AMY J. ST. EVE, District Court Judge.
Before the Court are the parties' cross-motions for summary judgment pursuant to Federal Rule of Civil Procedure 56(a). (R.100, R.104). Plaintiff Essex Insurance Company ("Essex") seeks a declaration that it has no duty to indemnify its insured, Defendant Village of Oak Lawn ("Village" or "Oak Lawn"), because Oak Lawn breached the notice condition of Essex's insurance policy with respect to an underlying lawsuit. (R.100). Third-Party Defendant Cannon Cochran Management Services, Inc. ("CCMSI") seeks a declaration that it provided timely notice of that lawsuit to Essex on behalf of Oak Lawn. (R.104). Oak Lawn joins CCMSI's motion.
For the following reasons, the Court grants CCMSI's motion and denies Essex's cross-motion. In light of this disposition, the Court denies as moot Oak Lawn's motion to defer or, alternatively, to extend the filing of dispositive motions directed to the Third-Party Complaint. (R.94).
In this action, Essex seeks a declaration that it has no duty to indemnify Defendants with respect to an action filed against them by Charles Petrishe, Nikki Caputo-Petrishe, and Dianne McGann in the United States District Court for the Northern District of Illinois, captioned Nikki Caputo-Petrishe et al. v. Oak Lawn Police Officers Todd Tenison and Scott Kirk et al., 1:10-cv-7950 (the "Underlying Action"). (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶¶ 6, 19; see also R.37, Second Am. Compl. ¶ 1).
This case concerns the interpretation of two insurance policies issued to Oak Lawn. The Court addresses each policy, in turn.
First, ACE issued to Oak Lawn Public Entity Retained Limits Policy number PEP G2488529A, covering a policy period of March 15, 2010 to March 15, 2011 (the "ACE Policy"). (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 9; R.6-2, ACE Policy). The ACE Policy had a liability limit of $2 million per occurrence and $5 million in the aggregate, and was excess over the Village's self-insured retention ("SIR") of $150,000. (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶¶ 10-12). The ACE Policy contained the following notice condition (the "ACE Notice Condition"):
(R.98, CCMSI Rule 56.1(a)(3) Stmt. Facts ¶ 5; R.6-2, ACE Policy at Section A-8).
(R.115, Essex Rule 56.1(b)(3)(C) Stmt. Additional Facts ¶ 38; R.6-2, ACE Policy at General Liability Coverage Part, Section A).
Second, Essex issued to Oak Lawn Excess Liability Policy number XOMW120310, covering a policy period of March 15, 2010 to March 15, 2011 (the "Essex Policy"). (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 13; R.6-1, Essex Policy). The Essex Policy had a liability limit of $10 million per occurrence and $10 million in the aggregate, and was excess over other underlying policies, including the ACE Policy. (R.113, CCMSI Rule 56.1(b)(3)(B) Stmt. Facts ¶¶ 14-15; R.6-1, Essex Policy at Declarations Items 3 and 4, and Schedule of Underlying Coverages; see also R.115, Essex Rule 56.1(b)(3)(C) Stmt. Additional Facts ¶¶ 33-34). The Essex Policy contained an insuring agreement, which provided that Essex:
(R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 16; R.6-1, Essex Policy at Section A). The Essex Policy also contained the following condition (the "Notice Condition"):
You must see to it that we or our authorized representative and your underlying insurers:
In addition, it is a requirement of this policy that:
(R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 17; R.6-1, Essex Policy at Section C-3). The Essex Policy further contained the following condition (the "Defense Condition"):
(R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 18; R.6-1, Essex Policy at Section C-4).
Having reviewed applicable policy provisions, the Court turns its focus to the additional undisputed facts bearing on the present summary judgment motions.
The original complaint in the Underlying Action alleged that, on December 8, 2010, Defendants Tenison and Kirk responded to a 911 call placed by plaintiff Nikki Caputo-Petrishe, informing them that her husband, Charles Petrishe ("Petrishe"), was acting suicidal by cutting himself with a kitchen knife. (R.101-5, Petrishe Compl. at ¶¶ 10-12). Kirk and Tenison entered the Petrishe home without first speaking to Caputo-Petrishe and, once there, observed Petrishe standing ten feet away, with his arms raised and a knife in one hand. (Id. ¶ 13). The Petrishe Complaint continued:
(Id. ¶ 14). Later that night, the police informed Petrishe's family that he was under arrest for the attempted murder of Officers Tenison and Kirk. (Id. ¶ 16). According to Defendants, Petrishe "charged" at the individual officers with his knife, thus justifying their use of force and supporting the filing of criminal charges. (R.98, CCMSI Rule 56.1(a)(3) Stmt. Facts ¶ 9).
Village of Oak Lawn Manager Larry Deetjen became aware of the December 8, 2010 incident that same night. (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 42) (citing Deetjen deposition testimony)). He also received a copy of the Petrishe Complaint one day after it was filed — December 15, 2010. (Id. ¶¶ 19-20). The Petrishe Complaint requested "actual and compensatory and punitive damages" in recognition that Petrishe had "sustained bodily injuries, as well as mental and emotional pain and suffering, humiliation, and past and future psychological damage." (R.101-5, Petrishe Compl. at ¶¶ 24-25).
Upon receipt of the Petrishe Complaint, CCMSI's liability supervisor, Ryan Fee ("Fee"), entered a claim note reflecting that the "plaintiff's allegations trigger the Village's professional law enforcement liability policy, which is a claims-made policy. Therefore, I will be placing the insurance carrier on notice of this incident immediately." (R.98-1 at CC 00001, Petrishe Claim Note, dated Dec. 15, 2010; see also R.101-10, Fee Dep. Tr. at 29-34, 127 (testifying to his initial belief that the ACE "package policy" included "a law enforcement part" which "might be implicated by [the] claim")). Fee did not, however, inform ACE of the Petrishe incident or lawsuit until a few months later. (R.101-10, Fee Dep. Tr. at 35).
On January 12, 2011, the Petrishe plaintiffs moved to stay Underlying Action pending the related criminal proceedings against Petrishe. The district court granted the stay request on January 18, 2011. (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 32). On January 21, the Petrishe plaintiffs filed an Amended Complaint, which added counts against the Defendants. (Id. ¶ 33). CCMSI did not evaluate those additional counts or provide notice to ACE or any other carrier. (R.101-10, Fee Dep. Tr. at 131). As Fee explained, CCMSI believed
By this time, both CCMSI and the Village were aware that Petrishe had been in the ICU for six weeks following the shooting. (R.110, Essex Rule 56.1(b)(3)(C) Stmt. Additional Facts ¶ 28; see also R.101-10, Fee Dep. Tr. at 127-28). By March 2011, Petrishe's claimed medical expenses had surpassed $672,000 — more than the Village's SIR. (R.101-10, Fee Dep. Tr. at 132). Fee testified that, at least by May 2011, he knew that the Village's exposure — but not its liability — could exceed the $150,000 SIR. (R.113, CCMSI Rule 56.1(b)(3)(B) Stmt. Facts ¶ 55; see also R.101-10, Fee Dep. Tr. at 54:12-17; id. at 142 (clarifying that he "wouldn't have been surprised from the beginning if the damages alone would exceed $150,000"). Yet, the Village and CCMSI did not believe that the Petrishe claim implicated either the ACE Policy or the Essex Policy because they "did not believe that there would be liability for the allegations in the Petrishe matter until Mr. Petrishe was found not guilty" in the parallel criminal action. (R.113, CCMSI Rule 56.1(b)(3)(B) Stmt. Facts ¶¶ 52-53). CCMSI's claim notes reflect this belief. (R.98-1 at CC 00004-5, Petrishe Claim Note, dated Feb. 15, 2011 ("The plaintiff has been charged with two counts of attempted first-degree murder for his attack on the Oak Lawn police officers. At this time, the officers' actions appear justified and warranted and therefore, we are not placing any negligence on the Officers. Therefore, we will not post a loss reserve for this claim")).
