Citations
- 776 F. Supp. 2d 670
Full opinion text
MEMORANDUM OPINION AND ORDER
VIRGINIA M. KENDALL, District Judge.
This insurance coverage dispute between the City of Waukegan, Illinois (“Waukegan” or “the City”) and its various insurers arises from a $9,063,000 verdict entered against Waukegan in a civil rights case brought by S. Alejandro Dominguez (“Dominguez”), who was convicted of rape in 1990 after an investigation by Waukegan police officers but exonerated by DNA evidence in 2002. The insurers issued to the City various primary and excess policies in effect between 1991 and 2006. The parties have filed summary judgment motions addressing whether the insurers should now indemnify Waukegan for its loss as a result of the Dominguez verdict, whether certain of Waukegan’s carriers should have defended the City in the underlying case, and whether a subset of those insurers violated Section 155 of the Illinois Insurance Code by acting “unreasonably and vexatiously” in handling the Dominguez claim.
Plaintiff American Safety Casualty Insurance Company (“American Safety”) filed a Complaint against Waukegan on April 11, 2007, seeking a declaratory judgment that it does not owe coverage to Waukegan for its obligations in S. Alejandro Dominguez v. Paul Hendley et al., No. 04 C 2907 (N.D.Ill.) (“the Dominguez Civil Case”). On August 19, 2009, Waukegan filed its operative complaint, the Second Amended Counterclaim (Doc. 273), against Counter-Defendants American Safety, Interstate Indemnity Company (“Interstate”), Certain Underwriters at Lloyds of London (“Underwriters”), Northfield Insurance Companies (“Northfield”), West-port Insurance Corporation (“Westport”) (formerly Coregis Insurance Organizations), Dominguez, and Paul Hendley (“Hendley”). Two defendants, Scottsdale Insurance Company (“Scottsdale”) and Evanston Insurance Company (“Evanston”), were named in Waukegan’s first counterclaim, but the Court granted Scottsdale’s motion for summary judgment in March 2009 (see Doc. 236) and Waukegan voluntarily dismissed Evanston without prejudice in July 2009 (see Doc. 260).
American Safety (Doc. 563) and Interstate (Doc. 561) have each filed Motions to Strike portions of Waukegan’s Rule 56.1 statements of material facts in connection with its summary judgment motions. The Court addressed these motions during its analysis of the pending summary judgment motions. For the reasons explained below, the Court grants in part and denies in part American Safety’s motion, and grants Interstate’s motion in its entirety.
In addition, American Safety (Doe. 444), Interstate (Doc. 448), and Westport (Doc. 460) have each filed motions for summary judgment against Waukegan, and Waukegan has cross-moved for summary judgment against each of them. (Docs. 458, 533 (amending 466), 539 (amending 476), respectively). Northfield and Underwriters have joined in three separate summary judgment motions, one addressing whether their policies were triggered (Doc. 450), one addressing their duty to defend Waukegan (Doc. 435), and the last addressing whether they had a duty to indemnify the City given its allegedly voluntary agreement to assume Hendley’s liability (Doc. 429). Waukegan has cross-moved for summary judgment against Northfield and Underwriters separately (Docs. 535 (amending 491), 537 (amending 498), respectively).
For the reasons stated below, the Court:
1. grants in part American Safety’s motion to strike portions of Waukegan’s Local Rule 56.1 Statement supporting its motion for summary judgment against American Safety, as detailed below;
2. grants in its entirety Interstate’s motion to strike portions of Waukegan’s Local Rule 56.1 Statement supporting its motion for summary judgment against Interstate;
3. denies American Safety’s motion for summary judgment against Waukegan in its entirety, and grants Waukegan’s cross-motion for summary judgment as detailed below, finding American Safety (a) breached its duty to defend Waukegan, (b) must now indemnify Waukegan for the Dominguez verdict to the policy’s limits, and (c) is liable under Section 155 of the Illinois Insurance Code for “unreasonable and vexatious” conduct in handling the Dominguez claim;
4. grants in part, and denies in part, Interstate’s motion for summary judgment against Waukegan; and grants in part, and denies in part, Waukegan’s cross-motion for summary judgment, finding that Interstate did not breach a duty to defend or violate Section 155, but must indemnify Waukegan for the Dominguez verdict;
5. grants in its entirety Northfield’s and Underwriters’ joint motion for summary judgment regarding whether their policies were triggered and denies Waukegan’s cross-motions for summary judgment against Northfield and Underwriters, finding that the Northfield/Underwriters policies were not triggered by Dominguez’s allegations in the underlying complaint, rendering moot Northfield’s and Underwriters’ joint motions for summary judgment regarding duty to defend and duty to indemnify;
6. grants in its entirety Westport’s motion for summary judgment against Waukegan, and denies in its entirety Waukegan’s motion for summary judgment against Westport, finding that the Westport policies were not triggered by Dominguez’s allegations in the underlying complaint.
