UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ONEBEACON AMERICA INSURANCE )

COMPANY, )

)

Plaintiff, ) 

)

v. ) 12 C 4437

)

CITY OF ZION, ILLINOIS, LANE )

HARRISON, DELAINE ROGERS, )

GRAND SLAM SPORTS & )

ENTERTAINMENT LLC, and )

GREEN BAY CROSSING, LLC, )

)

Defendants. )

MEMORANDUM OPINION

CHARLES P. KOCORAS, District Judge:

This matter comes before the Court on the motion for summary judgment of 

Plaintiff OneBeacon America Insurance Company (“OneBeacon”) on Counts I and III

of its second amended complaint pursuant to Fed. R. Civ. P. 56 (“Rule 56”) against 

Defendants Lane Harrison (“Harrison”) and Delaine Rogers (“Rogers”) (collectively 

the “Individual Defendants”) and the City of Zion (the “City” or the “City of Zion”)

(all Defendants are referred to collectively as “the Zion Defendants”). For the 

following reasons, OneBeacon’s motion for summary judgment is granted on Count I 

as to the City of Zion, granted on Count III in its entirety, and otherwise denied. 

Count II remains. The Court declares that OneBeacon has a duty to defend the 

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Individual Defendants in the underlying state court lawsuit, but does not have a duty 

to defend the City of Zion in that matter.

BACKGROUND

I. Facts

The following facts are taken from the parties’ respective statements, responses 

and exhibits filed pursuant to Local Rule 56.1 (“Rule 56.1”). We review each Rule 

56.1 statement and disregard any argument, conclusion or assertion unsupported by 

the evidence in the record. The Court is mindful of its duty to weigh the credibility of 

the evidence presented by all parties and only relies on relevant, admissible evidence 

when ruling on the motion for summary judgment.

On November 22, 2011, GSSE brought suit against the Zion Defendants, GBC 

and others in the Circuit Court of Lake County. On December 6, 2013, GSSE 

amended its complaint (the “Underlying Complaint”), seeking recovery, for, inter 

alia: (i) fraud against Harrison and Rogers (Count III); (ii) breach of contract against 

the City of Zion (Count V); and (iii) civil conspiracy against Harrison and Rogers 

(Count XI). After the state court proceedings commenced, the Zion Defendants

attempted to tender the defense of their case to their insured, OneBeacon. OneBeacon 

refused to defend the case and subsequently filed this declaratory judgment action on 

April 24, 2014. In OneBeacon’s three-count second amended complaint for 

declaratory judgment (the “Federal Court Complaint”) against the Zion Defendants, 

Grand Slam Sports and Entertainment LLC (“GSSE”) and Green Bay Crossing, LLC 

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(“GBC”), OneBeacon seeks a declaration that it did not owe a duty to defend, or 

indemnify, the Zion Defendants with respect to the Underlying Complaint and GBC’s 

counterclaim. 

OneBeacon alleges in the Federal Court Complaint that it is a corporation with 

its principal place of business in Minnesota. It was recently re-domiciled in 

Pennsylvania. Venue is proper pursuant to 28 U.S.C. § 1391(b)(1) because all 

defendants reside in the Northern District of Illinois. The City of Zion is a 

municipality in Illinois. Harrison and Rogers are citizens of Illinois and both City of 

Zion officials. Harrison was the mayor of the City of Zion and Rogers acted as the 

Economic Development Director. GSSE is an Illinois limited liability company 

whose sole member is a citizen of Illinois. GBC is a Wisconsin limited liability 

company in the business of real estate acquisition and development whose members 

are citizens of Illinois and Wisconsin. 

The parties generally do not disagree as to the facts, which primarily consist of 

the terms of the Policy and the pleadings in the underlying state court lawsuit. The 

only significant factual disagreement regards whether certain allegations support a 

conclusion that all statements made by the Zion Defendants were intentionally false 

material representations. However, it is important to thoroughly reference the 

Underlying Complaint and the insurance policy (the “Policy”) OneBeacon issued to 

the City of Zion for insurance coverage purposes. 

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A. Allegations in the Underlying Complaint

The Court must decide whether OneBeacon had a duty to defend based on the 

allegations of the Underlying Complaint as they are currently pled, not based on the 

possibility of future discovery and/or amendments to the complaint. Conn. Indem. 

Co. v. DER Travel Serv., Inc., 328 F.3d 347, 350-51 (7th Cir. 2003) (“[I]t is the actual 

complaint, not some hypothetical version, that must be considered.”

According to the allegations in the Underlying Complaint, GSSE operated a 

minor league baseball team known as the Lake County Fielders (the “Fielders”). In 

2006, Rogers, as the Director of Economic Development for the City of Zion, 

approached GSSE’s manager to ask if he would be interested in providing a start-up 

minor league baseball team in the City of Zion because the City was interested in 

developing a stadium project (the “Stadium”). At the time, no professional baseball 

team was operating, or expected to operate in the City of Zion. During negotiations, 

GSSE’s manager allegedly insisted that the Stadium, with its concessions, naming 

rights, advertising and other financial advantages was a necessity for the team. GSSE 

alleges that City officials, including, but not limited to Harrison and Rogers, 

repeatedly agreed to construction of the Stadium in consideration of the Fielders 

playing in Zion. As a result, GSSE’s manager agreed to have the Fielders play in 

return for the City of Zion’s promise to build the Stadium for the team to use. After a 

long and arduous period of temporary facilities, funding issues, and talks of 

relocation, on March 21, 2011, the City of Zion Council approved the sale of bonds to 

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finance the Stadium project. On March 29, 2011, the City entered into a construction 

contract with Olson General Contractor (the “Olson Contract”) to construct the 

Stadium in 2011 for $5.6 million dollars, which was agreed upon by GSSE. 

GSSE alleges that sometime in the first five months of 2011, Harrison, Rogers 

and Richard DeLisle, a real estate developer, determined that the exposure of the 

financial flaws in the new proposed site for the Stadium made it too risky to allow 

execution of the bond issue for construction of the Stadium. According to GSSE, 

Harrison, Rogers and DeLisle then privately determined that the bond issuance for the 

construction of the Stadium would not be pursued, and no Stadium would be built in 

2011. 

