Chi. Ins. Co. v. City of Council Bluffs

• Decision Date: 12 March 2012
• Docket Number: Nos. 1:07–cv–21 RP–TJS, 1:07–cv–24.,s. 1:07–cv–21 RP–TJS, 1:07–cv–24.
• Citation: 859 F.Supp.2d 967
• Parties: CHICAGO INSURANCE COMPANY, an Illinois Corporation, Plaintiff, v. The CITY OF COUNCIL BLUFFS, IOWA, Daniel C. Larsen, in his individual and official capacities, and Lyle W. Brown, in his individual and official capacities, Defendants. Columbia Casualty Company, Plaintiff, v. City of Council Bluffs, Iowa, Daniel C. Larsen, Lyle W. Brown, David Dawson, Terry Harrington, and Curtis W. McGhee, Jr., Defendants.
• Court: U.S. District Court — Southern District of Iowa

859 F.Supp.2d 967

CHICAGO INSURANCE COMPANY, an Illinois Corporation, Plaintiff,

v.The CITY OF COUNCIL BLUFFS, IOWA, Daniel C. Larsen, in his individual and official capacities, and Lyle W. Brown, in his individual and official capacities, Defendants.

Columbia Casualty Company, Plaintiff,

v.City of Council Bluffs, Iowa, Daniel C. Larsen, Lyle W. Brown, David Dawson, Terry Harrington, and Curtis W. McGhee, Jr., Defendants.

Nos. 1:07–cv–21 RP–TJS, 1:07–cv–24.

United States District Court,

S.D. Iowa,

Western Division.

March 12, 2012.

Bethany K. Culp, Duana Joan Grage, Hinshaw & Culbertson LLP, Minneapolis, MN, Debra Lynne Hulett, Nyemaster Goode PC, Des Moines, IA, Linda J. Carwile, Roderick T. Dunne, Karbal, Cohen, Economou, Silk & Dunne LLC, Chicago, IL, for Plaintiff.

Michael A. Sciortino, Council Bluffs City Attorneys Office, Council Bluffs, IA, Lorraine J. May, Thomas P. Murphy, Hopkins & Huebner, Alan O. Olson, Olson Law Office PC, Des Moines, IA, Thomas P. Frerichs, Frerichs Law Office Waterloo, IA, Mel C. Orchard, Spence Law Firm LLC, Jackson, WY, Stephen Dillard Davis, Steve Davis Law PC, Oak Brook, IL, William H. Jones, Canel Davis & King, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

ROBERT W. PRATT, District Judge.

Before the Court are two motions for summary judgment. The first motion was filed by Plaintiff Chicago Insurance Co. (“CIC”) on May 4, 2011. Clerk's No. 28. The City of Council Bluffs (the “City”), Daniel C. Larsen (“Larsen”), and Lyle W. Brown (“Brown”) (collectively “Defendants”) filed a response in opposition to CIC's motion on October 25, 2011. Clerk's No. 57. CIC filed a reply on December 23, 2011. Clerk's No. 101–1; see also Clerk's No. 112. The second motion was filed by Plaintiff Columbia Casualty Co. (“Columbia”) on May 13, 2011. Clerk's No. 29. Defendants ¹ filed a response in opposition to Columbia's motion on October 25, 2011. Clerk's No. 59. Curtis McGhee, Jr. (“McGhee”) ² filed a response in opposition to Columbia's motion on November 8, 2011.³ Clerk's No. 77; see also Clerk's Nos. 65–1, 65–2. Columbia filed a reply on December 23, 2011. Clerk's No. 108–1; see also Clerk's No. 110. The matters are fully submitted.⁴

I. FACTUAL & PROCEDURAL BACKGROUND

These cases arise out of two underlying actions filed by McGhee and Terry Harrington (“Harrington”) (collectively “Claimants”): Harrington v. County of Pottawattamie, Case No. 4:05–cv–178 and McGhee v. Pottawattamie County, Case No. 4:05–cv–255 (collectively “the Underlying Actions”). The following facts are undisputed unless otherwise noted.⁵

A. The Underlying Actions

In 1977, Claimants were arrested for the murder of former police officer John Schweer (“Schweer”). Pl. Chicago Ins. Co.'s Statement of Undisputed Facts (hereinafter “CIC Facts”) ¶ 1 (Clerk's No. 28–1); Columbia Cas. Co.'s Statement of Undisputed Facts (hereinafter “Columbia Facts”) ¶ 1 (Clerk's No. 29–2). McGhee was convicted of Schweer's murder on or around May 11, 1978. Clerk's No. 65–1 at 2; see also CIC Facts ¶ 2; Columbia Facts ¶ 3. Harrington was convicted of Schweer's murder on August 4, 1978. CIC Facts ¶ 2; Columbia Facts ¶ 2. Claimants were released from prison in 2003. CIC Facts ¶ 3; Columbia Facts ¶ 4.

In 2005, Claimants filed the Underlying Actions. See CIC Facts ¶¶ 4–5; Columbia Facts ¶¶ 5–6. The Underlying Actions were consolidated in 2009 and are currently stayed pending the resolution of an interlocutory appeal. See Case No. 4:03–cv–90616, Clerk's Nos. 104, 249–50. For the time being, however:

Harrington still has the following claims pending against Defendants: Counts 1 and 2 (claims against Defendants for violation of 42 U.S.C. § 1983) and Count 3 (claims against Defendants for conspiracy under 42 U.S.C. § 1985(3)). McGhee still has the following claims pending against Defendants: Counts 1 and 5 (claims against Larsen and Brown, in their individual capacities, for violation of 42 U.S.C. § 1983); Count 15 (a claim against Larsen and Brown for conspiracy under 42 U.S.C. § 1985(3)); Count 18 (a claim against the City for violation of § 1983); and Count 19 (a claim against the City for indemnity).⁶See Case No. 4:03–cv–90616, Clerk's No. 224 at 3 (footnotes omitted). Claimants' remaining “ § 1983 claims seeking damages for constitutional injuries resulting from their arrests, convictions, and incarcerations are in the nature of malicious prosecution because Plaintiffs essentially allege that their constitutional rights were violated as a result of the wrongful institution of legal process against them.” Id. at 13.