7. denies as moot Waukegan’s objection (Doc. 781) to Magistrate Finnegan’s Order of December 17, 2010 denying Waukegan’s motion to compel.
I. MOTIONS TO STRIKE PORTIONS OF WAUKEGAN’S 56.1 STATEMENTS
As an initial matter, American Safety and Interstate have each moved to strike portions of Waukegan’s Local Rule 56.1 statements in the City’s cross-motions for summary judgment against them, arguing that they contain improper legal conclusions, rely on portions of Donald Brayer’s Amended Expert Report that have been stricken by the Court’s January 12, 2011 order, 2011 WL 98596, fail to provide adequate citation to the record, or are immaterial. Local Rule 56.1(a) provides that a party moving for summary judgment shall file a “statement of material facts” entitling it to judgment as a matter of law, “including within each paragraph specific references to the affidavits, parts of the records, and supporting materials relied upon to support the facts set forth in that paragraph.” See L.R. 56.1(a) (emphasis added). Nonconformity with the Local Rules and the standing orders of the Court is not without consequence. “A district court is entitled to expect strict compliance with Rule 56.1.” Ammons v. Aramark Uniform Servs., Inc., 368 F.3d 809, 817 (7th Cir.2004) (citing Bordelon v. Chicago School Reform Bd. of Trustees, 233 F.3d 524, 527 (7th Cir.2000)). Further, “a district court does not abuse its discretion, when, in imposing a penalty for a litigant’s non-compliance with Local Rule 56.1, the court chooses to ignore and not consider the additional facts that a litigant has proposed.” Cichon v. Exelon Generation Co., L.L.C., 401 F.3d 803, 809-10 (7th Cir.2005).
First, with respect to American Safety’s and Interstate’s objections to paragraphs that contain or consist of legal conclusions, a party may not include legal opinions or conclusions of law in its statement of facts in support of summary judgment. See Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 529 F.3d 371, 382 n. 2 (7th Cir.2008) (“Local Rule 56.1 requires that statements of facts concerning summary judgment motions identify the evidence supporting a party’s factual assertions. It is inappropriate to make legal arguments in a Rule 56.1 statement of facts.”); Cady v. Sheahan, 467 F.3d 1057, 1060 (7th Cir.2006) (finding a statement of material facts did not comply with Rule 56.1 because it failed to adequately cite the record and contained legal arguments).
The Court, therefore, strikes the following portions of Waukegan’s statements of material facts because they address legal issues that are to be decided by this Court:
_Document_Statement Stricken_
Waukegan’s Statement of Material Facts in support of its Motion for Summary Judgment against American Safety
The second and forth sentences of paragraph 34; the latter part of the second sentence of paragraph 54.
Waukegan’s Statement of Additional Material Facts in Opposition to American Safety’s Motion for Summary summary judgment
The first clause of paragraph 7; paragraph 9; paragraph 13; and the first sentence of paragraph 24_
Waukegan’s Statement of Material Facts in support of its Motion for Summary Judgment against Interstate
Paragraph 34; all but the first sentence of paragraph 36; all but the first sentence of paragraph 38; the first clause of paragraph 44; the last sentence of paragraph 45; paragraph 46; the last clause of paragraph 48 reading “Dominguez’s claims ... are covered claims under the Interstate policy.”; and the first sentence of paragraph 50._
Waukegan’s Statement of Additional Material Facts in Opposition to Interstate’s Motion for Summary Judgment
Paragraphs 10-11; the first sentence of paragraph 14; the first clause of paragraph 15; paragraphs 18-19; the last sentence of paragraph 20; the first sentence of paragraph 22; _and the first two sentences of paragraph 23.
Each of these paragraphs contains or consists of legal conclusions regarding whether certain claims in the Dominguez Civil Case occurred or accrued within the policy periods, who qualifies as an insured under the policies, when an insured’s duty to defend was triggered, and whether claims in the underlying complaint are “covered” under the policies — in other words, the primary issues to be decided in this case.
