No. 1-06- 2754 FIRST DIVISION FILED: 9-24-07 ANDREOU an

d CASSON, LTD., FRA

NK ) Appe al fro m the ANDR EO U, LUKE CASS ON, and FR ANK ) Ci rcu i t Cou rt of KOSTUR OS, ) Co o k C o un t y. ) Plai ntif fs-Appel lan ts, )

) v. ) No. 04 CH 20705 ) LIBERTY IN SURA

NCE UNDER

WRITER S, ) INC., ) Ho no r ab le ) So ph ia H all, Defe ndan t-Appell ee. ) Judge Presidin g. JU STI CERO BE RTE. G OR DO N del i v ered th e op i n i on of th e c our t: The issue presented in

this case is whether defendant Li berty Insurance Underwriters, Inc. (Li berty), ha d a duty to defend i

ts insured, plai

ntif f A ndreou & Cass on, Ltd. (A&C), a law fi rm, an d their represen

tatives, Fran

k An dreou, Luke Casson, and Fran k Kosturos, in an underl yi ng sui t file d by Dana K urtz (Kurtz) alle gin

g, among other thi

ngs, def am ation. On March 24, 2003, Kurtz, an attor ney , fi le d a compl

ai nt agai nst A& C and thei

r representative s alle gin g that she had b een ousted from the fi rm, where she h

ad been a partner, and that after being o ust ed, A&C and its va rio us r epr ese nt at ives “pu blicly dispa ra ged her pr ofe ssio nalism and in tegrity.” On

March 25, 2003, A& C tendered i ts defense of the K

urtz suit to Li

berty, wh ic h refuse d the tender of def

ense an d deni ed coverage on March

31, 2003. On October 27, 2004, A&C re t ende re d t he de fense o f the Kur t z su it t o L ibert y, and it ag ain refu sed t he t ende r c laimi ng
no c ove rag e. On D ec em

be r 13 , 20 04, A &C

f i l ed a d ec l ara tory ac ti on i n th e c ha nc ery di vi si on of the ci rcuit court o f Cook County see kin g, among other thi

ngs, a decl

aration that Li

berty h ad aNo. 1-06- 2754

2

dut y to d efend A&C i

n the Kurt z suit. O n August 2 8, 20 06, t he tr ial cou rt grant ed Liberty’s
m oti on f or sum mar y j udgm en t f i n di n g th at th e K ur tz s ui t wa s n ot co v ered

un der the L i b er ty policy , and Li

berty theref

ore had no duty to defend.

1. T he Un de r lying L aw su it On Ma rc h 24, 200 3, Dana Kur t z filed a co mplaint ag ainst A&C alleging t hat A&C and its r epr ese nt at ives “pu blicly dispa ra ged her pr ofe ssio nalism and inte gr ity.” The follow ing summary o f event s lead ing t o t he fili ng o f Kurt z’s c omp laint is bas ed, in par t , o n t he allega t ions i n h er com plai nt. K urtz v . An

dreou & Cas son, L

td., No. 03 CH

5433 ( Ci r. Ct. Cook Co.). Acco rd ing t o Ku rt z’s c omp laint, Kur t z wa s “a yo ung a t t or ney induce d t o jo in a partnershi p based on represe

ntations that were f

al se and i ntended ul

tim ately to depriv e her of h er atto rney s’ f ees f rom several l

ucrative c ases.” Specifi

cally , Kurtz all eged that on August 3, 2002, “sh e entered i

nto a verbal

agreem ent wi th Andreou and C asson to join the fi rm of [A&C]” un

der
cer t ain co ndit ions, including t he co ndit ion t hat she w ou ld be an e qua l par t ner in all respe ct s and th at th e f i rm n am e w oul d b e ch an ge d to i n cl ude h er own . Acc ordi

n g to th e c om pl ai n t, K ur tz
acc ept ed t he o ffer. Kur t z “move d her law pr act ice t o [ A&C’s] place of bu siness, joined t he Par t ner ship and pr act iced law wit h [A&C] and d epo site d all pr oc eed s o f her p ra ct ice into t he Partne rsh i p’s f i rm acc ount.” K urtz al l eg ed tha t f rom Ma rch 8, 2 003 , th ough

Ma rch 15, 200 3, A

nd reou an d C as son bre ache d t he pa rt ner ship ag re ement and e ngag ed in var iou s ac t s o f wro ngful co nduc t , includ ing b re ach of f i du ci ar y du ti es , f ra ud , di sp arag em en t, d ef am ati on , a n d h um i l i ati on . Th e K ur tz
com plai nt stated f urthe r:No. 1-06- 2754

3 “39. On Ma rc h 17, 200 3 De fendant CASS ON filed a p leading in t he Dis trict Court of the Northern Di strict of Illi nois fal sel y a ll egi ng that [Kurtz] ‘rem oved several

fi le s f rom the off

ic es of [A&C] and f

al sel y [s tated] that [Kurtz] was i n possessi on of ‘al l rel evan t do cum entation, pleadi

ngs, an d ot her wri

tt en
mate rial wh i ch [w as ] re qui

re d to res pon d to th e m oti on ’ w h en i n f ac t th e [ su

b j ec t] f i l es w ere i n the poss ess i on of

[A& C].
*** 41. At the tim

e that they f

il ed the fa ls e pl eadi ng, Def endan ts CASSON
an d A ND REOU w ere

pe rf ec tl y aw are tha t [K urtz ] had certai n d ocu men ts f rom the f i l e (n am el y di sc ove ry answ ers ) b ec au se

sh e h ad be en pre vi ous l y work i ng on [ a] su mmar y jud gme nt r es po nse , as she ha d a dv ise d t he m. 42. Tha t same d ay, D efenda nt CASS ON c alled [ Kur t z’s] long -st anding clients and mad e false r epr ese nt at ions t hat [Ku rt z] had no t fil ed a nything w ith t he Co ur t on t he client s’ ca se, when in fact [Ku rt z] had filed an a ppr op riat e mot ion.
*** 44. Defend ant s’ st at ement s and act ion we re co mmi t t ed w ith t he inte nt and eff ect *** to dam

age [Kurtz’s] reputation ***.

*** 50. [Ku rt z] has p ro t ect able inte re st s in not having her re put at ion and character i

mpugn ed ***.
***No. 1-06- 2754

4 52 . F ur th er , [K ur tz] h as al re ad y suf f ered ** * a s a di re ct a n d p rox i mate resul t o f [A&C’s ] false and def am ator y s tatements *** and s

he h as suf fered in jury to her reput ation by

[A&C’s] f

alse an d defam ato ry statements.
*** 91. [Kurtz] has suf

fered *** dam

age to her reput ation i

n the l egal
comm uni ty ***.
*** 100. On March

17, 2003, Defen

dant CASSON cal

le d [Kurtz’s] l ongst anding c lients a nd made false re pr ese nt at ions t hat [Ku rt z] had no t fil ed a nything wi th th e C our t on th e c l i en ts’ ca se s w

h en i n f ac t [K ur tz] h ad f i l ed an appropri ate
m otion .” At the underl

yi ng trial, A&C cl

ai me d that Kurtz was an em ploy ee of A&C, had n

ever been a partner, and had b een termi nated from

her em ploy me nt in March 2003. The t rial co ur t in the u nder lyi ng ac t ion fo und in favo r o f Kurt z o n Febr uar y 23, 200 5, and bifurca t ed t he ca se by re ser ving t he de t er minatio n of d amage s su bject t o a n acc ou nt ing. T he t r ial c o ur t fo un d t ha t Ku r t z w as a p ar t ne rin t he firm a nd t ha t A&C br ea ch ed t he pa r t ne r ship ag re em en t on Ma rc h 8, 2 00 3, w

h en i t re f us ed to ch an ge th e n am e of th e f i rm an d i n f orm ed K ur tz that she was n

ot an equal

partner. Al

though the partnershi

p purport edl

y term in ated on March 10, 2003, no partner engaged i n the wi ndi ng up of the af

