on

of” to mean “‘originating from,’ ‘having its origin in,’ ‘growing out of and ‘flowing from,
Maryland Cas. Co, v. Chicago & N. W. Transp. Co., 126 Ill. App. 3d 150, 154 (1984) (quoting WV.
Cas, & Sur. Co. v. Branon, 463 F. Supp. 1208, 1210 (.D. Ill. 1979)), or “[t]o spring up, originate,
to come into being or notice .. . or to come into being, to come about: come up: take place.” Smiley,
276 Ill. App. 3d at 978 (internal quotation marks and citations omitted).

The bankruptcy court held that:

[iJn this case, the injuries alleged by Rochester arose out of the discrimination. Sex
discrimination under Title VI includes sexual harassment, which takes two forms:
Quid pro quo [sic] sexual harassment and hostile work environment.

St. Paul asserts properly that Rochester’s claims arose out of sexual
harassment committed by Fishman and her discharge from F&M based on her refusal
to assent to the harassment. The trustee does not refute these arguments.

Instead, the trustee states that because Rochester’s claims arose out of the
sexual harassment by Fishman, it is not within the discharge of, coercion of, or
discrimination against her.

The trustee confuses the issue by failing to recognize that sexual harassment
is a form of discrimination. Rochester specifically sued F&M under the two theorics
of sexual harassment that are recognized as forms of discrimination under Title VIL
and for discrimination under Title VII,

In addition, in count five, Rochester alleged tortious interference with
contractual relationships. This came out of her refusal to submit to harassment.
Fishman interfered with her employment relationship with F&M, thereby resulting
in her constructive discharge, thus all of her claims arose out of the scxual
harassment she endured at F&M and her constructive discharge.

Hence, the . . . policies’ employment related practice exclusions are
applicable, and St. Paul had no duty to defend F&M with respect to the underlying
litigation,

(Tr. at 10 11.18-25 to 12 Il. 1-11) (internal citations omitted),
The bankruptcy court’s ruling was correct. Rochester’s injuries “arise out of” the

discrimination. “Sexual harassment is the form of sex discrimination in the terms or conditions of

employment that consists of efforts by coworkers or supervisors to make the workplace intolerable



The Policies

St, Paul issued the policies to F&M. The policies were in effect for two annual periods,
beginning January 1, 1990 until January 1, 1992. The policies provided that: “You are insured if you
are an employer named in item 1 of the Information Page. If that employer is a partnership, and if
you are one of its partners, you arc insured, but only in your capacity as an employer of the
partnership’s cmployees.” (Adversary Compl. Ex. Al, Workers Compensation & Employers
Liability Insurance Policy { B.)

The policies also provided that they applied to “bodily injury” by accident or disease subject
to certain exclusions. Under the policies, St. Paul had the right and duty to defend at its expense any
claim or proceeding or suit brought against F&M for benefits payable by the policies. However, the
policies excluded coverage for, among other things, “5. bodily injury intentionally caused or
aggravated by” the insured (“Exclusion 5”) and “7. damages arising out of the discharge of, coercion
of, or discrimination against any employee in violation of law”. (Id. at Pt. 2, § C, 975, 7.) Pursuant
to an endorsement, “Part Two (Employers Liability Insurance), C. Exclusion is amended by
replacing exclusion 7 with this exclusion. This insurance does not cover: 7. damages arising out of
coercion, criticism, demotion, evaluation, reassignment, discipline, defamation, harassment,
humiliation, discrimination against or termination of any employee, or any personnel practices,
policies, acts or omissions.” (Jd. at Employers Liability Insurance Endorsement.) This endorsement
was part of both policies issued to F&M.

The Bankruptcy Court Ruling
In the adversary procceding, St. Paul moved for summary judgment, arguing that it had no

duty to defend or indemnify F&M because (1) Rochester’s allegations did not involve bodily injury

4.



impermissible conduct, illegal harassment and subsequent retaliation toward Rochester, but F&M
failed to take any corrective action and in fact participated in and facilitated retaliation after she
complained about Fishman.” (Adversary Compl. Ex. B ff] 12, 13V, 13MM, 16.) Rochester’s
complaint further alleged that F&M withheld services and resources, refused to give her assignments
and projects, interfered with her professional relationships at the firm and treated her differently than
male employees solely because of her sex. (7d. 29.) It is inconceivable that F&M would not have
expected Rochester’s injuries to result from its alleged conduct.

The Trustee also argues that the bankruptcy court erred because allegations of negligence
invoke the duty to defend. The Trustee relies on Wilkin Insulation Co., 144 Ul. 2d at 79, for the
proposition that, although a complaint alleges intentional conduct, if it also alleges a theory of
recovery sounding in negligence it does not allege that the insured expected or intended the injury.
Count 1] of Rochester’s complaint alleges that under Title VII of the Civil Rights Act of 1964, as
amended by the Civil Rights Act of 1991, F&M “had a duty to refrain from” creating or maintaining
an offensive and hostile working environment for Rochester due to Fishman’s persistent sexual
advances and lewd comments and treating Rochester differently on the basis of sex. (Adversary
Compl. Ex. B ff] 25, 30.) The Trustee argues that these allegations indicate that F&M was negligent
and that, therefore, Rochester’s injuries were “accidental” and covered under the policies.

The bankruptcy court held that, although certain counts used terminology associated with
negligence,

[b]oth counts incorporate the specific factual allegations of the previous counts.

According to those allegations, F&M intentionally discriminated against and

retaliated against Rochester. This conduct is clearly intentional and not merely

negligent or accidental.
The point to be made here is that the allegation of duty docs not imply that

9.



the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Cincinnati Ins. Co.
v, Flanders Elec. Motor Serv., Inc., 40 F.3d 146, 150 (7th Cir. 1994), “One of the principal purposes
of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses
... 2? Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Thus, although the moving party on a
motion for summary judgment is responsible for demonstrating to the court why there is no genuine
issue of material fact, the non-moving party must go beyond the face of the pleadings, affidavits,
depositions, answers to interrogatories, and admissions on file to demonstrate, through specific
evidence, that there remains a genuine issue of material fact and show that a rational jury could
return a verdict in the non-moving party’s favor. Ceflotex, 477 U.S. at 322-27; Anderson v, Liberty
Lobby, Inc., 477 U.S. 242, 254-56 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
US. 574, 586-87 (1986); Waldridge v. American Hoechst Corp., 24 F.3d 918, 923 (7th Cir. 1994).

Disputed facts are material when they might affect the outcome of the suit. Mirs¢ Ind. Bank
v, Baker, 957 F.2d 506, 507-08 (7th Cir. 1992). When reviewing a motion for summary judgment,
a court must view all infcrences to be drawn from the facts in the light most favorable to the
opposing party. Anderson, 477 U.S. at 247-48; Popovits v. Circuit City Stores, Inc., 185 F.3d 726,
731 (7th Cir. 1999). Tlowever, a metaphysical doubt will not suffice. Matsushita, 475 U.S. at 586.
If the evidence is merely colorable or is not significantly probative or is no more than a scintilla,
summary judgment may be granted. Anderson, 477 U.S. at 249-250.

DISCUSSION

The ‘Trustee argues that while Fishman’s conduct toward Rochester may have been

intentional as to Fishman, under Jllinois law, it was an “accident” as to F&M. Spccifically, the

Trustee argues that, because Rochester’s complaint alleges facts that suggest that F&M was

-6-



by accident but were the result of intentional conduct by Fishman and F&M and, therefore, excluded
from coverage by Exclusion 5 and (2) Exclusion 7 applied because Rochester’s claims arose out of
Fishman’s and F&M’s coercion and discrimination.

On November 26, 2002, the bankruptcy court granted St. Paul’s motion for summary
judgment. The Trustee argued that St. Paul had a duty to defend and indemnify F&M because
Rochester’s complaint alleged negligent behavior by F&M. The bankruptcy court held that St. Paul
had no duty to defend or indemnify F&M because Fishman’s and F&M’s conduct had not been
“accidental”. The bankruptcy court also held that, even if the policies covered Rochester’s claim
against F&M, the exclusion provisions would preclude coverage because Rochester’s injuries arose
out of the discrimination.

The Trustec then appcaled the bankruptcy court’s judgment to this Court, raising the
following issues for review:

1, Whether the Bankruptcy Court erred by concluding that the injury alleged in the

underlying complaint did not constitute an “accident” within the meaning of the

applicable insurance policies.

2. Whether the Bankruptcy Court erred by concluding that Exclusion C7 of the

insurance policies, which excluded “damages arising out of the discharge of, coercion

of, or discrimination against any employee in violation of law,” applicd to exclude

coverage for the claim in the instant circumstances.
(Pl.’s Br. at 5.)

LEGAL STANDARD

A bankruptcy court’s grant of summary judgment is reviewed de nove. Herbstein yv.
Bruetman, 266 B.R. 676, 681 (N.D. Ill. 2001). The Court reviews the bankruptcy court’s factual
determinations for clear error. Jn re Ratner, 132 B.R. 728, 730 (N.D. Ill. 1991).

Summary judgment is appropriate when there remains no genuine issuc of material fact and

5.



result.” Am. Acad. of Orthopaedic Surgeons, 315 Ill. App. 3d at 561.

The bankruptcy court held that:

the factual allegations set forth that Rochester's complaint contends that F&M

engaged in an intentional pattern of misconduct and discrimination against her.

Rochester detailed deliberative action taken by F&M once it was made fully

aware of Fishman's sexual harassment toward her.

Rochester further alleged that F&M did not take any corrective action, but
instead condoned the harassment and participated in a scheme of retaliation against

her. This conduct was intentional on the part, not only of Fishman, but also F&M.

Therefore, these actions cannot be seen as accidental.

(Tr. at 7 Il. 20-25, 8 11. 1-8.)

In West American Insurance Co. v. Vago, 197 Ill. App. 3d 151 (1990), the court considered
an exclusionary provision that cxcluded from coverage bodily injury that was expected or intended
by the insured. The insured had sexually assaulted a waitress who later filed a tort action against
him. The Vago court held that the insurer had no duty to defend the insured because the waitress’s
injurics were expected or intended by the insured and, thus, not accidental, reasoning that since the
complaint alleged that the insured “deliberately sexually assaulted the waitress” it was not
“conceivable that [the insured] would not have reasonably anticipated the injuries to the waitress
allegedly resulting from his conduct,” 197 Ill. App. 3d at 137.

From the allegations in Rochester’s complaint it is clear that Rochester’s injuries were the
expected or intended result of F&M’s actions, Rochester’s complaint alleged that “F&M was aware
of Fishman’s abusive and illegal conduct but failed to take any corrective action”; “F&M
orchestrated a campaign of retaliation against her”; “F&M and [a partner at the firm] had donc

nothing to stop the retaliation, the discrimination and to work for or intercede on her behalf’; and

“F&M, its management and cmployees . . . knew that Fishman was engaged in a course of



Mitute Order Foe (i097)

\su

United States District Court, Northern District of Dlinois

Name of Assigned Jud Sitting Judge if Oth
avoe Mage ate Judge John W. Darrah than Assigned Judge
CASE NUMBER 02 C 9488 DATE 4/15/2003
CASE LAWRENCE FISHER vs, ST. PAUL INSURANCE COMPANY OF ILL
TITLE
[In the following bux (a) indicate the party filing the motion, e.x., plaintitT, defendant, 3rd party plaintiff, und (b) state briefly the nature
MOTION: of the motion being presented]
DOCKET ENTRY:
qd) o Filed motion of [ use listing in “Motion” box above.]

(2) oO Brief in support of motion duc

Q) oOo Answer brief to motion due_____. Reply to answer bricfdue____.

(4) a} Roling/Hearing on___set for ato.

(5) a Status hearing[held/continued to] [set for/re-set for] on set for at

(6) o Pretrial conference[held/continued to] [sct for/re-set for]on __—ssetfor_ at,

(7) o Trial[sel for/re-set for]on______at |

(8) Oo (Bench/Jury trial] [Tearing] held/continued to ___at

(9) Q This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

QFRCP4(m) O Local Rule 41.1 C)FRCP41(a)\(1) 0 FRCP41(a)(2),

(10) M_[Other docket entry] Enter memorandum opinion and order, The decision of the bankruptcy court
is affirmed.

al of [For further detail see order attached to the original minute order.)

No notices required, advised in open court

No notices required.
req) umber of wotices "4

Nolives mailed by judge's staff.

PR 17 208

Notified counsel by telephone, date docketed

Docketing to mail notices. " \
Mail AO 450 form. AMNDD ON LIT SA abst

ergata

Copy to judge/magistrate judge,

date muiled notice

courtroom:
deputy's
initials

LG

Date/timme received in
central Clerk’s Office

sling deputy initials



(N.D. Ill. 1993), are distinguishable. In Wilkin Insulation Co., the insurance policies defined an
“occurrence” as “an accident, including continuous or repeated exposure to conditions which result
in property damage * * * neither expected nor intended from the standpoint of the insured.” 144 Ill,
2d at 76 (internal quotation marks omitted). The Wilkin Insulation Co. court held that the insurer
had a duty to defend because

{iJn the instant action, the underlying complaints all allege that the asbestos-
containing products continuously release toxic asbestos fibers into the air. This
continuous release of asbestos fibers constitutes a harmful condition. By virtue of
the “continuous or repeated exposure to the condition” of asbestos fiber release, the
buildings and their contents became contaminated. It is the continuous exposure of
the buildings and their contents to released asbestos fibers which constitutes the
“accident,” as defined by the insurance policies. This “accident” results in “property
damage.” Therefore, the “property damage” alleged in the underlying complaints is
caused by an “occurrence,” as defined within the insurance policies,

We have reviewed the underlying complaints and are unable to find any allegations
that Wilkin “expected or intended” to contaminate the buildings and the contents
therein with toxic asbestos fibers.
[W]e conclude that the underlying complaints do not allege that Wilkin expected or
intended to contaminate the buildings and the contents therein with toxic asbestos
fibers.
144 Ill, 2d at 77, 78. In Open Sesame, the insurance policy contained a definition of occurrence that
was identical to the one in Wilkin Insulation Co.. 819 F. Supp. 756. In Open Sesame, the underlying
complaint alleged, among other things, that:
John Doe was sexually assaulted and abused by [an employee of the insured]. . .
during normal hours, .. . [The insured] failed to perform any background check [on
the employee] before allowing him to work there. ... [The insured] was negligent in
allowing [the employee] to work there in that it knew or reasonably should have
known that [the employee] had a prior history of sexually assaulting an individual.

819 F. Supp. at 758. In Open Sesame, the underlying complaint also alleged a claim for intentional

infliction of emotional distress. After noting that “an Tllinois court would find, as a maiter of law,

-L1-



the breach of the duty was merely negligent or accidental. Allegations of a duty do

not transform the character of claimed misconduct from intentional to negligence so

as to invoke coverage of a policy dealing with accidental injuries.

(Tr. at 8 Il. 18-25, 9 IL 5) (citing Atlantic Mut. Ins. Co. v. Am. Academy of Orthopaedic Surgeons,
315 Ll App. 3d 552 (2000); West Am. Ins. Co. v. Vago, 197 Ill. App. 3d 151 (1990)).

The Vago court held the insurer had no duty to defend, reasoning that:

While count V of the tort complaint uses terminology generally associated with

negligence, speaking of [the insured’s] ‘duty to act with due care’ and his alleged

‘breach of said duty,’ that count incorporates the specific factual allegations of the

other four counts. According to these allegations, [the insured sexually assaulted the

waitress]. Such a course of conduct is clearly intentional and not merely negligent

or accidental. Furthermore, if [the insured] engaged in such conduct, he would have

been consciously aware that he was practically certain to cause emotional injuries to

the waitress.

197 Ill. App. 3d at 137. In American Academy of Orthopaedic Surgeons, that court held that the
insured expected the injuries to result because “the injurics suffered by the underlying plaintiffs
occurred as a direct result of surgically implanting . , . devices in violation of FDA regulations.” 315
Ill. App. 3d at 565.

Similarly, here, Count I] realleged F&M’s intentional conduct. F&M’s conduct, as alleged,
was clearly intended and not merely negligent, Rochester’s complaint alleges that her injurics
occurred as a direct result of F&M’s deliberate conduct in allegedly tuming a blind eye to Fishman’s
alleged misconduct and allegedly retaliating against Rochester. The allegations that F&M owed
Rochester a “duty” to take corrective action or not to create a sexually hostile working environment

do not sound in negligence but rather are claims for violations of federal laws.

Furthermore, the cases that the Trustee cites in support of his position, Wilkin Insulation Co.

and United States Fidelity & Guaranty Co. v. Open Sesame Child Care Center, 819 F. Supp. 756



negligent, Rochester’s injuries were not expected or intended by F&M but accidental; and, therefore,
St. Paul had a duty to defend and indemnify F&M.

Tinois law controls because the insured risk was in Tlinois, F&M is an Ilinois resident and
St. Paul is an insurance company licensed to do business in Illinois. Knoll Pharm. Co. v. Automobile
ins. Co. of Hartford, 152 F. Supp. 2d 1026, 1032 (N.D. Ul. 2001). Under Illinois law, the
interpretation of an insurance policy is a question of law. Mank y, West Am. Ins, Co., 249 Il. App.
3d 827, 830 (1993).

An insurer’s duty to defend its insured is broader than its duty to indemnify. . . . In

determining whether an insurer owes its insured a duty to defend, the court must look

to the allegations of the underlying complaint in comparison to the relevant insurance

policy provisions. . .. If the underlying complaint alleges facts within or potentially

within policy coverage, the insurer is obligated to defend its insured, even if the

allegations are groundless, false or fraudulent. . . . In order for the insurer to

justifiably refuse to defend the insured, it must be “clear from the face of the
underlying complaint that the allegations fail to state facts” which bring the cause

within or potentially within coverage.

Atlantic Mut. Ins. Co. v.. Am. Acad. of Orthopaedic Surgeons, 315 I. App. 3d 552, 559-60 (2000)
(quoting United States lid. & Guar. Co. v. Wilkin Insulation Co., 144 I1.2d 64, 73 (1991).

Under the policies, St. Paul was required to defend and indemnify F&M for “bodily injury
caused by accident”. The policies do not define “accident”. IMlinois law provides an “accident” is
“‘an unforeseen occurrence of untoward or disastrous character’ or an ‘undesigned sudden or
unexpected event.’ The natural and ordinary consequences of an act do not constitute an accident.”
Bituminous Cas. Corp. v. Gust K. Newberg Constr. Co., 218 Ill. App. 3d 956, 1009 (1991) (quoting
Aetna Cas. & Sur. Co. y. Freyer, 89 Ill. App. 3d 617, 619 (1980)). “Tf the actor expects or intends

the injury to follow from the act, there is no coverage under the policy. However, even an intentional

act will be covered under the policy language at issue if it causes an unexpected or unintended

-7-



Rochester alleged that, beginning in late October or carly November 1990 and continuing
until July 8, 1991, Fishman made repeated sexual imnuendoes and advances to Rochester.
Specifically, Rochester alleged that Fishman (J) flirted with her; (2) kissed her against her will on
morc than one occasion; (3) fondled her breast on more than one occasion; (4) masturbated in front
of her; (5) put his hand up her skirt; and (6) on July 5, 1991, held her down and forcibly stuck his
finger in her vagina. The complaint also alleges that during this time, Rochester repeatedly advised
Fishman that his conduct was unacceptable and had to stop and brought Fishman’s conduct to the
attention of other F&M partners. However, F&M took no steps to curb Fishman’s conduct.

The complaint further alleges that after the July 5, 1991 episode, Rochester complained about
Fishman’s conduct to an attorney at F&M, Scott Porterfield, on two occasions. The complaint
alleges that after these complaints and until Rochester’s termination, (1) the partners only spoke to
her on work-related matters; (2) Fishman and partners closely associated with him did not work with
Rochester again, cutting off her professional growth; (3) F&M withheld secretarial, clerk and
paralegal services, did not allow her to incur ordinary and customary expenses, and denied her
resources that it made available to male associates.

After Rochester filed the charge and the complaint, F&M submitted a claim to St. Paul for
coverage. St. Paul denied coverage, stating that (1) the claim was not covered by the policies and
(2) even if it was, the employer’s liability exclusion applied.

The case went to trial; and a jury verdict was entered against F&M, finding it liable for guid
pro quo sexual harassment, hostile working environment sexual harassment and unlawful retaliation,

The jury awarded Rochester compensatory and punitive damages.

3.



or at least severely and discriminatorily uncongenial to women (‘hostile work environment’
harassment), and also efforts (normally by supervisors) to extract sexual favors by threats or
promises (‘quid pro quo” harassment).” DeClue v. Central Ill. Light Co., 223 F.3d 434, 437 (7th Cir.
2000) (citing Burlington Indus., Inc. v. Ellerth, 524 U.S. 742, 752 (1998)). Here, Rochester’s
complaint alleged that Fishman sexually harassed her and that F&M condoned and participated in
the creation of a hostile work environment and treated her differently than similarly-situated male
associates. Furthermore, Rochester’s claims for intentional infliction of cmotional distress (Count
IV) and tortious interference with contractual relationship (Count V) have their origin in Fishman’s
and F&M’s discriminatory conduct. Count V alleges that as a result of her refusal to submit to
Fishman’s sexual advances, Fishman interfered with her employment by refusing to work with her
and encouraging other partners not to work with her, which resulted in her constructive discharge
on February 9, 1994, Tf not for Fishman’s and F&M’s discriminatory conduct, Rochester’s claims
would not have come about. Thus, coverage was precluded under Exclusion 7'.

Additionally, coverage is precluded by Exclusion 5. Exclusion 5 of the policies precluded
coverage for “bodily injury intentionally caused or aggravated by” the insured. As was discussed
in greater detail above, Rochester's complaint alleges that F&M acted deliberately to cause her
injuries, Therefore, Exclusion 5 also precludes coverage under the policy.

Itis clear from the face of Rochester’s complaint that the allegations fail to state facts which
bring the cause within or potentially within coverage, see Am. Acad. of Orthopaedic Surgeons, 315

Ill. App. 3d 560; and the grant of summary judgment in favor of St. Paul was correct. Therefore, the

‘Although the bankruptcy court did not address this issue, it is clear that coverage is also
precluded under the endorsement amending Exclusion 7, which expressly excludes coverage for
damages arising out of harassment.

-14-



July 9, 1999; and Lawrence Fisher (“Trustee”) was elected trustee.

On October 5, 2001, the Trustee filed an adversary proceeding against St. Paul, alleging that
St. Paul breached its contractual obligations pursuant to the policies by refusing to defend or
indemnify F&M in connection with an administrative claim and subsequent federal lawsuit by a
former F&M cmployee, Roxanne Rochester (“Rochester”), against F&M and Fishman (“the
Rochester Action”).

The Rochester Action

Rochester filed two charges of discrimination (“the charges”) with the Illinois Human Rights
Commission and the Equal Employment Opportunity Commission (“EEOC”) against Fishman and
F&M. The charges alleged that Rochester had been employed as an associate attorney from
November 13, 1989 until February 9, 1994,when she was constructively discharged. The charges
alleged that during her employment, Rochester had been discriminated against because of her sex
and retaliated against for refusing Fishman’s unwanted sexual advances and for reporting the scxual
harassment.

After receiving a Right to Sue letter, Rochester filed a five-count complaint against Fishman
and F&M in the United States District Court for the Northern District of Illinois, alleging guid pro
quo sexual harassment (Count 1), hostile working environment sexual harassment (Count IT), sex
discrimination (Count I), intentional infliction of emotional distress (Count IV), and tortious
interference with contractual relationship (Count V). In the complaint, Rochester alleged that during
her employment at F&M, Fishman, with F&M’s knowledge, consent and approval, deliberately,
maliciously and repeatedly sexually harassed her. She further alleged that F&M and Fishman

discriminated against her because of and due to her gender.

-2-



IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

LAWRENCE FISHER, Trustee of the
Estate of Fishman, Merrick, Gennelly,

Springer, Klimek, & Anderson, P.C.,
Case No. 02 C 9488
Plaintiff-A ppellant,

vy

ST. PAUL INSURANCE COMPANY
OF ILLINOTS,

Ae; ER TED

APp ,

)
)
)
)
)
) Honorable John W. Darrah
)
)
)
)
, £7 2og3

Defendant-Appellee.
MEMORANDUM OPINION AND ORDER

This matter comes before the Court on the appeal of the judgment of the bankruptcy court
on November 26, 2002, by Lawrence Fisher, the Trustee of the Estate of Fishman, Merrick,
Gennelly, Springer, Klimek & Anderson, P.C. For the reasons that follow, the decision of the
bankruptcy court is affirmed.

BACKGROUND

The Estate of Fishman, Merrick, Gennelly, Springer, Klimek & Anderson, P.C. (“F&M”) was
an Illinois professional corporation. Gerald Fishman (“Fishman”) was a partner at F&M. The
Defendant, St. Paul Insurance Company of Illinois (“St. Paul”), is an insurance company which is
authorized to do business in Illinois. St. Paul was the issuer of workers compensation policies (“the
policies”) to F&M,

On February 10, 1999, an involuntary petition for relief was filed under Chapter 7 of Title

11 of the United States Code against F&M. An order for bankruptcy relief was issued on



that [the employee] intended to injure John Doe when he was sexually abused,” the Open Sesame
court held that the injury was covered under the policy because only the insured’s, not the
employee’s, intentional conduct fell outside the ambit of the insurance policy. 819 F. Supp. at 759,
760. Since the complaint alleged only negligent conduct on the part of the insured, the insurer had
a duty to defend the insured. Open Sesame, 819 F. Supp. at 760.

Here, as was noted above, Rochester’s complaint alleged intentional conduct by the insured,
F&M, that caused her injuries. Rochester’s complaint fails to state facts that support the conclusion
that F&M was negligent or that Rochester’s injuries were accidental under the policy. Thus, it is
clear from the face of Rochester’s complaint that Rochester’s injuries were not “accidental” within
the meaning of the policy and that the ruling of the bankruptcy court was correct.

The Trustee next argues that the bankruptcy court erred by holding that Exclusion 7 applied
to Rochester’s claims. Specifically, the Trustee argues that Rochester’s damages actually “arose out
of” Fishman’s sexual battcry and other misconduct and not discrimination.

Under Minois law, “if the insurer relies on an exclusionary provision, it must be ‘clear and
free from doubt’ that the policy’s exclusion prevents coverage.” Am. Acad. of Orthopaedic Surgeons,
315 Ul. App. 3d at 560. Exclusion 7 precluded coverage for “damages arising out of the discharge
of, coercion of, or discrimination against any employee in violation of law.” An endorsement
amended Exclusion 7 to preclude coverage for damages arising out of harassment in addition to
those arising out of discrimination and coercion,

“Although not ambiguous as a matter of law, the phrase ‘arising out of in an exclusionary
clause of an insurance policy should be given a limited interpretation in favor of the insured.”

Allstate Ins. