Freeburg Cmty. Consol. Sch. Dist. No. 70, an Ill. Body Politic v. Country Mut. Ins. Co.

2021 IL App (5th) 190098

183 N.E.3d 1020

451 Ill.Dec. 563

FREEBURG COMMUNITY CONSOLIDATED SCHOOL DISTRICT NO. 70, an Illinois Body Politic; Herschel Parrish; Clarence Haege; and Lawrence Meggs, Plaintiffs-Appellees,

v.COUNTRY MUTUAL INSURANCE COMPANY, an Illinois Corporation; RSUI Indemnity Company; and John Doe 4, Defendants

(RSUI Indemnity Company, Defendant-Appellant).

NO. 5-19-0098

Appellate Court of Illinois, Fifth District.

Filed April 8, 2021

Neil E. Holmen and Cassandra L. Jones, of Walker Wilcox Matousek LLP, of Chicago, for appellant.

Thomas R. Kelley, LLC, of Belleville, for appellees.

JUSTICE BARBERIS delivered the judgment of the court, with opinion.

¶ 1 The instant appeal involves a coverage dispute pertaining to a claims-made insurance policy (policy) issued by defendant, RSUI Indemnity Company (RSUI), to plaintiff, Freeburg Community Consolidated School District No. 70 (Freeburg school district), and its directors and officials. The policy covered claims made during the policy period July 1, 2013, to July 1, 2014. RSUI denied Freeburg school district's demand for coverage under the policy for an underlying federal lawsuit (Doe 4 action) filed against Freeburg school district and certain former Freeburg school district officials, Herschel Parrish, Clarence Haege, and Lawrence Meggs,¹ on June 11, 2014. The Doe 4 action was brought by John Doe 4, a former Freeburg school district student, who alleged that he had been sexually abused on multiple occasions, by a male Freeburg school district official, Robin Hawkins (now deceased), from 2007 to spring of 2009.

¶ 2 Freeburg filed a complaint for declaratory judgment against RSUI² in the circuit court of St. Clair County, seeking a determination that RSUI had a duty to defend and indemnify Freeburg in the Doe 4 action. RSUI filed a motion to dismiss Freeburg's complaint, pursuant to section 2-619 of the Code of Civil Procedure ( 735 ILCS 5/2-619 (West 2014) ), which was denied by the court. The court subsequently granted Freeburg's motion for summary judgment on the issue of RSUI's duty to defend Freeburg in the Doe 4 action but reserved ruling on the issue of indemnity. RSUI filed a motion for summary judgment, and Freeburg filed a cross-motion for summary judgment seeking further determination on the issues of RSUI's duty to defend and duty to indemnify Freeburg in the Doe 4 action. The court later denied RSUI's motion for summary judgment and granted Freeburg's cross-motion for summary judgment, determining that RSUI had a duty to indemnify Freeburg in the Doe 4 action. Thereafter, the court ordered RSUI to indemnify Freeburg in the amount of $1,159,144.37. RSUI appeals, arguing that the court erred in finding that it had a duty to defend and indemnify Freeburg in the Doe 4 action under the policy. For the following reasons, we reverse in part, vacate in part, and remand with directions.

¶ 3 I. Background

¶ 4 The instant case has a lengthy procedural history. The common law record is in excess of 4900 pages, and the transcripts of the various circuit court proceedings exceed 500 pages. In the interest of brevity, we have omitted facts not germane to our resolution of the issues raised on appeal.

¶ 5 A. Prior Litigation

¶ 6 From 1977 to 1993, Hawkins was employed by Freeburg school district as a teacher, also serving as a counselor, student council sponsor, and coach for the basketball and track teams. In 1994, he was promoted to principal and assistant superintendent. In 1998, Hawkins was, again, promoted, serving as superintendent until his death by suicide in May 2009. Hawkins's suicide occurred after he became aware that the Illinois State Police and Freeburg Police Department were investigating Hawkins's alleged sexual abuse of several elementary students dating back to 1979.

¶ 7 Following the investigation, at least three federal lawsuits were filed against Freeburg between 2010 and 2012.³ The first lawsuit (Doe 1 action) alleged that Doe 1 had been sexually abused by Hawkins on multiple occasions while attending the Freeburg school district's Carl L. Barton Elementary School from 1994 to 1996. The second lawsuit (Doe 2 action) alleged that Doe 2 had been sexually abused by Hawkins on multiple occasions while attending Carl L. Barton Elementary School in 1991. The third lawsuit (Doe 3 action) alleged that Doe 3 had been sexually abused by Hawkins on multiple occasions while attending Carl L. Barton Elementary School from 2005 to 2008.