fai rs of the partnershi

p. The court found, t he r efo r e, t ha t ea ch pa r t y br ea ch ed it s fid uc iar y du t y o f lo yalt y and t he pa r t ne r ship r ema ine d in
ex i ste n ce un ti l th e c on tra ctual re l ati on sh i pswi th cl i en ts were w oun

d u p. B ec au se

each pa rtyNo. 1-06- 2754

1 The unde rlying Kurt z co mplaint allege d, among ot her t hings, defamat ion by A&C and i ts representatives

in March 2003, wh

ic h i s wi thin the policy

period. 5 faile d t o ac co un t an d h o ld fo rt he be ne fit o f t he pa r t ne r ship an y pr o pe r t y o rpr o fit r ec eiv ed in win din g up the partnershi

p aff ai rs, the court im

posed a constructive trust on the assets of each party and ordered an ac counting. It app ear s t hat t he pa rt ies re ache d a s et t lement a gr eement aft er t he co ur t in the u nder lyi ng action rende

red its partial

judgm ent. The trial

court la ter vacated its order and both parties voluntaril y dismi ssed their cl aim

s. 2. The Li

berty Polic

y The i nsuran ce poli cy at issue in this case, Illi nois la wyers professi

onal li abi li ty poli cy No. EJE- B71092764-012, was i ssued to A&C b y L ib erty f or t he peri

od of September 20, 2002, to Septembe

r 20, 2003. 1 The p oli cy

pr ov i de d i

n perti n en t pa rt:

“ We agr ee t o p ay on your be ha lf all damages in e xc es s o f t he de du ct ible
am oun t an d u p to th e l i m i ts o f l i ab i l i ty sta ted i n th e D ec l arati

on s th at you be co me legally obligat ed t o p ay, p ro vided s uch damages : 1. r es ult fr o m claims
a. f i rs t m ade a gai n st you durin

g the policy period *** and b. rep orted

to us in writ ing, a nd 2. are caused by

a wr ongf

ul a ct which t ake s plac e befo re or dur ing t he policy period ***. ” The policy

pro vides the foll

owing defi

ni tions:No. 1-06- 2754

6 “ [W]r ongf

ul a ct mea

ns an y ac tua l or al l eg ed ac t, er ror, om i ss i on or personal in jury whi ch ari ses out of the renderi ng or fai lure to render professi

onal legal services. [P]ersonal

injury means a. *** hum

il ia tion *** b. the publ i ca ti on or utter an ceof a l i be l or s l an de r or oth er d ef am atory or disparaging material, or a publication or ut ter ance in vi olatio n of an in

divi dual’s righ t o f pri vacy ***.
*** [C]laim mea ns a d ema nd r ec eiv ed by you for money or ser vices, i n cl udi n g th e s er v i ce of su i t or i n sti tuti on of ar b i tra ti on pr oce ed i n gsag ai n st you , or a di sci pli na ryprocee di ng.” The policy

defi nes “y ou” as: "b. if the named insured is a partnershi

p or li mi ted liabi li ty partnershi

p, such partnersh

ip or lim ited l ia bi li ty partnershi

p and each

la wyer who is

a partner thereof i ncl udin g any in corpo rated part ner and e ach sh areholde r of any such i nc orporated pa

rtner; c. if the named insured

i s a pr of es si on al cor porati on , l i m i ted l i ab i l i ty corpo ration or professional associ ation, such

professi onal corpo ration, li

mi ted li abili ty corpo ration o r pro fessi onal association an

d each lawy

er who is a sha re ho lde r o r me mber t her eo f;No. 1-06- 2754

7 d. each l awy er empl oyed b y the named insured ;
e. a ny pe rs on 1. who quali

fi ed prior to t he policy period , but who no longer qual if ie d as of the f irst day of the policy period; or 2. who durin

g the policy period

qua lif ies as a n insured

und er b ., c., or d., im me dia tely above, but onl

y to the extent such pers on performs or has perform

ed profes sional le gal ser

vices on beh

al f of the name d insu re d ***." The po licy then co nt ains t he fo llowing exc lusion: “5
. Insured ver

sus Insured . Fo r t he pu rp os e o f this su b-se ct ion, t he t er m ‘in su r ed ’ s ha ll me an ‘yo u’
. T he po licy d o es no t ap pl y t o an y claim made by
o ne o rmo r e in su r ed ag ain st an o t he rinsu r ed un les s a n a t t o rne y/c lient r ela t io nsh ip exi sts." The Lib erty policy

further pro vides:

