Essex Ins. Co. v. Vill. of Oak Lawn

• Decision Date: 31 May 2016
• Docket Number: No. 14-cv-4572,14-cv-4572
• Citation: 189 F.Supp.3d 779
• Parties: Essex Insurance Company, Plaintiff, v. Village of Oak Lawn, Todd Tenison, and Scott Kirk, Defendants. Village of Oak Lawn, Todd Tenison, and Scott Kirk, Third-Party Plaintiffs, v. Cannon Cochran Management Services, Inc., Third-Party Defendant.
• Court: U.S. District Court — Northern District of Illinois

189 F.Supp.3d 779

Essex Insurance Company, Plaintiff,

v.Village of Oak Lawn, Todd Tenison, and Scott Kirk, Defendants.

Village of Oak Lawn, Todd Tenison, and Scott Kirk, Third-Party Plaintiffs,

v.Cannon Cochran Management Services, Inc., Third-Party Defendant.

No. 14-cv-4572

United States District Court, N.D. Illinois, Eastern Division.

Signed May 31, 2016

Amanda Michelle Buishas, Samuel Robert Stalker, William K. McVisk, Johnson & Bell, Ltd., Rachael G. Winthrop, Ellen Louise Green, Victor J. Piekarski, Clay H. Phillips, SmithAmundsen LLC, Chicago, IL, Bethanie Legare Berube, SmithAmundsen, Chicago, ID, for Plaintiff/Third-Party Defendant.

Christopher S. Naveja, Hal R. Morris, Arnstein & Lehr LLP, Chicago, IL, Arthur L. Janura, Jr., Arnstein & Lehr LLP, Hoffman Estates, IL, for Defendants/Third-Party Plaintiffs.

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Court Judge

Before the Court are the parties' cross-motions for summary judgment pursuant to Federal Rule of Civil Procedure 56(a). (R.100, R.104). Plaintiff Essex Insurance Company ("Essex") seeks a declaration that it has no duty to indemnify its insured, Defendant Village of Oak Lawn ("Village" or "Oak Lawn"), because Oak Lawn breached the notice condition of Essex's insurance policy with respect to an underlying lawsuit. (R.100). Third-Party Defendant Cannon Cochran Management Services, Inc. ("CCMSI") seeks a declaration that it provided timely notice of that lawsuit to Essex on behalf of Oak Lawn. (R.104). Oak Lawn joins CCMSI's motion.

For the following reasons, the Court grants CCMSI's motion and denies Essex's cross-motion. In light of this disposition, the Court denies as moot Oak Lawn's motion to defer or, alternatively, to extend the filing of dispositive motions directed to the Third-Party Complaint. (R.94).¹

BACKGROUND

In this action, Essex seeks a declaration that it has no duty to indemnify Defendants with respect to an action filed against them by Charles Petrishe, Nikki Caputo-Petrishe, and Dianne McGann in the United States District Court for the Northern District of Illinois, captioned Nikki Caputo-Petrishe et al. v. Oak Lawn Police Officers Todd Tenison and Scott Kirk et al. , 1:10-cv-7950 (the "Underlying Action"). (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶¶ 6, 19; see also R.37, Second Am. Compl. ¶ 1).² The Underlying Action resulted in a $3 million settlement agreement between the parties, with Defendants' two insurance companies—Essex and non-party Illinois Union Insurance Company ("ACE")—paying out $1 million and $2 million, respectively. (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶¶ 35-37). Essex now seeks to recoup that $1 million payment, along with applicable interest, pursuant to a Non-Waiver Agreement that it entered into with Oak Lawn as a condition precedent to settlement. (Id. ¶¶ 8, 38-39; R.37, Second Am. Compl. at Prayer for Relief; R.37-A, Non-Waiver Agreement). The Non-Waiver Agreement provides, in relevant part, that Essex's contribution to the underlying settlement "is without prejudice, shall not be deemed a waiver or estoppel against Essex of its rights and defenses under the Essex Policy, and shall not be otherwise used against Essex in any action," including this action. (R.37-A, Non-Waiver Agreement at ¶ 2).³ Essex now argues that: (i) it is entitled to a finding that Oak Lawn breached its insurance policy; and (ii) Oak Lawn must therefore reimburse Essex for its settlement payment under the Non-Waiver Agreement. Oak Lawn disagrees, arguing that it did not breach the insurance policy and therefore has no obligation to reimburse Essex.

I. The Policies

This case concerns the interpretation of two insurance policies issued to Oak Lawn. The Court addresses each policy, in turn.