GSSE further alleges that during these first five months of 2011, Harrison and 

Rogers, along with DeLisle, were on notice that absent the building of the Stadium, 

GSSE would not field a team for the 2011 season. GSSE contends that Harrison and 

Rogers knew that operating the Fielders in the 2011 season without a completed 

Stadium would result in an immediate collapse of the entire project, creating extensive 

negative publicity for Harrison, Rogers and DeLisle, in addition to potentially 

destroying a possibility of substantial land appreciation for GBC. Accordingly, GSSE 

alleges that Harrison, Rogers and DeLisle sought alternative plans to relieve GBC of 

its debt obligations on the Stadium’s purported site and agreed to engage in 

affirmative and knowing false representations and material omissions to GSSE to 

conceal from it that the Stadium would not be built for the 2011 season. GSSE 

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alleges that Harrison, Rogers and DeLisle knew that operating the Fielders during the 

2011 season without a completed Stadium would result in substantial economic losses 

for GSSE, as had occurred in the 2010 season, and could possibly leave GSSE without 

financial capital to maintain the team after 2011. They allegedly agreed amongst 

themselves to seek to establish a new or relocated baseball team with fresh financial 

capital to replace GSSE’s baseball team after the 2011 season. However, Rogers also 

allegedly made repeated statements and representations to GSSE and the general 

public, by way of the radio, that construction of the Stadium was ready to begin, as

also shown in a written letter from March 10, 2011. In the March 10, 2011 letter, 

Rogers represented to GSSE that: (i) the sale of bonds for construction of the Stadium 

would occur the following week; (ii) the temporary Stadium facilities would be 

completed by the first week of April 2011 for use by GSSE’s team; (iii) the Olson 

Contract was signed; (iv) the primary Stadium cement and steel components were 

then currently being fabricated off site; and (v) the Stadium would be completed by 

early June 2011, all of which GSSE argues were completely false. Additionally, a

construction buffer zone fence was built around the Stadium. On two separate 

occasions in April 2011, the City’s finance director sent written confirmation to 

Harrison, Rogers, the City Council and GSSE’s manager that the $7.5 million bond 

sale was in a position to commence the following week and that the funds from the 

sale of those bonds would be wired to the City within a few days. On two separate 

occasions in June 2011, the City’s finance director allegedly sent written memos to 

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Harrison, the City Council and GSSE’s manager stating the imperative need to 

commence sale of approved bonds in order to commence construction of the Stadium. 

According to GSSE, at no time during the months of March through June 2011 did 

Harrison or the City indicate to GSSE that the bond sale would not move forward or 

that construction of the Stadium was not moving forward. No bonds were ever issued 

or sold pursuant to the City Council approval and direction and Stadium construction 

never occurred. Two weeks after the start of the 2011 season, the City started to build

some temporary facilities. During 2011, three of the four members of the Zion City 

Council allegedly told GSSE’s manager that they were puzzled by Harrison’s failure 

to move forward on the bond sale approved by the Council three months earlier. Two 

of those Council members allegedly stated to GSSE’s manager that Harrison was not 

returning their telephone calls or requests for meetings on the subject.

GSSE claims that it reasonably relied on the Individual Defendants’ 

misrepresentations and fielded a baseball team for 2011, all while the City never 

fulfilled the construction contract to build the Stadium. GSSE alleges that Harrison 

and Rogers undermined the financial condition of GSSE, and attacked its reputation,

as additional means of causing the termination of any relationship between GSSE and 

the City of Zion. As a result of the inadequate facilities and the missing Stadium, 

advertisers and ticket buyers allegedly revoked purchase money commitments to 

GSSE for tickets and events in the 2011 season, which created severe financial loss 

and critically strained the ability of GSSE to maintain cash flow to operate the 

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baseball team during the 2011 season. During the 2010 season, GSSE advanced over 

$90,000 on the City’s behalf for expenses at the Stadium site that were the City’s 

responsibility, made rent payments totaling approximately $40,000 under the 

operating agreement after the 2010 season and allowed the rent to be credited against 

the far greater amounts owed by the City to GSSE, all without objection from the 

City. During the 2011 season, Harrison allegedly caused the City to publically claim

that GSSE still owed $60,000 rent from the 2010 season, which the City stated caused

the significant delay in Stadium construction. At that time, however, GSSE alleges 

that the City still owed it $90,000. GSSE offered to settle with the City, but the City 

rejected the offer. Later in 2011, the City reimbursed GSSE $70,000 of the $90,000 

that had been owed to GSSE for more than a year, but allegedly ceased all 

communications with GSSE regarding the Stadium. GSSE estimates that it lost 

approximately $500,000 in operation of the Fielders team during the 2011 season and 

is effectively at a standstill based on the City’s alleged actions.

Counts III, V and XI are the claims in the Underlying Complaint that pertain to 

the instant matter. In Count III, GSSE alleges a fraud claim against Harrison and 

Rogers for engaging in a series of false material representations in connection with the 

proposed construction of the Stadium. These misrepresentations include that the City 

would build the Stadium, the sale of bonds for construction of the Stadium would 

occur in March 2011, the temporary Stadium facilities would be completed by the first 

week of April 2011 for use by the Fielders, the Olson contract was signed, the 

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Stadium’s construction was in production and the Stadium would be completed by 

early June 2011 for home games. GSSE alleges that Harrison and Rogers’ omissions 

were material and comprised essential parts of a fraudulent scheme and were intended 

to mislead GSSE. It also claims that as public officials engaging in criminal conduct, 

Harrison and Rogers had a duty to disclose their conduct and all material omissions of 

material facts that would have made their actual statements not misleading. In 

specific reliance upon these material misrepresentations, GSSE fielded a 2011 team 

and suffered damages. 

In Count V, GSSE states that it is a third party beneficiary of the Olson 

Contract. GSSE alleges that the City materially breached the contract by its failure to 

engage in reasonable measures to build the Stadium, and effectively abandoned the 

construction of the Stadium. In Count XI, GSSE alleges that Harrison, Rogers, 

DeLisle and GBC engaged in a civil conspiracy by conducting the “2011 Fake 

Stadium Scheme” with the alleged goal of causing GSSE to operate the Fielders team

during the 2011 season by means of fraudulent misrepresentation, material omissions, 

bribery, and intentional misuse of public services and public resources. Regarding the 

bribery allegations, GSSE claims Harrison illegally accepted bribes that were given to 

obtain his cooperation, participation and use of municipal powers in fraud and 

conspiracy. Likewise, there is also an allegation that Rogers illegally accepted bribes 

to reward her for, and to obtain her participation in, the fraud and conspiracy. These 

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alleged agreements were made between January and March 2011 to conceal from 

GSSE that the Stadium would not be built.