“ We ha ve t he r ig ht an d d ut y t o de fe nd an y claim ag ai n st you including the appeal

thereof seeki

ng damages t o w hich this insu ra nce a pplies e ven if the al l egati ons of the s ui t are groun

dl ess , f al se or f raudu l en t." On March

25, 2003, A&C tendered the def ense of the Kurtz action to Lib erty. On March 31, 2003, Lib erty deni

ed coverage f

or a variety

of reasons, i

ncl udin g the fact t hat the poli

cy contain ed the insured versus insured exclusion that bars coverage f or clai ms between i

nsureds
un der the p oli cy. O n

Oc tob er 27 , 20 04 , A & C re- ten

dere d th e def ense of th e K ur tz s ui t toNo. 1-06- 2754

8

Li berty. Li berty aga in deni ed coverage, noting that Kurtz was an in sured under the polic

y regar dl ess of w hen she cea sed practi ci ng l aw wi th A&C
. 3. Th e D ec l ara tory Judgm en t Ac ti on A & C f i l ed th e i n sta n t acti on , s eeki

n g a de cl arati on th at th e p oli cy pr ov i de d c ov erag e to A &C f or th e K urtz ac ti on. Li

be rty answ ere d A&C ’s

com pl ai nt a nd f i l ed a c oun terc l ai m f or decl arator y judgme

nt. As part of i

ts counterclai

m, Li berty s ought a declarati on that t he polic y did n ot provide cove

rage for the Kurtz action f or several reasons, i

ncl udin g that t he insured versus ins ured exclusion ba rred a ny duty to def end or i nde m ni f y A& C. Li be rty f i l ed a m oti on f or s um mary j udg men t. Th e tri al cou rt gran ted Li be rty ’s moti on for sum ma ry j udgme nt on August 28, 2006, and speci fi cally found that the insured versus insured exclusionba

rred c overa

ge. Th i s ti mel y appe al f oll owed. AN AL YSIS As prev i ousl y noted, th i s ap peal wastaken

f rom th e tri al court’s gran t of su m mary judg ment in favo r o f Libert y and ag ainst A&C. “Summar y judgment is app ro pr iate wher e t he pleadi ngs, depositions, admi ssions, and af fi davi ts o n f il e, when taken to gether in the li ght most favo ra ble to t he no nmovant , sho w t hat t her e is no genu ine issue o f mate rial fact and t he mova nt is entitled to judgme

nt as a m atter of law.” Gaw

ryk v. Firemen’s Annuity & Benefit Fund of Chicago , 3 56 I ll. App. 3d 3 8, 41 ( 200 5) . Whe re , a s her e, “the par t ies have filed c ro ss- mot ions for sum ma ry j udgme nt, they agree that no genui ne i ssue as to any

ma terial fact ex is ts and that only a qu est ion o f law is involved, and t hey invite t he co ur t t o d ecide t he issue base d o n t heNo. 1-06- 2754

9

record.” Gaw

ryk , 35 6 Il l . A pp. 3d a t 41. W e re

vi ew a tri al cou rt’ s r ul i ng on a moti on f or
su m mar y j udgm en t de novo
. Gaw

ryk , 356 Il l . Ap p. 3d a t 41. A& C cl ai m s tha t the tri al court erred

by gran tin g Li berty’ s m otion f or sum mary judg ment w her e t he insur ance po licy i n que st ion es t ablishes t hat Libert y had a d ut y to defend A& C i n the K urtz su i t. In i ti al l y , we note tha t i n I l l i noi s, th e d utiesto de f

