W. Bend Mut. Ins. Co. v. Cmty. Unit Sch. Dist. 300

2021 IL App (2d) 210108

193 N.E.3d 266

456 Ill.Dec. 298

WEST BEND MUTUAL INSURANCE COMPANY, Plaintiff-Appellant,

v.COMMUNITY UNIT SCHOOL DISTRICT 300; John Does Nos. 3, 4, and 5; and Carlos Alberto Bedoya, Defendants,

(Community Unit School District 300, Defendant-Appellee).

No. 2-21-0108

Appellate Court of Illinois, Second District.

Order filed November 12, 2021

Jeffrey A. Siderius, of Cray Huber Horstman Heil & Van Ausdal, of Chicago, for appellant.

Daniel J. Zollner, Charles A. LeMoine, and Jennifer Warner, of Dykema Gossett PLLC, of Chicago, for appellee.

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

¶ 1 In this declaratory judgment case ( 735 ILCS 5/2-701 (West 2018) ), plaintiff, West Bend Mutual Insurance Company (West Bend), sought a declaration that it had no duty to defend an additional insured, defendant Community Unit School District 300 (district), in connection with several lawsuits filed on behalf of minors. The minors were allegedly sexually molested and/or abused by defendant, Carlos Alberto Bedoya, during after-school programs run by West Bend's named insured, the Boys & Girls Clubs of West Dundee Township (club), which had rented the district premises. Bedoya was an employee of the district and the club. The underlying complaints alleged willful and wanton hiring and retention and willful and wanton supervision against the district. On cross-motions for summary judgment in the declaratory judgment action, the court granted the district summary judgment. The court found that (1) West Bend had a duty to defend the district under the policy's¹ physical abuse and sexual molestation liability endorsement and (2) the district was not required to provide notice of an occurrence and, thus, did not fail to comply with the policy's notice requirement. Subsequently, the court made findings under Illinois Supreme Court Rule 304(a) (eff. Mar. 8, 2016). West Bend appeals. We affirm.

¶ 2 I. BACKGROUND

¶ 3 The district entered into rental agreements with the club, allowing the club to conduct after-school programs at district schools for the 2016-17 and 2017-18 school years. Under the agreements, the club (1) agreed to name the district as an additional insured in its commercial general liability policy—which it did—and (2) was required to "defend, indemnify and hold harmless" the district against all claims arising out of the club's use of its property or any of its activities on the rented site.

¶ 4 A. Doe Complaints

¶ 5 In 2018 and 2019, the district and the club, among others, were named as defendants in several complaints filed by unnamed minors, three of which are relevant here (Doe complaints) (Kane County case Nos. 18-L-519, 18-L-520, and 18-L-521).² The Doe complaints, which were attached as exhibits to West Bend's declaratory judgment complaint,³ which we discuss below. That complaint alleged that the minors were sexually molested and/or abused by Bedoya while he acted as an "agent, servant, employee, tutor and/or volunteer of or for" the district or the club during the club's after-school programs at a district school. Bedoya, they asserted, used his position with the district and club to engage in "inappropriate behaviors toward children" between "approximately August 2016, and June 2017" as to John Doe 3 and John Doe 4 and between "approximately 2015 and 2017" as to John Doe 2. The complaints alleged that Bedoya's acts were not reported to the district until between "April[ ] 2017 and May[ ] 2017."

¶ 6 The district was the sole defendant in counts I and V of the Doe complaints. In those counts, the Doe plaintiffs asserted claims for willful and wanton hiring and retention of Bedoya (count I) and willful and wanton supervision of Bedoya (count V) and alleged that the district "had a duty to exercise reasonable care for the safety of others," including each minor plaintiff, or in its "supervision of" Bedoya. Each count also alleged that the district "knew, or should have known," that (1) Bedoya lacked proper identification or credentials for his position, (2) there was an outstanding warrant for his arrest, (3) he was engaged in activities involving children, and (4) he was not releasing children to the club's after-school activities after his tutoring sessions. The counts further alleged that the district willfully and wantonly failed to protect the children from the reasonably foreseeable threat Bedoya posed—namely, his inappropriate conduct and sexual abuse. The counts further alleged that the minors suffered injuries as a proximate result of the district's conduct.

¶ 7 The district tendered the defense of the complaints to West Bend, and West Bend agreed to defend the district, subject to a reservation of rights. The reservation of rights raised coverage questions under the policy's commercial general liability coverage as to the definition of "occurrence" and a policy exclusion for "intentional acts," and it questioned the district's compliance with a notice of occurrence condition, set forth below.