GBC has brought a counterclaim for breach of contract against the City of 

Zion. In its counterclaim, GBC alleges that it entered into a ground lease with the 

City, which the City anticipatorily breached by not building the Stadium as the lease 

required, and by manifesting an intent not to do so. GBC asks for indemnification by 

the City of the claims made against GBC by GSSE, pursuant to an indemnification 

clause in the contract. GBC specifically pleads that the City has “clearly, definitely, 

and unequivocally manifested an intent not to perform its obligation to build the 

Baseball Stadium under the Ground Lease and has therefore [ ] anticipatorily 

repudiated and breached the Ground Lease.” GSSE seeks damages against GBC 

arising, in whole or in part, from the City’s failure to build the Stadium. GBC alleges 

that in the event that GSSE recovers any damages from GBC resulting from the City’s 

failure to build the Stadium, GBC is entitled to recover the full amount of any such 

damages, plus attorney’s fees and costs of defense from the City. 

B. State Court Decision

The parties dispute the admissibility of the Circuit Court of Lake County’s 

May 13, 2014 dismissal of Count V of the Underlying Complaint. OneBeacon argues 

that this information is extraneous evidence and immaterial to its pending motion for 

summary judgment. According to the Circuit Court of Lake County’s electronic 

docket, on May 8, 2015, the court entered an agreed order “dismissing cause.” The 

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parties failed to supplement the record in this case to reflect this activity in the state 

court case.1

C. Policy

1. CGL Section

At the time of the foregoing incident, the Zion Defendants were covered by

Policy number 791-00-03-58-0000, issued by OneBeacon to the City of Zion for the 

period of December 15, 2010 to December 15, 2011. The Policy contains a portion

entitled commercial general liability form for government risks (the “CGL Section”). 

OneBeacon provided the Court a copy of the Policy issued to the Zion Defendants, 

and the relevant parts of the CGL Section are listed below:

COVERAGE B PERSONAL AND ADVERTISING LIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as 

damages because of “personal and advertising injury” to which this 

insurance applies. We will have the right and duty to defend the insured 

against any “suit” seeking those damages. However, we will have no duty to 

defend the insured against any “suit” seeking damages for “personal and 

advertising injury” to which this insurance does not apply. We may, at our 

discretion, investigate any offense and settle any “claim” that may result. But:

(1) The amount we will pay for damages is limited as described in 

SECTION III – LIMITS OF INSURANCE; and 

(2) Our right and duty to defend ends when we have used up the 

applicable limit of insurance in the payment of judgments or settlements 

under Coverages A, B, C or medical expenses under Coverage D.

1 Local news media reported that the state court case recently settled for $55,000 in return for a 

release of GSSE’s remaining claims pending against the City of Zion.

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No other obligation or liability to pay sums or perform acts or services is 

covered unless explicitly provided for under Supplementary Payments –

Coverages A, B and C.

b. This insurance applies to “personal and advertising injury” caused by an 

offense arising out of your business but only if the offense was committed in 

the “coverage territory” during the policy period.

* * *

In the Policy’s section of definitions, “Personal and advertising injury” is defined as 

an injury, including a consequential “bodily injury”, arising out of one or more of the 

following offenses:

a. False arrest, detention or imprisonment;

b. Malicious prosecution;

c. The wrongful eviction from, wrongful entry into, or invasion of the right of 

private occupancy of a room, dwelling or premises that a person occupies, 

committed by or on behalf of its owner, landlord or lessor;

d. “Publication” of material that slanders or libels a person or organization or 

disparages a person’s or organization’s goods, products or services;

e. “Publication” of material that violates a person’s right of privacy;

f. The use of another’s advertising idea in your “advertisement”; or 

g. Infringing upon another’s copyright, trade dress or slogan in your 

“advertisement”.

* * *

Publication is defined as “any method of announcing or disseminating any material to 

any third party.”

* * *

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The Coverage B Personal and Advertising Injury liability had specific exclusions, 

which are listed below:

2. Exclusions

This insurance policy does not apply to:

a. Knowing Violation Of Rights Of Another

“Personal and advertising injury” caused by or at the direction of the insured 

with the knowledge that the act would violate the rights of another and would 

inflict “personal and advertising injury”.

This exclusion does not apply to “personal and advertising injury” caused by 

malicious prosecution.

b. Breach Of Contract

“Personal and advertising injury” arising directly or indirectly out of, or in any 

way related to breach of contract, except an implied contract to use another’s 

advertising idea in your “advertisement”, or any “claim” against any insured 

arising directly or indirectly out of, or in any way related to tortious 

interference with a contract or business relations.

c. Contractual Liability

“Personal and advertising injury” for which any insured has assumed liability 

in a contract or agreement. This exclusion does not apply to liability for 

damages that the insured would have in the absence of the contract or 

agreement.

* * *

n. Material Published With Knowledge of Falsity

“Personal and advertising injury” arising directly or indirectly out of, or in any 

way related to “publication” of material, if done by or at the direction of the 

insured with knowledge of its falsity.

* * *

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Additionally, Coverage B: Personal and Advertising Injury Liability, Section 

II(2)(a), includes Harrison and Rogers as insured officials of the City of Zion “while 

performing duties related to the conduct of [the City’s] business.” In Section II(2)(b), 

the Policy also insures the City’s “current or previously elected or appointed officials 

of [the City’s] operating authorities, boards, commissions, districts or any other 

governmental units, but only for acts within of the scope of their employment by [the 

City] or while performing duties related to the conduct of [the City].”

2. E&O Section

The Policy also contains a section entitled Public Officials Error and Omissions

Coverage Form Claims-Made for Government Risks (the “E&O” Section). Harrison 

and Rogers, as officials of the City, are insured under the E&O Section, “but only for 

the conduct of their duties as [City’s] elected or appointed officials.” The relevant 

parts of the E&O Section are listed below:

SECTION I – COVERAGES

A. Insuring Agreement – Liability for Wrongful Acts

1. We will pay those sums that the insured becomes legally obligated to pay as 

“damages” resulting from a “wrongful act” to which this insurance applies. 

This insurance DOES NOT apply to any “claim” resulting from a “wrongful 

act” which takes place in whole or in part prior to the Retroactive Date shown 

in the Declarations or subsequent to the termination of this policy.

2. We will have the right and duty to defend the insured against any “suit” 

seeking those “damages”. However, we will have no duty to defend the 

insured against any “suit” seeking “damages” for a “wrongful act” to which this 

insurance does not apply. We may, at our discretion, investigate any “wrongful 

act” and settle any “claim that may result.

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* * *

The E&O Section also contains specific exclusions:

SECTION III – EXCLUSIONS

This insurance does not apply under either Coverage A or Coverage B or 

Coverage C to:

* * *

4. Contracts

Any “claim” arising directly or indirectly out of, or in any way related to 

liability assumed under any contract or agreement of breach of contract to 

which the insured is a party or a third-party beneficiary, or any representations 

made in anticipation of such contract or agreement of any “claim” against any 

insured arising directly or indirectly out of, or in any way related to tortious 

interference with a contract or business relations. However this exclusion does 

not apply to liability the insured would have in the absence of the contract or 

agreement.

5. Criminal Acts

Any “claim” arising directly or indirectly out of, or in any way related to a 

dishonest, malicious, fraudulent, or criminal act, or the willful violation of any 

statute, ordinance or regulation committed by or with the knowledge of the 

insured.

However, we will defend the insured for a “suit” subject to the other terms of 

this coverage part until either a judgment or final adjudication established such 

an act or the insured confirms such an act.

* * *

19. Profit, Advantage or Remuneration

Any “claim” arising directly or indirectly out of, or in any way related to any 

insured gaining any profit, advantage or remuneration to which that insured is 

not legally entitled.

* * *

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D. Federal Court Case’s Procedural History 

In the Federal Court Complaint, OneBeacon first argues in Count I that the 

Policy issued to the Individual Defendants did not extend coverage to damages 

alleged in the Underlying Complaint. OneBeacon claims it has no duty to defend the 

Zion Defendants under the CGL Section because the claims do not allege a personal 

and advertising injury, and because the claims are excluded by the “knowing violation 

of rights of another,” “breach of contract,” and “the material published with 

knowledge of falsity” exclusions contained in CGL Section. OneBeacon further

argues it has no duty to defend or indemnify the Zion Defendants under the E&O 

Section because the claims are excluded by the “contracts” and “profit, advantage or 

remuneration” exclusions. In Count III of the Federal Court Complaint, OneBeacon 

denies it has any duty to defend the City of Zion against GBC’s counterclaim under

the CGL Section because it does not allege a personal and advertising injury and is 

excluded by the “breach of contract” and “contractual liability” exclusions in 

Coverage B. 

On September 9, 2014, this Court denied the Zion Defendants’ motion to 

dismiss, or in the alternative, for a more definite statement. On January 29, 2015, 

OneBeacon filed the instant motion for summary judgment on Counts I and III of the 

Federal Court Complaint for declaratory judgment. 

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LEGAL STANDARD

Summary judgment is appropriate when the pleadings, discovery, disclosures, 

and affidavits establish that there is no genuine issue of material fact, such that the 

movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The movant 

bears the initial burden of showing that no genuine issue of material fact exists. 

Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The burden then shifts to the nonmoving party to show through specific evidence that a triable issue of fact remains on 

issues on which the movant bears the burden of proof at trial. Id. at 325. The nonmovant may not rest upon mere allegations in the pleadings or upon conclusory 

statements in affidavits; it must go beyond the pleadings and support its contentions 

with documentary evidence. Id. A genuine issue of material fact exists when, based 

on the evidence, a reasonable jury could find in favor of the non-movant. Anderson v. 

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In determining whether summary 

judgment is appropriate, “[t]he evidence of the non-movant is to be believed, and all 

justifiable inferences are to be drawn in his favor.” Id. at 255. 

DISCUSSION

OneBeacon argues that it has no duty to defend the Zion Defendants in the 

underlying state court case because coverage has not been triggered and various 

exclusions apply. The Zion Defendants argue that coverage has in fact been triggered 

under both the “Personal and Advertising Injury Liability” portion of the CGL Section

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and the E&O Section. The Zion Defendants also contend that the exclusions do not

permit OneBeacon to avoid its duty to defend. 

I. Applicable Case Law

A. Duty to Defend

The parties agree that Illinois law controls the construction and application of 

the Policy’s terms. The burden is on the insured to prove that a claim falls within the 

coverage of the Policy. Axiom Ins. Managers, LLC v. Capitol Specialty Ins. Corp., 

876 F.Supp.2d 1005, 1008 (N.D. Ill. 2012) (citing cases). The insurer has the burden 

of proving that an exclusion applies, while the insured has the burden of proving that 

an exception to an exclusion restores coverage. Santa’s Best Craft, LLC v. St. Paul 

Fire & Marine Ins. Co., 611 F.3d 339, 347 (7th Cir. 2010). 

It is well-settled that to decide whether an insurer has a duty to defend an action 

against the insured, a reviewing court must compare the allegations of the Underlying 

Complaint to the relevant portions of the Policy. Outbound Marine Corp v. Liberty 

Mutual Ins. Co., 154 Ill. 2d 90, 108 (1992). However, “[f]ocusing on the complaint is 

necessary because the insurer must determine whether it has an obligation to defend at 

the outset of the litigation.” Travelers Ins. Companies v. Penda Corp., 974 F.2d 823, 

827 (7th Cir. 1992).2

 If the Underlying Complaint alleges facts that fall “within or 

2 Since the duty to defend is initiated at the outset of litigation, whether or not the breach of 

contract claim against the City of Zion was later dismissed by the state court is irrelevant. See 

Atlantic Mut. Ins. Co. v. American Academy of Orthopaedic Surgeons & Scoliosis Research 

Society, 315 Ill. App. 3d 552, 567 (2000) (“where summary judgment is sought in the context of 

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potentially within” the coverage of the Policy, the insurer is obligated to defend its 

insured even if the allegations are “groundless, false, or fraudulent.” United States 

Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill. 3d 64, 73 (1991) (emphasis 

in original). The Underlying Complaint need only set forth sufficient facts to 

establish a policy-covered offense. Country Mut. Ins. Co. v. Ticketsnow.com, No. 1-

06-1135, 2007 WL 7595190, at *6 (Ill. App. Ct. June 29, 2007). Also, the duty to 

defend arises “even if only one such theory is within the potential coverage of the 

policy.” Wilkin Insulation Co., 144 Ill. 2d at 73. An insurer may not justifiably refuse 

to defend an action against the insured “unless it is clear from the face of the 

underlying complaint[ ] that the allegations fail to state facts which bring the case 

within, or potentially within the policy’s coverage.” Wilkin Insulation Co., 144 Ill. 2d 

at 73 (emphasis in original). 

In determining if the allegations in the Underlying Complaint meet the 

threshold requirement, both the Underlying Complaint and the Policy must be 

liberally construed in favor of the Zion Defendants. Wilkin Insulation Co., 144 Ill. 2d 

at 73. Where the words in the policy are clear and unambiguous, “a court must afford 

them their plain, ordinary, and popular meaning.” Outboard Marine Corp, 154 Ill.