en d a nd to i nd em ni f y are not
coex tens i ve , the ob l i gation to def

end be i ng b roader than

the ob l i gation to pay . International Minerals &

Chemical Corp. v. Liberty Mutual Insurance Co. , 168 Il l . Ap p. 3d 36 1 (198 8). In det er mini ng whe t her an insur er has a dut y to defend its insu re d, a co ur t loo ks t o t he allega t ions in the underl

yi ng com pla in t and compares them

to the relev

ant provis ions

of the i nsuran ce pol i cy . Outboard Marine Corp. v. Liberty Mutual Insurance Co. , 154 Il l . 2d 90, 1 07-08 (1992 ). “If the facts alleged in the underlyi ng complain

t fall wi thin, or pot entiall

y wi thin, the p olicy ’s coverage, the in

surer’s duty to defen

d aris es.” Outboard Marine , 15 4 I ll. 2 d a t 10 8. Ho we ve r , if it is clear f rom the face of the complai nt that the allegations fai

l to st ate facts t hat bring the case wi thi n, or poten

tia l l y wi thi n, the pol i cy ’scove rage, a n i ns urer m ay properl y ref use to def end. United State Fidelity &

Guaranty Co. v. Wilkin Insulation Co. , 144 Ill . 2d 64, 73 (1991), quot ed in State Farm Fire

& Casualty Co. v. Hatherley , 250 Ill . App. 3d 333, 336 (1993). "[W]here an
excl us i ona ry cl au se i s rel i ed upon to de ny covera ge , i ts a ppl i ca bi l i ty m us t be cl ea r an d f ree f rom doubt because any

doubt s as to coverage will be resolved i

n f avor o f the i

nsured." International Minerals &

Chemical Corp. , 168 Ill . App. 3d at 367. “[W]here the l anguage of

an i nsuran ce policy is cl ear and un

am bi guous, it wil

l b e applie d as wri

tt en.” Hather

ly , 250 Il l . Ap p. 3d a t 337.No. 1-06- 2754

10

The construction of an

in surance pol

ic y pres ents a questi on of law that is rev ie wed de novo
. Outboard Marine , 154 Il

l . 2d at 10 8. In he r c omp laint, Kur t z allege d t hat she e nt er ed a ver bal agr eement wit h Andr eo u and Cass on o n Augu st 3, 200 2, t o jo in the law firm as an eq ual pa rt ner . S he allege s t hat she, Cass on, and And re ou re ache d an a gr eement t hat A&C’s na me wo uld be c hange d t o And re ou , Ku rt z, and Casson to reflect her status as an equal partner in

the fi rm. She a

ll eged that she “

move d her law pr act ice t o [ A&C’s] place of bu siness, joined t he Pa rt ner ship and pr act iced law wit h [A&C] and deposited al

l proceeds [f

rom] her practic e i

nto t he Partnershi

p’s f irm account.” Kurtz further alleged t hat fro m Marc h 8, 200 3, t hro ugh M ar ch 15 , 2 003 , And re ou and C asso n bre ache d t he partnershi p agreem ent by engagi ng i n va rious acts of wrongf

ul c onduct inc ludi

ng l ockin g her out of the fi rm’s pl ace of busi

ness. Co mpa r ing t he lan gu ag e o f t he un de r lying c o mpla int t o t he insu r an ce po licy a t iss ue in this decl arator y a

ction, i t is cl ear that the insured versus insured exclus ion applie s and that therefore Li

berty owed no duty to A&C to defen d it i n the K urtz action. As noted, the policy defi nes “y ou” as: “b . if the named insured

is a partnershi

p or li mi ted liabi li ty partnershi

p, such partnersh

ip or lim ited l ia bi li ty partnershi

p and each

la wyer who is

a partner thereof i ncl udin g any in corpo rated part ner and e ach sh areholde r of any such i nc orporated pa

rtner; c. if the named insured

i s a pr of es si on al cor porati on , l i m i ted l i ab i l i ty corpo ration or professional associ ation, such

professi onal corpo ration, li

mi tedNo. 1-06- 2754

2 Our co nclusio n is sup po rt ed by t he findings o f the co ur t in the u nder lyi ng su it, altho ugh,
as n oted ab ove, the parti

