Carney v. Village of Darien

• Decision Date: 31 July 1995
• Docket Number: No. 94-2973,94-2973
• Citation: 60 F.3d 1273
• Parties: Paul CARNEY, individually, and Christopher Benson, individually, Plaintiffs, v. VILLAGE OF DARIEN, Darien Chief of Police Donald Hoppe, President of the Village of Darien Michael Obershal, et al., Defendants-Appellants, and Tower Insurance Company, Incorporated, an insurance corporation, now known as G.R.E. Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1273

60 F.3d 1273

Paul CARNEY, individually, and Christopher Benson individually, Plaintiffs, v. VILLAGE OF DARIEN, Darien Chief of Police Donald Hoppe President of the Village of Darien Michael Obershal, et al., Defendants-Appellants and Tower Insurance Company, Incorporated, an insurance corporation, now known as G.R.E. Corporation Defendant-Appellee.

No. 94-2973.

United States Court of Appeals, Seventh Circuit.

Argued March 29, 1995.

Decided July 31, 1995.

Michael J. Cohen, Meissner & Tierney, Milwaukee, WI, Jerome Wiener, Schain, Firsel & Burney, Chicago, IL, for plaintiffs.

Michael J. Cieslewicz (argued), Vicki L. Arrowood, Kevin A. Christensen, Kasdorf, Lewis & Swietlik, Milwaukee, WI, for Village of Darien, Donald Hoppe, Michael Obershal, Kenneth Blank, Harold Mayer, Curtis Schellhase, Joseph Moran, Dean Logterman, Wesley Hanson, Employers Mut. Cas. Co., Village Trustees.

Susan R. Tyndall (argued), Tomislav Z. Kuzmanovic, Michael J. Pfau, Hinshaw & Culbertson, Milwaukee, WI, for Tower Ins. Co., Inc.

Before CUMMINGS and KANNE, Circuit Judges, and WALTER, ¹ District Judge.

WALTER, District Judge.

Defendants, the Village of Darien, Darien Chief of Police Donald Hoppe, Village of Darien President Michael Obershal, Village of Darien Trustees Kenneth Blank, Harold Mayer, Dean Logterman, Wesley Hanson (hereinafter collectively referred to as the "Village Defendants") and Defendant Employers Mutual Casualty Company (hereinafter "Employers Mutual"), have appealed the granting of a motion for summary judgment in favor of Tower Insurance Corporation (hereinafter "Tower"), which declared that Tower had no duty to defend or indemnify its insured, the Village Defendants, because the allegations in the plaintiffs' complaint fell outside the scope of coverage provided by Tower's insurance policies. For the reasons set forth below, we AFFIRM the district court's entry of summary judgment in favor of Tower and the corresponding declaratory judgment.

BACKGROUND

On June 26, 1991, plaintiffs Paul Carney and Christopher Benson filed a complaint alleging a violation of 42 U.S.C. Sec. 1983. The facts giving rise to the complaint began on July 4, 1985, when Village of Darien Police Officer Donald White effected a traffic stop upon the plaintiffs as they were driving on Wisconsin Route 14 in the Village of Darien. Officer White issued traffic citations and arrested the two individuals for having open intoxicants in the vehicle. Plaintiffs claim that subsequent to their arrests, Officer White harassed, threatened and attempted to coerce them into performing sexual acts in exchange for voiding the citations.

On October 30, 1992, plaintiffs filed a First Amended Complaint which contained six counts. ² Counts I and IV allege that Officer White's actions against the plaintiffs were committed "under color of state law and with deliberate, wilful, malicious and reckless indifference and disregard for [the plaintiffs'] rights guaranteed under the Constitution of the United States." The specific constitutional violations alleged were of the Fifth Amendment right of privacy and liberty interest in bodily integrity, and the Fourth Amendment right to be free from unreasonable searches and seizures.

Counts II and V include allegations against the Village Defendants and claim that because there had been several complaints about White's abusiveness prior to the July 4, 1985 incident, the Village Defendants knew or should have known that White was unfit to be a police officer; that he would engage in unconstitutional conduct while under the employ of the Village of Darien. Plaintiffs specifically allege that the Village Defendants were aware of one similar incident in 1984, when White offered to void a traffic citation Counts I, II, IV and V, also assert liability on the part of Employers Mutual and Tower Insurance Company, each of which issued insurance policies to the Village of Darien and its employees that were in full force and effect on July 4, 1985. Counts III and VI involve statutory indemnity claims which allege that according to Section 895.46(1)(a) of the Wisconsin Statutes, the Village of Darien is liable as indemnitor for the payment of all damages--including attorneys' fees, awarded against Officer White and the Village Officials. These counts, however, are not the subject of this appeal and will not be reviewed.