B. Additional Facts Relevant to CIC's Motion

CIC issued two excess liability policies to the City, specifically: (1) No. 55C–043379, which “was in effect for the period July 1, 1983 to July 1, 1984”; and (2) No. 55C–2060253, which “was in effect for the period July 1, 1984 to July 1, 1985” (collectively the “CIC Policies”). CIC Facts ¶¶ 6, 8–9. The corresponding underlying insurance policies were issued by Admiral Insurance Co. (“Admiral”) in policies numbered A 3 CM 3110 and A 84 CM 3982, respectively (collectively the “Admiral Policies”). See id. ¶¶ 7–9.

C. Additional Facts Relevant to Columbia's Motion

Columbia issued a number of “Special Excess Liability” policies to the City, specifically:(1) No. SXP 358 38 48, “incepting August 8, 1977 and expiring August 8, 1978”; (2) No. SXP 358 38 97, “incepting August 8, 1978 and ending August 8, 1979”; (3) No. SXP 358 39 95, “incepting August 8, 1979 and ending August 8, 1980”; (4) No. SXP 358 42 88, “incepting August 8, 1980 and ending August 8, 1981”; (5) No. SXP 358 40 43, “incepting July 1, 1981 and ending July 1, 1982” (collectively, the “Special Excess Policies”). Columbia Facts ¶¶ 7–11. Columbia also issued a “Commercial Umbrella Liability” insurance policy to the City; specifically, No. UMB 689 1266, “with a policy period beginning July 1, 1982 and ending July 1, 1983” (the “Umbrella Policy”). Id. ¶ 14. “The City has requested coverage from Columbia ... under each of the ... Special Excess Policies and the Umbrella Policy.” Id. ¶ 21.

Each of the Special Excess Policies provides, under the heading “Coverage A–Personal Injury Liability” and “Coverage B–Property Damage Liability,” that “[t]he Company will indemnify the insured for ultimate net loss in excess of the retained limit hereinafter stated which the insured shall become legally obligated to pay as damages because of personal injury or property damage to which this policy applies, caused by an occurrence.” E.g., Columbia App. 64; see also Columbia Facts ¶ 12. The Special Excess Policies define “personal injury” to include “malicious prosecution” and “discrimination.” E.g., Columbia App. 67; see also Columbia Facts ¶ 13. The Special Excess Policies define “occurrence” as “an accident, including injurious exposure to conditions, which results, during the policy period, in personal injury or property damage neither expected nor intended from the standpoint of the insured.” Id.

The Umbrella Policy provides:

1. COVERAGE A—EXCESS LIABILITY INDEMNITY

The Company will indemnify the insured for loss in excess of the total applicable limits of liability of underlying insurance stated in the schedule. The provisions of the Immediate underlying policy are, with respect to Coverage A, incorporated as a part of this policy.... In the event the obligation of the underlying insurer(s) either to investigate and defend the insured, or pay the cost of such investigation and defense, ceases solely because of exhaustion of the underlying limits of liability through payment of judgments and settlements, then the company shall with respect to damages otherwise covered under Coverage A, either:

(1) assume the duty of investigating and defending the insured against suits seeking damages, or

(2) if the company elects not to assume the duty described in (1) above, the company will reimburse the insured for reasonable defense costs and such reimbursement shall exclude office expenses of the insured, salaries and expenses of employees of the insured and general retainer fees of counsel retained by the insured.

....

2. COVERAGE B—EXCESS LIABILITY INDEMNITY OVER RETAINED LIMIT

The company will indemnify the insured, with respect to any occurrence not covered by underlying insurance, or with respect to damages not covered by underlying insurance but which result from an occurrence covered by underlying insurance, for loss in excess of the insured's retained limit which the insured shall become obligated to pay as damages by reason of liability imposed upon the insured by law or assumed by the insured under any contract because ofpersonal injury,

property damage, or

advertising injury

to which this coverage applies, caused by an occurrence.

Columbia Facts ¶ 16 (citing App. in Supp. of Columbia Cas. Co.'s Mot. for Summ. J. (hereinafter “Columbia App.”) at 111 (Clerk's No. 29–3)). The Umbrella Policy defines “personal injury” as including:

(1) bodily injury, shock, mental injury or mental anguish,

(2) false arrest, detention or imprisonment, wrongful entry or eviction or other invasion of private occupancy, malicious prosecution or humiliation; except that maliciously inflicted by, at the direction of, or with the consent of the insured, [and]

...

(4) discrimination because of race, color, sex, religion, national origin, age or handicap....

Columbia Facts ¶ 20 (citing Columbia App. at 127–28). The Umbrella Policy defines “occurrence” as follows:

(1) with respect to subsection (1) of the definition of personal injury and with respect to property damage, an accident, including continuous or repeated exposure to conditions, which results, during this policy period, in such personal injury or property damage neither expected nor intended from the standpoint of the insured. All loss arising out of continuous or repeated exposure to substantially the same conditions shall be considered as arising out of one occurrence.

(2) with respect to subsections (2...