Empire Indemnity Insurance Company v. The Chicago Province of the Society of Jesus ( 2013 )

ILLINOIS OFFICIAL REPORTS
Appellate Court
Empire Indemnity Insurance Co. v. Chicago Province of the Society of Jesus,
2013 IL App (1st) 112346
Appellate Court EMPIRE INDEMNITY INSURANCE COMPANY, Plaintiff-Appellee,
Caption v. THE CHICAGO PROVINCE OF THE SOCIETY OF JESUS,
Defendant-Appellant (Donald J. McGuire, John Doe 116, John Doe 117,
and John Doe 118, Defendants and Intervening Defendants; RLI
Insurance Company and Mt. Hawley Insurance Company, Intervening
Plaintiffs-Appellees; Pennsylvania General Insurance Company,
Intervening Defendant-Appellee; First Nonprofit Insurance Company,
Intervening Defendant and Intervening Plaintiff-Appellee; John Doe 119
and Does 1 through 20, Intervening Defendants).
District & No. First District, First Division
Docket Nos. 1-11-2346, 1-11-2653 cons.
Filed May 13, 2013
Held In an action arising from a dispute as to whether defendant, an insured
(Note: This syllabus religious order, had coverage for the claims arising from allegations that
constitutes no part of one of its priests sexually molested minors, the trial court properly
the opinion of the court entered summary judgment for several of the insurers based on the
but has been prepared findings that the underlying complaints triggered either the exclusion for
by the Reporter of “expected or intended” damages, the exclusion applicable if any
Decisions for the executive officer, supervisory employee, director or trustee had actual
convenience of the knowledge of the abuse, or the limitation of coverage to molestation
reader.)
occurring during the term of coverage; however, the entry of summary
judgment for one insurer that failed to provide complete copies of its
policies was reversed and that cause was remanded for further
proceedings.
Decision Under Appeal from the Circuit Court of Cook County, No. 07-CH-35007; the
Review Hon. Martin Agran and the Hon. Lee Preston, Judges, presiding.
Judgment Affirmed in part and reversed in part; cause remanded for further
proceedings.
Counsel on Peterson, Johnson & Murray, of Chicago (Jennifer L. Turiello, of
Appeal counsel), for appellant.
Stellato & Schwartz, Ltd. (Esther Joy Schwartz, Richard D. Foody, and
Theodore W. Pannkoke, of counsel), Swanson, Martin & Bell, LLP
(Daniel G. Wills, of counsel), and Tressler LLP (Michael J. Duffy and
Ashley L. Conaghan, of counsel), all of Chicago, and Morison Holden &
Prough, LLP, of Walnut Creek, California (Michael D. Prough, of
counsel), for appellees.
Panel JUSTICE DELORT delivered the judgment of the court, with opinion.
Presiding Justice Hoffman and Justice Rochford concurred in the
judgment and opinion.
OPINION
¶1 The dispute we must resolve here is whether a Catholic religious order is insured for
potential losses resulting from alleged molestation of minors by one of its priests. The
defendant-appellant, the Chicago Province of the Society of Jesus (the Jesuits), appeals from
orders granting summary judgment in favor of Empire Indemnity Insurance Company
(Empire), First Nonprofit Insurance Company (FNIC), RLI Insurance Company (RLI), Mt.
Hawley Insurance Company (Mt. Hawley), and Pennsylvania General Insurance Company
(Pennsylvania General) (collectively, the Insurers), in an insurance coverage dispute
regarding the five insurers’ duty to defend lawsuits brought against the Jesuits. The Jesuits
contend that the trial court erred in finding that: (i) the “expected or intended injury”
exclusion in the Insurers’ policies applied; (ii) the claims of John Doe 117 and his parents
occurred before the FNIC policies incepted; (iii) the FNIC policies’ “Condition 1.A”
exclusion, regarding actual knowledge, applied; (iv) Pennsylvania General owed no
coverage, where Pennsylvania General failed to produce copies of its policies; and (v) the
allegations in the underlying claims did not potentially assert damages resulting from pastoral
counseling activities. For the following reasons, we affirm in part, reverse in part, and
remand.
¶2 BACKGROUND
¶3 This case began when Empire filed a declaratory judgment action (which FNIC, RLI, Mt.
Hawley, and Pennsylvania General eventually joined) seeking a finding that there was no
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duty to defend the Jesuits against complaints filed by various alleged sexual abuse victims
of defendant Donald J. McGuire, a former priest and member of the Jesuits.1 FNIC issued
one-year multiple-peril insurance policies, and Pennsylvania General issued one-year general
liability policies. Empire, RLI, and Mt. Hawley each issued one-year umbrella liability
policies.
¶4 The FNIC Insurance Policy
¶5 FNIC issued a nonprofit multiple-peril insurance policy effective from November 30,
1998, to November 30, 1999, and subsequently renewed the policy on an annual basis to
November 30, 2004. The policy contained provisions covering “Bodily Injury and Property
Damage Liability” as well as “Sexual Abuse or Sexual Molestation Liability.” The bodily
injury coverage provided in pertinent part that FNIC would pay sums that the Jesuits became
legally obligated to pay as damages due to “bodily injury or property damage to which this
coverage applies.” This coverage was further limited to bodily injury and property damage
occurring “during the Term of Coverage” and specifically excluded damages “expected or
intended from the standpoint of the insured.” The sexual abuse or molestation coverage
stated that FNIC would pay damages that the Jesuits become legally obligated to pay “arising
out of any actual, threatened, intentional or unintentional sexual molestation of any person
to which this coverage applies.”2 The sexual abuse/molestation coverage was also limited to
sexual abuse or molestation occurring “during the Term of Coverage” and, under “Condition
1.a,” the coverage would be cancelled “if any executive officer, supervisory employee,
director or trustee [had] actual knowledge of any act, incident or alleged act of sexual abuse
or sexual molestation.” The policy defined sexual abuse or sexual molestation as “the
infliction of harm upon a person, by any employee, agent or representative or volunteer of
[the Jesuits], whether such harm is physical, emotional or psychological in nature and is
primarily sexually motivated.”
¶6 The Pennsylvania General Policy
¶7 Pennsylvania General issued a one-year general liability policy beginning on November
30, 1990, and renewed the policy annually until November 30, 1998. The policy covered
bodily injury liability and “Pastoral Counseling Professional Liability.” The coverage for
bodily injury liability excluded such injury “expected or intended from the standpoint of the
insured,” except for bodily injury “resulting from the use of reasonable force to protect
persons or property.” With respect to the pastoral counseling professional liability, coverage
was excluded, inter alia, for damages arising out of: (i) “the willful violation of a penal
1
The Jesuits do not appeal the trial court’s denial of their own motion for judgment on the
pleadings brought under section 2-615(e) of the Code of Civil Procedure (Code) (735 ILCS 5/2-
615(e) (West 2008)).
2
Subsequent policies removed the “any actual, threatened, intentional or unintentional” terms
and provided coverage for damages “arising out of sexual molestation.”
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statute *** committed by or with the consent of the insured”; (ii) “the actual or alleged
conduct of a sexual nature” (although Pennsylvania General agreed to defend the Jesuits in
any suit seeking damages from such conduct until judgment was rendered); and (iii)
dishonest, fraudulent, or criminal acts or omissions of the insured.
¶8 The Empire Policy
¶9 Empire issued a one-year umbrella liability insurance policy beginning on November 30,
2002, and renewed the policy annually to November 30, 2005. The policy indemnified the
Jesuits for bodily injury liability caused by an “occurrence” in excess of a retained limit. An
occurrence was defined as an “accident, including continuous or repeated exposure to
substantially the same harmful conditions.” The Empire policy also excluded coverage for
bodily injury “either expected or intended from the standpoint of the insured.”
¶ 10 The RLI and Mt. Hawley Policies
¶ 11 RLI and Mt. Hawley both issued an umbrella liability policy to the Jesuits. RLI’s one-
year policy began November 30, 1990, and was renewed annually to November 30, 2001.
Mt. Hawley’s policy was effective from November 30, 2001, to November 30, 2002. Both
policies provided bodily injury liability coverage, and as with the Pennsylvania General and
Empire policies, they also excluded coverage for bodily injury “expected or intended from
the standpoint of the insured.”3
¶ 12 The Underlying Litigation
¶ 13 Beginning in August 2007, various “John Doe” complainants (hereinafter, the John Doe
complaints) sued the Jesuits, alleging that they had been either sexually abused or sexually
molested by McGuire, then a priest and member of the Jesuits who had also been a “teacher
and scholastic advisor” at Loyola Academy, a high school operated by the Jesuits. The
complaints all alleged negligence, intentional infliction of emotional distress, and fraud
against the Jesuits. Significantly, the complaints claimed that the Jesuits either knew or
should have known of McGuire’s abuse, because the Jesuits were first apprised of McGuire’s
abuse of minors in 1969, when another abuse victim, John Doe 84, reported to a Fr. Schlax,
a Chicago Archdiocesan priest, that McGuire had sexually abused him. Fr. Schlax then
allegedly reported that abuse to the Jesuits and officials at Loyola Academy, including its
president, principal, and headmaster. The John Doe lawsuits further claimed that the Jesuits
had subsequently received numerous other complaints of sexual abuse of minors by
McGuire, all of which took place prior to the time of the abuse in the John Doe complaints.
The complaints also all alleged that, despite this knowledge of McGuire’s activities and
propensity to abuse minors, the Jesuits did not report these allegations to law enforcement.
3
Although the RLI’s 1990 to 1993 policies did not contain a separate “expected or intended”
exclusion (whereas subsequent RLI policies and the Mt. Hawley policy did), this exclusion was
incorporated into the 1990 to 1993 RLI policies’ definition of an “occurrence.”
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Instead, the Jesuits transferred McGuire and allowed him to “remain in ministry and travel
around the world” solely to avoid scandal.
¶ 14 In August 2007, John Doe 116 filed a complaint against the Jesuits and McGuire,
alleging that McGuire abused him from 1999 to 2003 while he was a minor. John Doe 116
amended his complaint in November 2007 and again in September 2008. In addition to the
common allegations above, the second amended complaint also alleged that, after reporting
his abuse by McGuire to Fr. Schlax, John Doe 84, his parents, and Fr. Schlax met with
representatives of the Jesuits and Loyola Academy regarding these allegations. Following
this meeting, John Doe 84 transferred to another Jesuit school and McGuire was removed
from Loyola Academy in the middle of the year. John Doe 116 also claimed that, in addition
to transferring McGuire, the Jesuits confidentially settled other victims’ sexual abuse
allegations against McGuire to avoid scandal.
¶ 15 In October 2007, John Does 117 and 118, who are brothers, filed a joint complaint also
alleging sexual abuse by McGuire while they were minors. This complaint was amended in
October 2008. In the amended complaint, John Doe 117 alleged that McGuire sexually
abused him between 1988 and 1989 and then sexually molested him in 1992 and 1994. His
brother, John Doe 118, claimed that McGuire sexually molested him in 2001 and had other
“inappropriate sexual contact” with him in 2002. John Does 117 and 118 also alleged that
John Doe 84 met with Jesuit and Loyola Academy representatives, after which John Doe 84
transferred schools and McGuire was removed from his position. Similar to John Doe 116,
John Does 117 and 118 also claimed that the Jesuits secretly settled other allegations of
sexual abuse by McGuire to avoid further scandal.
