Twin City Fire Insurance v. McBreen & Kopko LLP

847 F. Supp. 2d 1084, 2012 WL 404494, 2012 U.S. Dist. LEXIS 15273
CourtDistrict Court, N.D. Illinois
DecidedFebruary 8, 2012
DocketNo. 10 C 7949
StatusPublished

This text of 847 F. Supp. 2d 1084 (Twin City Fire Insurance v. McBreen & Kopko LLP) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Twin City Fire Insurance v. McBreen & Kopko LLP, 847 F. Supp. 2d 1084, 2012 WL 404494, 2012 U.S. Dist. LEXIS 15273 (N.D. Ill. 2012).

Opinion

MEMORANDUM OPINION AND ORDER

ELAINE E. BUCKLO, District Judge.

Twin City Fire Insurance Company (“Twin City”) filed this declaratory judgment action seeking a declaration that it [1085]*1085has no obligation to defend or indemnify McBreen & Kopko LLP (“McBreen & Kopko”) and its named partners Hugh McBreen (“McBreen”) and Frederick Kopko (“Kopko”)1 under a lawyers professional liability policy issued to McBreen & Kopko in connection with a lawsuit currently pending in the Circuit Court of the Seventeenth Judicial Circuit, Broward County, Florida.

I.

The Florida suit was brought by a group of creditors of Butler International, Inc. (“Butler”), a client of McBreen & Kopko’s. The complaint alleges that while Edward Kopko (brother of defendant Frederick Kopko) was the Chief Executive Officer of Butler, he intentionally set up a division of Mercury Air Group (“Mercury”) to unfairly compete with Butler and steal Butler’s assets. The underlying plaintiffs allege that McBreen & Kopko breached its fiduciary duties to Butler by failing to avoid a conflict of interest while acting as general counsel to Butler. Specifically, the underlying plaintiffs allege that an improper conflict of interest existed when McBreen & Kopko represented both Butler and Mercury. The underlying plaintiffs accuse various parties, including the CEO of Butler and members of the board of directors, of engaging in a fraudulent and intentional conspiracy to devalue Butler’s assets and unfairly compete with Butler through another company, namely Mercury.2

After McBreen & Kopko’s request for coverage was denied, Twin City filed the instant complaint for declaratory judgment. Currently before me are cross motions for summary judgment. For the reasons that follow, Twin City’s motion for partial summary judgment is granted. McBreen & Kopko’s motion for summary judgment is denied.

II.

Summary judgment is appropriate if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Once the moving party shows that there is no genuine issue of material fact, the burden of proof shifts to the nonmoving party to designate specific facts showing that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 817, 330, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Under Illinois law3, “[a]n insurer must provide its insured with a defense when ‘the allegations in the complaint are even potentially within the scope of the policy’s coverage.’ ” Medmarc Cas. Ins. Co. v. Avent America, Inc., 612 F.3d 607, 612 (7th Cir.2010) (quoting Nat’l Cas. Co. v. Forge Indus. Staffing Inc., 567 F.3d 871, 874 (7th Cir.2009)). “If the underlying complaints allege facts within or potentially within policy coverage, the insurer is obligated to defend its insured even if the allegations are groundless, false or fraudulent.” Id. (quoting Northbrook Prop. & Cas. Co. v. Transp. Joint Agreement, 194 Ill.2d 96, 251 Ill.Dec. 659, 741 N.E.2d 253, 254 (2000)). When considering whether an insurance company has a duty to defend, a court “should not simply look to the particular legal theories pursued by the claimant, but must focus on the allegedly tortious conduct on which the lawsuit is based.” Hurst-Rosche Eng’rs, Inc. v. [1086]*1086Comm. Union Ins. Co., 51 F.3d 1336, 1342 (7th Cir.1995).

In its complaint, Twin City presents the following five “counts”: (1) “No ‘Wrongful Act’ or ‘Personal Injury’ ” (Count I); (2) “Designated Entities Exclusion Applies” (Count II); (3) “The Dishonesty Exclusion Applies” (Count III); (4) “Officer, Director, Partner, or Principal Shareholder Exclusion Applies” (Count IV); and (5) “Punitive Damages Exclusion Applies” (Count V). In addition, McBreen & Kopko filed two counterclaims. Twin City has moved for partial summary judgment on Counts I, II and III and the second counterclaim, while McBreen & Kopko has moved for summary judgment on all claims.

Count I

Looking at Counts I, II and III, Twin City posits that there are three independent reasons that it was proper for it to deny coverage to McBreen & Kopko. Because I do not view these as separate “counts” in the normal sense, but rather three potential bases for a declaration that it was proper for Twin City to deny coverage, I have considered them as three parts of a single claim. As explained below, I agree with Twin City that the fiduciary duty claim in the underlying lawsuit is not based on “wrongful act,” as that phrase is defined in the policy. Because Twin City’s “wrongful act” argument is dispositive, I need not address the “Dishonesty Exclusion” or “Designated Entity” arguments.

Twin City argues that it need not defend or indemnify McBreen & Kopko in the underlying suit because there is no “wrongful act” alleged in that suit. The policy at issue provides coverage for damages because of a “wrongful act,” which is defined by the policy as “a negligent act, error or omission committed in the performance or failure to perform professional legal services.” According to Twin City, the underlying lawsuit involves intentional, dishonest, and conspiratorial conduct. Arguing that I must look at the factual allegations supporting the breach of fiduciary duty claim brought against McBreen & Kopko in the underlying suit, Twin City alleges that the fiduciary duty count incorporates all of the intentional and conspiratorial allegations described in the underlying complaint. Generally, the underlying complaint alleges an intentional scheme whereby Frederick and Edward Kopko and others conspired to steal Butler’s assets for the benefit of Mercury.

McBreen & Kopko does not dispute that the underlying complaint involves an intentional conspiracy, but argues that McBreen & Kopko is not identified as one of the conspirators. McBreen & Kopko argues that Twin City fails to cite to any specific paragraphs in the underlying complaint alleging intentional, deceptive and/or conspiratorial actions on the part of McBreen & Kopko. While the fiduciary duty claim against McBreen & Kopko does incorporate all of the preceding conspiratorial allegations, those allegations, the law firm argues, are directed at other defendants, not McBreen & Kopko.

I conclude that the claim brought against McBreen & Kopko is not based on a “wrongful act” as that phrase is defined in the policy. The underlying complaint alleges an intentional scheme by the defendants to conspire to steal Butler’s assets in favor of Mercury. I reject McBreen & Kopko’s assertion that McBreen & Kopko is not identified as a co-conspirator in the underlying complaint.

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Bluebook (online)
847 F. Supp. 2d 1084, 2012 WL 404494, 2012 U.S. Dist. LEXIS 15273, Counsel Stack Legal Research, https://law.counselstack.com/opinion/twin-city-fire-insurance-v-mcbreen-kopko-llp-ilnd-2012.