2d at 108 (emphasis in original); see also Lexmark Int’l Inc. v. Transp. Ins. Co., 327 

Ill. App. 3d 128, 135-36 (2001) (“We give little weight to the legal label that 

characterizes the underlying allegations. Instead, we determine whether the alleged 

a declaratory judgment action to determine whether an insured has a duty to defend, the use of 

extrinsic evidence is inappropriate”).

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conduct arguably falls within at least one of the categories of wrongdoing listed in the 

policy.”). If a provision is subject to more than one meaning, it is considered 

ambiguous, and all ambiguities and doubts must be resolved in favor of the insured. 

Wilkin Insulation Co., 144 Ill. 2d at 74.

B. Exclusionary Provisions

“Once the insured has demonstrated coverage, the burden then shifts to the 

insurer to prove that a limitation or exclusion applies.” Addison Ins. Co. v. Fay, 232 

Ill. 2d 446, 453-54 (2009); see also Johnson Press of America, Inc. v. N. Ins. Co. of 

New York, 339 Ill. App. 3d 864, 871-72 (2003) (burden rests with insurer to 

demonstrate applicability of exclusion; courts will liberally construe any doubt as to 

coverage in favor of insured and against insurance company, especially when insurer 

seeks to avoid coverage based on an alleged exclusion). “Exclusion provisions that 

limit or exclude coverage must be construed liberally in favor of the insured and 

against the insurer.” Pekin Ins. Co. v. Miller, 367 Ill. App. 3d 263, 267 (2006). 

Where the insurer relies on a provision that it contends excludes coverage to reject a 

tender of defense, we review the applicability of the provision to ensure it is “ ‘clear 

and free from doubt’ that the policy’s exclusion prevents coverage.” Atlantic Mut.

Ins. Co., 315 Ill. App. 3d at 560.

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II. Coverage Under the Policy for GSSE’s Underlying Complaint

A. E&O Section

In the Policy, there are two coverage sections that could possibly trigger 

coverage. The Court begins with the E&O Section, which covers “Liability for 

Wrongful Acts.” The E&O Section provides that OneBeacon “will pay those sums 

that the insured becomes legally obligated to pay as ‘damages’ resulting from a 

‘wrongful act’ to which this insurance applies.” The Policy also defines an “insured” 

to include the City of Zion and its employees for acts “within the course and scope of 

their employment.” Additionally, OneBeacon:

will have the right and duty to defend the insured against any ‘suit’ seeking 

those “damages”. However, we will have no duty to defend the insured against 

any “suit” seeking “damages” for a “wrongful act” to which this insurance does 

not apply. 

OneBeacon concedes that the Underlying Complaint alleges wrongful acts on the part 

of the insureds, so coverage is uncontested, but insists that two exclusions preclude its 

duty to defend. It is OneBeacon’s burden to prove the exclusions apply. First, 

OneBeacon argues that it does not have a duty to defend because the contracts 

exclusion applies to both the City of Zion and the Individual Defendants. Second, 

OneBeacon proclaims that the profit, advantage or remuneration exclusion also 

pertains to coverage of both the City of Zion and the Individual Defendants. The 

foregoing Policy language allows us to look at whether the Contracts Exclusion 

applies separately to the City of Zion and the Individual Defendants. See Williams v. 

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Am. Country Ins. Co., 359 Ill. App. 3d 128, 139-40 (2005) (where the court found that 

the policy language “allows coverage to be excluded as to one insured and remain in 

effect as to the other insured” under the doctrine of respondeat superior). 

1. Contracts Exclusion

We will begin with Exclusion 4 (the “Contracts Exclusion”). As a reminder, 

the Contracts Exclusion states:

4. Contracts

Any “claim” arising directly or indirectly out of, or in any way related to 

liability assumed under any contract or agreement of breach of contract to 

which the insured is a party or a third-party beneficiary, or any representations 

made in anticipation of such contract or agreement of any “claim” against any 

insured arising directly or indirectly out of, or in any way related to tortious 

interference with a contract or business relations. However this exclusion does 

not apply to liability the insured would have in the absence of the contract or 

agreement. (Emphasis added).

Regarding the applicability of the Contracts Exclusion to the City of Zion, 

OneBeacon contends that it had no duty to defend because Count V of the Underlying 

Complaint is a breach of contract claim against the City of Zion, which the Policy 

undoubtedly excludes. Out of all the relevant counts in the Underlying Complaint, 

Count V is the only one that is alleged solely against the City of Zion, claiming that 

the City of Zion “has engaged in a material breach of the Olson Contract by its failure 

to engage in reasonable measures to build the Stadium, and effectively abandoning the 

construction of the Stadium.” In response to OneBeacon’s contention that the 

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Contracts Exclusion applies, the Zion Defendants focus on the inapplicability of this 

exclusion to the Individual Defendants and not the City of Zion. 

After review of Count V in the Underlying Complaint, and construing the 

Contracts Exclusion liberally in favor of the City of Zion and against OneBeacon, it is 

clear and free from doubt that the breach of contract claim in the Underlying 

Complaint would necessarily fall within the Contracts Exclusion so as to preclude 

coverage of the City of Zion. Santa’s Best Craft, LLC, 611 F.3d at 348. The alleged 

wrongful acts of the City of Zion described in the Underlying Complaint, would not 

exist but for the breach of contract. See Axiom Ins. Managers, LLC, 876 F. Supp. 2d 

at 1016 (“Illinois case law supports that ‘arising out of’ is ambiguous and, when used 

in an exclusion, should be construed as requiring but for causation since that favors 

the insured.”). OneBeacon was correct in its assessment that it did not have the duty 

to defend the City of Zion under the E&O Section based on the Contracts Exclusion.

As for the Individual Defendants, the applicability of the Contracts Exclusion is 

less straightforward. There is not a count for breach of contract in the Underlying 

Complaint against the Individual Defendants. However, in Count III, for fraud, and 

Count XI, for civil conspiracy, the “Olson Contract” is mentioned in the general 

allegations portion and briefly as an “overt act” in Count XI. OneBeacon insists that 

the Court read the complaint as a whole and find that the allegations against the 

Individual Defendants are enough to negate its duty to defend. Contrarily, the 

Individual Defendants focus on the last sentence in the Contracts Exclusion: “[ ] this 

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exclusion does not apply to liability the insured would have in the absence of the 

contract or agreement.” This exception to the exclusion did not pertain to the City of 

Zion because the only claim in the Underlying Complaint against it was for breach of 

contract. The Individual Defendants maintain that if the allegations about the Olson 

Contract were removed from Counts III and XI in the Underlying Complaint that 

coverage would still exist for wrongful acts unrelated to any contract.