¶ 16 In April 2008, John Doe 119 filed a complaint against McGuire and the Jesuits also
alleging that he had been sexually abused by McGuire as a minor beginning in June 1998.
As with John Doe 116 and John Does 117 and 118, John Doe 119 also alleged that John Doe
84 met with the Jesuits and Loyola Academy officials prior to John Doe 84 transferring to
another school and McGuire’s removal from Loyola Academy.
¶ 17 In February 2009, John Doe 129 and John Doe 130 each filed individual complaints also
alleging that they had been sexually abused by McGuire as minors. John Doe 129 alleged that
he had been molested by McGuire from 1988 to 1998, and John Doe 130 alleged McGuire
sexually abused him between 1990 and 1995. These complaints, however, did not allege a
meeting between John Doe 84 and representatives of the Jesuits or Loyola Academy.
¶ 18 In addition to the John Doe complaints, John and Jane Doe, the parents of John Does 117
and 118, filed a complaint against the Jesuits and McGuire in September 2009 in the federal
district court in Arizona (the John Doe parents’ complaint). The John Doe parents’ complaint
alleged negligence, loss of filial consortium, and intentional infliction of emotional distress,
and sought damages against the Jesuits and McGuire (whom they alleged the Jesuits
supervised or employed) resulting from McGuire’s alleged sexual abuse of their sons. This
complaint also alleged that the Jesuits knew of McGuire’s abuse of minors no later than 1969
and had been aware of other incidents between 1969 and 1988 (when the abuse of their son,
John Doe 117, began), but resolved those claims confidentially in order to avoid scandal.
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¶ 19 The Declaratory Judgment Proceedings
¶ 20 The Insurers each filed various declaratory judgment actions seeking a finding that they
had no duty to defend the Jesuits in the underlying lawsuits.4 One of the first dispositive
motions heard was FNIC’s motion for summary judgment. This motion, which dealt with
John Doe 116’s first amended complaint and the original complaint of John Does 117 and
118, claimed in part that FNIC’s policies excluded coverage because: (i) John Doe 117’s
claims took place after the effective date of the policies, and (ii) both the “expected or
intended” exclusion and also “Condition 1.a” (regarding actual knowledge) applied. The trial
court agreed, and granted FNIC’s motion.
¶ 21 FNIC then filed a second motion for summary judgment, this time directed at John Doe
116’s second amended complaint, the amended complaint of John Does 117 and 118, John
Doe 119’s amended complaint, and John Doe 129’s original complaint. This second motion
again claimed that the “expected or intended” exclusion and Condition 1.a barred coverage.
The trial court denied this motion as to the second amended John Doe 116 complaint, but
granted it against the other John Doe complainants. The trial court found that, unlike John
Doe 116’s original and amended complaints, the allegations of negligence in his second
amended complaint did not include factual allegations that the Jesuits had actual knowledge
of McGuire’s abuse of John Doe 84.
¶ 22 On May 24, 2010, however, the trial court granted the Jesuits’ motion to reconsider,
which argued that the other complaints also did not include allegations of actual knowledge
in their respective negligence claims. The trial court thus found that the claims asserted were
either within or potentially within FNIC’s policies, and concluded that FNIC owed a duty to
defend.
¶ 23 FNIC then filed its own motion to reconsider that order. FNIC’s motion argued that the
supreme court’s holding in Pekin Insurance Co. v. Wilson, 237 Ill. 2d 446 (2010), required
the trial court to consider all of the factual allegations in the various John Doe complaints
before determining whether FNIC owed a duty to defend. FNIC thus concluded that the
absence of the specific allegation of the Jesuits’ knowledge of prior incidents of alleged
sexual abuse within the negligence count was immaterial. On December 3, 2010, the trial
court granted this motion, vacated its prior order, and found that FNIC owed no coverage
based upon the allegations in the prefatory “Facts” section of the complaint (regarding the
Jesuits’s receipt of a report about McGuire’s abuse of John Doe 84 in 1969 and their failure
to warn the public of McGuire’s behavior), which preceded the specific negligence
allegations. As a result, the trial court found that the FNIC policies’ “expected or intended”
exclusion as well as Condition 1.a applied, barring coverage.
4
The online case information for the circuit court of Cook County as well as the United
States District Court for the District of Arizona indicate that the John Doe complaints and the John
Doe parents’ complaint have either been settled or dismissed by stipulation or agreement. This court
may take judicial notice of the public documents that are included in the records of other courts.
Pfaff v. Chrysler Corp., 155 Ill. 2d 35, 75 (1992), overruled on other grounds by ABN AMRO
Mortgage Group, Inc. v. McGahan, 237 Ill. 2d 526 (2010); Ill. R. Evid. 803(8) (eff. Jan. 1, 2011).
At oral argument, none of the parties disputed that all of the cases have been settled.
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¶ 24 Empire and Pennsylvania General then filed individual motions for summary judgment,
and Mt. Hawley and RLI filed a combined summary judgment motion. The motions argued
that these insurers were entitled to summary judgment for the same reason that the trial court
granted summary judgment to FNIC: the alleged claims were barred under the “expected or
intended” exclusions in their respective policies.
¶ 25 Pennsylvania General’s motion, which was directed at the John Doe parents’ complaint,5
also alleged that their complaint did not allege acts arising from professional pastoral
counseling, and thus were not actually or potentially covered under the pastoral counseling
professional liability coverage in Pennsylvania General’s policies. The motion included the
affidavit of Tom Conlon, a representative of Pennsylvania General. Conlon’s affidavit stated
that Pennsylvania General “has provided the portions of the policies issued to [the Jesuits]
that it currently has available to [them].” The affidavit also stated that Pennsylvania General
did not “currently have access to the remaining portions of the policies issued to [the
Jesuits].” The Jesuits responded by arguing that summary judgment was inappropriate
because Pennsylvania General did not produce the actual policies, and since Pennsylvania
General was the plaintiff and the movant, it had the burden of proof regarding the policy
provisions.
