Cambridge Mut. Fire Ins. Co. v. Bell & Arthur Condo. Ass'n
| Decision Date | 21 October 2022 |
| Docket Number | 18 C 05951 |
| Parties | CAMBRIDGE MUTUAL FIRE INSURANCE COMPANY, Plaintiff, v. BELL & ARTHUR CONDOMINIUM ASSOCIATION, an Illinois not-for-profit corporation, MICHAEL MENTO, LISA MIJATOVIC, DRITON RAMUSHI, SELI BENKO, ALAN ALHOMSI, and NAWWAR ALHOMSI Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Cambridge Mutual Fire Insurance Company (“Cambridge”) seeks a declaratory judgment that it owes no duty to defend a state court lawsuit under a policy that it issued to defendant Bell & Arthur Condominium Association (“Association”). In the underlying state court case, defendants Alan Alhomsi and Nawwar Alhomsi (the “underlying plaintiffs”[1]) sued the Association[2] and defendants Michael Mento, Lisa Mijatovic, Driton Ramushi, and Seli Benko (“the individual defendants”) in the Circuit Court of Cook County.[3] During the relevant time periods, the underlying plaintiffs owned one of the Association's condominiums, and the individual defendants were board members of the Association. The underlying plaintiffs' Third Amended Complaint asserts 27 state tort claims against the Association and the individual defendants for mismanagement of their condominium and various other misconduct. Cambridge asserts that it has no duty to defend the Association or the individual defendants under its insurance policy. The Court agrees with Cambridge that the policy's bodily injury, property damage, and personal injury liability provisions provide no basis for coverage. The underlying plaintiffs' complaint, however, also alleges that the Association's board members committed “wrongful acts” that could potentially form the basis for coverage under the policy's Directors and Officers provisions. Finding that the insurance policy obliges Cambridge to defend those claims, the Court denies Cambridge's motion for summary judgment.
Cambridge's Business Liability Coverage Form imposes upon Cambridge the duty to defend the insured against liability arising out of “bodily injury,” “property damage,” “personal injury,” or “advertising injury.” Ex A. to Am. Compl. at 48, 12/6/2015 Insurance Policy, ECF No. 35-1 (“Policy”).[4] To trigger coverage under the Policy, an “occurrence”-“an accident, including continuous or repeated exposure to substantially the same general harmful conditions”-must cause the alleged bodily injury or property damage. Id. at 48, 61. The Business Liability Coverage Form explains that “[a]n organization” designated in the declarations, i.e., the Association, as well as its “executive officers and directors,” i.e., the Association's board members, are considered insureds under the Policy. Id. at 56. In Count I of its amended complaint in the case before this Court, Cambridge asserts that the underlying plaintiffs have not alleged ‘bodily injury,” “property damage,” or “personal injury” within the meaning of the Policy.[5]
The Policy also includes a “Condominium Enhancement Endorsement.” Id. at 95. That addendum contains a section entitled “Directors and Officers.” Id. at 97. Under the Directors and Officers section, Cambridge asserts an obligation to “pay those sums that the ‘Insured' becomes legally obligated to pay as damages . . . arising out of any ‘Wrongful Act' committed during the policy term.” Id. at 98. That section also imposes a “duty to defend the insured against any ‘suit' seeking damages or non-monetary damages.” Id. As is the case for many contracts, the Policy tells the reader that capitalized terms and terms that appear in quotations carry special meaning. Id. at 97. “Insured,” as employed in the Directors and Officers section, means “any former present or future director, [or] officer . . . while acting on behalf of the ‘Named Insured.'” Id. at 99. “Named Insured” means the “organization named in the Declarations,” or the Association. Id. A “Wrongful Act” means “any negligent act, any error, omission or breach of duty of directors or officers of the ‘Named Insured' while acting in their capacity as such.” Id. In other words, the Directors and Officers section provides liability coverage arising out of the board members' negligent or erroneous official acts. Under the section's relevant exclusions, however, Cambridge does not cover liability arising from board members' “dishonest, fraudulent, criminal, or malicious acts.” Id. at 98. In Count II of its amended complaint, Cambridge asserts that the underlying plaintiffs do not allege that defendants committed a “Wrongful Act” under the Policy.
Cambridge moves for summary judgment on both of its claims,[6] seeking a declaratory judgment that it does not owe defendants a duty to defend under both relevant Policy provisions.
Summary judgment is appropriate when the moving party shows that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). When determining the scope of an insurer's duty to defend as a matter of law, the Court compares the allegations in the underlying complaint to the policy language. Gen. Agents Ins. Co. of Am. v. Midwest Sporting Goods Co., 215 Ill.2d 146, 154-55, 828 N.E.2d 1092, 1098 (2005).[7] The Court must “liberally construe[]” the allegations in the underlying complaint in the insured's favor. Id. at 155, 1098. That means that the insurer must defend the claimant if the underlying suit alleges facts even “potentially” within the scope of policy coverage. Id. Even if only one of the theories alleged in the underlying complaint falls within the policy's coverage, the insurer must defend the insured against all of the claims. Id. To invoke Cambridge's duty to defend, therefore, the defendants need only show that one of the counts in the underlying complaint falls within a policy provision's scope.
Cambridge first asks this Court to declare that the Policy's “bodily injury,” “property damage,” and “personal injury” do not trigger its duty to defend. The defendants do not claim that the underlying plaintiffs' lawsuit alleges any “personal injury” as defined by the Policy. Because the defendants bear the initial burden of showing that claims fall within coverage, Addison Ins. Co. v. Fay, 232 Ill.2d 446, 453, 905 N.E.2d 747, 752 (2009), the Court will address only the scope of coverage for “bodily injury” and “property damage” liability. In those respects, the Court recognizes that this case resembles State Auto Prop. & Cas. Ins. Co. v. Bell & Arthur Condo. Ass'n, 454 F.Supp.3d 792, 801 (N.D. Ill. 2020), in which Judge Kendall found that the insurer State Auto owed no duty to defend the defendants in this case. Although that case involved a different insurance company plaintiff, it addressed the same underlying lawsuit and the same defendants. Like the Cambridge policy, the State Auto policy imposed a duty to defend against lawsuits seeking damages arising from bodily injury, property damage, personal injury, or advertising injury, and defined those injuries in similar ways. Id. at 795-96. Considering these similarities, the State Auto case offers a useful starting point in assessing the bodily injury and property damage allegations in the underlying suit.
To start, the Court agrees with Judge Kendall that “Counts 1, 2, 3, 4, 5, 6, 7, 8, 9, 11, 12, 13, 14, 15, 16, 18, 19, 20, 21, 23, 26, and 27 do not allege anything pertaining to property damage or bodily injury relating to an occurrence, even in a light read generously to the policy holders.” State Auto Prop. & Cas. Ins. Co. v. Bell & Arthur Condo. Ass'n, 454 F.Supp.3d 792, 798 (N.D. Ill. 2020). Of those counts, the Association argues that Counts 13 and 16 involve liability for bodily injury and property damage.
In Count 13, the underlying plaintiffs allege that the individual defendants and the Association violated the Chicago Municipal Code by failing to provide the underlying plaintiffs with hot water. Underlying plaintiffs had been having problems with hot water ever since they moved into their home in October 2014. The problem gradually worsened until the underlying plaintiffs allegedly discovered that “defects in the main pipes” caused the lack of hot water. TAC ¶ 206. Despite notice of the problem, underlying plaintiffs allege, defendants failed to fix it, adversely affecting the underlying plaintiffs' health and safety. The Association argues that the reference to the defects in the pipes alleges property damage and the reference to the negative effect on plaintiffs' health alleges bodily injury.
Under the Policy, an “occurrence,” or an accident, must have caused the property damage or bodily injury for the allegations to fall within the Policy's scope. But the underlying plaintiffs do not allege what caused the “defects in the main pipes” that prompted the hot water shortage or when those defects occurred. The complaint vaguely suggests two possible dates that spurred the damage but neither supports a claim for coverage. The first possibility is that something caused the damage sometime before October 2014, when the underlying plaintiffs moved in. The Cambridge policy period, however, only began in December 2014, and any claim outside of the policy period exceeds the scope of coverage. See Northfield Ins. Co. v. City of Waukegan, 701 F.3d 1124, 1129 (7th Cir. 2012). Any “continuous and repeated exposure” constituting an “occurrence” must have been caused by an accident that happened within the policy period. Great Lakes Dredge & Dock Co. v. City of Chicago, 260 F.3d 789, 795 (7th Cir. 2001) ...
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