On or about March 15, 2011, CCMSI informed ACE of the Underlying Action. (R.98, CCMSI Rule 56.1(a)(3) Stmt. Facts ¶ 6). CCMSI offers several explanations for the timing of this notice. According to Fee, he gave ACE notice because the ACE Policy was expiring and because he thought "the case might have an exposure over $75,000 irrespective of liability. And, therefore, it triggers an automatic notice to the carrier." (R.101-10, Fee Dep. Tr. at 51-52; see also ACE Notice Condition at Section A-8(b)(i)). CCMSI's briefing offers another reason: "[s]ince the Petrishe claim involved bodily injury resulting from the `use of a weapon,' ACE was notified of the Petrishe suit on or about March 15, 2011, in conjunction with the first amended complaint against the Village." (R.99, CCMSI Reply Br. at 7; see also ACE Notice Condition at Section A-8(b)(iii)(9) (requiring automatic notice, "regardless of the coverage or liability" where an occurrence or claim involves "bodily injury resulting from use of a weapon or restraining device by law enforcement")).
In July 2011, defense counsel in the Underlying Action e-mailed Fee and ACE, informing them that the "criminal prosecution is moving along very slowly...In the meantime, I have scanned all of our paper file materials ... which are extremely favorable." (R. 98-1 at CC 00011, Petrishe Claim Note, dated July 14, 2011). In August, Fee informed ACE, "I have a $10k initial legal reserve set at this time, pending the outcome of the plaintiff's criminal trial. As previously noted, if the plaintiff is found guilty, most of his civil complaint goes away ... At this time, I do not anticipate this claim exceeding the $150k SIR." (Id. at CC 00012).
In June 2012 and again in November 2012, defense counsel in the Underlying Action informed Fee and ACE that the criminal proceedings were ongoing. (Id. at CC 00023, -028). Throughout this period, the Village and CCMSI held quarterly meetings to discuss the Underlying Action and other civil matters pending against the Village. (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶¶ 50-51). Village Manager Larry
On January 23, 2013, ACE advised CCMSI of its intent to close its Petrishe claim file. (R.98, CCMSI Rule 56.1(a)(3) Stmt. Facts ¶ 12) (citing R.98-1, CC 00032, Claim Note dated Jan. 23, 2013 (ACE Adjustor to Fee: "Given the $150,000 SIR I am inclined to close my file as it does not appear that ACE's [coverage] will be impacted")). The criminal trial began around this time. (R.115-A, March 20, 2013 Report at 7). On February 1, 2013, the criminal court acquitted Petrishe of all charges. (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 34).
On February 20, 2013, defense counsel in the Underlying Action e-mailed Fee:
(R. 98-1 at CC 00033, Petrishe Claim Note, dated Feb. 20, 2013). Fee responded, in part, "We will need to review the Village's excess liability policy to determine the total amount of policy limits available for this loss." (Id.). It is undisputed that neither CCMSI nor the Village considered the existence of excess insurance, including the Essex Policy, until February 2013, following Petrishe's acquittal. (R.113, CCMSI Rule 56.1(b)(3)(B) Stmt. Facts ¶¶ 53-54). February 20, 2013 was also the first time that CCMSI believed that the Petrishe claim "may involve" the underlying ACE Policy. (R.101-10, Fee Dep. Tr. at 104-05).
On March 14, 2013 — after two years and the completion of the criminal case — the district court lifted the stay in the Underlying Action. (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 34). On March 15, the Village's insurance broker e-mailed CCMSI a copy of the Essex Policy. (R. 98-1 at CC 0046, Petrishe Claim Note, dated Mar. 15, 2013). The Petrishe plaintiffs filed a Second Amended Complaint three days later. (R.113, CCMSI Rule 56.1(b)(3)(B) Stmt. Facts ¶ 33). On March 20, 2013, defense counsel in the Underlying Action sent a report to ACE and CCMSI evaluating the Second Amended Complaint. (R.98-1 at CC 00041-43, Petrishe Claim Note, dated Mar. 20, 2013; see also R.115-A, March 20 Report). Defense counsel recited the Second Amended Complaint's counts and allegations, concluding, "[a]t this time we believe that the Village has a strong liability defense insofar as the video would seem to corroborate the officers' statements that Petrishe threatened them with deadly force ... Although the case involves a significant exposure, we believe it to be a highly defensible one." (Id. at CC 00043). The March 20 Report noted, however, that Petrishe's medical expenses could reach $2.5 million. (Id.). Defense counsel thus estimated, using jury multipliers from excessive force cases, that the Village's overall exposure could fall somewhere between $3.375 million and $7.5 million. (Id.; see also R.113, CCMSI Rule 56.1(b)(3)(B) Stmt. Facts ¶ 56; R.121, Village Rule
On April 11, 2013, the Petrishe plaintiffs filed a Third Amended Complaint. (R.101, Essex Rule 56.1(a)(3) Stmt. Facts ¶ 33; see also R.92-1, Third Am. Compl).