¶ 26 In February 2011, FNIC filed a motion for summary judgment with respect to the John
Doe parents’ complaint. FNIC argued that it owed no coverage or duty to defend because
John Doe 117’s injuries took place prior to the effective date of the policies, and therefore
owed no coverage regarding the claim brought by the parents of John Doe 117. FNIC also
invoked the policies’ exclusions for “expected or intended” injuries, professional services,
as well as Condition 1.a. On June 21, 2011, the trial court granted FNIC’s motion, agreeing
that the allegation in the John Doe parents’ complaint that was predicated upon the injuries
to John Doe 117 was barred because those injuries took place prior to the policy’s effective
date. The trial court also agreed that the expected or intended injury exclusion applied
because the allegations in the John Doe parents’ complaint indicated that the Jesuits had
actual knowledge that McGuire had sexually abused minors prior to the alleged sexual abuse
of John Does 117 and 118.
¶ 27 On July 13, 2011, the trial court granted the summary judgment motions of Empire,
Pennsylvania General, RLI, and Mt. Hawley. As to Empire, RLI, and Mt. Hawley, the trial
court found that, as it found with respect to the FNIC dispute, the “expected or intended”
exclusion applied because the complaints alleged that the Jesuits had known of McGuire’s
prior sexual abuse of minors beginning in 1969 and had received reports of other incidents
and, therefore, “should have anticipated or ‘expected’ that McGuire would sexually abuse
or molest children.” In addition, the trial court agreed that the claims did not allege an injury
caused by an occurrence, which the policies defined in part as an “accident.” The trial court
5
In a separate appeal, we reversed the trial court’s granting of summary judgment in favor
of Pennsylvania General with respect to certain of the John Doe complaints. Pennsylvania General
Insurance Co. v. Chicago Province of the Society of Jesus, 2012 IL App (1st) 103828-U
(Pennsylvania General I). Pennsylvania General I is discussed later herein in greater detail. See
infra ¶ 58 et seq.
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noted that, since the complaints alleged that the abuse of the minors was expected or
intended and not accidental, the injuries did not arise from an insurable occurrence.
¶ 28 With respect to Pennsylvania General’s summary judgment motion against the John Doe
parents’ complaint, the trial court also found that Pennsylvania General’s “expected or
intended” exclusion applied for the same reasons it noted in its ruling on Empire’s motion
and the combined RLI/Mt. Hawley motion. The trial court further ruled that Pennsylvania
General’s “Pastoral Counseling Professional Liability” coverage did not apply because the
alleged injuries in the John Doe parents’ complaint did not arise from McGuire’s role as a
spiritual advisor; rather, according to the trial court, they arose “from McGuire’s alleged
sexual abuse of John Doe 117 and John Doe 118.” In so doing, the trial court relied on
excerpts from the missing policies and did not address the Jesuits’ argument regarding
Pennsylvania General’s failure to attach the actual, complete policy to either its complaint
for declaratory judgment or its summary judgment motion.
¶ 29 This timely appeal follows.
¶ 30 ANALYSIS
¶ 31 On appeal, the Jesuits contend that the circuit court erred in granting summary judgment
to the Insurers on the issue of their duty to defend. Specifically, the Jesuits argue that the trial
court erred in finding that: (i) the “expected or intended injury” exclusion in the Insurers’
policies applied; (ii) the claims of John Doe 117 and his parents occurred before the FNIC
policies incepted; (iii) the FNIC policies’ “Condition 1.A” exclusion, regarding actual
knowledge, applied; (iv) Pennsylvania General owed no coverage, where Pennsylvania
General failed to produce copies of its policies; and (v) the allegations in the underlying
claims did not potentially assert damages resulting from pastoral counseling activities.
¶ 32 Summary judgment is appropriate “if the pleadings, depositions, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a matter of law.” 735 ILCS 5/2-1005(c)
(West 2010). Summary judgment is a drastic measure and should only be granted when the
moving party’s right to judgment is “clear and free from doubt.” Outboard Marine Corp. v.
Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102 (1992). “Where a reasonable person could
draw divergent inferences from undisputed facts, summary judgment should be denied.” Id.
We review a trial court’s entry of summary judgment de novo. Id.
¶ 33 In construing an insurance policy, the court determines the intent of the parties to the
contract by construing the policy as a whole, with due regard to the risk undertaken, the
subject matter that is insured and the purposes of the entire contract. Id. at 108. Where the
words in the policy are clear and unambiguous, “a court must afford them their plain,
ordinary, and popular meaning.” (Emphasis in original.) Id. However, if the words in the
policy are susceptible to more than one reasonable interpretation, they will be considered
ambiguous and will be strictly construed in favor of the insured and against the insurer that
drafted the policy. Id. Nonetheless, courts will not strain to find an ambiguity where none
exists. Hobbs v. Hartford Insurance Co. of the Midwest, 214 Ill. 2d 11, 17 (2005). “The
construction of an insurance policy and a determination of the rights and obligations
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thereunder are questions of law ***.” Konami (America), Inc. v. Hartford Insurance Co. of
Illinois, 326 Ill. App. 3d 874, 877 (2002).
