International Insurance v. City of Chicago Heights

643 N.E.2d 1305, 268 Ill. App. 3d 289, 205 Ill. Dec. 698
CourtAppellate Court of Illinois
DecidedNovember 18, 1994
Docket1-92-1493
StatusPublished
Cited by25 cases

This text of 643 N.E.2d 1305 (International Insurance v. City of Chicago Heights) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
International Insurance v. City of Chicago Heights, 643 N.E.2d 1305, 268 Ill. App. 3d 289, 205 Ill. Dec. 698 (Ill. Ct. App. 1994).

Opinion

JUSTICE GORDON

delivered the opinion of the court: 1

BACKGROUND

International Insurance Company (International) filed a declaratory judgment action in the circuit court of Cook County against the City of Chicago Heights, several of its employees, and one of its agents (collectively Chicago Heights) on December 9, 1988. It sought a declaration of its obligations under a public officials and employees liability policy issued to Chicago Heights. Specifically, International sought a determination of its liability to indemnify Chicago Heights for legal fees resulting from seven lawsuits filed against it. Six of the seven underlying suits alleged that Chicago Heights enforced building codes in a racially discriminatory manner to force African-Americans and Hispanics from Chicago Heights. The seventh alleged that Chicago Heights razed a building in violation of the owner’s constitutional rights but alleged no discriminatory enforcement of building codes.

Chicago Heights filed a counterclaim in International’s declaratory judgment action, alleging breach of contract, waiver, and estoppel. It subsequently filed a motion for summary judgment, arguing that the policy obligated International to indemnify its legal fees in each of the underlying suits and to indemnify its legal fees in this declaratory judgment action. International filed a cross-motion for summary judgment, contending primarily that policy exclusions precluded coverage. On October 31, 1991, the trial court granted Chicago Heights’ motion for summary judgment and later awarded damages of $878,457.71; the court awarded $573,566.89 for legal fees in the seven underlying suits and $304,890.82 for Chicago Heights’ legal fees in this coverage litigation. For the reasons discussed below, the circuit court’s judgment is affirmed in part and reversed in part.

FACTS

The International public officials and employees liability policy issued to Chicago Heights covered losses arising from enumerated wrongful acts. The policy defined "wrongful act” to include "any actual or alleged error or misstatement or misleading statement or act or omission or neglect or breach of duty including misfeasance, malfeasance and nonfeasance by an insured as public official or employee of the public entity.” It further provided that "loss” "shall include but not be limited to damages, judgments, settlements and costs, cost of investigation and defense of legal actions.” The policy, however, did not impose a duty to defend on International but specified in policy condition 5 that "[i]n the event of a claim, the Insureds shall take reasonable measures to protect their interests. If defense of a suit shall be required then the insured shall appoint counsel.”

Although International acknowledged that the coverage could include civil rights claims, including claims for discriminatory enforcement of statute or ordinance, its coverage defense in each of the seven underlying suits was predicated on two policy exclusions, exclusion 5.b., for claims based on property damage, and exclusion 6.d., for claims based on wrongful entry or eviction. Exclusion 5.b. provides:

"The Company shall not be liable to make payment for Loss in connection with any claim made against the Insureds allegedly, based upon or arising out of any one or more of the following:
* * *
5. b. loss or criminal abstraction of, damage to or destruction of any tangible property or the loss of use of such property ***.”

Exclusion 6.d. provides:

"The Company shall not be liable to make payment for Loss in connection with any claim made against the Insureds allegedly, based upon or arising out of any one or more of the following:
* * *
6. d. wrongful entry or eviction or other invasion of the right of private occupancy ***.”

The International policy also provided, in policy condition 14, that its coverage was excess to any other policy insuring a loss covered under its policy, stating:

"14. Other Insurance
If the public Entity or any Insured has other insurance insuring a Loss covered by this Policy, the insurance provided by this Policy shall apply in excess of such other insurance.”

In addition to its policy with International, Chicago Heights also maintained two policies which provided coverage for the claims at issue here. The first was a general liability policy issued by the Insurance Corporation of Ireland (ICI). That policy provided coverage for property damage and wrongful eviction. The Governmental Interinsurance Exchange (GIE) issued the second policy, which provided coverage for violations of civil rights. The GIE policy expressly provided that its coverage was excess to that provided under International’s policy. Both the ICI and GIE policies provided that each had a duty to defend Chicago Heights.

Between 1984 and 1988, seven civil rights lawsuits were brought against Chicago Heights. In six of the seven underlying actions, the respective plaintiffs alleged that Chicago Heights violated their constitutional rights by engaging in a conspiracy to force minorities from Chicago Heights through discriminatory enforcement of building codes. In the seventh, the plaintiff alleged that Chicago Heights violated his constitutional rights by razing his building without affording him due process. 2 In six of the seven underlying cases, Chicago Heights retained the law firm of Keck, Mahin & Cate (Keck) to represent it in addition to whatever counsel were already provided.

We note here that Keck, Mahin & Cate corresponded with International from the inception of its representation of Chicago Heights in the underlying actions, advising it both that it represented Chicago Heights and of the status of those actions. In a letter to International’s coverage counsel dated August 19, 1987, Keck further advised International that ICI also provided a defense on Chicago Heights’ behalf in the Schak and Atkins suits, and that GIE also provided a defense on Chicago Heights’ behalf in the Cepela, Dale and Urban actions. In a letter dated January 15, 1988, International’s coverage counsel requested that Keck provide it with billing statements for its legal services in each of those six underlying suits.

At the time this declaratory judgment action was filed, eight different lawsuits were pending against various defendants insured by International in which Keck was retained by International to represent those insured parties. Those actions were apparently unrelated to any of the parties or issues involved in this coverage action. Certain Keck attorneys, absorbed from the law firm of Karon, Savikas & Horn (hereinafter Karon), had earlier represented International in coverage matters during their previous affiliation.

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Bluebook (online)
643 N.E.2d 1305, 268 Ill. App. 3d 289, 205 Ill. Dec. 698, Counsel Stack Legal Research, https://law.counselstack.com/opinion/international-insurance-v-city-of-chicago-heights-illappct-1994.