Westport Ins. Corp. v. Sycamore Cmty. Unit Sch. Dist. #427

555 F.Supp.3d 550

WESTPORT INSURANCE CORPORATION, Plaintiff/Counter-Defendant,

v.SYCAMORE COMMUNITY UNIT SCHOOL DISTRICT #427 and Dayle Boyle, Defendants/Counter-Plaintiffs.

No. 20 CV 7081

United States District Court, N.D. Illinois, Eastern Division.

Signed August 19, 2021

Adam Hoyt Fleischer, Michael Haskell Passman, Lindsey D. Dean, BatesCarey LLP, Chicago, IL, for Plaintiff/Counter-Defendant.

Seth David Lamden, Blank Rome LLP, Chicago, IL, for Defendant/Counter-Plaintiff Sycamore Community Unit School District # 427.

Elizabeth Margaret Bartolucci, Bartolucci Law, LLC, Chicago, IL, for Defendant/Counter-Plaintiff Dayle Boyle.

MEMORANDUM OPINION AND ORDER

Manish S. Shah, United States District Judge In this insurance-coverage dispute, Westport Insurance Corporation seeks a declaration that it has no duty to defend or indemnify Sycamore Community Unit School District #427 or former District employee, Dayle Boyle, in a suit brought by a former student. The parties agree that the applicable insurance policies control the outcome and cross-move for judgment on the pleadings under Rule 12(c). For the reasons set forth below, there is no coverage under the policies for the claims asserted against the District and Boyle.

I. Legal Standards

The same standard applies to a Rule 12(c) motion for judgment on the pleadings and a Rule 12(b) motion to dismiss. See Federated Mut. Ins. Co. v. Coyle Mech. Supply Inc. , 983 F.3d 307, 313 (7th Cir. 2020). I take all well-pleaded allegations as true and draw all reasonable inferences in favor of the nonmoving party. Id. Judgment on the pleadings should be granted only when "it appears beyond doubt that the nonmovant cannot prove facts sufficient to support its position, and that the [moving party] is entitled to relief." Scottsdale Ins. Co. v. Columbia Ins. Grp., Inc. , 972 F.3d 915, 919 (7th Cir. 2020). I consider the complaint and counterclaims, answers, and documents attached to the pleadings. See Milwaukee Police Ass'n v. Flynn , 863 F.3d 636, 640 (7th Cir. 2017).

II. Background

From 2001 to 2004, Sycamore Community Unit School District #427 purchased liability insurance from Westport Insurance Corporation's predecessor. [14] at 1–2, ¶ 2.¹ The policies indemnified the District and its employees (when acting within the scope of their employment) from damages caused by certain occurrences. They also required the District to notify Westport of any suit or occurrence that may result in a claim. In 2019, former Sycamore High School student Dustin Ruby sued the District and former athletic trainer, Dayle Boyle, alleging that Boyle sexually abused Ruby when he was an underage student. The District and Boyle sought coverage under the policies, but Westport refused to defend the suit. Ruby's lawsuit against the District and Boyle, Dustin Ruby v. Sycamore Community Unit School District #427, et al. , No. 2019-L-50, remains pending before the Circuit Court of Dekalb County.

A. The Insurance Policies

Westport issued three liability insurance policies to the District covering 2001 to 2002, 2002 to 2003, and 2003 to 2004. See [1-2], [1-3], [1-4]. Westport has no duty to defend the underlying suit under the 2003–2004 policy because the allegations in Ruby's complaint precede that policy period. According to the underlying complaint, the final at-school sexual act between Boyle and Ruby occurred on May 10, 2003, Boyle resigned three days later, and the school punished Ruby the day after that. [25] at 57–58, 60, ¶¶ 32–34, 36, 43. The policy period for the 2003–2004 policy did not start until July 1, 2003. [1-4] at 2. The 2003–2004 policy provided coverage to the District for bodily injuries caused by " ‘occurrence[s]’ arising from ‘sexual misconduct,’ " but it expressly excluded coverage for "any person who allegedly or actually participates in any act of ‘sexual misconduct.’ " Id. at 110. The policy further provided that "[i]f the date of the ‘occurrence’ precedes the effective date of the policy, then any liability ... is not covered." Id. at 111. So Boyle—the only party seeking coverage under the 2003–2004 policy, see [25] at 47, ¶ 56—is not entitled to coverage. Westport is entitled to judgment on the pleadings on Counts II and VI of its complaint.