                issued to Michael M. Rowe in exchange for sexual acts.  Plaintiffs also claim that the Village Defendants' failure to adequately supervise, hire or instruct White in the performance of his duties, "amounted to a deliberate indifference and disregard for the constitutionally protected rights of citizens with whom Officer White would come in contact in the course of his employment as a Darien police officer."   First Amended Complaint Counts II and V p 26
                

All of the defendants, except White, filed answers denying the allegations in the complaint. ³ Employers Mutual accepted the defense of the Village Defendants and filed an answer on their behalf. Tower, on the other hand, believing that it owed no duty to defend against the allegations in the complaint, filed an answer solely on its own behalf. Because of Tower's refusal to defend its insured, the Village Defendants along with Employers Mutual filed a cross-claim against Tower alleging that Tower was obligated to defend and indemnify its insured for the allegations contained in the plaintiffs' complaint. In answer to the cross-claim, Tower raised the affirmative defense of non-coverage.

The Village Defendants and Employers Mutual filed a motion for summary judgment asking the court to declare that Tower had a duty to defend and indemnify its insured. In response, Tower filed a cross-motion seeking a declaratory judgment of non-coverage, arguing that Tower's policies eliminated coverage for all of the plaintiffs' allegations. The district court determined that Tower had successfully established that the allegations in the complaint were specifically excluded from coverage by the terms of the policies and Tower owed no duty to defend or indemnify the Village Defendants. Accordingly, on January 27, 1994, the district court granted Tower's motion for summary judgment and issued a declaratory judgment of non-coverage in Tower's favor. The remaining issues in the case were tried to a jury which rendered a verdict in favor of the plaintiffs, finding that White intentionally deprived them of their constitutional rights, but that his actions were not made while acting within the course and scope of his employment with the Village of Darien. The jury further found that former Village of Darien Police Chief Donald Hoppe acted intentionally or recklessly violating the rights of the plaintiffs and causing them injury. As to the remaining defendants, the jury determined that neither their acts nor omissions deprived the plaintiffs of their constitutional rights. The district court entered judgment in accordance with the jury's findings on July 13, 1994 and this appeal ensued on August 9, 1994.

The Village Defendants and Employers Mutual appeal the determination of the district judge that Tower had no duty to defend the underlying action. Specifically, they assert two arguments on appeal: first, that Tower breached its duty to defend its insured and therefore has waived its right to rely on any policy defenses; and second, that the insurance policies issued by Tower to the Village Defendants provided coverage for the allegations in the Plaintiffs' complaint.

DUTY TO DEFEND

The determination of whether an insurance company owes a duty to defend is An insurer that breaches its duty to defend waives its right to later challenge coverage. Professional Office Buildings, Inc., 145 Wis.2d at 585, 427 N.W.2d at 431; See also, Grieb v. Citizens Casualty Co., 33 Wis.2d 552, 148 N.W.2d 103 (1967) (holding that the insurer who improperly refuses to defend its insured does so at its own peril). However, an insurer's refusal to tender a defense to its insured does not automatically result in a breach of the contractual duty to defend. If the coverage issue is "fairly debatable" from the standpoint of the insured and a coverage determination by the court precedes the liability action, the insurer runs no risk of breaching its duty to defend. ⁴ Kenefick v. Hitchcock, 187 Wis.2d 218, 522 N.W.2d 261 (Ct.App.1994); Mowry v. Badger State Mutual Casualty Company, 129 Wis.2d 496, 516-517, 385 N.W.2d 171, 180-181 (1986). An insured seeking a preliminary determination by the court on coverage can either request a bifurcated trial on the issues of coverage and liability, and move to stay any proceedings on liability until after the coverage issue is resolved, or seek a declaratory judgment to obtain a resolution of coverage prior to the liability trial. Id; Grube v. Daun, 173 Wis.2d 30, 75, 496 N.W.2d 106, 123 (Ct.App.1992). Under either procedure, if coverage is determined to exist, the insurer must then tender a defense to its insured regarding the subsequent liability issue. Elliott, 169 Wis.2d at 318, 485 N.W.2d at 406.

a question of law reviewed de novo and without deference to the trial court. Professional Office Buildings, Inc. v. Royal Indemnity Company, 145 Wis.2d 573, 580, 427 N.W.2d 427, 429 (Ct.App.1988). In return for the premiums paid by the insured, an insurance company owes its insured the duty to defend and indemnify for those claims falling within the parameters of the insurance policy. Elliott v. Donahue, 169 Wis.2d 310, 321, 485 N.W.2d 403, 407 (1992). Wisconsin employs a complaint test for determining whether an insured's claim triggers the insurer's duty to defend. Id. If there are allegations in the complaint which, if proven, would give rise to liability under the terms of the insurance policy, the insurer has a duty to defend. Sola Basic Industries, Inc. v. U.S. Fidelity & Guaranty Co., 90 Wis.2d 641, 646, 280 N.W.2d 211, 214 (1979). Any existing...