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First Mercury Insurance Co. v. Ciolino

Court of Appeals of Illinois, First District, Sixth Division

May 11, 2018

FIRST MERCURY INSURANCE COMPANY, Plaintiff and Counter-Defendant-Appellee,
PAUL J. CIOLINO; PAUL J. CIOLINO AND ASSOCIATES, INC.; PAUL J. CIOLINO AND ASSOCIATES, LLC; and Alstory Simon, Defendants (Paul J. Ciolino; Paul J. Ciolino and Associates, Inc.; and Paul J. Ciolino and Associates, LLC; Defendants and Counter-Plaintiffs-Appellants).

          Appeal from the Circuit Court of Cook County. No. 15 CH 05558 Honorable Sanjay T. Tailor, Judge Presiding.

          JUSTICE CUNNINGHAM delivered the judgment of the court, with opinion. Presiding Justice Hoffman and Justice Delort concurred in the judgment and opinion.



         ¶ 1 In this insurance coverage dispute, plaintiff First Mercury Insurance Company (First Mercury) filed a declaratory judgment action against its insured, defendants Paul J. Ciolino, Paul J. Ciolino & Associates, Inc., and Paul J. Ciolino & Associates, LLC (collectively, Ciolino). Ciolino filed a six-count counterclaim. The circuit court dismissed five counts of the counterclaim and in a subsequent order granted summary judgment in favor of First Mercury, including with respect to the remaining count of the counterclaim. For the following reasons, we affirm the judgment of the circuit court of Cook County.

         ¶ 2 BACKGROUND

         ¶ 3 The crux of this insurance coverage dispute is whether First Mercury owed coverage to its insured, Ciolino, in an underlying lawsuit for malicious prosecution initiated by Alstory Simon. The complaint commencing the underlying action (Simon action) was filed in federal court in February 2015 against Northwestern University (Northwestern), Davis Protess, Paul J. Ciolino, and Jack P. Rimland. Simon v. Northwestern University, No. 15-cv-1433 (N.D. Ill.). According to the Simon complaint, Protess was a professor at Northwestern who taught an investigative journalism class, Ciolino acted as a private investigator for Northwestern, and Rimland was an attorney. Simon alleged that in the late 1990s, these defendants "conspired to frame Simon" for a 1982 double murder "in order to secure the release of the real killer, Anthony Porter, " who had been convicted of the crime. Simon's complaint included counts for malicious prosecution and conspiracy against Ciolino.

         ¶ 4 Simon's complaint alleged that Protess instructed his students to investigate the murder case and "develop evidence of Porter's innocence." Simon alleged that "Northwestern, through its employees and/or agents Protess and Ciolino, intentionally manufactured false witness statements against Simon and then used the fabricated evidence, along with terrifying threats and other illegal and deceitful tactics, to coerce a knowing false confession from Simon." Among other acts, Simon alleged that in February 1999, Ciolino "illegally impersonated a police officer and, while armed with a handgun, " entered Simon's house and "obtained a false confession from Simon to the murder" through threats, false evidence, and "other illegal tactics."

         ¶ 5 According to Simon's complaint, in March 1999 a grand jury indicted him based on "the false evidence manufactured by the Northwestern Team." Simon alleged that, as a direct result of the Simon defendants' conduct, he pleaded guilty in September 1999 to the murder of one of the victims and the voluntary manslaughter of the second victim.

         ¶ 6 In October 2013, the Cook County State's Attorney's office announced that it would re-investigate the murder case. In October 2014, the State's Attorney's office requested that the circuit court vacate the murder and voluntary manslaughter charges against Simon. On the same day, Simon was released.

         ¶ 7 It is undisputed that First Mercury was not Ciolino's insurer when Simon was allegedly framed or at the time of his 1999 guilty plea and conviction. However, First Mercury was Ciolino's insurer at the time of Simon's eventual exoneration in 2014.