¶ 34 While an insurer’s duty to indemnify arises only if the facts alleged actually fall within
coverage, the duty to defend is much broader. Crum & Forster Managers Corp. v. Resolution
Trust Corp., 156 Ill. 2d 384, 398 (1993). “To determine whether the insurer has a duty to
defend the insured, the court must look to the allegations in the underlying complaint and
compare these allegations to the relevant provisions of the insurance policy.” Outboard
Marine Corp., 154 Ill. 2d at 107-08. If the underlying complaint alleges facts that fall “within
or potentially within” the coverage of the policy, the insurer is obligated to defend its insured
even if the allegations are “groundless, false, or fraudulent.” (Emphasis in original.) United
States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill. 2d 64, 73 (1991). “An
insurer may not justifiably refuse to defend an action against its insured unless it is clear
from the face of the underlying complaints that the allegations fail to state facts which bring
the case within, or potentially within, the policy’s coverage.” (Emphasis in original.) Id.
“Moreover, if the underlying complaints allege several theories of recovery against the
insured, the duty to defend arises even if only one such theory is within the potential
coverage of the policy.” Id. The threshold requirement that the complaint must satisfy to
present a claim of potential coverage is minimal; the complaint need present only a
possibility, not a probability, of recovery. Bituminous Casualty Corp. v. Gust K. Newberg
Construction Co., 218 Ill. App. 3d 956, 960 (1991).
¶ 35 In determining whether the allegations in the underlying complaint meet that threshold
requirement, both the underlying complaint and the insurance policy must be liberally
construed in favor of the insured. Wilkin Insulation Co., 144 Ill. 2d at 73. “[T]he duty to
defend does not require that the complaint allege or use language affirmatively bringing the
claims within the scope of the policy.” International Insurance Co. v. Rollprint Packaging
Products, Inc., 312 Ill. App. 3d 998, 1007 (2000). In addition, the plaintiff in a declaratory
judgment action bears the burden of proof. Farmers Automobile Insurance Ass’n v. Gitelson,
344 Ill. App. 3d 888, 896 (2003). Finally, all doubts are resolved in the insured’s favor.
Employers Insurance of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127, 154 (1999)
(citing Wilkin Insulation Co., 144 Ill. 2d at 74). With these principles in mind, we turn to the
questions presented here.
¶ 36 The “Expected or Intended” Exclusion
¶ 37 The Jesuits first contend that the trial court erred in finding that the “expected or
intended” exclusion applied. First, the Jesuits argue that the allegations of negligence were
at least potentially covered under the Insurers’ policies. Their second argument is that the
trial court’s finding improperly determined an ultimate factual issue in the underlying
litigation. Since the underlying claims have been settled or otherwise dismissed, we elect to
address the Jesuits’ first argument.
¶ 38 As to their first argument, the Jesuits contend that the complaints in the underlying
litigation were “littered” with allegations that the Jesuits either should have known, should
have been aware, or had constructive notice of McGuire’s prior sexual abuse of minors. The
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Jesuits then conclude that, since those allegations did not rise to the level of actual
knowledge, the “expected or intended” exclusion could not apply. In addition, they claim
that, in finding the “expected or intended” exclusion barred the claim, the trial court misread
Wilson when it erroneously considered the allegations outside of those within the specific
negligence count. We disagree.
¶ 39 At the outset, we note that the complaints do, in fact, include allegations that the Jesuits
either should have known, should have been aware, or had constructive notice of McGuire’s
prior sexual abuse of minors. In addition, when an insurer seeks to avoid coverage under a
policy exclusion, “the applicability of the exclusionary clause must be clear and free from
doubt.” Bituminous Casualty Corp. v. Fulkerson, 212 Ill. App. 3d 556, 564 (1991). In other
words, we must construe any limitations on an insurer’s liability liberally in favor of the
insured and against the insurer. Pekin Insurance Co. v. Estate of Goben, 303 Ill. App. 3d 639,
642 (1999). As noted above, all doubts are resolved in the insured’s favor. Ehlco Liquidating
Trust, 186 Ill. 2d at 154 (citing Wilkin Insulation Co., 144 Ill. 2d at 74). It is well established,
however, that the terms “intended” and “expected,” as used in similar insurance policy
exclusionary clauses, are not synonyms: an “expected” injury is merely one that should have
been “reasonably anticipated” by the insured. Bay State Insurance Co. v. Wilson, 96 Ill. 2d
487, 494 (1983).
¶ 40 Here, the factual section preceding the various counts of both the John Doe and the John
Doe parents’ complaints allege that the Jesuits were first apprised of McGuire’s abuse of
minors in 1969 and had subsequently received numerous other complaints alleging
McGuire’s sexual abuse of minors, all of which took place prior to the respective times of
the John Does’ abuse. These allegations set forth that the Jesuits reasonably should have
anticipated (or expected) McGuire’s abuse of the underlying John Doe plaintiffs after the
Jesuits received Fr. Schlax’s report of John Doe 84’s abuse in 1969 as well as numerous
subsequent reports prior to the abuse of the underlying plaintiffs. Since these allegations
were an expected injury from the Jesuits’ standpoint, the exclusion for “expected or
intended” injuries barred coverage under the various policies.
¶ 41 Moreover, when determining whether an insurance company has a duty to defend, a trial
court need not “consider each count in isolation and ignore facts pled in other counts,” where
the plaintiff has pleaded separate counts against various defendants but did not plead those
counts in the alternative. Illinois Casualty Co. v. Turpen, 84 Ill. App. 3d 288, 293 (1980).
Here, neither the John Doe complaints nor the John Doe parents’ complaint alleged mere
negligence or respondeat superior as an alternative theory of relief. Prior knowledge of
McGuire’s predilections is the cornerstone of each John Doe claim against the Jesuits. We
simply cannot parse the allegations into smaller parts in order to fashion some insurable
cause of action that does not trigger the “expected or intended” exclusion. Consequently, the
trial court did not err in refusing to consider those counts in isolation from the facts alleging
the Jesuits’ prior knowledge of McGuire’s numerous incidents of sexual abuse of minors
(and before the alleged abuse of the John Doe plaintiffs). Related to this point, the Jesuits
argue that the trial court misread the supreme court’s holding in Wilson when it considered
the factual allegations of McGuire’s prior abuse in finding that the negligence counts were
barred. This argument, however, is without merit.