A. The ACE Policy

First, ACE issued to Oak Lawn Public Entity Retained Limits Policy number PEP G2488529A, covering a policy period of March 15, 2010 to March 15, 2011 (the "ACE Policy"). (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 9; R.6-2, ACE Policy). The ACE Policy had a liability limit of $2 million per occurrence and $5 million in the aggregate, and was excess over the Village's self-insured retention ("SIR") of $150,000. (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶¶ 10-12). The ACE Policy contained the following notice condition (the "ACE Notice Condition"):

8. Duties In the Event of Accident, Occurrence, Wrongful Act, or Claim

a. You must see to it that:

i. We are notified in writing as soon as practicable once You have knowledge of any Accident, Occurrence or Wrongful Act which may reasonably and subsequently give rise to a Claim being made against an Insured that is likely to result in liability for Us under this Policy.

ii. You immediately make a written record of specific information about any Claim which appears reasonably likely to involve indemnification under this Policy , including but not limited to...(excerpted )

iii. You notify Us in writing as soon as practicable and provide Us with all the information required under section ii above.

b. You must notify Us and provide information in the manner specified above of any Accident, Occurrence, Wrongful Act or Claim , regardless of the coverage or liability, which:

i. Results in the establishment of a reserve, or would reasonably require the establishment of a reserve, for Damages which equals or exceeds 50% of the Retained Limit ; or

ii. Involves a notice of Claim for a Wrongful Act which is reasonably likely to equal or exceed 25% of the Retained Limit ; or

iii. Involves any of the following:

9. Bodily injury resulting from use of a weapon or restraining device by law enforcement.

(R.98, CCMSI Rule 56.1(a)(3) Stmt. Facts ¶ 5; R.6-2, ACE Policy at Section A-8).⁴ The ACE Policy also included the following insuring agreement:

The Insurer will indemnify the Insured for Damages and Claim Expenses in excess of the Retained Limit for which the Insured becomes legally obligated to pay because of a Claim first arising out of an Occurrence happening during the Policy Period in the Coverage Territory for Bodily Injury, Personal Injury, Advertising Injury, or Property Damage taking place during the Policy Period .

No other obligation to pay any additional sums, perform acts or provide services is covered.

(R.115, Essex Rule 56.1(b)(3)(C) Stmt. Additional Facts ¶ 38; R.6-2, ACE Policy at General Liability Coverage Part, Section A).

B. The Essex Policy

Second, Essex issued to Oak Lawn Excess Liability Policy number XOMW120310, covering a policy period of March 15, 2010 to March 15, 2011 (the "Essex Policy"). (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 13; R.6-1, Essex Policy). The Essex Policy had a liability limit of $10 million per occurrence and $10 million in the aggregate, and was excess over other underlying policies, including the ACE Policy. (R.113, CCMSI Rule 56.1(b)(3)(B) Stmt. Facts ¶¶ 14-15; R.6-1, Essex Policy at Declarations Items 3 and 4, and Schedule of Underlying Coverages; see also R.115, Essex Rule 56.1(b)(3)(C) Stmt. Additional Facts ¶¶ 33-34). The Essex Policy contained an insuring agreement, which provided that Essex:

hereby agrees to pay on behalf of the insured that portion of Ultimate Net Loss in excess of the limits of Underlying Insurance as shown in Item 4, of the Declarations, but only up to an amount not exceeding the Company's Limit of Liability as shown in Item 3 of the Declarations. Except for the Terms, Definitions, Conditions and Exclusions of this policy, the coverage provided by this policy shall follow the Insuring Agreements, Definitions, Conditions and Exclusions of the Controlling Underlying Insurance Policy as shown in Item 4 of the Declarations.

(R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 16; R.6-1, Essex Policy at Section A). The Essex Policy also contained the following condition (the "Notice Condition"):

Duties in the Event of Accident, Occurrence, Claim or Suit.

You must see to it that we or our authorized representative and your underlying insurers:

a. are notified as soon as practicable of any accident or occurrence which may result in a claim if the claim may involve this policy or any underlying insurance;

b. receive notice of the claim or suit as soon as practicable. Notice shall include:

1) How, when and where the accident or occurrence took place;

2) The insured's name and address;

3) The names and addresses of any injured persons and witnesses; and4) The nature and location of any injury or damage arising out of the accident or occurrence.

c. are assisted, upon our request, in the enforcement of any right against any person or organization which may be liable to you or any other Insured because of injury or damage to which this insurance may apply; and

d. receive the Insured's full cooperation in the investigation, adjustment, settlement, or defense of any claim or suit.

In addition, it is a requirement of this policy that:

a. the Insured not make any admission of liability;

b. no Insured will, except at their own cost, voluntarily make a payment, assume any obligation or incur any expense other than for first aid without our written consent;

c. you immediately send us copies of any demands, notices, summonses or legal paper received in connection with a claim or suit involving you or any other Insured.

(R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 17; R.6-1, Essex Policy at Section C-3). The Essex Policy further contained the following condition (the "Defense Condition"):

Defense.

The Company shall not be called upon to assume charge of the investigation, settlement or defense of any claim made, or suit brought, or proceedings instituted against the Insured, but shall have the right and be given the opportunity to be associated in the defense and trial of any such claim, suit or proceeding relative to any occurrence which, in the opinion of the Company, may create liability on the part of the Company under the terms of this policy. If the Company avails itself of such right and opportunity the Company shall do so at its own expense.

Court costs and interest, if incurred

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