         ¶ 8 Beginning in 2006, First Mercury issued a number of policies to Ciolino, each with a one-year term. These included a policy in effect at the time of Simon's 2014 exoneration (the 2014-15 policy). The 2014-15 policy provided four coverages: "Coverage A-Bodily Injury and Property Damage Liability"; "Coverage B-Personal and Advertising Injury Liability"; "Coverage C-Medical Payments" and "Coverage D-Errors and Omissions." This appeal concerns application of Coverage B, under which First Mercury agreed:

"We will pay those sums that the insured becomes legally obligated to pay as damages because of 'personal injury' or 'advertising injury' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages. However, we will have no duty to defend the insured against any 'suit' seeking damages for 'personal injury' or 'advertising injury' to which this insurance does not apply."

         Coverage B also specified that it applied to " 'Personal injury' caused by an offense arising out of your business *** but only if the offense was committed *** during the policy period."

         ¶ 9 The 2014-15 policy elsewhere defined the term "personal injury" to mean "injury, other than 'bodily injury, ' arising out of one or more of the following offenses, " followed by a list including "malicious prosecution." However, the 2014-15 policy does not define the term "offense."

         ¶ 10 In April 2015, shortly after the Simon action was commenced, First Mercury filed a complaint in the circuit court of Cook County for declaratory judgment against Ciolino.[1] First Mercury's complaint pleaded that the alleged "offense" in the Simon action occurred outside the policy period of any First Mercury policy issued to Ciolino. First Mercury alleged that Coverage B of the 2014-15 policy did not apply because the Simon complaint "asserts no claim for 'personal injury' caused by an offense committed during the policy periods." Thus, First Mercury alleged that it owed no duty to defend or indemnify Ciolino in the Simon lawsuit.

         ¶ 11 On December 15, 2015, Ciolino filed a verified counterclaim containing six counts. Each of those counts incorporated allegations that in the spring of 2006, Ciolino contacted an agent of First Mercury and "asked if First Mercury's policy would insure against claims of malicious prosecution that arose during the term of the policy." Ciolino alleged that "[h]e was told that the policy would insure against such claims" and that he relied on that representation. The counterclaim alleged that First Mercury knew or should have known that "in Illinois a claim for malicious prosecution does not exist" until "the termination of the proceeding in favor of the plaintiff." Ciolino thus alleged that "the relevant event for the purpose of determining insurance coverage is exoneration, the final legal element of the [malicious prosecution] claim."

         ¶ 12 Count I of the counterclaim, for breach of contract, alleged that First Mercury breached the 2014-15 policy by refusing to defend and indemnify Ciolino in the Simon action. Count II pleaded in the alternative that the 2014-15 policy should be reformed to afford coverage for the Simon case. Count III pleaded "promissory estoppel" in that Ciolino relied on First Mercury's "unambiguous promise that it would provide insurance coverage against claims of malicious prosecution that arose during the policy period." Ciolino also pleaded a count for "equitable estoppel" (count IV). Counts V and VI alleged fraud and negligent misrepresentation.

         ¶ 13 In February 2016, First Mercury moved to dismiss all six counts of the counterclaim pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 2016)) for failure to state a cause of action. On July 26, 2016, the trial court granted the motion only with respect to counts II through VI but declined to dismiss count I for breach of contract.

         ¶ 14 In March 2017, First Mercury and Ciolino filed cross-motions for summary judgment. Ciolino's motion urged that it was entitled to coverage under Coverage B, emphasizing that the policy applied to personal injury caused by "an offense" if "committed" in the policy period. Ciolino claimed that coverage applied "when the offense was completed" and that the malicious prosecution alleged by Simon was not completed until his 2014 exoneration.

         ¶ 15 In its motion for summary judgment, First Mercury argued that the relevant question was whether the "trigger of coverage" for an underlying malicious prosecution claim was the date on which the underlying prosecution commenced or the date of the exoneration. First Mercury contended that multiple appellate court decisions held that the commencement of the prosecution is the triggering event. First Mercury argued that because the alleged malicious prosecution against Simon commenced in 1999-before First Mercury issued any policy to Ciolino-it did not owe coverage and did not breach the 2014-15 policy by refusing to defend the Simon action. Thus, First Mercury sought summary judgment in its favor with respect to both its declaratory judgment complaint as well as the remaining breach of contract count of Ciolino's counterclaim.

         ¶ 16 The cross-motions were argued at a hearing on June 1, 2017. On that date, the trial court entered an order that (1) granted First Mercury's motion for summary judgment, (2) denied Ciolino's cross-motion for summary judgment, and (3) dismissed ...

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