As noted above, the Underlying Complaint alleges numerous other wrongful 

acts of the Individual Defendants, including, but not limited to, disparaging 

publications about GSSE to the public, the failed bond issue for construction of the 

Stadium, and the choice to switch the stadium site, none of which relies on a provision 

in the Olson Contract. The Court cannot conclusively determine that such alleged 

wrongful acts would not have arisen but for a breach of contract. Accordingly, there 

remains sufficient uncertainty as to the applicability of the Contracts Exclusion to the 

Individual Defendants, and we therefore, cannot decisively apply the Contracts 

Exclusion to the claims against them. Since the Contracts Exclusion only exempts 

OneBeacon from defending the City of Zion, we must now look at whether another

exclusion prevents OneBeacon’s duty to defend the Individual Defendants.

2. Profit, Advantage or Remuneration Exclusion

According to OneBeacon, the second applicable exclusion of its coverage over 

the Individual Defendants is the Profit, Advantage or Remuneration Exclusion (the 

“Profit Exclusion”) because the Underlying Complaint is “saturated with the illegal 

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financial motivations of the Individual Defendants.” The issue is whether coverage of 

the Individual Defendants is excluded because the Underlying Complaint incorporated 

allegations of profit, advantage or remuneration into Counts III and XI, where such 

allegations are necessary to maintain those counts. The Profit Exclusion states:

19. Profit, Advantage or Remuneration

Any “claim” arising directly or indirectly out of, or in any way related to any 

insured gaining any profit, advantage or remuneration to which that insured is 

not legally entitled.

A “claim” is defined as an oral or written demand, including a “suit” for payment of 

money “damages,” whereas a “suit” is defined as a civil proceeding alleging 

“damages” to which this insurance applies. 

OneBeacon supports its assertion that allegations in the Underlying Complaint

fall under the Profit Exclusion because GSSE claims Harrison illegally accepted 

bribes that were given to obtain his cooperation, participation, and use of municipal 

powers in fraud and conspiracy. Likewise, GSSE alleges that Rogers illegally 

accepted bribes to reward her for, and to obtain her participation in, the fraud and 

conspiracy. OneBeacon contends that the Profit Exclusion was triggered because

these alleged bribes were done to enrich the Individual Defendants and create an 

opportunity for them to enjoy further bribery.

As observed in McCook Metals, L.L.C. v. Federal Ins. Co., 2007 WL 1687262 

(N.D. Ill. 2007), we find Alstrin v. St. Paul Ins. Co., 179 F. Supp.2d 376 (D. Del. 

2002) to be persuasive in deciding if the Profit Exclusion applies. In Alstrin, the court 

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found “[t]he proper inquiry, therefore, must focus not only on the factual allegations, 

but on the elements of the causes of action that are alleged. If an element of the cause 

of action that must be proved requires that the insured gained a profit or advantage to 

which he was not legally entitled, then, if proved, this exclusion would be applicable.” 

Alstrin, 179 F.Supp.2d at 400. In the instant matter, for the Count III fraud claim to 

survive, the following elements must be pleaded: (i) a false statement of fact by the 

defendant; (ii) made with the knowledge that the statement was false; (iii) the 

defendant intended that the statement would induce the plaintiff to act; (iv) the 

plaintiff justifiably relied upon the statement; and (v) the plaintiff suffered damages 

arising from that reliance. Abazari v. Rosalind Franklin Univ. of Med. & Sci., 2015 

IL App (2d) 140952, ¶ 14 (citing Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 496 

(1996)). As for Count XI, the elements of a civil conspiracy claim that a plaintiff 

must establish are: (i) an agreement between two or more persons; (ii) for the purpose 

of accomplishing by some concerted action either an unlawful purpose or a lawful 

purpose by unlawful means; (iii) in the furtherance of which one of the conspirators 

committed an overt tortious or unlawful act. Fritz v. Johnston, 807 N.E.2d 461, 470 

(Ill. 2004), citing Adcock v. Brakegate, Ltd., 645 N.E.2d 888, 894 (Ill. 1994)). 

After reviewing the elements of both causes of action, it is evident that GSSE 

could still have pleaded fraud and civil conspiracy claims regardless of whether the 

Individual Defendants gained a profit, advantage or remuneration in which they were 

not legally entitled. Nowhere is profit, advantage or remuneration a requisite element 

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of either cause of action. Like in McCook Metals, L.L.C., because the Underlying 

Complaint claims do not require an allegation (or proof) that the Individual 

Defendants personally profited from illegal conduct, the Profit Exclusion has not been 

sufficiently triggered. Id. at *4. We do not find OneBeacon’s contention that at least 

some of the allegations in the forty-two page Underlying Complaint fall in the Profit 

Exclusion to be very convincing. There must be more than sporadic general

allegations to convince us to apply this exclusion. Liberally construing the 

Underlying Complaint in the Individual Defendants’ favor, with all doubts also 

resolved in their favor, the Court finds that the allegations fall outside the Profit 

Exclusion. 

3. Criminal Acts Exclusion

The language of this exclusion is as follows:

5. Criminal Acts

Any “claim” arising directly or indirectly out of, or in any way related to a 

dishonest, malicious, fraudulent, or criminal act, or the willful violation of any 

statute, ordinance or regulation committed by or with the knowledge of the 

insured.

However, we will defend the insured for a “suit” subject to the other terms of 

this coverage part until either a judgment or final adjudication established such 

an act or the insured confirms such an act.

Notably, neither party spends much time arguing for or against the criminal 

acts exclusion (the “Criminal Acts Exclusion”). OneBeacon merely claims that the 

Criminal Acts Exclusion is “[b]asically” an “indemnification-only exclusion” and 

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fails to meet its burden of proving this exclusion applies. Additionally, OneBeacon 

does not offer a defense to the second paragraph of the Criminal Acts Exclusion, 

which, in the absence of any other applicable exclusions under the E&O Section, 

solidifies OneBeacon’s duty to defend the Individual Defendants in the state court 

proceeding. Thus, because none of the exclusions asserted by OneBeacon applies,

OneBeacon has the duty to defend the Individual Defendants in the underlying state 

court proceeding subject to the general E&O provisions. 

