Roman Catholic Diocese of Springfield in Ill. v. Maryland Cas. Co.

Citation139 F.3d 561
Decision Date07 April 1998
Docket NumberNo. 97-2482,97-2482
PartiesROMAN CATHOLIC DIOCESE OF SPRINGFIELD IN ILLINOIS, a Trust, Daniel L. Ryan, Bishop, Successor Trustee, et al., Plaintiffs-Appellants, v. MARYLAND CASUALTY COMPANY, a foreign corporation, Defendant-Appellee, and TIG Insurance Company, a foreign corporation, and National Risk Retention Group, Inc., a foreign corporation, Defendants.
CourtU.S. Court of Appeals — Seventh Circuit

Hugh J. Graham (argued), Dean W. Jackson, Graham & Graham, Springfield, IL, for Plaintiffs-Appellants.

Jill B. Berkeley, Schiff, Hardin & Waite, Chicago, IL, Joshua G. Vincent (argued), Peter C. Morse, D. Kendall Griffith, Hinshaw & Culbertson, Chicago, IL, for Defendants-Appellees.

Before CUMMINGS, RIPPLE, and ROVNER, Circuit Judges.

ILANA DIAMOND ROVNER, Circuit Judge.

The Roman Catholic Diocese of Springfield, Illinois and the other appellants (collectively, "the Diocese") sought a declaratory judgment obligating their insurers, among them Maryland Casualty Company, to defend the Diocese in a state court action filed by the parents of children abused by a former parish priest. The district court granted Maryland Casualty judgment on the pleadings, reasoning that the injuries claimed by the parents did not occur during the period of time that Maryland Casualty insured the Diocese. We reverse.

I.

Maryland Casualty was the general liability insurer for the Diocese from December 1977 until December 1981. The primary liability policies in force during this period provided that Maryland would indemnify and defend the Diocese for claims arising from bodily injury and property damage caused by an "occurrence." "Bodily injury" included a "bodily injury, sickness or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom." "Occurrence" was defined as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." 1 Excess liability policies in effect between December 1978 and December 1981 defined their key terms--"personal injury" and "occurrence"--with comparable language.

From approximately 1978 through 1981, it is alleged, Joseph Havey, then the associate pastor at St. Agnes Parish and School (within the Diocese), sexually abused a number of boys entrusted to his supervision and guidance. In 1993, five of Havey's alleged victims, now adults, filed suit against him and the Diocese in Illinois state court seeking recompense for the abuse. Doe, et al. v. Ryan, et al., No. 93 L 546 (Circuit Court Sangamon County). The trial court ultimately dismissed that suit with prejudice, concluding that it was barred by the statute of limitations. The Illinois appellate court affirmed the dismissal in an unpublished ruling, Doe v. Ryan, No. 4-95-0457 (Ill.App. 4th Dist. Dec. 15, 1995), and the Illinois Supreme Court denied the plaintiffs leave to appeal, Doe v. Ryan, 166 Ill.2d 537, 216 Ill.Dec. 2, 664 N.E.2d 639 (1996). In 1995, two other men claiming to have been abused by Havey each filed suit against Havey and the Diocese. Green v. Ryan, et al., No. 95 L 157 (Circuit Court Sangamon County); Black v. Ryan, et al., No. 95 L 158 (Circuit Court Sangamon County).

In May 1995, two weeks after the Doe v. Ryan suit was dismissed, the parents of two of the Doe plaintiffs, joined by the parents of the plaintiffs in the Green and Black actions, filed yet another action against Havey and the Diocese. Ward, et al. v. Ryan, et al., No. 95 L 0343 (Circuit Court Sangamon County). The complaint in Ward, after detailing the abuse that Havey allegedly inflicted on the children, alleges that because Havey admonished the children to never disclose the abuse to anyone, the plaintiff parents remained ignorant of what Havey had done until on or after May 29, 1993. Ward Complaint at 6 p 29. The complaint makes the following allegations as to the respective injuries of the minors and their parents:

30. As a direct result of Defendant Joseph Havey's conduct, the minor children have suffered and will continue to suffer severe and medically diagnosable emotional distress, embarrassment, loss of self-esteem, disgrace, humiliation, psychological injury, loss of enjoyment of life, wage loss and deprivation of earning capacity.

31. As a direct result of the aforesaid conduct by Defendant Joseph Havey and disclosure of same to the Plaintiffs, all Plaintiffs have suffered extreme emotional pain and distress; all plaintiffs have experienced shock, impaired mental and physical health, nervousness, and mental anguish. Plaintiffs' faith has been diminished and their personal relationship with their God has been abridged. Plaintiffs have lost faith and confidence in the Catholic Church. Plaintiffs have had to contend with constant and severe emotional stress.

