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Starr Indemnity & Liability Co v. Boys and Girls Club of

November 19, 2012


The opinion of the court was delivered by: Reagan, District Judge:


Plaintiff insurer Starr Indemnity & Liability Company ("Starr") has brought this action for declaratory judgment regarding whether it owes a duty to its insureds, Defendants Boys and Girls Club of Carbondale ("the Club") and Randy Osborne (the Club's executive director), to defend them against two civil lawsuits brought by Darlene Faust and Forrestine Williamson (who are also defendants in this action).*fn1 Faust and Williamson's minor children were allegedly removed from the premises of the Club by a Club volunteer and sexually assaulted on multiple occasions between 2006 and 2010. The two mothers have filed separate suits:

The Faust Suits-Darlene Faust v. Boys and Girls Club of Carbondale, and Executive Director Randy Osborne, Case No. 11-L-68, Circuit Court, Williamson County, Illinois (Doc. 55-2); upon transfer, re-designated Darlene Faust v. Boys and Girls Club of Carbondale, and Executive Director Randy Osborne, Case No. 11-L-57, Circuit Court, Jackson County, Illinois (Doc. 55-4); and The Williamson Suit-Forrestine Williamson v. Boys and Girls Club of Carbondale, and Executive Director Ron [sic] Osborne, Case No. 12-L__, Circuit Court, Jackson County, Illinois (Doc. 55-5).

Starr is before the Court seeking summary judgment (Docs. 50 and 51). Starr asserts that it has no duty to defend or indemnify the Club and Osborne relative to the Faust and Williamson lawsuits because of the applicability of two exemptions in the Club's general liability insurance policy: the Abuse or Molestation Exclusion (Doc. 55-1, p. 33), and the Assault and Battery Exclusion (Doc. 55-1, p. 45). The Club has filed a response, arguing that the two exclusions do not bar coverage for the claims raised in the Faust and Williamson suits (Doc. 56). The Club also characterizes the two exclusions as ambiguous, and otherwise attempts to parse the policy and prioritize the exclusions so as to maintain coverage. Faust and Williamson have jointly filed a similar response (Doc. 59).

Starr claims that Defendants' "unique and original contract law arguments" constitute exceptional circumstances justifying a reply. See Local Rule 7.1 (only permitting replies to be filed under exceptional circumstances). Because Defendants present arguments not addressed in Starr's memorandum in support of summary judgment, Starr's two replies (Docs. 58 and 60) will be considered by the Court.

I.Applicable Legal Standards

"The construction of an insurance policy and a determination of the rights and obligations arising under the policy are questions of law for the court, and summary judgment is an appropriate proceeding for resolving these questions." Westfield National Insurance Co. v. Continental Community Bank and Trust Co., 804 N.E.2d 601, 604 (Ill.App. 2nd Dist. 2004).

As a general matter, summary judgment should be granted when "'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Bevolo v. Carter, 447 F.3d 979, 982 (7th Cir. 2006), quoting Fed.R.Civ.P. 56(c), and citing Ezell v. Potter, 400 F.3d 1041, 1046 (7th Cir. 2005), Celotex Corp. v. Catrett, 477 U.S. 317, 322--323 (1986). In assessing whether summary judgment is warranted, the Court must construe all evidence, plus the inferences reasonably drawn from the evidence, in the light most favorable to the non-moving party. Sallenger v. Oakes, 473 F.3d 731, 739 (7th Cir. 2007), citing Leaf v. Shelnutt, 400 F.3d 1070, 1078 (7th Cir. 2005). The mere existence of an alleged factual dispute is not sufficient to defeat a summary judgment motion. Anderson v. Liberty Lobby, 477 U.S. 242, 247 (1986); Salvadori v. Franklin School District, 293 F.3d 989, 996 (7th Cir. 2002). Rather, to successfully oppose summary judgment, the non-movant must present definite, competent evidence in rebuttal. Salvadori, 293 F.3d at 996 (citing Vukadinovich v. Bd. of Sch. Trs. of N. Newton Sch. Corp., 278 F.3d 693, 699 (7th Cir. 2002)).