On January 21, 2014, the Petrishe plaintiffs made a $12 million settlement demand in the Underlying Action. (R.115, Essex Rule 56.1(b)(3)(C) Stmt. Additional Facts ¶¶ 27-29). On January 22, 2014, Essex issued a reservation of rights letter, reserving its right to deny coverage to the Village on several grounds, including "on the basis that the Village failed to comply with the policy condition which requires notice as soon as practicable of any accident or occurrence which may result in a claim if the claim may involve the Essex Policy or any underlying insurance." (R. 98-1, CC 00140-151, Reservation of Rights Letter, dated Jan. 22, 2014). Essex filed this declaratory judgment action on June 17, 2014. (R.1, Complaint).
Essex participated in settling the Underlying Action on behalf of the Village, including with respect to the September 23, 2014 settlement conference, during which "all parties to the present action and the Underlying Action" agreed to "settle the Underlying Action for $3,000,000." (R.113, CCMSI Rule 56.1(b)(3)(B) Stmt.
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). A genuine dispute as to any material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). "The mere existence of some alleged factual dispute will not defeat summary judgment." Bordelon v. Bd. of Educ. of the City of Chicago, 811 F.3d 984, 989 (7th Cir.2016) (quoting Anderson, 477 U.S. at 247-48, 106 S.Ct. 2505).
In determining summary judgment motions, "facts must be viewed in the light most favorable to the nonmoving party only if there is a `genuine' dispute as to those facts." Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). The party seeking summary judgment has the burden of establishing that there is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). After "a properly supported motion for summary judgment is made, the adverse party must set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 255, 106 S.Ct. 2505 (quotation omitted); Life Plans, Inc. v. Sec. Life of Denver Ins. Co., 800 F.3d 343, 349 (7th Cir.2015).
Essex and CCMSI cross-moved for summary judgment on the notice issue
Notice provisions in insurance contracts "impose valid prerequisites to insurance coverage." Country Mut. Ins. Co. v. Livorsi Marine, Inc., 222 Ill.2d 303, 311, 305 Ill.Dec. 533,856 N.E.2d 338, 343 (2006).
Where, as here, an insurance policy requires an insured to notify the insurer "as soon as practicable," courts interpret
The Illinois Supreme Court has looked to several factors in assessing whether an insured's notice is reasonable, including: (1) the specific language of the policy's notice provision; (2) the insured's sophistication in insurance matters; (3) the insured's awareness of an event which may trigger insurance coverage; (4) the insured's diligence in ascertaining whether policy coverage is available; and (5) prejudice to the insurer. Country Mut., 222 Ill.2d at 313, 305 Ill.Dec. 533, 856 N.E.2d 338; Yorkville, 238 Ill.2d at 185-86, 345 Ill.Dec. 445, 939 N.E.2d 288. Illinois courts have made clear that these factors "may be considered and, though relevant, are not individually determinative." Hartford Cas. Ins. Co. v. ContextMedia, Inc., 65 F.Supp.3d 570, 579 (N.D.Ill.2014) (citation and quotation omitted).
Essex argues that, in consideration of these factors, Oak Lawn's 30-month delay in providing notice of the Underlying Action was unreasonable, constituting a breach of the Notice Condition. CCMSI, in turn, argues that its notice was reasonable under the circumstances, pointing to the two-year stay in the Underlying Action and to defense counsel's assessment that the related criminal case was a "slam-dunk" one which would obviate civil liability for Defendants Tension, Kirk, and the Village. The Court examines each Country Mutual factor, in turn.
