St. Paul Fire & Marine Ins. Co. v. Downs

• Decision Date: 26 May 1993
• Docket Number: No. 1-91-3880,1-91-3880
• Citation: 187 Ill.Dec. 130,247 Ill.App.3d 382,617 N.E.2d 338
• Parties: , 187 Ill.Dec. 130 ST. PAUL FIRE & MARINE INSURANCE COMPANY, Plaintiff-Appellee, v. William DOWNS and Elise Ziemann, Defendants-Appellants.
• Court: United States Appellate Court of Illinois

Page 338

617 N.E.2d 338

247 Ill.App.3d 382, 187 Ill.Dec. 130

ST. PAUL FIRE & MARINE INSURANCE COMPANY, Plaintiff-Appellee, v. William DOWNS and Elise Ziemann, Defendants-Appellants.

No. 1-91-3880.

Appellate Court of Illinois First District, Third Division.

May 26, 1993.

Hinshaw & Culbertson, Chicago (Carol Proctor, Nancy G. Lischer, Marisa A. Mancini, of counsel), for appellee St. Paul Fire & Marine Ins. Co.

Michael D. Hughes, Hughes & Associates, Flossmoor, for Elise Ziemann.

Justice GREIMAN delivered the opinion of the court:

In a declaratory judgment action concerning the scope of coverage available under a professional liability insurance policy issued by plaintiff St. Paul Fire & Marine Insurance Company (St. Paul), the trial court granted summary judgment in favor of St. Paul, applying the doctrine of collateral estoppel to prohibit relitigation of the issue of whether a psychotherapist, defendant William Downs (Downs), was acting within the scope of his duties at the time he allegedly engaged in sexual misconduct with defendant Elise Ziemann (Ziemann). In an underlying action, another court had earlier determined that Downs' employer was not liable for his acts under the doctrine of respondeat superior.

Ziemann now appeals and asserts that the doctrine of collateral estoppel was improperly applied by the trial court because (1) the issue decided in the underlying lawsuit differed from the issue presented in the instant declaratory judgment action; and (2) the parties to the prior proceeding (i.e., proceedings on a motion to dismiss) differed from the parties to the declaratory judgment action.

For the reasons which follow we affirm the granting of summary judgment for St. Paul on theory of collateral estoppel.

Elise Ziemann filed a lawsuit (hereinafter the underlying action) against William Downs, her psychotherapist, and Downs' employer, Family Service and Mental Health Center of South Cook County (hereinafter the Center). In her amended complaint, Ziemann alleged that while she was receiving treatment from Downs, he invited her to his residence in Olympia Fields and initiated sexual contact with her. Thereafter, on numerous occasions spanning from November 1987 through February or March 1988, Downs and Ziemann engaged in sexual intercourse.

Ziemann's complaint contained two counts (counts V and VI) against the Center. Count V alleged that the Center was vicariously liable for the acts of Downs. Count VI alleged that the Center breached its duties to Ziemann, alleging several negligent acts or omissions by the Center.

Paragraph 12 of both counts specifically states:

"12. At all times relevant hereto, Defendant DOWNS was an employee, agent or servant of Defendant MENTAL HEALTH CENTER, acting within the scope of his employment as a psychotherapist."

Ziemann's complaint also included four counts against Downs: (1) breach of therapist's duties; (2) assault and battery; (3) intentional infliction of emotional distress; and (4) punitive damages. The counts against Downs are not a part of this appeal and apparently are still pending.

The Center filed a motion to dismiss counts V and VI. It argued that count V should be dismissed because "Downs was acting for his sole benefit and not acting in the course of his employment when he engaged in sexual conduct with Elise Ziemann. Therefore, Family Service and Mental Health Center of South Cook County cannot be held vicariously liable under a doctrine of respondeat superior for William Downs' acts."

The Center contended that count VI should be dismissed "[b]ecause of the convoluted manner in which Count VI is pleaded it is unknown what cause of action is being alleged against [the Center]."

In her response to the Center's motion to dismiss, Ziemann only addressed count V and contended that it alleges a cause of action under the doctrine of respondeat superior and bases the Center's liability "upon the wrongful and negligent acts and omissions committed by its employee [Downs], in the course of his treatment of [Ziemann] as a psychotherapist employed by the Mental Health Center" and that these acts have been committed in the course of his employment, which gives rise to the vicarious liability of the Center alleged in count V.