The duty of an insurer to defend its insured against suit depends on whether the underlying lawsuit alleges facts within, or potentially within, the ambit of coverage. Westfield, 804 N.E.2d at 604. In a declaratory judgment action such as this, the Court usually looks to the allegations in the underlying complaint (the Faust and Williamson suits) and compares the allegations to the relevant provisions of the insurance policy. Pekin Insuarance Co. v. Wilson, 930 N.E.2d 1011, 1016-1017 (Ill. 2010).

The complaint is liberally construed, with all doubts resolved in favor of the insured. Maryland Casualty, 466 N.E.2d at 1093.

"The insurer's duty to defend does not depend upon a sufficient suggestion of liability raised in the complaint; instead, the insurer has the duty to defend unless the allegations of the underlying complaint demonstrate that the plaintiff in the underlying suit will not be able to prove the insured liable, under any theory supported by the complaint, without also proving facts that show the loss falls outside the coverage of the insurance policy." Illinois Emcasco Insurance Co. v. Northwestern National Casualty Co., 337 Ill.App.3d 356, 361, 271 Ill.Dec. 711, 785 N.E.2d 905 (2003). "'[T]he duty to defend does not require that the complaint allege or use language affirmatively bringing the claims within the scope of the policy. The question of coverage should not hinge on the draftsmanship skills or whims of the plaintiff in the underlying action.'" Illinois Emcasco Insurance, 337 Ill.App.3d at 361, 271 Ill.Dec. 711, 785 N.E.2d 905, quoting International Insurance Co. v. Rollprint Packaging Products, Inc., 312 Ill.App.3d 998, 1007, 245 Ill.Dec. 598, 728 N.E.2d 680 (2000).

American Economy Ins. Co. v. Holabird and Root, 886 N.E.2d 1166, 1171 (Ill. App. 1st Dist. 2008). In Pekin Insurance Co. v. Wilson, 930 N.E.2d at 1019-1020, the Illinois Supreme Court concurred with the Holabird and Root decision, and further agreed that, in certain circumstances, it is appropriate to examine evidence beyond the underlying complaint. Id. at 1020. In Holabird and Root, consistent with the summary judgment analysis, it was appropriate to examine a third-party complaint to glean all relevant facts needed to determine whether there was a duty to defend. Pekin, 930 N.E.2d at 1020-1021 (summarizing with approval Holabird and Root).

The insurance policy is construed as a whole, taking into account the type of insurance, the risks undertaken, the subject matter that is insured, and the purpose of the entire contract. Westfield, 804 N.E.2d at 639. Moreover, according to the policy itself, the entire policy must be read to determine rights, duties and coverage (Doc. 55-1, p. 16). If the terms of the policy are clear and unambiguous, they are given their ordinary meaning, but if a term is susceptible to more than one meaning, it is considered ambiguous and will be interpreted strictly against the insurer, who drafted the policy. Pekin, 930 N.E.2d at 1017. Exclusions are interpreted liberally in favor of the insured. Id. Contract principles, not tort principles, must be used in interpreting the policy and Starr's contractual liability. AAA Disposal Systems, Inc. v. Aetna Casualty and Surety Co., 821 N.E.2d 1278, 1290 (Ill. App. 2nd Dist. 2005); Allstate Insurance Co. v. Smiley, 659 N.E.2d 1345, 1354 (Ill. App. 2nd Dist. 1995); Transamerica Insurance Co. v. South, 89 F.3d 475, (7th Cir. 1996) (opining that the Illinois Supreme Court would follow Allstate Insurance Co. v. Smiley and not allow tort principles to be used instead of contract principles in insurance contract construction).

II.The Issues

For obvious reasons, a declaratory judgment action to determine the insurer's duty to indemnify-to pay"must usually wait until the underlying action is determined and the insured's liability is fixed. Maryland Casualty Co. v. Chicago and North Western Transportation Co., 466 N.E.2d 1091, 1095 (Ill.App. 1st Dist. 1984). However, if the issues in the action for declaratory judgment are separable and can be decided without prejudicing the underlying case through application of collateral estoppel, then the declaratory judgment may be decided. Id. at 1095-1096 (citing Murphy v. Urso, 430 N.E.2d 1079 (Ill. 1981)). The parties do not dispute that this declaratory action ...

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