United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
VIRGINIA M. KENDALL, District Judge.
Maria Cardenas filed a complaint against Twin City Fire Insurance Company to enforce a settlement agreement between Cardenas and her former attorney, John Ambrose, and his firm, Ambrose &Associates, P.C., following a legal malpractice suit. Twin City was Ambrose's legal malpractice insurer. In 2008, Ambrose had unsuccessfully represented Cardenas in a civil rights suit against the City of Chicago and a Chicago Police Officer. Judge Norgle dismissed the suit after Ambrose failed to serve the police officer within the 120-day period that Fed.R.Civ.P. 4(m) provides. See Cardenas v. City of Chi., No. 08 C 3174, 2010 WL 610621 (N.D. Ill. Feb. 15, 2010). Cardenas sued Ambrose on February 15, 2012 in the Circuit Court of Cook County, Illinois, alleging legal malpractice. On February 20, 2012, Ambrose notified Twin City of the pending malpractice action against him, but Twin City refused to defend or indemnify him or his firm. In a letter to Ambrose justifying its position, Twin City cited violations of the insurance policy's notice provisions and a policy exclusion. Without assistance or advice from Twin City, Ambrose and his firm negotiated a $750, 000 settlement with Cardenas, which assigned all of his rights to the insurance policy to Cardenas and provided that Cardenas could seek to enforce the agreement only against Twin City; not against Ambrose or his firm. Cardenas now asks the Court to enforce that settlement agreement against Twin City.
Twin City moved for summary judgment alleging that it owed no duty to defend or indemnify Ambrose because the claim he submitted fit into a policy exclusion. (Dkt. No. 14). Cardenas cross-moved for summary judgment alleging that Twin City was estopped from asserting policy defenses based on its failure to defend Ambrose, and that the settlement agreement between her and Ambrose was valid and enforceable against Twin City. (Dkt. No. 24).
For the reasons set forth below, Twin City's motion for summary judgment is granted because the claim that Ambrose submitted fit into a coverage exclusion. Cardenas's motion for summary judgment is therefore denied. Twin City's motion to stay ruling on a money judgment (Dkt. No. 30) is therefore dismissed as moot.
The following facts are undisputed unless otherwise noted.
A. The Malpractice Insurance
Twin City provided four consecutive, twelve month malpractice insurance policies to Ambrose and his firm, Ambrose & Associates, P.C., between August 29, 2008 and August 29, 2012. (Def. 56.1 St. ¶ 18; Pl. 56.1 St. ¶ 1). Among other things, the policies provided for indemnification and defense against charges of professional negligence. (Def. 56.1 St. ¶ 19; Pl. 56.1 St. ¶ 5). The policies also contained a requirement that Ambrose notify Twin City when he first became aware of events that had the potential to lead to a claim against him. In the words of the policy: "You [Ambrose]... must see to it that we [Twin City] are notified immediately... of any circumstance which may give rise to a claim." (Def. 56.1 St. ¶ 19; Pl. Resp. 56.1 St. ¶ 19). The benefit to Ambrose of such notification was that reported claims would be "considered to have been made and reported during the policy period." ( Id. ) In other words, Twin City would defend Ambrose and indemnify him for any resulting covered liability. Another provision of the policies, which the parties have called the Prior Knowledge Exclusion, gave the notice requirement teeth. That section provided that the insurance did not cover claims arising out of acts or omissions occurring before the inception date of the policy, August 29 of each year, if the insured "knew or could have reasonably foreseen" that the acts "might be expected to be the basis of a claim." ( Id. ). Claims that were the result of circumstances that occurred before the inception date of the plan were not covered, unless Ambrose had timely notified Twin City of the facts that gave rise to the claim. Even then, those claims would be covered under the policy under which notice was made, not the policy in effect at the time of the claim.
B. The Underlying Civil Rights Lawsuit
In April 2008, Ambrose represented Plaintiff, Maria Cardenas, in a civil rights lawsuit against the City of Chicago and a Chicago Police officer alleging violation of her civil rights under 42 U.S.C. § 1983 during the execution of a search warrant at her home. (Pl. 56.1 St. ¶ 9; Def. 56.1 Resp. ¶ 9). Ambrose properly served the City of Chicago, and the City removed the case to federal court on June 2, 2008. ( Id. ) The 120-day period during which to serve additional defendants began running that day. See Fed.R.Civ.P. 4(m).
The district court's order dismissing the civil rights lawsuit sheds more light on the events that followed than do the parties' submissions in this case. See Cardenas v. City of Chicago, No. 08 C 3174, 2010 WL 610621 (N.D. Ill. Feb. 15, 2010); see also Fed.R.Civ.P. 56(c)(3) ("The court need consider only the cited materials, but it may consider other materials in the record."). Ambrose first attempted to serve the officer at Chicago Police Headquarters, but delivered the summons and complaint to the wrong office. 2010 WL 610621 at *1. Ambrose had attempted to deliver the complaint to the Superintendent's office, which refused to accept service on the officer's behalf. Id. Ambrose represented to the court that he then called the Chicago Police Department to inquire about how to serve an officer, and was told that the proper place to serve officers was at Chicago Police Headquarters. He did not attempt to follow these instruction, perhaps because the Superintendent's office - located at Chicago Police Headquarters - had previously rejected service.
Not until November 12, 2008 (after the 120-day service period ended on October 2) did Ambrose do more to determine the proper method of serving the police officer. On that day, he wrote a letter to the City defendants asking them directly to explain the proper way to serve the officer. Id. at *2. The City responded on December 17, 2008, informing Ambrose that the proper method of serving a police officer is at Chicago Police Department Headquarters, Office of Legal Affairs. Id. Ambrose claimed that the City assured him that service was unimportant, because settlement was likely; the City denied it made such representations. Id. On November 9, 2009, Ambrose served the officer at Chicago Police Department Headquarters, Office of Legal Affairs. Id. By then, a motion to dismiss for failure to serve was already pending, nearly a year had passed since Ambrose learned the proper mechanics of serving a Chicago Police officer, and over a year had passed since the 120-day service period following removal had expired. Id.
On February 15, 2010, the Northern District of Illinois dismissed the case for Ambrose's unjustified failure to timely serve the police officer named in the complaint. (Def. 56.1 ¶ 10; Pl. 56.1 St. ¶ 9). The district court made clear in its order that Ambrose had "only himself to blame" for the dismissal. (Def. 56.1 St. ¶ 11; Pl. Resp. 56.1 St. ¶ 11). The district court denied Ambrose's motion to amend or alter that judgment on September 1, 2010. (Def. 56.1 St. ¶ 12; Pl. 561. Resp. ¶ 12). The Seventh Circuit affirmed the dismissal on July 21, 2011. (Def. 56.1 St. ¶ 14; Pl. 56.1 St. ¶ 9). The Seventh Circuit denied rehearing in that case on September 15, 2011 (Def. 56.1 St. ¶ 16; Pl. 56.1 ...