The Court first considers the specific language of the Essex Policy in determining the reasonableness of Oak Lawn's notice.
In construing the language of an insurance policy, a court must view the policy "as a whole and take into account the type of insurance purchased, the nature of the risks involved, and the overall purpose of the contract." AMCO Ins. Co. v. Erie Ins. Exch., 2016 IL App (1st) 142660, ¶ 20, 401 Ill.Dec. 198, 49 N.E.3d 900, 907 (1st Dist.2016) (citation and quotation omitted); see also U.S. Fire Ins. Co. v. Schnackenberg, 88 Ill.2d 1, 5, 57 Ill.Dec. 840, 429 N.E.2d 1203, 1205 (1981) ("We suspect that it is usually, if not always, possible in cases involving the interpretation of contracts as complex as the modern insurance policy to isolate particular phrases or clauses which are then urged in support of the desired result. That approach does little, however, to resolve the problem"). "If the words of a policy are clear and unambiguous, a court must afford them their plain and ordinary meaning." AMCO, 401 Ill.Dec. 198, 49 N.E.3d at 907 (citing Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90, 108, 180 Ill.Dec. 691, 607 N.E.2d 1204 (1992)). If, however, the policy language "is susceptible to more than one meaning, it is
Illinois courts recognize that primary and excess insurance policies "inherently serve different functions, cover different risks and attach at different stages." Ingalls Mem'l Hosp. v. Executive Risk Indem., Inc., No. 1-10-0831, 2011 WL 10069004, at *4 (Ill.App.Ct. June 30, 2011) (citation omitted). "Since excess coverage is contingent on exhaustion of primary or underlying policies, excess insurers generally do not require notification of occurrences until the excess policy is reasonably likely to be implicated." Tribune, 306 Ill. App.3d at 790, 239 Ill.Dec. 818, 715 N.E.2d 263; see also L.R. Nelson Corp. v. Great Am. Ins. Co., No. 06-CV-1252, 2008 WL 4391832, at *5 (C.D.Ill. Sept. 22, 2008) (recognizing that, generally, excess policies "allow the insured more discretion than do primary policies when it comes to choosing the proper point in time to notify the insurer of a potential claim"). The Tribune court, for example, interpreted excess policy provisions requiring notice of a claim when it "appears likely to involve" the excess policy as giving "the insured considerable discretion for deciding whether a claim appears reasonably likely to result in liability within the coverage." 306 Ill. App.3d at 791, 239 Ill.Dec. 818, 715 N.E.2d 263. On the other hand, the Tribune court affirmed summary judgment on untimely notice grounds in favor of one excess insurer, whose policy contained a "markedly different notice requirement[,]" requiring notice "whenever a claimant's total damages, without regard to liability, appeared likely to exceed $250,000." Id. at 789, 792, 239 Ill.Dec. 818, 715 N.E.2d 263, 269.
With these principles in mind, the Court reviews the language of the Essex Policy.
The Notice Condition contains two principal notice provisions — Subsection (a) relating to "any accident or occurrence," and Subsection (b) relating to "the claim or suit." Specifically, the Essex Policy provides:
(R.6-1, Essex Policy at Section C-3). Indeed, "[i]nsurance policies are likely to contain two different notice conditions: one that requires notice of the occurrence of an incident which may fall within the policy's coverage, and one that requires notice of any lawsuit stemming from such an incident. When interpreting notice provisions, most Illinois decisions have not differentiated between the two requirements." Country Mut., 222 Ill.2d at 313-14, 305 Ill.Dec. 533, 856 N.E.2d 338.
According to Essex, this language is "nearly identical" to the excess policy provision at issue in MHM Services Inc. v. Assurance Company of America, 2012 IL App (1st) 112171, 363 Ill.Dec. 830, 975 N.E.2d 1139 (1st Dist.2012). The relevant notice provision in MHM provided:
MHM, 363 Ill.Dec. 830, 975 N.E.2d at 1153. The MHM court examined Subsection (B) and held that:
Id., 363 Ill.Dec. 830, 975 N.E.2d at 1157.
