Vill. of Crestwood v. Ironshore Specialty Ins. Co.

• Decision Date: 22 February 2013
• Docket Number: 1–12–0227 cons.,Docket Nos. 1–12–0112
• Citation: 369 Ill.Dec. 365,986 N.E.2d 678,2013 IL App (1st) 120112
• Parties: The VILLAGE OF CRESTWOOD, an Illinois Municipal Corporation and Chester Stranczek, Individually and as a Former Mayor of the Village of Crestwood, Plaintiff–Appellants, v. IRONSHORE SPECIALTY INSURANCE COMPANY, Westport Insurance Corporation, and United National Insurance Company, Defendants–Appellees.
• Court: United States Appellate Court of Illinois

2013 IL App (1st) 120112

986 N.E.2d 678

369 Ill.Dec. 365

The VILLAGE OF CRESTWOOD, an Illinois Municipal Corporation and Chester Stranczek, Individually and as a Former Mayor of the Village of Crestwood, Plaintiff–Appellants,

v.IRONSHORE SPECIALTY INSURANCE COMPANY, Westport Insurance Corporation, and United National Insurance Company, Defendants–Appellees.

Docket Nos. 1–12–0112, 1–12–0227 cons.

Appellate Court of Illinois, First District, Fifth Division.

Feb. 22, 2013.

Robert Marc Chemers, Scott L. Howie, Heather E. Plunkett, and Peter G. Syregelas, all of Pretzel & Stouffer, Chtrd., of Chicago, for appellant Village of Crestwood.

Chris C. Gar, John H. Mathias, Jr., Christopher C. Dickinson, and Jason J. Green, all of Jenner & Block, LLP, of Chicago, for appellant Chester Stranczek.

Carlos Del Campo and Mary E. Fechtig, both of Meckler Bulger Tilson Marick & Pearson, LLP, of Chicago, for appellee Ironshore Specialty Insurance Company.

Robert J. Bates, Jr.,and Catherine M. Crisham, both of Bates Carey Nicolaides, LLP, of Chicago, for appellee Westport Insurance Corporation.

Edward J. Murphy, of Life Lyons Murphy Nahrstadt & Pontikas, of Chicago, and Lawrence K. Rynning, of Law Offices of Lawrence K. Rynning, of Wheaton, for appellee United National Insurance Company.

OPINION

Presiding Justice McBRIDE delivered the judgment of the court, with opinion.

[369 Ill.Dec. 367]¶ 1 Plaintiffs Village of Crestwood, Illinois, and the town's former long-standing mayor, Chester Stranczek (together Village or Crestwood), filed this declaratory judgment action seeking a declaration that three excess public entity general liability insurers owed duties to defend or indemnify against at least 25 individual and class action lawsuits alleging the Village knowingly and routinely mixed cheap, polluted water into the municipal tap water supply in order to cut municipal expenses. The defendant insurers were Westport Insurance Corporation, as successor-in-interest to Coregis Insurance Company (Westport), United National Insurance Company (United National), and Ironshore Speciality Insurance Company, formerly known as TIG Speciality Insurance Company (Ironshore). The circuit court held that the underlying claims fell within absolute pollution exclusion clauses in each of the eight insurance contracts at issue and that this entitled the defendant insurers to summary judgment. The Village appeals, contending the pollution exclusions should have been limited to claims alleging “traditional environmental pollution,” pollution originated by the Village, or pollution exceeding maximum permitted contaminant levels for drinking water; or should not have been applied to claims arising from the Village's “central business activity” of providing municipal tap water.

¶ 2 The Village's practices became the subject of a nine-count civil pleading the Illinois Attorney General filed on June 9, 2009. The Attorney General sought injunctive relief, civil penalties, and costs against the Village, Crestwood's current and former mayors, and Frank Scaccia, who was the certified operator of Crestwood's water supply between 1998 and 2008, due to their failure to comply with laws and regulations enacted for public health and safety such as those requiring accurate reports to regulators and consumers and periodic testing for chemical contaminants. Also, as discussed further below, two of the Village's liability insurers, Scottsdale Indemnity Company and National Casualty Company, filed a coverage action in federal court alleging that pollution exclusions in their contracts precluded coverage for the Village. Scottsdale Indemnity Co. v. Village of Crestwood, 784 F.Supp.2d 988 (N.D.Ill.2011). Meanwhile, the Village was proceeding in the current state court action against liability insurers Westport, United National, and Ironshore. It appears the federal coverage action and state coverage action proceeded simultaneously without any party seeking stay or removal and consolidation of the actions. Thus, while the federal district court's decision was being reviewed in the Seventh Circuit Court of Appeals, the circuit court of Cook County was entering judgment against the Village, and the Village was initiating the current appeal around the same time the Seventh Circuit Court of Appeals rendered its decision against the Village. Scottsdale Indemnity Co. v. Village of Crestwood, 673 F.3d 715 (7th Cir.2012).