Turning to American Safety’s and Interstates’s objections to statements of fact that rely on Brayer’s expert testimony, “to be considered in a motion for summary judgment, the testimony [by an expert] must be admissible.” See Porter v. Whitehall Labs., Inc., 9 F.3d 607, 612 (7th Cir.1993). For that reason, the Court strikes the following portions of Waukegan’s statements of material facts because they are supported solely by portions of Brayer’s report that the Court struck in its January 12, 2011 order. See e.g., Good Shepherd Manor Found. v. City of Momence, 323 F.3d 557, 564 (7th Cir.2003) (expert testimony on conclusions of law not admissible); see also In re Ocean Bank, 481 F.Supp.2d 892, 898 (N.D.Ill.2007) (St. Eve, J.) (same).
_Document_Statement Stricken_
Waukegan’s Statement of Material Facts in support of its Motion for Summary Judgment against American Safety_
Paragraph 47 and paragraph 68.
Waukegan’s Statement of Additional Material Facts in Opposition to American Safety’s Motion for Summary Judgment_
The second sentence of paragraph 2; and the second sentence of paragraph 19.
Waukegan’s Statement of Material Facts in support of its Motion for Summary Judgment against Interstate_
All but the first sentence of paragraph 42 and paragraph 43.
Finally, the Court strikes various facts because they do not making specific reference to a relevant portion of the record to support the statements therein or are not supported by the cited record. See L.R. 56.1 (a party’s statement of material facts in support of its motion for summary judgment “shall consist of short numbered paragraphs, including within each paragraph specific references to the affidavits, parts of the record, and other supporting materials relied upon to support the facts set forth in that paragraph”). In Waukegan’s 56.1 statement in support of its motion for summary judgment against American Safety, the Court strikes the last clause of paragraph 31 referring to various “provisions” without citing them specifically; the general statements about cooperation and notification of “all information” in paragraph 49; and the last statement in paragraph 72 that “[b]y its own admission, [American Safety] has no policies or procedures it followed with regard to processing claims,” which is a conclusion not supported by the cited testimony. See L.R. 56.1(a).
The Court denies American Safety’s motion to strike, however, with respect to the first sentence of paragraph 56, paragraphs 58-59, and paragraphs 69-70 in Waukegan’s 56.1 statement. Contrary to American Safety’s assertions, these factual statements are relevant to the Court’s legal determinations regarding coverage in this matter, including whether American Safety’s conduct was “unreasonable and vexatious” for purposes of Waukegan’s claims under Section 155 of the Illinois Insurance Code. It also denies American Safety’s motion to strike with respect to paragraph 71 in Waukegan’s 56.1 statement, which cites to portions of Brayer’s amended report describing a claim representative’s duties that the Court found admissible in its January 12, 2011 order.
II. MOTIONS FOR SUMMARY JUDGMENT
A. Statement of Material Undisputed Facts
1. The Parties.
Waukegan is a municipal corporation providing governance to residents within Lake County, Illinois. (Waukegan v. American Safety 56.1 Resp. ¶ 1; Interstate v. Waukegan 56.1 Resp. ¶ 1; Underwriters & Northfíeld Trigger Issue 56.1 Resp. ¶ 1; Waukegan v. Westport 56.1 Resp. ¶ 1.) Plaintiff and Counter-Defendant American Safety issued insurance policies to Waukegan that are at issue in this matter, as did Counter-Defendants Interstate, Westport, Underwriters, and Northfíeld. (Waukegan v. American Safety 56.1 Resp. ¶2; Waukegan v. Interstate 56.1 Resp. ¶ 2; Underwriters & Northfield Trigger Resp. ¶¶ 24-25; Waukegan v. Westport 56.1 Resp. ¶2.) Counter-Defendant Interstate provides insurance coverage policies to Illinois insureds. (Interstate v. Waukegan 56.1 Resp. ¶ 3.) Counter-Defendant Underwriters are members of syndicates who severally subscribed to certain insurance policies and are authorized to underwrite insurance policies in Illinois. (Underwriters & Northfíeld Trigger Issue 56.1 Resp. ¶ 2.) Counter-Defendant Northfíeld is a Minnesota insurance company that provides insurance policies to Illinois insureds. (Underwriters & Northfíeld Trigger Issue 56.1 Resp. ¶ 3.) Counter-Defendant West-port is an insurance company licensed to do business in the state of Illinois. (West- port v. Waukegan 56.1 Resp. ¶ 1.) Counter-Defendant Dominguez is a resident of Illinois who was tried and convicted for home invasion and sexual assault in 1990 but later exonerated. (Waukegan v. American Safety 56.1 Resp. ¶¶ 4 — 5.) Counter-Defendant Hendley is a former Waukegan police sergeant involved in the investigation of the home invasion and sexual assault for which Dominguez was convicted. (Waukegan v. American Safety 56.1 Resp. ¶7; Waukegan v. Interstate 56.1 Resp. ¶ 7; Underwriters & Northfield Trigger Issue 56.1 Resp. Add. Facts ¶ 15; Waukegan v. Westport 56.1 Resp. ¶ 6.) At all times relevant to the allegations in Dominguez’s federal court complaint following his exoneration, Hendley was a Waukegan employee engaged in law enforcement activities, as directed and controlled by Waukegan. (Waukegan v. American Safety 56.1 Resp. ¶ 8; Waukegan v. Interstate 56.1 Resp. ¶ 7.)
2. Dominguez’s Civil Case (the Underlying Complaint).
On April 23, 2004, Dominguez then filed suit against Waukegan, Hendley, Waukegan Police Detective John Moran (“Moran”), Lisa Kraus (“Kraus”), and others in the United States District Court for the Northern District of Illinois, alleging false arrest and false imprisonment, malicious prosecution under 42 U.S.C. Section 1983 (“Section 1983”), and unconstitutional policies and procedures (the “Dominguez Civil Case”). (Waukegan v. American Safety 56.1Resp. ¶¶ 6, 26; Interstate v. Waukegan 56.1 Resp. ¶¶ 6, 16; Waukegan v. Interstate 56.1 Resp. ¶¶ 6, 23-24; Underwriters & Northfield Trigger Issue 56.1 Resp. ¶¶ 6, 17; Waukegan v. Westport 56.1 Resp. ¶ 5; Waukegan v. Westport 56.1 Resp. ¶ 24.) Dominguez filed his operative complaint on August 2, 2004 against Waukegan, Hendley, Moran, Kraus, and security guard Richard McCandless (“McCandless”), alleging federal claims for false arrest and false imprisonment (Count I), a violation of the Due Process Clause through malicious prosecution pursuant to Section 1983 (Count II), claims against Kraus and McCandless for conspiracy pursuant to Section 1983 (Count III), state law malicious prosecution against Kraus and McCandless (Count IV), state law intentional infliction of emotional distress (Count V), respondeat superior (Count VI), and indemnification (Count VII) (“the Underlying Complaint”). (Waukegan v. American Safety 56.1 Resp. ¶ 27; Interstate v. Waukegan 56.1 Resp. ¶ 6; Waukegan v. Interstate 56.1 Resp. ¶¶ 23, 25; Underwriters & Northfield Trigger Issue 56.1 Resp. ¶¶ 6, 18; Underwriters & Northfield Trigger Issue 56.1 Resp. Add. Facts ¶3; Waukegan v. Westport 56.1 Resp. ¶ 24, 26.) These constitute personal injury claims for offenses caused in the course of Waukegan’s law enforcement activities. (Waukegan v. American Safety 56.1 Resp. ¶ 15; Waukegan v. Interstate 56.1 Resp. ¶ 13.)
a. The Factual Allegations in the Underlying Complaint.
The Underlying Complaint made the following factual allegations. First, it alleged that on September 19, 1989, Lisa Kraus (“Kraus”) filed a complaint with the Waukegan Police Department asserting that she was sexually assaulted in her apartment. (Waukegan v. American Safety 56.1 Resp. ¶ 15; Waukegan v. Interstate 56.1 Resp. ¶ 13; Underwriters & Northfield Trigger Issue 56.1 Resp. ¶7; Waukegan v. Westport 56.1 Resp. ¶ 14.) Waukegan police officers Hendley and Moran conducted an investigation into these allegations. (Waukegan v. American Safety 56.1 Resp. ¶ 16; Interstate v. Waukegan 56.1 Resp. ¶ 8; Waukegan v. Westport 56.1 Resp. ¶ 15.) On September 21, 1989, the Underlying Complaint alleged, Hendley arrived at Kraus’s apartment building for investigation purposes and spoke with a security guard. (American Safety v. Waukegan 56.1 Resp. ¶ 7; Waukegan v. Interstate 56.1 Resp. ¶ 14; Underwriters & North-field Trigger Issue 56.1 Resp. ¶ 8.) Although Hendley denied the following allegations in his answer to the Underlying Complaint, that complaint alleged that Hendley asked the security guard to bring Dominguez into the guard’s office for Kraus to identify him, and that Kraus then identified Dominguez as her assailant in that office. (American Safety v. Waukegan 56.1 Resp. ¶¶ 8,10.)