B. CGL Section

We must next assess whether OneBeacon had a duty to defend the City of Zion 

under the CGL Section. It is unnecessary to discuss the impact of the CGL Section on 

the Individual Defendants because the duty to defend the Individual Defendants is 

triggered under the E&O Section. Thus, under the CGL Section, the parties’ main 

disagreement rests on whether the Underlying Complaint’s breach of contract and 

claim alleged a “personal and advertising injury” covered under the Policy, and if so, 

whether any of the exclusions apply. 

The City of Zion argues that a personal and advertising injury arose based on a 

publication (defined in the Policy as any method of announcing or disseminating any 

material to any third party) because Rogers allegedly made repeated statements and 

representations to GSSE and the general public, by way of the radio, that construction 

of the Stadium was ready to begin and would begin shortly. Also, Harrison allegedly 

represented to GSSE’s manager that the Stadium would be built for the 2011 season 

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and supplied a quote for public distribution about the impending construction, but 

then claimed publicly that GSSE still owed the City $60,000 in rent from the 2010 

season, which contributed to the delay. OneBeacon disagrees, stating that under the 

CGL Section, “[it] will have no duty to defend the insured against any ‘suit’ seeking 

damages for ‘personal and advertising injury’ to which this insurance does not apply.” 

OneBeacon proclaims that it has no duty to defend the City of Zion because there are 

no facts pleaded in the Underlying Complaint to support a recovery based on any of 

the causes of action within the definition of personal and advertising injury in the 

Policy. 

The Policy provides a list of offenses that constitute a personal and advertising 

injury: (i) false arrest; (ii) malicious prosecution; (iii) wrongful eviction or entry; (iv) 

publication of material that slanders or libels a person or organization or disparages a 

person’s or organization’s goods, products or services; (v) publication of material that 

violates a person’s right of privacy; (vi) the use of another’s advertising idea in an 

advertisement; and (vii) infringing upon another’s copyright, trade dress or slogan in 

an advertisement. The City of Zion argues that there are allegations throughout the 

Underlying Complaint which clearly allege conduct that falls or could potentially fall 

under the category of a personal and advertising injury—specifically, the “publication 

of material that slanders or libels a person or organization or disparages a person’s or 

organization’s goods, products or services” provision. OneBeacon contends that the 

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only cause of action against the City of Zion is the breach of contract claim, which is 

not considered a personal and advertising injury. 

What OneBeacon must remember is that its duty to defend arises even if only 

one theory is within the potential coverage of the policy or the allegations fall within 

at least one of the categories of wrongdoing alleged. It is the Court’s duty to look past 

the labels attached to the state court claims and focus on whether the factual 

allegations as a whole trigger coverage, and if any exclusions apply. Understandably, 

the duty to defend is not unlimited, Amerisure Mutual Ins. Co. v. Microplastics, Inc., 

622 F.3d 806, 810 (7th Cir. 2010), because the Court must look at the objective of 

contract construction, which is to give effect to the intent of the parties. Gallagher v. 

Lenart, 226 Ill. 2d 208, 232 (2007). But OneBeacon’s duty to defend “does not 

depend upon a sufficient suggestion of liability raised in the [Underlying Complaint]; 

instead, [OneBeacon] has the duty to defend unless the allegations of the [U]nderlying 

[C]omplaint demonstrate that [GSSE] in the underlying suit will not be able to prove 

the [City of Zion] liable, under any theory supported by the complaint, without also 

proving facts that show the loss falls outside the coverage of the insurance policy.” 

See Am. Econ. Ins. Co. v. Holabird & Root, 382 Ill. App. 3d 1017, 1022 (2008) 

(internal quotation marks omitted) (quoting Ill. Emcasco Ins. Co. v. Nw Nat’l Cas.

Co., 337 Ill. App. 3d 356, 361 (2003)); see also Int’l Ins. Co. v. Rollprint Packaging 

Prods., Inc., 312 Ill. App. 3d 998, 1007 (2000) (“[T]he duty to defend does not require 

that the complaint allege or use language affirmatively bringing the claims within the 

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scope of the policy.”). “The question of coverage should not hinge on the 

draftsmanship skills of whims of the plaintiff in the underlying action.” 312 Ill. App.

3d at 1007. Accordingly, although the Court must assess if the Underlying Complaint 

sets forth sufficient facts to the policy offenses of: (i) slander; (ii) libel; and (iii) 

disparagement, the allegations in the Underlying Complaint do not need to satisfy all 

three offenses or each element of a cause of action to establish a policy offense, and 

thus the duty to defend. 

However, “a consequence is not a claim.” See Nat’l Union Fire Ins. Co. of 

Pittsburgh, Pa. v. Mead Johnson & Co., LLC, 735 F.3d 539, 544-45 (7th Cir. 2013) 

(“Mead is trying to shoehorn one tort—product disparagement, which the insurance 

policy covers—into another—fraud, which isn’t covered.”). As in Mead Johnson, the 

City of Zion is trying “to shoehorn” slander, libel and disparagement, which the 

Policy covers—into breach of contract, which the Policy does not cover. In any 

event, regardless of whether the Underlying Complaint sufficiently alleges a claim for 

slander, libel, or disparagement, the breach of contract exclusion would nevertheless 

preclude OneBeacon’s duty to defend the City of Zion under the CGL Section. The 

breach of contract exclusion in the CGL Section states that coverage is excluded for a:

b. Breach Of Contract

“Personal and advertising injury” arising directly or indirectly out of, or in any 

way related to breach of contract, except an implied contract to use another’s 

advertising idea in your “advertisement”, or any “claim” against any insured 

arising directly or indirectly out of, or in any way related to tortious 

interference with a contract or business relations.

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Both the “arising directly and indirectly out of, or in any way related to breach of 

contract” and “or any ‘claim’ against any insured arising directly or indirectly out of, 

or in any way related to tortious interference with a contract or business relations” 

sections apply as exclusions to the instant matter. We note that the Policy’s language 

of “arising directly” and “in any way related to” is quite broad, and that the “core 

factual allegations” against the City of Zion plainly involve a breach of contract. 

Lemko Corp. v. Fed. Ins. Co., No. 12 C 03283, 2014 WL 4924403, at *10 (N.D. Ill. 