The Court disagrees with Essex as to MHM's likeness. Unlike the Notice Condition in the Essex Policy, the notice provision in MHM specifically distinguished between the insured's duties in the event of an occurrence versus a claim. See id., 363 Ill.Dec. 830, 975 N.E.2d at 1153 ("Notice of an `occurrence' or offense is not notice of a `claim'"). The language clearly specified that, in the event of "a" claim made or "`suit' ... brought against any insured,"
Here, by contrast, Subsection (b) of the Notice Condition does not speak of "a" claim, or a suit "brought against any insured." Rather, Subsection (b) speaks of "the" claim or suit. Under its plain and ordinary meaning, "the" is a word of limitation. "[I]t indicates that `a following noun or noun equivalent refers to someone or something previously mentioned" and particularizes "the subject which it precedes." Sibenaller v. Milschewski, 379 Ill.App.3d 717, 722, 318 Ill.Dec. 944, 884 N.E.2d 1215, 1219 (2d Dist.2008) (citing Webster's Third New International Dictionary 2368 (1986)); see also Outboard Marine, 154 Ill.2d at 123, 180 Ill.Dec. 691, 607 N.E.2d 1204 ("A court must strive to give each term in the policy meaning unless to do so would render the clause or policy inconsistent or inherently contradictory").
Reading the Essex Policy as a whole — as the Court must, see AMCO, 401 Ill.Dec. 198, 49 N.E.3d at 907-08 — Subsection (b) refers to the claim or suit arising from an "accident or occurrence" contemplated in Subsection (a). This reading of the Notice Condition adheres to the text and is reasonable in view of the fact that: (1) the "suit" term in Subsection (b) is not limited to "suits brought against any insured," unlike in MHM, AU Electronics, Yorkville, or Northbrook, and thus has no meaningful limitation absent a link to Subsection (a); (2) sections 1-4 underneath Subsection (b) refer to "the accident or occurrence," plausibly linking Subsection (b) to Subsection (a); and (3) considering the nature of excess insurance, see AMCO, 401 Ill.Dec. 198, 49 N.E.3d at 907-08, Essex does not need — and chose not to require — notice of each and every claim made or lawsuit filed, regardless of coverage implications. See Tribune, 306 Ill. App.3d at 790, 239 Ill.Dec. 818, 715 N.E.2d 263.
Based on this analysis, the Court agrees with CCMSI that the Essex Policy did not require the Village to notify Essex of the Underlying Action unless and until it believed such lawsuit "may involve" either
Essex next argues that, "even assuming Subsection (b) permitted the Village to exercise discretion in determining when to notify Essex of the Underlying Action, it was Mr. Petrishe's potential damages, not the Village's subjective belief of its liability, that would have triggered its notice obligation." (R.117, Essex Reply Br. at 3, 8; R.109, Response Br. at 6). As CCMSI observes, however, the "Essex Policy is completely silent as to the method of determining whether a claim may involve the policy. An insured could reasonably interpret this provision to allow an evaluation of both liability and damages." (R.118, CCMSI Reply Br. at 5). Ultimately, the Court agrees with CCMSI.
The parties do not dispute that CCMSI and the Village knew, throughout 2010-2012, that Petrishe's claimed damages — namely those resulting from four bullet wounds and a six-week stay in the ICU — far exceeded the $150,000 SIR. The parties also do not dispute, however, that neither CCMSI nor the Village believed that the Village's potential liability in the Underlying Action could implicate the ACE Policy or the Excess Policy until February 2013, after Petrishe's acquittal. Contrary to Essex's suggestion, moreover, the Court cannot deem this "subjective belief" unreasonable as a matter of law. The record reflects that defense counsel in the Underlying Action (i) monitored Petrishe's criminal case throughout 2011-2013, (ii) "was confident that the attempted murder charges brought against the plaintiff would result in a conviction," (iii) characterized litigation materials as "extremely favorable," and (iv) even after the unanticipated acquittal — and despite its "significant exposure" — believed the Underlying Action "to be a highly defensible" one. The record further reflects that, after receiving notice of the Underlying Action and corresponding with CCMSI and defense counsel, ACE closed its claim file. As Fee testified, "the information that was provided from defense counsel was essentially that this was a slam-dunk criminal case, and that most of this [civil action] was going to go away." (R.101-10, Fee Dep. Tr. at 41). Given these circumstances, the Court does not view the Village's liability predictions as inherently unreasonable. See, e.g., Pac. Emp'rs Ins. Co. v. Clean Harbors Envtl. Servs., Inc., No. 08 C 2180, 2011 WL 813905, at *6 (N.D.Ill. Feb. 24, 2011) (insured's 33-month delay in notifying excess insurer of underlying lawsuit not held unreasonable where defense counsel had opined that "the case was one of `non-liability'").