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¶ 42 In Wilson, the supreme court held that a trial court could, under certain circumstances,
look beyond the underlying complaint in order to determine an insurer’s duty to defend.
Wilson, 237 Ill. 2d at 459. Here, the trial court did not look beyond the underlying complaint
in order to determine the Insurers’ duty to defend, which the Wilson court held to be
appropriate “under certain circumstances.” Id. Rather, the trial court looked at the entire
underlying complaint, which included factual allegations of McGuire’s sexual abuse other
minors prior to the abuse of the underlying John Doe complainants. The trial court thus did
not misread Wilson.
¶ 43 This court has previously found the underlying actions of an insured to be clearly
intentional, notwithstanding the injured parties’ claims of negligence. See, e.g., Westfield
National Insurance Co. v. Continental Community Bank & Trust Co., 346 Ill. App. 3d 113
(2003). The Jesuits argue that the trial court erred in relying upon Westfield because, unlike
the insured spouse (the aunt) there, the Jesuits here are not “accused of engaging in any
‘participatory conduct’ relative to” the claims of the underlying plaintiffs. We reject this
argument.
¶ 44 The holding in Westfield was predicated upon the insured party’s failure to act, rather
than her participatory conduct. Notably, the Westfield court made the following observations:
“The aunt did nothing when [her husband] left the marital bedroom to visit the minors
in their bedrooms. Even when one of the minors locked herself in the bathroom crying,
the aunt did nothing. The allegations reflect the aunt’s awareness of her husband’s prior
criminal involvement with minors in Florida and of her husband’s inappropriate physical
encounters with the minors; however, despite this awareness, the aunt did nothing to
advise or report these circumstances to the minors’ parents.” (Emphases added.)
Westfield, 346 Ill. App. 3d at 122.
¶ 45 Immediately after making those observations, the court held that the insured party
“reasonably should have anticipated or ‘expected’ the injuries, which were a natural and
probable result of her enabling acts, regardless of whether she could anticipate the precise
injury the minors would actually suffer.” Westfield, 346 Ill. App. 3d at 122.
¶ 46 Here, the complaint alleges that the Jesuits (the insured party) were aware of McGuire’s
abuse of minors on multiple prior occasions and reasonably should have anticipated or
expected the injuries that McGuire would subsequently inflict on the John Doe plaintiffs. As
such, the expected or intended exclusion also applies here, and summary judgment in favor
of the Insurers was warranted.
¶ 47 Nonetheless, the Jesuits contend that the “expected or intended” exclusion should not
apply because to do so would allow the allegations of intentional conduct to “override,
negate or obliterate allegations of negligent conduct.” In support of this contention, the
Jesuits cite Roman Catholic Diocese of Dallas v. Interstate Fire & Casualty Co., 133 S.W.3d
887 (Tex. Ct. App. 2004), and Roman Catholic Diocese of Joliet, Inc. v. Lee, 292 Ill. App.
3d 447 (1997). The Jesuits’ reliance upon Diocese of Dallas and Diocese of Joliet, however,
is misplaced.
¶ 48 At the outset, Diocese of Dallas was not a duty to defend case; rather, it concerned the
duty to indemnify, which involves a different analysis. Diocese of Dallas, 133 S.W.3d at 890
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(observing that the policies at issue did not provide a duty to defend). In addition, Diocese
of Dallas was decided by the Texas court of appeals, and there was no discussion therein to
demonstrate that Texas law tracks the Illinois Supreme Court’s subsequent holding in
Wilson, i.e., that a trial court may under certain circumstances look at all of the underlying
pleadings to determine an insurer’s duty to defend. In any event, it is well established that
case law from other states is not binding upon this court. American Freedom Insurance Co.
v. Uriostegui, 366 Ill. App. 3d 1000, 1004 (2006). Finally, Diocese of Dallas is factually
distinguishable: the court in that case noted that there were alternate bases for the negligence
claim other than the insured’s prior actual knowledge. Diocese of Dallas, 133 S.W.3d at 895.
Here, the negligence count was itself wholly grounded upon the Jesuits’ prior knowledge.
The negligence counts of the John Doe complaints mirror each other in that they claim that
the Jesuits should have known of McGuire’s “propensities as a child sexual abuser” based
upon “numerous complaints or reports to the Jesuits since 1961 that McGuire had engaged
in inappropriate conduct with minors.”6 Therefore, Diocese of Dallas is unpersuasive.
¶ 49 With respect to Diocese of Joliet, we note that the issue on appeal also was not the
insurer’s duty to defend. Diocese of Joliet, 292 Ill. App. 3d at 449. In addition, that court did
not address whether an exclusion for expected or intended acts applied; instead, the issue
presented was how many insurable occurrences took place. Id. Finally, there was only one
underlying plaintiff in Diocese of Joliet and, unlike this case, there were no claims that the
diocese had been aware of other victims of the abusive priest before the underlying plaintiff’s
abuse. Thus, there were no allegations of a prior awareness on the part of the insured that
would raise the issue of whether the diocese reasonably should have anticipated the
underlying plaintiff’s injuries. Since Diocese of Joliet is factually distinguishable, the Jesuits’
reliance upon it is misplaced, as well.
¶ 50 John Doe 117’s and His Parents’ Injuries
¶ 51 Next, the Jesuits claim that the trial court erred in finding that FNIC’s policies did not
cover the claims of John Doe 117 and his parents because he and his parents sufficiently
alleged injuries that occurred during the policy term. The Jesuits posit that the policies
unambiguously provide that any injury occurring during the policy term (including lingering
emotional or psychological injuries) is covered regardless of when the harm giving rise to
the injury occurs. They conclude that the trial court erred in finding that damages resulting
from John Doe 117’s and his parent’s emotional and psychological injuries occurring during
the policy term were not covered, because the sexual abuse of John Doe 117 (between 1988
and 1989, and in 1992 and 1994) occurred before the term of the FNIC policies (November
30, 1998, to November 30, 2004).
¶ 52 The parties agree that, where the policy language is unambiguous, it must be applied as
written. Hobbs, 214 Ill. 2d at 17. This court also may not strain to find ambiguity where none
exists. Id. In this case, the policy defined “sexual abuse or sexual molestation” in pertinent
6
The complaints of John Does 129 and 130 are substantially the same as the other John Doe
complainants: they alleged that the reports took place “in the 1960s and thereafter.”
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part as: “the infliction of harm of a sexual nature upon a person by any employee, agent or
representative of [the Jesuits], whether such harm is physical, emotional or psychological.”
We cannot agree with the Jesuits’ interpretation that the manifestation of emotional or
psychological injury during a policy period would under all circumstances relate back to the
infliction of the sexual abuse causing that injury, even if, as here, the sexual abuse took place
well before the beginning of the policy period. The precise act giving rise to coverage is the
infliction of some type of harmful or inappropriate sexual contact, not the subsequent
emotional or psychological ill effects from that contact, even if those ill effects persist long
after the sexual contact occurred. To hold as the Jesuits contend would improperly transform
this occurrence-based policy into a claims-based policy. See Stark v. Illinois Emcasco
Insurance Co., 373 Ill. App. 3d 804, 811 (2007). We therefore agree with the trial court that
John Doe 117’s claims and those of his parents are not covered by the FNIC policy.
¶ 53 The Actual Knowledge Component of “Condition 1.a”
¶ 54 The Jesuits also claim that the trial court erred in finding that FNIC’s coverage was
avoided because of “Condition 1.a,” which cancelled any subsequent sexual abuse coverage
if any “executive officer, supervisory employee, director or trustee” of the Jesuits had “actual
knowledge of any act, incident or alleged act of sexual abuse or sexual molestation”
committed by any “employee, agent, representative or volunteer worker.” Similar to their
contention centered on the “expected or intended” exclusion discussed above, the Jesuits
argue that the complaints in the underlying litigation are “littered” with allegations that the
Jesuits merely “should have known” of McGuire’s abusive proclivities. The Jesuits further
assert that, even assuming actual knowledge of McGuire’s tendencies, the underlying
complaints do not identify which executive officer, supervisory employee, director or trustee
of the Jesuits had this knowledge.
¶ 55 As discussed above, we construe an insurance policy as a whole, keeping in mind the risk
undertaken, the subject matter to be insured, and the purposes of the entire contract.
Outboard Marine Corp., 154 Ill. 2d at 108. Where the words in the policy are clear and
unambiguous, “a court must afford them their plain, ordinary, and popular meaning.”
(Emphasis in original.) Id. In addition, we may not strain to find an ambiguity where none
exists. Hobbs, 214 Ill. 2d at 17.
¶ 56 Here, Condition 1.a cancelled any subsequent sexual abuse coverage if a “supervisory
employee” of the Jesuits had “actual knowledge of any *** alleged act of sexual abuse or
sexual molestation” committed by any “employee, agent, representative or volunteer
worker.” Furthermore, it is undisputed that McGuire, a teacher and scholastic advisor at
Loyola Academy, was an employee of the Jesuits. The underlying complaints plainly alleged
that the Jesuits were first apprised of McGuire’s abuse of minors in 1969, when John Doe
84 reported to Fr. Schlax, a Chicago Archdiocese priest, that McGuire had sexually abused
him. The underlying complaints also alleged that Fr. Schlax reported that abuse to the Jesuits
and officials at Loyola Academy. In addition, the complaints of John Does 116, 117 and 118,
as well as John Doe 119 alleged that, after reporting his abuse, John Doe 84, his parents, and
Fr. Schlax met with representatives of the Jesuits and Loyola Academy, including the
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president, the headmaster, and the principal of the academy. In other words, the complaints
alleged that supervisory employees (the president, principal, and the headmaster of the
academy) had actual knowledge of an alleged act of sexual abuse (inflicted upon John Doe
84) by an employee, agent, representative or volunteer worker (McGuire). In light of these
allegations, the trial court properly found that Condition 1.a barred any coverage for the
underlying complaints.
¶ 57 The Jesuits dispute this, however, contending that only higher-ranking members of the
Jesuit organization were supervisory employees and that the exclusion was not triggered
unless some yet even higher, but unspecified, Jesuit authority was notified of McGuire’s
activities. Taking into account the customary institutional structure of American high
schools, we find this argument to be utterly implausible. While the insurance contract does
not define “supervisory employee,” and it includes that term with such titles as “executive
officer,” “director,” and “trustee,” we find that a plain reading of the term “supervisory
employee” clearly includes the president, principal, and headmaster of Loyola Academy (the
Jesuit high school where McGuire was employed as a teacher and spiritual advisor). The trial
court therefore correctly granted summary judgment in favor of the Insurers on this basis, as
well.
¶ 58 Pennsylvania General’s Coverage
¶ 59 The Jesuits’ final contention is that the trial court erred in finding that Pennsylvania
General owed no coverage. Specifically, they first argue that Pennsylvania General’s failure
to produce its policies created a question of material fact as to the content of those policies,
precluding summary judgment. Their second point is that the allegations in the John Doe
parents’ complaint either sufficiently alleged damages arising out of pastoral counseling
activities or raised a question of material fact as to what constitutes pastoral counseling
activities, also precluding summary judgment.
¶ 60 In Pennsylvania General I, this court considered Pennsylvania General’s coverage
obligations of the John Doe complaints. There, the Jesuits appealed the trial court’s decision
granting Pennsylvania General’s motion for summary judgment with respect to John Does
117, 118, 129, and 130. Pennsylvania General I, 2012 IL App (1st) 103828-U, ¶ 2. The
Jesuits contended that: (i) a question of fact existed regarding what the insurance polices
actually provided; (ii) the “expected or intended injury” exclusion did not foreclose coverage
for bodily injury and, in deciding that the exclusion did apply, the court improperly ruled on
an ultimate factual question in the underlying actions; and (iii) the pastoral counseling
professional liability coverage endorsement in the policies covered the claims. Id.
¶ 61 With respect to their first point, the Jesuits argued that questions of material fact existed
regarding the content of Pennsylvania General’s policies because Pennsylvania General, in
support of its claims that it had no duty to defend or indemnify the Jesuits and in its
subsequent motion for summary judgment addressed to those claims, relied on generic,
preprinted policy forms as opposed to actual, complete copies of its insurance agreements
with the Society. Id. ¶ 20. For reasons that remain unknown, Pennsylvania General has not
yet found a full copy of its own actual policy insuring the Jesuits. We noted that
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Pennsylvania General initially attached to its fourth amended complaint all forms and
documents Pennsylvania General allegedly had relating to the policies, as well as a sworn
affidavit from one of its “representative[s]” stating that Pennsylvania General had provided
the available portions of the Jesuits’ policies, but it did not have access to the remaining
portions of the Jesuits’ policies. Id. Pennsylvania General then filed a motion for summary
judgment and a supporting memorandum attaching the same forms, as well as a sworn
affidavit from a senior underwriter and assistant vice president for its parent company stating
that the policy provisions attached to the motion for summary judgment were the “operative
parts” of the Jesuits’ policies. Id. ¶ 21. In response, Pennsylvania General argued: (i) section
2-606 of the Illinois Code of Civil Procedure (735 ILCS 5/2-606 (West 2010)) only required
it to attach the relevant portions of the policies and not complete copies of them; and (ii) it
was up to the Jesuits to either produce any additional provisions they believed were relevant,
counter their senior underwriter’s affidavit, or request additional discovery. Pennsylvania
General I, 2012 IL App (1st) 103828-U, ¶¶ 30, 32.
¶ 62 We rejected Pennsylvania General’s arguments. As to its first argument, we held that
section 2-606, which concerns claims or defenses, was inapplicable because Pennsylvania
General had filed a motion for summary judgment. Id. ¶ 30. As to its second argument, we
observed that, in order to interpret the coverage provisions of an insurance policy that are
relevant to the allegations of an underlying complaint, a court must construe those provisions
“in the context of the insurance policy as a whole.” Id. ¶ 31 (citing Crum & Forster
Managers Corp., 156 Ill. 2d at 391). We further noted that Pennsylvania General, as the
plaintiff, had the burden to provide as much of the written document as necessary to the
determination at hand, which meant the entire policies, not just portions thereof, but that it
failed to explain: (i) why the policies were unavailable, (ii) its diligence in looking for them,
(iii) why it believed the provisions it attached to its summary judgment motion were the
operative parts, or (iv) whether those operative parts were copies of actual policy provisions.
Id. ¶¶ 32-33. As a result, absent proof by Pennsylvania General that the attached documents
were the best evidence of the Jesuits’ policies, the documents were insufficient and
Pennsylvania General had failed to meet its burden. Id. ¶ 33 (citing Zurich Insurance Co. v.
Raymark Industries, Inc., 145 Ill. App. 3d 175 (1986)). We thus reversed the judgment of the
trial court on this issue and remanded for further proceedings. Id. ¶ 30. Pennsylvania General
did not petition the supreme court for leave to appeal our decision.
¶ 63 In this appeal, Pennsylvania General, however, argues that our prior decision was clearly
erroneous. As in the prior appeal, Pennsylvania General claims that it was not obligated
under section 2-606 of the Code of Civil Procedure (735 ILCS 5/2-606 (West 2010)) to
produce the complete policy, and that the Jesuits had the burden to produce some evidence
to support its position that additional policy terms were implicated. These arguments,
however, were presented and rejected in Pennsylvania General I, and this court remanded
the matter for further proceedings. Pennsylvania General has presented no argument to
convince us that the holding in Pennsylvania General I was erroneous or should otherwise
be reconsidered. Accordingly, we must reverse the trial court’s granting of summary
judgment in favor of Pennsylvania General, and remand this cause for further proceedings.
¶ 64 Finally, because of our holding on this issue, we need not determine whether
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Pennsylvania General’s “expected or intended” exclusion applied or whether the John Doe
parents’ complaint sufficiently alleged a claim under the provision providing coverage for
“Pastoral Counseling Professional Liability.” These are matters that shall be determined by
the trial court upon remand.
¶ 65 CONCLUSION
¶ 66 For these reasons, the trial court correctly granted summary judgment in favor of Empire,
FNIC, RLI, and Mt. Hawley, because the underlying complaint: (i) alleged facts that
triggered either the “expected or intended” or the “Condition 1.a” exclusion; or (ii) alleged
injuries that took place outside of the policies’ effective dates. The trial court did, however,
err in granting Pennsylvania General’s motion for summary judgment, because Pennsylvania
General failed to provide complete copies of its insurance policies. Accordingly, the
judgment of the trial court granting summary judgment in favor of Pennsylvania General is
reversed, and the cause is remanded for further proceedings.
¶ 67 Affirmed in part and reversed in part; cause remanded for further proceedings.
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