INTERN. INS. CO. v. ROLLPRINT PACKAGING PROD., INC.

• Decision Date: 31 March 2000
• Docket Number: No. 1-98-2381.,1-98-2381.
• Citation: 245 Ill.Dec. 598,728 N.E.2d 680,312 Ill. App.3d 998
• Parties: INTERNATIONAL INSURANCE COMPANY, Plaintiff-Appellant, Cross-Appellee, v. ROLLPRINT PACKAGING PRODUCTS, INC., a corporation; Advanced Retort Systems, Inc., a corporation; Paul Livingston; Richard Wood; and Robert Dodrill, Defendants-Appellees, Cross-Appellants.
• Court: United States Appellate Court of Illinois

728 N.E.2d 680

312 Ill. App.3d 998

245 Ill.Dec. 598

INTERNATIONAL INSURANCE COMPANY, Plaintiff-Appellant, Cross-Appellee, v. ROLLPRINT PACKAGING PRODUCTS, INC., a corporation; Advanced Retort Systems, Inc., a corporation; Paul Livingston; Richard Wood; and Robert Dodrill, Defendants-Appellees, Cross-Appellants.

No. 1-98-2381.

Appellate Court of Illinois, First District, Third Division.

March 31, 2000.

Kralovec & Marquard, Chartered (William E. Spizzirri, of counsel), Chicago, for Appellant, Cross-Appellee.

Schwartz & Freidin (David L. Applegate, of counsel), Chicago, for Appellees, Cross-Appellants.

Justice BURKE delivered the opinion of the court:

Plaintiff International Insurance Company (International)¹ appeals from an order of the circuit court granting summary judgment in favor of defendants Rollprint Packaging Products, Inc., Advanced Retort Systems, Inc., Paul Livingston, Richard Wood, and Robert Dodrill (Rollprint) in International's declaratory judgment action seeking a declaration that International did not owe Rollprint a duty to defend and indemnify it in a federal civil rights lawsuit pursuant to a commercial general liability insurance policy (policy). The trial court found that International owed Rollprint a duty to defend and entered summary judgment in favor of Rollprint for "reasonable" fees and costs incurred in Rollprint's defense of the federal action. On appeal, International contends that the trial court erred: (1) in granting Rollprint's motion for summary judgment on International's duty to defend; (2) in awarding Rollprint $665,547.10 for Rollprint's fees and costs in defending the federal action; and (3) in failing to limit International's duty to defend Rollprint to the claims actually falling under the terms of International's policy.

Rollprint cross-appeals from the trial court's order granting summary judgment in favor of International based on the court's finding that International did not owe Rollprint a duty to indemnify it under the policy for the amount Rollprint paid in settlement of the underlying federal action following a jury verdict against Rollprint. Rollprint also appeals the trial court's order denying it reimbursement of fees and costs associated with its prosecution of a counterclaim in the underlying federal action and its defense of International's declaratory judgment action. On appeal, Rollprint contends: (1) the facts proven in the federal action fell within the offenses listed in International's policy requiring International to indemnify Rollprint for the amount Rollprint paid to settle the federal action following the jury verdict against it; (2) Rollprint was entitled to its fees and costs in prosecuting the counterclaim in the federal action because the claim was necessary to Rollprint's complete defense in that action; and (3) Rollprint was entitled to its fees and costs in defending against International's declaratory judgment action based on the policy language. For the reasons set forth below, we affirm.

On September 14, 1987, Rollprint Packaging hired Netzer Novissar (Novissar) as a product development specialist. Rollprint is a corporation which provides packaging materials to the medical and food industries. Advanced Retort Systems (ARS) is a subsidiary of Rollprint and serves as a sales and distribution agent for equipment. Novissar also served as product development specialist for ARS. Paul Livingston (Livingston) was a sales manager for Rollprint. Richard Wood (Wood) was the vice president of Rollprint. Robert Dodrill (Dodrill) was the president and chief executive officer of Rollprint.

Rollprint discharged Novissar on September 19, 1991. On September 23, Novissar filed a claim with the Equal Employment Opportunity Commission (EEOC) alleging discrimination on the basis of age, national origin and religion, and retaliation. On December 30, the EEOC issued Novissar a notice of the right to sue defendants on these claims.