The Court further notes that, had Essex desired to trigger notice based on damages alone, irrespective of liability, it could have requested policy language to that effect. The ACE Policy, for example, required automatic notice of any occurrence or claim, "regardless of the coverage or liability," where the potential exposure exceeded 50% of the SIR, or which involved "bodily injury resulting from use of a weapon or restraining device by law enforcement." (R.6-2, ACE Policy at Section A-8(b)(i), (iii)(9)); see also Tribune, 306 Ill.App.3d at 792, 239 Ill.Dec. 818, 715 N.E.2d 263 (excess insurer required notice "whenever a claimant's total damages, without regard to liability, appeared likely to exceed $250,000"). Essex did not insist on such language. Essex also could have requested language requiring notice whenever
Because the "may involve" clause at issue is ambiguous, and no evidence resolves the ambiguity, the Court construes it in favor of the Village. See Tribune, 306 Ill. App.3d at 786, 239 Ill.Dec. 818, 715 N.E.2d 263 ("Where an insurance contract is ambiguous, and other evidence does not resolve the ambiguity, the court must adopt any reasonable interpretation the policyholder suggests"). Here, the Court interprets the (i) "may involve" language and the (ii) "as soon as practicable" language as requiring notice of the Underlying Action within a reasonable time, but only when it appeared "reasonably likely to result in liability within the coverage" of the ACE Policy or the Essex Policy. See id. at 791, 239 Ill.Dec. 818, 715 N.E.2d 263, 269.
The Court next analyzes the Village's sophistication in insurance matters. The Village concedes this point, acknowledging that "there is no dispute that the Village is a sophisticated entity that entered into an insurance contract with Excess for excess coverage with a $1 million underlying primary policy and a $150,000 self-insured retention." (R.118, CCMSI Reply Br. at 7-8). This factor, therefore, weighs in favor of Essex. See MHM, 363 Ill.Dec. 830, 975 N.E.2d at 1159.
The Court next examines the Village's "awareness of an event which may trigger insurance coverage." Country Mut., 222 Ill.2d at 313, 305 Ill.Dec. 533, 856 N.E.2d 338. Here, Essex looks to the undisputed facts: the Village knew about the Petrishe shooting on December 8, 2010, knew about the Underlying Action and its allegations on December 15, 2010, and gave ACE notice on March 15, 2011. Yet, Essex argues, the Village did not inform Essex of the incident or the lawsuit until May 21, 2013.
The Village responds that, while it had "awareness" of the Petrishe claim in 2010, it did not believe that such claim "may trigger insurance coverage" until February 2013, after Petrishe's acquittal. Indeed, the record reflects that CCMSI set an initial reserve of only $10,000 and — prior to 2013 — did not anticipate the Petrishe claim exceeding the Village's $150,000 SIR. As noted above, moreover, the ACE Notice Condition is distinct from the Notice Condition contained in the Essex Policy. The Court does not, therefore, interpret
The fourth factor — the Village's diligence in ascertaining the availability of excess coverage — also weighs in favor of the Village. The Court is not convinced by Essex's argument that the Village's delay "had nothing to do with its belief about its liability. Rather, the delay was attributable to the Village's failure to read its insurance contract[.]" (R.102, Essex Opening Br. at 11). This argument assumes that the Notice Condition required automatic notice of every lawsuit filed against the Village — an assumption not borne out by the policy language. This argument further ignores that the Village entrusted CCMSI to review its insurance contracts, (R.101-7, Deetjen Dep. Tr. at 69), and that CCMSI — shortly after the unanticipated criminal acquittal and the lift of the stay in the Underlying Action — requested the Essex Policy and provided notice to Essex. (R.98-1 at CC 0046-47, CC 00051, Petrishe Claim Notes; R.113, CCMSI Rule 56.1(b)(3)(B) Stmt. Facts ¶ 53).