Ziemann and the Center agreed that an employer may be held liable for the negligent, wilful, malicious or criminal acts of its employees where such acts are committed in the course of employment but not liable for acts committed solely for the benefit of the employee and outside the scope of his employment.

However, the parties disagreed as to how the scope of employment element should be applied to these facts. Ziemann contended that whether an employee's act was committed within the scope of employment is a question of fact for the jury to decide while the Center asserted it to be a proper threshold question of law for the court.

In the underlying action, on October 16, 1990, Judge Odas Nicholson entered an order that (1) dismissed count V with prejudice and without leave to amend; (2) dismissed count VI without prejudice; and (3) granted Ziemann leave to amend count VI by November 14, 1990. Apparently no hearing preceded this order and there were no findings or reasons given by Judge Nicholson. It does not appear that count VI was amended.

St. Paul, the present plaintiff, issued a professional liability insurance policy to the Center. Following the October 1990 order, St. Paul filed a declaratory judgment action seeking a determination that no coverage existed under the insurance policy issued to the Center for any liability incurred by Downs by reason of the sexual misconduct alleged against Downs occurring outside the scope of his duties as a psychotherapist.

The relevant portions contained in St. Paul's insurance policy provide:

"Liability. We'll pay amounts you or others protected under this agreement are legally required to pay as damages for covered professional liability claims. To be covered, claims must be based on events that arise out of the profession named in the Coverage Summary.

* * * * * *

Employees. Your employees are protected against covered claims while working for you within the scope of their duties."

St. Paul filed a motion for summary judgment asserting that the Center's motion to dismiss the vicarious liability claim against the Center in the underlying action "was granted on the basis that Mr. DOWNS' alleged sexual misconduct was not within the scope of his employment." Thus, "the alleged sexual exploitation of Ms. ZIEMANN by Mr. DOWNS is outside the scope of his duties as a psychotherapist and, therefore, he is not an insured under the St. Paul policy."

At the November 8, 1991, hearing, the trial court granted St. Paul's motion for summary judgment based on the doctrine of collateral estoppel reasoning that Ziemann and Downs "are prohibited from relitigating the issue of whether Downs was acting within the scope of his duties." As to the identity of issues, the trial court found that "[t]he issue before the court in the underlying action on the motion to dismiss was whether Downs was acting within the scope of his employment when engaging in sexual conduct with Ziemann or was sexual conduct committed solely for his own benefit. The identical issue is presented in this declaratory judgment action." As to the identity of the parties involved, the trial court found that both "Downs and Ziemann were parties to the 'prior action.' "

Ziemann now appeals the November 1991 order granting summary judgment in favor of St. Paul. Ziemann asserts that the trial court erroneously invoked the doctrine of collateral estoppel because the issue and the parties were different in the declaratory judgment action and the underlying lawsuit. We disagree.

Three elements are required for the application of collateral estoppel: (1) a final judgment on the merits entered in the prior action; (2) the issue decided in the prior adjudication is identical with the one presented in the suit in question; and (3) the party against whom estoppel is asserted was a party or in privity with a party to the prior action. In re Owens (1988), 125 Ill.2d 390, 399-400, 126 Ill.Dec. 563, 532 N.E.2d 248.

Regarding the first element, the parties do not dispute that a final judgment was entered on the merits in the prior action, i.e., the ruling on the Center's motion to dismiss count V of Ziemann's complaint. The order of dismissal provided appropriate language under Supreme Court Rule 304(a) (134 Ill.2d R. 304(a)) so that it was final and appealable. However, no one appealed that order.

The second element of collateral estoppel, i.e., the identity of issues, presents the primary dispute in this case. In the declaratory judgment action, the trial court clearly stated its belief that the issue to be decided there was whether Downs was acting within the scope of his duties and that collateral estoppel was appropriate based on the prior adjudication which resulted in dismissal of Ziemann's vicarious liability count against the Center.

Ziemann maintains that there is a distinction between the court's determination in the underlying action that she had not stated a cause of action against the Center and the court here construing the language of an insurance policy although both admittedly deal with the question of whether the employee is working within the scope of his duties. Ziemann does not suggest that there are any special rules such as presumptions, adverse construction or otherwise in examining the insurance policy nor does she suggest the existence of an ambiguity that would bring these rules of construction into play.

On the other hand, St. Paul contends that the identical issue presented in both suits is whether the sexual misconduct of Downs was within the scope of his employment. St. Paul argues that the underlying court necessarily decided this issue because it was the only issue before that court based on...