The first two policies did not have a sexual-misconduct exclusion. The 2001–2002 policy provided coverage for damages because of "bodily injury" caused by an "occurrence" and for " ‘personal injury’ caused by an offense arising out of [the District's] business." [1-2] at 113–114. The policy also promised to defend lawsuits seeking such damages. Id. It defined "bodily injury" to include "bodily injury ... mental anguish, mental injury and humiliation, sustained by a person." Id. at 128. The policy defined "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions," and "personal injury," in relevant part, as "injury arising out of ... [m]ental anguish, mental injury and humiliation." Id. at 130–31. Insureds under the policy included the District (the named insured) and its employees, "but only for acts within the scope of their employment or at [the District's] direction." Id. at 124. The policy excluded from coverage, however, damages for any bodily injury or personal injury "arising, in whole or in part, from any dishonest, fraudulent or criminal act of any insured." Id. at 114. The District had a duty to notify Westport "as soon as practicable of an ‘occurrence’ or an offense which may result in a claim." Id. at 126.

The 2002–2003 policy covered mostly the same ground. It again provided coverage for bodily injury arising from an occurrence and personal injury caused by an offense to which the coverage applied; it adopted the 2001–2002 policy's definitions of "occurrence" and "bodily injury"; and it excluded from coverage any bodily or personal injury "arising from any dishonest, fraudulent or criminal act" of any insured. [1-3] at 188, 190, 217, 222. The District's employees also remained insured only for acts within the scope of their employment. Id. at 219. But the policies weren't identical. Unlike the 2001–2002 policy, the 2002–2003 policy's definition of personal injury did not encompass "injury arising out of ... [m]ental anguish, mental injury and humiliation." Id. at 222. The notice requirement, moreover, did not require notification "as soon as practicable." Instead, it required the District to notify the insurer in writing "if a claim or ‘Suit’ is brought against an ‘Insured’ or in the event of an ‘Occurrence’ that [m]ay result in a claim under this policy" or "[i]nvolves ... [r]ape and/or serious physical assault ... regardless of perceived liability." Id. at 207–08. After notifying the insurer of such an occurrence, the policy dictated that the District "must also [c]ooperate with [the insurer's] investigation, settlement or defense." Id. at 208.

B. The Underlying Action

In August 2019, Ruby filed a complaint in Illinois state court, alleging that from 2001 to 2003, Boyle engaged in an inappropriate and sexually abusive relationship with him while he was a minor. See [25] at 90, 95, ¶¶ 23–26. The complaint alleged that Sycamore High School employed Boyle as a graduate assistant athletic trainer while Ruby was a student and member of several athletic teams. Id. at 91–92, ¶¶ 2–6, 9–10. Ruby alleged, among other things, that a coach witnessed he and Boyle engaging in inappropriate sexual conduct on May 10, 2003—just weeks after Ruby had turned 18—and that "top level administrative staff, as well as district safety and supervisory personal" began an investigation into the matter and punished Ruby within days. Id. at 96–97, ¶¶ 31–38. Ruby amended his complaint four times between January 2020 and February 2021. Id. at 52, 112, 128, 166. The February 2021 operative complaint removed allegations against Boyle relating to her sexual relationship with Ruby after he reached the age of majority on April 15, 2003. See id. at 58–59, ¶¶ 37–42. But the core factual allegations remain the same. See id. at 52–204; [14] at 4.

Ruby originally brought an intentional tort claim against Boyle and negligence and willful and wanton conduct claims against the District. [25] at 98–103, 107–08, ¶¶ 43–49, 56–58. In addition to willful and wanton conduct, Ruby labeled Boyle's grooming, sexual touching and abuse as "negligent" in the second amended complaint. Id. at 147, 149 ¶¶ 22–23, 33. In the operative complaint, Ruby asserts claims against the District for willful and wanton conduct and against Boyle, both individually and as an agent for the District, for negligence and willful and wanton conduct. Id. at 52–88. Ruby alleges that the District willfully and wantonly failed to properly investigate and report Boyle's inappropriate conduct, allowed Boyle to have unrestricted and unsupervised access to minors and to abuse Ruby, and failed to protect Ruby from 2001 to 2003 while he was a minor. Id. at 59–60, ¶ 42. As for Boyle, the complaint contends that she acted both negligently and willfully and wantonly by grooming and physically touching, abusing, and engaging in sexual conduct with Ruby as a minor. Id. at 66, ¶ 31; id. at 73, ¶ 34; id. at 80, ¶ 34; id. at 86, ¶ 31. Ruby contends that, as a result of Boyle's abuse and the District's conduct, he has and will continue to suffer pain, trauma, and psychological, spiritual, and emotional injury and distress. Id. at 60–61, ¶ 45; id. at 67, ¶ 34; id. at 74, ¶ 37; id. at 80, ¶ 37; id. at 86, ¶ 34.

The District notified Westport of the suit less than a month after Ruby filed his first complaint. [21] at 10, ¶ 30. Westport informed the District that its policies did not provide coverage because the District allegedly knew of the abuse no later than May 2003 but did not provide notice until Ruby filed his lawsuit sixteen years later. [1-6] at 2. The District admitted that in May 2003, it "was made aware of an incident that had occurred in Sycamore High...