es re ach ed a s ettle men t agreemen

t and the tri al court va cated th at order. 11 li abili ty corpo ration o r pro fessi onal association an

d each lawy

er who is a sha re ho lde r o r me mber t her eo f; d. each l awy er empl oyed b y the named insured ;
e. a ny pe rs on 1. who quali

fi ed prior to t he policy period , but who no longer qual if ie d as of the f irst day of the policy period; or 2. who durin

g the policy period

qua lif ies as a n insured

und er b ., c., or d., im me dia tely above, but onl

y to the extent such pers on performs or has perform

ed profes sional le gal ser

vices on beh

al f of the name d insu re d." The dec l arati

on s i n th e i n su ra n ce pol i cy sta te th at th e i n su ra n ce pol i cy wa s iss ue d to A&C
. T he de cla r at io ns lis t A&C as a p r o fes sio na l co r po r at io n, alt ho ug h it wa s ju dic ially determi ned i n the un derly in g sui t t hat A& C operated as a partnershi p and n ot as a profess iona

l corpo ration, and that Kurtz was a partner of that partnershi p. Under ei

ther scenari

o, it is cl ear that Kurtz qualifi

ed as an i nsured un der either paragraph

b or c in that section of the i

nsuran ce policy that defi nes “ you” f or purpo ses of determ

in in g in sured status. Kurtz’s insured status
co nt inued d esp ite he r t er minatio n on M ar ch 8, 200 3, beca use even a fte r she was t er minated she stil l retai ned h er in terest in the f

irm , providi ng he r coverage under paragraph b or c. T heref

ore, the tri al cou rt di d n ot err by f i nd i ng tha t Li be rty di d n ot owea d

uty to de f en d A&C by operati on of the insured versus insured exclus ion
. 2No. 1-06- 2754

12

De sp i te the f oreg oi ng , A &C arg ue s to th i s c ourt th

at K urtz wa s a mere em pl oyeean d n ot a part ner of the fi

rm. A&C argues that if K urt z were t o be considered an empl oyee of A&C , the n s he woul d have c ea se d to have b een a n i ns ure d a f ter h er te rm i na ti on, wi th th e e xc ep ti on of coverage under paragraph e i n the section that defi

nes “ you.” Ini tial ly , we note t hat A& C has ci ted n o au th ori ty f or i ts a rgum en t th at a i m s to sh ow th at K ur tz w as n ot an i n su re d if sh e w as to be consi dered an em

ploy ee, and n ot a partner, of A&C . More im port antly however, A& C has f ai l ed to prov i dean y thi ng i n th e re cord ten di ng to sh ow that K urtz wa s a mere em pl oyeean d n ot a partner. To the contrary, the record demonstrates that Kurtz was a partner or at least a m em ber of a profess iona

l c orpo ration, and h

ence an in sured. Th e re cord

sh owstha t Ku rtz is l i ste d a s a n u nd ers i gned on th e p rior acts e xc l

us i on
en dor se men t th at is p ar

t of th e L i b er ty pol i cy. K ur tz’ s s i gn atu reappe ar s a

l ongs i de b oth An dreou’ s an

d Cas son’ s si

gna tures on a si gna ture l i ne that i s en titl ed “ Si gna ture of Partne r, Member, Owner , o r So le Pro priet or ,” lead ing to the co nclusion t hat Kurt z was a par tne r in A&C
and an i ns ured u nde r the Li berty p oli cy . The trial court did n

ot err in concl udin g that t he insured versus insured exclus ion op er at ed t o p re clude co ver age t o A&C in the Ku rt z su it, since Ku rt z wa s an insur ed u nder t he Libert y policy at t he t ime of t he allege d de famat ion. CONCLUSION Fo rt he fo r eg o ing r ea so ns , we af fir m t he ju dg men t o f t he cir cu it co ur t o f Co o k C o un t y. Af f i rmed. WO LF SON a

nd G AR CIA , JJ., c oncu

r.No. 1-06- 2754

13