¶ 8 B. Prairie State Insurance Cooperative

¶ 9 Subsequent to the Doe 1 action, Freeburg school district sought to join the Prairie State Insurance Cooperative (PSIC), which is comprised of 134 public schools, for the purpose of acquiring a new insurance carrier in place of its insurance carrier at that time, Country Mutual Insurance Company (Country Mutual). On September 30, 2010, Bob Pegg, PSIC's executive director, and Don Bagley, an insurance producer, met with Tomi Diefenbach, Freeburg school district superintendent, to discuss the "possibility" of Freeburg school district joining PSIC.

¶ 10 On October 27, 2010, Doug Ransom, an insurance broker with Risk Placement Services, Inc., sent an e-mail to Eddie Flodberg, the area assistant vice president of Arthur J. Gallagher Risk Management Services, Inc., requesting details of the September 30, 2010, meeting with Diefenbach. Ransom included a link to an article concerning a former Freeburg school district student, who had made allegations of sexual molestation against Hawkins. Ransom specifically requested details surrounding the sexual abuse claims. Ransom expressed that, although claims by this "perp" would be excluded, allegations that there was an alleged cover-up "may make it difficult to cover this line without better detail."

¶ 11 Flodberg responded by informing Ransom via e-mail that PSIC was aware of the sexual molestation allegations against Hawkins. Flodberg also attached an e-mail from Pegg, which was intended for PSIC's executive committee, summarizing the details of the September 30, 2010, meeting. Pegg's e-mail, in pertinent part, states the following:

"The reason for our visit was to discuss with the district the possibility of joining the PSIC. I would like to give the PSIC Executive Committee a brief summary of our visit.

I felt the visit to the school was necessary due to the allegations filed in 2010 that the former superintendent was involved in the sexual molestation of a student. Prior to this formal complaint being filed[,] Superintendent Rob Hawkins’ [sic ] had committed suicide in 2009. Mr. Hawkins was superintendent from 1999 until his death in May 2009. Actually nothing was formally filed until July, 2010, against Mr. Hawkins. Rumors and hearsay of the alleged incident is what lead [sic ] to the suicide of Mr. Hawkins. Since the alleged incident was reported, claims have been made that the incidents had been reported to the two previous Freeburg superintendents and they did not take the appropriated [sic ] steps to investigate these incidents. I will add that the school and the former superintendents deny these allegations. There has been one lawsuit filed against the school (Doe vs. FCCSD#70) that is on file at the time of this report.

***

Our purpose in the visit was to determine if the issues at the school are confined to the alleged acts of past superintendents and are not reflected in the current leadership at the school. Second, we need to be secure that the PSIC would not be exposed to any possible legal activity in the ongoing litigation. *** I think it is important to note that the alleged activity by Mr. Hawkins occurred during the middle 1990's and none of the current school leadership was at the school at that time. The alleged conduct is reported to have happened during the middle 1990's at a time when Mr. Hawkins was a teacher and coach at the school. The alleged conduct was reported by one student not several students. There have been no reported incidents in the years when Mr. Hawkins was school superintendent. In July, 2010, the two former superintendents were sued in the case. Claims have been made that they were aware of the misconduct of Mr. Hawkins occurring in 1990 and they did nothing about it. However, they have indicated not [sic ] claims were made known to them during this time.

***

Can the PSIC as the potential carrier for the school become embroiled in this litigation? I do not think this is possible with one important change to our policy. The school was not carrying sexual molestation coverage during the time when this incident happened. When the coverage was added (after the alleged conduct came to light and the suicide of Mr. Hawkins) for sexual molestation in May of 2009[,] the current carrier used a retro date of 9/25/08. The current administrators do not know why this particular date was selected. The PSIC should extend our retro date only to that 9/25/08 date. That would protect the PSIC from any ‘unknown’ occurrence happening dating prior to 9/25/08. All current reported claims have come from the middle 1990's. One of the previous superintendents served as interim superintendent after the death of Mr. Hawkins. Again, this requires that we modify are [sic ] current 7/1/06 retro date for this one district. I feel that is a fair and appropriate action by the PSIC.

***

*** I do not feel that this district and their current leadership should be held responsible for the past acts of Mr. Hawkins. More importantly, the PSIC will be protected from these past actions."

Freeburg school district was subsequently permitted to join PSIC.

¶ 12 In 2013, PSIC, on behalf of Freeburg school district, acquired the policy from RSUI. The policy, numbered NHP652175, listed an effective date of July 1, 2013, and provided a $1 million aggregate limit of liability for claims first made during the policy period (July 1, 2013, to July 1, 2014). The policy also listed a "Prior And/Or Pending Litigation Date" of July 1, 2009, excluding all occurrences...