In March 1992, Novissar filed a 12-count complaint against defendants in the United States District Court, Northern District of Illinois. Novissar's federal complaint alleged the following claims: age discrimination and retaliation (count I); religion and national origin discrimination and retaliation (count II); violation of "42 U.S.C. Sect.1981" (Count III); breach of express contract (count IV); intentional interference with contractual relations (count V); intentional interference with business expectancy (count VI); breach of implied contract (count VII); misappropriation of trade secrets (count VIII); rescission of assignment contract (count IX); conversion (count X); rescission of assignment contract (count XI); and intentional infliction of emotional distress (count XII).

Novissar's federal complaint stated the following allegations against Rollprint:

[Nonpublishable material removed under Supreme Court Rule 23].

"43. On or about September 19, 1991 Livingston came into Novissar's office, falsely accused Novissar of wearing a recording device, physically frisked Novissar without permission, told Novissar he was fired and physically evicted Novissar from his office and from the building.

44. In the process of evicting and firing Novissar, Livingston did not give Novissar the opportunity to assemble and take with him the personal property including but not limited to the work papers, formulas, articles and other documents that Novissar had brought with him when he came to work for Rollprint * * *."

On May 8, 1992, Rollprint filed an answer and counterclaim to Novissar's federal complaint (Novissar action or lawsuit). Rollprint's counterclaim alleged that Novissar misappropriated Rollprint's trade secrets. On May 12, Rollprint asked its insurance broker to inquire whether International's policy would provide coverage or a defense for Novissar's federal lawsuit. The policy issued by International to Rollprint, effective from October 1, 1990, to October 1, 1991, stated in relevant part:

"COVERAGE A

1. Insuring agreement.

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of `bodily injury' or `property damage' to which this insurance applies. No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under SUPPLEMENTARY PAYMENTS-COVERAGES A AND B. * * * The `bodily injury' or `property damage' must be caused by an `occurrence.' * * * We will have the right and duty to defend any `suit' seeking those damages.

* * *

'Occurrence' means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

* * *

COVERAGE B. PERSONAL AND ADVERTISING INJURY LIABILITY

Insuring Agreement.

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of `personal injury' or `advertising injury' to which this insurance applies. No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under SUPPLEMENTARY PAYMENTS-COVERAGES A AND B. We will have the right and duty to defend any `suit' seeking those damages. * * *

* * *

SECTION V-DEFINITIONS

10. `Personal injury' means injury, other than `bodily injury,' arising out of one or more of the following offenses:

a. False arrest, detention, or imprisonment;

b. Malicious prosecution;

c. Wrongful entry into, or eviction of a person from a room, dwelling or premises that the person occupies;

d. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products, or services; or

e. Oral or written publication of material that violates a person's right of privacy."

On September 9, 1992, International denied coverage for the Novissar action in a letter to Rollprint. Among its reasons for denying coverage, International stated that the "Personal Injury Coverage" did not apply to Novissar's lawsuit because none of the counts nor the prayer for relief sought relief for injuries or damages arising out of the commission of any of the offenses listed under that section (i.e., false arrest, detention, or imprisonment; malicious prosecution; wrongful entry or eviction; libel or slander; or violation of privacy).

On March 13, 1993, International filed a declaratory judgment action against Rollprint and Novissar with respect to these coverage issues.² The complaint contained eight counts which mirrored the arguments made by International in its letter to Rollprint denying coverage for the Novissar claim. Rollprint filed a counterclaim which stated that the allegations in paragraph 43 of Novissar's complaint constituted allegations of "false arrest, detention, or imprisonment" and "wrongful entry into, or eviction of a person from, a room, dwelling or premises that the person occupies" within the meaning of the policy's "personal injury" coverage triggering International's duty to defend Rollprint under the policy.

On March 31, 1995, following a two-week trial of the Novissar lawsuit, the federal district court entered judgment on the jury's verdict in favor of Novissar on two of the counts of his complaint, interference with business expectancy and "retaliation for opposing age discrimination," for which the jury awarded Novissar $250,000 and $87,000, respectively. Rollprint subsequently settled the lawsuit with Novissar.

Thereafter, the parties in the present action filed cross-motions for summary judgment on the issues of whether International had a duty to defend and to indemnify Rollprint in connection with Novissar's lawsuit. Rollprint contended that the Novissar complaint alleged facts potentially bringing his federal claims within coverage under International's policy for wrongful entry into or eviction from an area a person occupies and for false arrest, detention, or imprisonment. Rollprint further argued that the policy required International to indemnify Rollprint for the...