It further alleges that Dominguez was arrested on September 21, 1989 and convicted on February 28, 1990 of aggravated criminal sexual assault and home invasion; he was sentenced to a nine year term, but then released for good behavior in December 1993 and required to register as a sex offender for ten years. (Waukegan v. American Safety 56.1 Resp. ¶¶ 4, 18-19; American Safety v. Waukegan 56.1 Resp. ¶ 12; Interstate v. Waukegan 56.1 Resp. ¶¶ 10-12; Waukegan v. Interstate 56.1 Resp. ¶¶ 15-17; Underwriters & North-field Trigger Issue 56.1 Resp. ¶¶ 9-11; Underwriters & Northfield Trigger Issue 56.1 Resp. Add.'Facts ¶ 19; Waukegan v. Westport 56.1 Resp. ¶¶ 17-18.) When he missed the sex offender registration deadline in November 1998, he was arrested and held in jail for one day. (Waukegan v. American Safety 56.1 Resp. ¶ 20; Interstate v. Waukegan 56.1 Resp. ¶ 13; Underwriters & Northfield Trigger Issue 56.1 Resp. ¶¶ 12-13; Waukegan v. Westport 56.1 Resp. ¶ 19) He then pled guilty to attempted failure to register as a sex offender and was sentenced to two years of probation and 100 hours of community service; he was also required to participate in therapy sessions. (Waukegan v. American Safety 56.1 Resp. ¶ 21; Waukegan v. Interstate 56.1 Resp. ¶ 19; Underwriters & Northfield Trigger Issue 56.1 Resp. ¶ 14; Waukegan v. Westport 56.1 Resp. ¶ 20.)
On January 28, 2001, Immigration and Naturalization Services (“INS”) arrested Dominguez, a non-citizen, and initiated proceedings for his immediate removal from the country based on his earlier sexual assault conviction. (Waukegan v. American Safety 56.1 Resp. ¶ 35; American Safety v. Waukegan 56.1 Resp. Add. Facts ¶ 15.) He remained in INS custody for a one month period between January 28, 2001 and February 28, 2001. (American Safety v. Waukegan 56.1 Resp. Add. Facts ¶ 15.) On August 10, 2001, the Underlying Complaint alleges, Dominguez was granted postconviction DNA testing; the results of this test excluded Mr. Dominguez as the alleged rapist. (American Safety v. Waukegan 56.1 Resp. ¶ 17; Interstate v. Waukegan 56.1 Resp. ¶ 14; Waukegan v. Interstate 56.1 Resp. ¶ 21; Underwriters & Northfield Trigger Issue 56.1 Resp. ¶ 15; Waukegan v. Westport 56.1 Resp. ¶ 21.) On April 26, 2002, the Circuit Court of the Nineteenth Judicial Circuit for Lake County, Illinois reversed Dominguez’s convictions for home invasion, aggravated criminal sexual assault, and exonerated him. (Waukegan v. American Safety 56.1 Resp. ¶ 5; Waukegan v. Interstate 56.1 Resp. ¶ 5; Waukegan v. Westport 56.1 Resp. ¶¶ 22-23.)
b. The Dominguez Verdict and Post-Trial Proceedings.
The district court later dismissed Counts III, IV, and V — the Counts against Kraus and the security guard individually. (American Safety v. Waukegan 56.1 Resp. ¶ 20.) On October 13, 2006, the district court entered a minute order stating: “[i]n accordance with this Court’s oral ruling the City of Waukegan is hereby dismissed as a defendant.” (Interstate v. Waukegan 56.1 Resp. ¶ 17; Underwriters & North-field Trigger Issue 56.1 Resp. ¶ 19.) That order stated:
the ruling was based on the lack of proof as to City in terms of the substantive Section 1983 claims of plaintiff S. Alejandro Dominguez ..., but with the express understanding, based on the representations of counsel for all parties, that the City had unconditionally undertaken to indemnify codefendant Paul Hendley ... for any awards of compensatory damages and attorneys’ fees entered against him.
{American Safety v. Waukegan 56.1 Resp. ¶ 40; American Safety v. Waukegan 56.1 Ex. Q.) Through this order, the Court ordered Waukegan to be held liable as indemnitor for all sums that Hendley was obligated to pay in the litigation. {Waukegan v. American Safety 56.1 Resp. ¶ 29.)
The district court conducted a jury trial beginning on October 3, 2006, and the jury returned a verdict in favor of Dominguez in the amount of $9,063,000 in compensatory damages on October 17, 2006. (Waukegan v. American Safety 56.1 Resp. ¶¶ 6, 28; Interstate v. Waukegan 56.1 Resp. ¶ 18; Underwriters & Northfield Trigger Issue 56.1 Resp. ¶ 20; Underwriters