Ward Complaint at 6. Finally, the complaint alleges that the plaintiffs had entrusted their children to the Catholic Church for religious and educational instruction and had made financial contributions to St. Agnes Parish to promote that instruction; consequently, "a fiduciary relationship and an implied and/or quasi-contractual relationship between the Plaintiffs and the Defendants were created." Ward Complaint at 6 p 32. The first four counts of the complaint seek to hold Havey liable on various theories. The remaining eight counts seek to hold the parish and the Diocese liable under theories of vicarious liability (including respondeat superior), negligent supervision, breach of fiduciary duty, and breach of an implied and/or quasi-contract.

The Diocese tendered the defense of the Ward suit to Maryland Casualty and also to TIG Insurance Company and National Catholic Risk Retention Group, Inc. ("NCRRG"), which had primary and excess coverage policies, respectively, in effect with the Diocese in May 1993, when the Ward plaintiffs allegedly learned of their children's abuse. All three of the insurers refused to assume responsibility for the Diocese's defense. Maryland asserted that although the children were allegedly abused between 1978 and 1981, when Maryland insured the Diocese, their parents were not injured until 1993, well after the Maryland policies had expired. TIG and NCRRG, on the other hand, asserted that although the parents may have been injured in 1993 when they insured the Diocese, the source of that injury was the abuse to the plaintiffs' children, which occurred during the term of Maryland's coverage.

Invoking the Declaratory Judgment Act, 28 U.S.C. § 2201, the Diocese filed this suit in 1996, alleging that either Maryland on the one hand or TIG and NCRRG on the other are obligated to defend the Diocese in the Ward suit. Maryland sought judgment on the pleadings, arguing that the Ward complaint comprehended no injury to the parents prior to 1993, when they finally learned of the abuse and suffered the resulting emotional distress.

The district court agreed that Maryland was entitled to judgment on the pleadings. The court noted first that Maryland could only be held liable for an injury which occurred during the period of coverage. Amended Order at 8. As the policy terms made clear, Maryland was responsible only for "occurrences"--that is, accidents or repeated exposure to conditions--resulting in injury during the policy period. Id. at 7-8. As the district court read the Ward complaint, however, the parents were seeking to recover for injuries that did not occur during the period of Maryland's coverage:

Although the Ward plaintiffs allege that an injury was sustained by their children during the Maryland policy period, the injury for which they are seeking recovery is the injury to them, which is alleged to have occurred on May 29, 1993, when they found out about the alleged sexual abuse. The claim appears to have been designed to circumvent the statute of limitations that caused the children's suit to be dismissed. By claiming an injury on May 29, 1993, the Ward plaintiffs' suit, filed on May 24, 1995, falls within the two-year statute of limitation. This injury occurred long after the Maryland policy expired in 1981.

Amended Order at 8-9. The court found unpersuasive the Diocese's effort to analogize the Ward suit to asbestos litigation and other suits concerning injuries that do not manifest until years after exposure to a harmful agent. The parents in Ward were not complaining of a truly latent injury, the court explained. Rather, the cause and manifestation of the parents' injuries occurred simultaneously on May 29, 1993, when they learned that their children had been harmed. Amended Order at 9-10. "That is when they were 'exposed' and that is when they were injured." Amended Order at 10. Finally, the court rejected the Diocese's assertion that Maryland was estopped from denying coverage because it had neither defended under a reservation of rights nor filed its own suit for declaratory judgment but instead had forced the Diocese to sue. The court noted that the estoppel argument applied only in cases in which the insurer in fact had a duty to defend and breached that duty. Amended Order at 10, citing Industrial Coatings Group, Inc. v. American Motorists Ins. Co., 276 Ill.App.3d 799, 213 Ill.Dec. 317, 324, 658 N.E.2d 1338, 1345 (1995) and Sears, Roebuck & Co. v. Seneca Ins. Co., 254 Ill.App.3d 686, 194 Ill.Dec. 57, 62, 627 N.E.2d 173, 178 (1993). The court subsequently denied the Diocese's motion to reconsider.

II.

Our review of the district court's decision granting judgment on the pleadings is de novo. GATX Leasing Corp. v. National Union Fire Ins. Co., 64 F.3d 1112, 1114 (7th Cir.1995) (collecting cases). Resolution of the case pursuant to FED.R.CIV.P. 12(c)--like dismissal pursuant to Rule 12(b)(6)--is appropriate only if it is clear that the plaintiff can prove no set of...

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