¶ 3 In a motion taken with the case, the three insurers here argue the federal appellate decision triggers the doctrine of collateral estoppel and warrants dismissal of this state court appeal. According to the doctrine of collateral estoppel, a prior adjudication precludes litigation of an issue where (1) the issue decided in the prior case is identical to the one in the pending suit, (2) there was a final judgment on the merits, and (3) the party against whom estoppel is asserted was either a party or in privity with a party in the prior lawsuit. Kessinger v. Grefco, Inc., 173 Ill.2d 447, 220 Ill.Dec. 137, 672 N.E.2d 1149 (1996). Even when the threshold elements of the doctrine are met, however, collateral estoppel will not be applied to preclude a party from presenting a defense or claim unless it is clear that no unfairness results to the party being estopped. Kessinger, 173 Ill.2d at 468, 220 Ill.Dec. 137, 672 N.E.2d at 1158. Here, where the insurers have proceeded in state court without any apparent attempt to stay or remove the action to federal court, we conclude that it would be manifestly unfair to hold that the federal decision precludes further argument in the state courts. Accordingly, we deny the insurers' joint motion to dismiss this appeal on grounds of collateral estoppel.

¶ 4 In an additional motion taken with the case, the Village asks us to strike the insurers' appellate brief. The Village contends it was improper for the insurers to file the motion to dismiss the appeal on collateral estoppel grounds and then file a responsive brief to the appeal. The Village contends that by filing a motion to dismiss, the insurers chose their course of action. The Village's argument is not well-founded. It is not based on any rule of appellate practice. It is based on two federal opinions that are inapposite. In Ramos v. Ashcroft, 371 F.3d 948, 949 (7th Cir.2004), on the date it was supposed to be filing a response brief, the respondent filed a motion to transfer in which it asked to be granted more time to file a brief if the court decided to deny the motion for transfer. The court recognized the tactic to be a self-granted extension, chastised the party, and stated that if the overdue brief was not filed in short order, the matter would proceed on the petitioner's brief alone. Ramos, 371 F.3d at 950. When the same dilatory tactic was used in United States v. Lloyd, 398 F.3d 978 (7th Cir.2005), the court reiterated its position: “ ‘If events justify a last-minute motion concerning jurisdiction, venue, sanctions, or any other subject, then that motion may accompany the brief; a motion is not a substitute for a brief.’ ” (Emphasis in original.) Lloyd, 398 F.3d at 981 (quoting Ramos, 371 F.3d at 950). The insurers here were not dilatory. The insurers filed their joint motion to dismiss and then timely filed their response brief. Furthermore, although the practice of filing both a motion to dismiss and a brief on the merits is not a common practice, it is a well-established one that is even suggested by the authority the Village relies upon. Lloyd, 398 F.3d at 981 (indicating a motion to dismiss may accompany a response brief). See also Wilson v. Evanston Hospital, 257 Ill.App.3d 837, 838, 196 Ill.Dec. 44, 629 N.E.2d 589, 590 (1994) (in which the defendants' motion to dismiss was taken with the case and addressed prior to the substantive issues); Perry v. Murtagh, 278 Ill.App.3d 230, 232, 214 Ill.Dec. 1021, 662 N.E.2d 587, 589 (1996) (indicating the defendant's motion to dismiss on procedural grounds was denied prior to consideration of the plaintiff's appeal). The Village's motion is denied.

¶ 5 The underlying complaints against the Village assert various theories of liability, such as negligence, fraud, failure to warn, wilful and wanton misconduct, and breach of contract. The pleadings typically allege as follows. Crestwood is a Chicago suburb of approximately 11,000 residents and 550 businesses. Stranczek was Crestwood's mayor between 1970 and 2007, and upon his retirement, he appointed one of his sons, Robert Stranczek, to fill the post. During the senior Stranczek's tenure in 1985 or 1986, the Illinois Environmental Protection Agency (IEPA) notified the Village that a groundwater well the Village was using to supply tap water to the Crestwood community was contaminated with a solvent used in the dry cleaning industry, perchloroethylene or PCE, and other chemicals that occur when PCE breaks down over time. Exposure to these chemicals is linked to human health issues such as cancer, liver damage, and neurological impairment. None of these chemicals occurs naturally in the environment. Some plaintiffs have specified that the likely source of the toxins was a dry cleaning business located within several hundred feet of the well. Although the IEPA told the Village it could no longer use the affected well except in emergencies and the Village responded that it would stop distributing water from the well, the Village subsequently began to routinely mix polluted well water with treated Lake Michigan water it purchased from the neighboring community of Alsip and then supply the polluted combination as the community's tap water. Also, the Village allowed a private firm that was investigating the dry cleaning firm to take samples from the municipal well and was informed in mid 1998, along with the IEPA, that this additional sampling detected contamination. Nevertheless, the Village used the well to provide up to 20% of the community's tap water in any...