and opinion.
¶ 1 Plaintiffs brought an action for declaratory judgment against their insured, defendant Chester Stranczek, seeking a declaration that they did not owe a duty to defend or indemnify him in several underlying lawsuits alleging that the Village of Crestwood, of which defendant was the mayor, and its municipal officers supplied its residents with contaminated drinking water. Plaintiffs claimed that they did not owe a duty to defend or indemnify Stranczek because of a "business pursuits" coverage exclusion contained in the insurance policies that Stranczek purchased from plaintiffs. On cross-motions for summary judgment, the trial court found that the underlying lawsuits fell within the coverage provided by the insurance policy and that plaintiffs owed a duty to defend Stranczek in those lawsuits. The trial court granted summary judgment in favor of Stranczek, and plaintiffs now appeal that judgment. For the reasons that follow, we reverse.
¶ 2 The relevant facts in this case are not in dispute. According to an unrebutted affidavit submitted by Stranczek's wife, Diane, that was attached to Stranczek's motion for summary judgment, Stranczek served as the mayor of the Village of Crestwood (Village) from 1969 to 2007. The job of mayor was a part-time position that initially paid Stranczek $1,000 per year and never paid him more than $6,000 per year. Stranczek did not retain any of that salary as compensation for his service as mayor. Instead, he donated the after-tax portion of that salary for charity, used it for projects benefitting the Village, and used it to defray his own out-of-pocket expenses incurred as mayor because he did not have an expense account. For many years, Stranczek was the president and chief executive officer (CEO) of two companies: Cresco Lines, Inc., a nationwide trucking company, and Chicago Marmon Trucks, Inc., a company operating maintenance facilities for tractors and trailers. Stranczek resigned as CEO of Chicago Marmon Trucks on August 8, 1994, and turned over day-to-day management of the company to one of his sons. Stranczek resigned as CEO of Cresco Lines on July 10, 1995, and turned over day-to-day operations of the company to another one of his sons. After these resignations, Stranczek continued to serve as chairman of the board of both companies until he resigned that position at Cresco on July 13, 2009, and at Marmon on August 10, 2009. In his role of chairman, Stranczek was closely involved in overseeing the companies' finances and overall operations until his medical condition started to deteriorate in 2008. Between 1984 and at least 1991, Stranczek received a salary of more than $100,000 for his work at both companies. Beginning in 1998, Stranczek was compensated principally through distributions from the companies, and although those distributions varied from year to year, they were never less than $189,000 and were frequently much more.
¶ 3 The pleadings and other evidentiary materials in the record reveal the following additional undisputed facts. From October 1995 through October 2009, Stranczek purchased and renewed, on an annual basis, "PAK II Personal Package" insurance policies from St. Paul Insurance, its successor in interest Metropolitan Property and Casualty Insurance Company, and Economy Premier Assurance Company. Each of the policies was issued under the trade name "PAK II" and contained substantially the same terms and conditions.*fn1 Therefore, for purposes of this appeal, the policies will be referred to collectively as the "PAK II" policies.
¶ 4 Each PAK II policy provides primary liability coverage in a
section entitled "Personal Liability Coverage," and additional
liability coverage in a section entitled "Personal Umbrella Liability
Endorsement." The "General Policy Information" section describes the
PAK II policy as a "new kind of policy" that provides "broad personal
protection." It further states that PAK II provides "all the personal
coverage you may need" in that it combines several types of insurance
coverage, including personal liability for third-party claims,
homeowners property insurance, and vehicle and boat coverage. The
"Legal Liability Protection" provides that under the PAK II policy,
"[the insured is] covered when someone makes a claim against [him or
her]." The section further states that the PAK II policy will "cover
[the insured's] legal liability resulting from an occurrence in which
there is actual accidental property damage, personal liability or
death, anywhere in the world, subject to the limitations and
exclusions" in the policy. The policy
defines an "occurrence" as "an event, including continuous
or repeated exposure to the same conditions, resulting in personal
injury or property damage neither expected nor intended by anyone
insured by PAK II."
¶ 5 The PAK II policies contain the following coverage exclusion, referred to by the parties as the "business pursuits" exclusion:
"PAK II doesn't cover accidents happening on your business premises. And we do not cover any liability or claims connected with your business, profession or occupation. For example, malpractice claims. But we do cover business use of the private passenger automobiles listed in the Coverage Summary. Other coverage for incidental business liability is further explained *** under 'Incidental Business Liability.' "*fn2
¶ 6 The record further shows that in 2009, a series of lawsuits were filed by Crestwood residents against the Village and its municipal officers, including its former mayor, Stranczek. Those lawsuits alleged that in the late 1980s, the Environmental Protection Agency (EPA) advised Village officials, including Stranczek, that its tap water was contaminated with toxic chemicals, including a dry-cleaning solvent, that were linked to cancer and other health problems. Village officials told the EPA that it was obtaining its tap water from Lake Michigan and that the contaminated well tap water would only be used in an emergency. The Village placed its well water on "emergency backup" status to avoid tests for chemical pollutants and assured its residents that the drinking water was safe and obtained exclusively from Lake Michigan. Stranzcek, as the mayor and the "official custodian" of the Village's water supply, signed and certified reports given to consumers and the EPA stating that Crestwood's water was safe and purchased indirectly from the City of Chicago, which drew its water from Lake Michigan. Despite these assurances, the Village, in an effort to save money, continued to draw water from the contaminated well and relied upon that water for up to 20% of the Village's water supply. The complaints alleged that Stranczek, as mayor and official custodian of the Village's water, knew of and participated in the decision to draw water from the contaminated well and to supply that water to the Village's residents and businesses. The complaints alleged that residents suffered personal injury, death, and/or property damage due to use or ingestion of the contaminated water, including but not limited to breast cancer, stomach cancer, and lymphoma. The lawsuits asserted causes of action for negligence, wrongful death, willful and wanton misconduct, fraud, and public nuisance. The State of Illinois also filed a lawsuit alleging a number of statutory violations based upon the failure to provide Crestwood residents with safe drinking water.
¶ 7 Stranczek notified the insurers of the underlying lawsuits and requested that they defend and indemnify him. The insurers refused to do so and instead filed the present declaratory judgment action. As relevant to this appeal, the insurers alleged that the Village "contracted with one or more insurance companies to provide Public Officials Liability insurance coverage" during the relevant time periods and that these policies were intended to apply to liability asserted against Stranczek "for his acts or omissions within the scope of his duties" as mayor. The insurers further alleged that the parties intended the PAK II policies to be mutually exclusive to the coverage provided by the Village's public officials liability insurance policies. Finally, the insurers alleged that they had no duty to defend or indemnify Stranczek in the underlying lawsuits based upon the "business pursuits" coverage exclusion contained in the PAK II policies.
¶ 8 Stranczek responded by filing a counterclaim and a partial motion for summary judgment, asserting a claim for breach of contract by the insurers and seeking a declaration that the Insurers were obligated to defend him in the underlying lawsuits. The insurers responded to the counterclaim and filed a cross-motion for summary judgment, arguing that they did not owe a duty to defend or indemnify Stranczek in the underlying lawsuits because of the "business pursuits" coverage exclusion in the PAK II policies.
¶ 9 Following a hearing, the trial court granted Stranczek's motion for partial summary judgment and denied the insurers' cross-motion for summary judgment. The court found that under Illinois law, a business pursuit must involve a "continuous or regular activity done for the purpose of returning a profit." The court further noted that the only evidentiary submission in the case was offered by Strancek and consisted of an affidavit from his wife, Diane, which was not contradicted in substance or challenged as to admissibility by the insurers and therefore had to be taken as true for purposes of summary judgment. The court found that considering the allegations in the underlying complaints, the language of the "business pursuits" exclusion, and the uncontradicted facts in the submitted affidavit, the insurers had failed to establish that the exclusion applied to preclude coverage because there was no evidence that Stranczek had a profit motive or economic consideration in serving as mayor. Accordingly, the court found that the insurers had a duty to defend Stranzcek in the underlying lawsuits and also found that there ...