Essex again likens this case to MHM, where the court held that MHM's "supposed belief that [the underlying suit] was defensible within the limits of its [primary] policy" was "not a credible position." MHM, 363 Ill.Dec. 830, 975 N.E.2d at 1160. In forming this conclusion, however, the MHM court looked to several specific factors unique to that case, including: (i) the "startling, horrendous" nature of the underlying allegations and the damages claimed; (ii) the rapid expenditure on defense; (iii) that, after denying MHM summary judgment, the judge advised that MHM "would most certainly lose a jury trial and should immediately hire a mediator and settle the case for at least $5 million;" (iv) that MHM ignored its counsel's recommendation to notify its insurers, even after he opined that a "multi-million dollar judgment" was "over 85% probable;" (v) that MHM eventually increased its settlement accrual in acknowledgment that a settlement or judgment would exceed the limits of its primary policy; and (vi) that MHM provided notice to Assurance — 25 months after the underlying lawsuit was filed — only because a new attorney, who "asked for and read all the insurance policies," joined the defense team. See id., 363 Ill.Dec. 830, 975 N.E.2d at 1160-61.
Except with respect to damages allegations, none of these circumstances are present here.
In this case, CCMSI and the Village do not claim mere "ignorance of the existence of the insurance policies" as an excuse for their delayed notice. See Fairmount Park, Inc. v. Travelers Indem. Co., 982 F.Supp.2d 864, 872 (S.D.Ill.2013). In view of CCMSI's notice to Essex once the stay status and liability assessment in the Underlying Action changed in early 2013, the Court concludes that the fourth Country Mutual factor weighs in favor of the Village.
Lastly, the Court considers prejudice to Essex resulting from the 30-month delay in receiving notice of the Underlying Action. According to Essex, by May 2013, "the question of whether Essex could effectively participate in the defense had already been answered. Mr. Petrishe had been acquitted of criminal charges and the case had a multi-million dollar value with no hope of settling within the underlying coverage." (R.102, Essex Opening Br. at 13). Essex disregards, however, the critical fact that the Defense Condition would have been of no use to it throughout 2011-2013; the district court had stayed the Underlying Action for two years pending the criminal proceedings. As CCMSI recognizes, none of Essex's cited authorities "involved a civil action that was stayed in its entirety... because it was connected to a concurrent pending criminal action." (R.118, CCMSI Reply Br. at 10). Once the Underlying Action became active, Essex waited several months to issue a reservation of rights letter, and then participated in settling the action through its eventual dismissal in November 2014.
In essence, Essex asserts that had it known of the Petrishe claim earlier, it would have reassessed the likelihood of acquittal in the criminal case and negotiated a lower civil settlement during the criminal case's pendency. This speculation alone, however, cannot overcome the other facts and circumstances unique to this case, including (i) the two-year stay; (ii) defense counsel's ongoing assessment of non-liability; (iii) ACE's inclination to close its claim file; (iv) the uniformly-held belief, up until February 2013, that the Village could handle the Petrishe claim well within its $150,000 SIR; and (v) the policy language contemplating insured discretion as to the timing of notice to its excess insurer.
The Court declines to find, under these specific facts and circumstances, that CCMSI's 30-month delay in giving notice to Essex was unreasonable as a matter of
For the foregoing reasons, the Court grants CCMSI's motion for summary judgment on the notice issue (R.104) and denies Essex's motion for summary judgment regarding the same. (R.100). In light of this disposition, the Court denies as moot Oak Lawn's motion to defer or, alternatively, to extend the filing of dispositive motions directed to the Third-Party Complaint. (R.94).