¶ 8 B. Relevant Policy Provisions

¶ 9 Three West Bend commercial general liability policies are at issue in this case (policy No. 1882101 01 covering the period August 1, 2014, to August 1, 2015; policy No. 1882101 02 covering the period August 1, 2015, to August 1, 2016; and policy No. 1882101 03 covering the period August 1, 2016, to August 1, 2017). All three policies (1) contain a physical abuse and sexual molestation liability endorsement; (2) define the terms "insured," "You," and "Your"; (3) identify the named insured; (4) contain an additional insured endorsement; and (5) contain notice requirements.

¶ 10 The main body of the "Commercial General Liability Coverage Form" defines the terms "You," "Your," and "insured":

"Throughout this policy the words ‘you’ and ‘your’ refer to the Named Insured shown in the Declarations [(i.e. , The Boys and Girls Club of Dundee Township)], and any other person or organization qualifying as a Named Insured under this policy. The words ‘we’ and ‘us’ and ‘our’ refer to the company providing this insurance.

The word ‘insured’ means any person or organization qualifying as such under Section II—Who Is An Insured."

¶ 11 "Section II—Who Is An Insured," in turn, generally provides that an insured is a named insured in the declarations.

¶ 12 In addition, pursuant to the "Additional Insured—Designated Person or Organization" endorsement, which modifies the insurance provided under the commercial general liability coverage part, the district is listed as an additional insured. The endorsement further provides:

"Section II—Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for ‘bodily injury’ *** caused, in whole or in part, by your acts or omissions or the acts or omissions of those acting on your behalf:

A. In the performance of your ongoing operations; or

B. In connection with your premises owned by or rented to you."

¶ 13 The physical abuse and sexual molestation liability endorsement, which modifies the insurance provided under the commercial general liability coverage part, provides, in relevant part:

"We will pay those sums the insured becomes legally obligated to pay as damages because of ‘physical abuse’, ‘mental injury’ or ‘sexual molestation’ arising out of the negligent :

(a) employment;

(b) investigation;

(c) supervision; (d) reporting to the proper authorities, or failure to so report; or

(e) retention of any person for whom the insured is legally responsible." (Emphasis added.)

"Sexual molestation" is defined as "any actual or alleged act, touching, or caressing or suggestion thereof which could be considered sexual and/or inappropriate."

¶ 14 Finally, the policy's notice requirements, contained in "Section IV—Commercial General Liability Conditions," provide:

"2. Duties In The Event Of Occurrence, Offense, Claim or Suit

a. You must see to it that we are notified as soon as practicable of an ‘occurrence’ or an offense which may result in a claim.

***

b. If a claim is made or ‘suit’ is brought against any insured , you must:

(1) Immediately record the specifics of the claim or ‘suit’ and the date received; and

(2) Notify us as soon as practicable[.]

You must see to it that we receive written notice of the claim or ‘suit’ as soon as practicable.

c. You and any other involved insured must:

(1) Immediately send us copies of any demands, notices, summonses or other legal papers received in connection with the claim or ‘suit’[.]" (Emphases added.)

¶ 15 C. West Bend's Complaint and the District's Counterclaim

¶ 16 On June 26, 2019, West Bend filed a declaratory judgment complaint ( 735 ILCS 5/2-701 (West 2018) ). In count I, which is the only count in West Bend's complaint relevant to this appeal, West Bend sought a declaration that it had no duty to defend or indemnify the district. It relied on the commercial general liability coverage, which provides liability coverage for "bodily injury" caused by an "occurrence"; an intentional-acts exclusion; and the district's alleged failure to comply with the notice-of-"occurrence" condition.

¶ 17 The district filed an answer, affirmative defenses, and a counterclaim for declaratory relief. It denied an actual controversy about the availability of coverage under the commercial general liability coverage. Further, it denied that notice conditions applied to it because it was an additional insured, not a named insured. In count I of its counterclaim, which is the only count relevant to this appeal, the district sought a declaration that West Bend had a duty to defend it from the Doe complaints.⁴

¶ 18 D. Cross-Motions for Summary Judgment

¶ 19 On March 20, 2020, the district moved for summary judgment (id. § 2-1005) on count I of West Bend's complaint and count I of its counterclaim, asserting that the Doe complaints triggered West Bend's duty to defend it under the policy's physical abuse and sexual molestation liability...