Sept. 30, 2014) (finding an exclusion for all claims “based upon, arising from, or in 

consequence of any actual or alleged infringement” to be “quite broad” and finding 

that because the “core factual allegations” involved excluded conduct there was no 

duty to defend the noninfringement claims because “they would not have arisen but 

for” the infringement claim). Putting labels of the claims in the Underlying 

Complaint aside, it is evident that the claim against the City of Zion, itself, primarily 

involves a breach of the Olson Contract. We can only read the Underlying 

Complaint’s allegations as expressly relying on the provisions of the Olson Contract 

and necessarily arising from a breach of contract claim. See Axiom Ins. Managers, 

876 F. Supp. 2d at 1016-17. Thus, there is no need to decide whether the Underlying 

Complaint alleged a “personal and advertising injury” within the meaning of the 

Policy because the breach of contract exclusion in the CGL section relieves

OneBeacon of any duty to defend the City of Zion3

. Santa’s Best Craft, LLC, 611 

3 The Zion Defendants do not assert the exception to the exclusion involving implied contracts.

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F.3d at 348; see also Nautilus Ins. Co. v. 1452-4 N. Milwaukee Ave., LLC, 562 F.3d 

818, 821-23 (7th Cir. 2009) (where contractor-subcontractor policy exclusion covered 

all “intertwined claims” that provide “an alternative theory of relief” based on the 

same factual allegations). 

Besides the allegations in the underlying breach of contract claim against the 

City of Zion, we must also assess whether the remaining allegations and claims in the 

Underlying Complaint incorporate the City of Zion enough to trigger OneBeacon’s 

duty to defend. After review, the Court concludes that the remaining allegations in 

the Underlying Complaint would not, by themselves, trigger OneBeacon’s duty to 

defend the City of Zion because, as to the City of Zion, they explicitly rely on the

breach of the Olson Contract, which we found was subject to the breach of contract 

exclusion in the CGL Section. Our decision “does not run afoul of the teachings that 

an insurer cannot avoid its duties of defense and indemnification by reference to the 

core or dominant character of the plaintiff's allegations, and that the insurer must 

defend if any conduct alleged in the complaint falls within the insurance policy, even 

if those allegations are only a “subordinate aspect” of the complaint. Lemko Corp, 

2014 WL 4924403, at *6 (citing Curtis-Universal, Inc. v. Sheboygan Emergency 

Medical Services, Inc., 43 F.3d 1119, 1122 (7th Cir. 1994)). As to the City of Zion, 

the remaining allegations in the Underlying Complaint are not a “subordinate aspect” 

as they are dependent on the breach of the Olson Contract. See Citizens Ins. Co. of 

Am. v. Uncommon, LLC, 812 F.Supp.2d 905, 910 (N.D. Ill. 2011) (holding that IP 

- 33 -
exclusion cannot be avoided “by the mere fact that unfair competition, deceptive trade 

practices, tortious interference, and unjust enrichment claims, as a general matter, can 

and usually do arise from conduct having nothing to do with trademark 

infringement”). Thus, OneBeacon has met its burden of establishing that the claims 

against the City of Zion in the Underlying Complaint, including its general 

allegations, “[arose] directly or indirectly out of, or in any way related to breach of 

contract . . .” as outlined in the Policy. See Citizens Ins. Co. of America, 812 F. Supp. 

2d at 9112. It is clear that the breach of contracts exclusion in the CGL Section 

applies to all the allegations in the Underlying Complaint that involve the City of 

Zion, eliminating OneBeacon’s duty to defend the City.4

 Because OneBeacon had no 

duty to defend the City of Zion, it also has no duty to indemnify. See Natl. Cas. Co. v. 

McFatridge, 604 F.3d 335, 338 (7th Cir. 2010) (“If an insurer has no duty to defend, it 

has no duty to indemnify.”). Accordingly, OneBeacon’s motion for summary 

judgment is granted in favor of OneBeacon on Count I as to the City of Zion and 

otherwise denied.

III. Coverage Under the Policy for GBC’s Counterclaim

In Count III of the Federal Court Complaint, OneBeacon denies it has any duty 

to defend the City of Zion against GBC’s counterclaim under the CGL Section on the 

basis that it does not allege a personal and advertising injury and is excluded by the 

“breach of contract” and “contractual liability” exclusions in Coverage B. It denies it 

4 There is no reason to discuss the remaining exclusions under the CGL Section.

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has any duty to defend the City against GBC’s counterclaim under the E&O Section 

on the basis that the counterclaim is excluded under the “contractual liability” 

exclusion. In the City of Zion’s response to the instant motion for summary 

judgment, it failed to challenge OneBeacon’s motion regarding Count III and explain 

why the Court should not grant summary judgment in OneBeacon’s favor on that 

count.

GBC’s counterclaim alleges that it entered into a ground lease with the City of 

Zion, which provided that the City “shall use its best efforts to cause a baseball 

stadium, parking lots and retail space to be constructed,” but the City failed to plan or 

commence building of the Stadium and has no intention of performing its obligation. 

As a result, GBC alleges that the City of Zion anticipatorily breached the ground lease 

by not building the Stadium as the lease required and asks for indemnification by the 

City of Zion for the claims made against GBC by GSSE, pursuant to an 

indemnification clause in the ground lease. The clause specifically provides that 

“[t]enant hereby agrees to defend, indemnify and hold Landlord harmless from and 

against all loss, cost damage and expense (including reasonable fees and costs of 

counsel selected by Landlord) arising from a breach of this Lease by Tenant.” The 

counterclaim also states that in the event that GSSE recovers any damages from GBC 

as a result of the City’s failure to build the Stadium, GBC is entitled to recover from 

the City the full amount of any such damages, plus attorneys’ fees and costs of 

defending the lawsuit. 

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After reading GBC’s counterclaim with the Policy, it is clear and free from 

doubt that the counterclaim falls within the scope of the same applicable contractual 

exclusions that dismissed OneBeacon’s duty to defend the City of Zion in the 

Underlying Lawsuit. GBC’s breach of contract by anticipatory repudiation 

counterclaim against the City arises directly out of the City’s alleged breach of the 

Olson Contract, and but for this alleged breach, the counterclaim would not exist. 

Consequently, OneBeacon does not have a duty to defend, or indemnify, the City of 

Zion against GBC’s counterclaim based on the applicable contractual exclusions in 

the CGL and E&O Sections. We, therefore, grant summary judgment as to Count III 

of the Federal Court Complaint.

CONCLUSION

For the aforementioned reasons, OneBeacon’s motion for summary judgment is 

granted on Count I as to the City of Zion, granted on Count III in its entirety, and 

otherwise denied. Count II remains. The Court declares that OneBeacon has a duty 

to defend the Individual Defendants in the underlying state court lawsuit, but does not 

have a duty to defend, or indemnify, the City of Zion in that matter.

____________________________________

Charles P. Kocoras

 United States District Judge 

 Dated: 7/29/2015

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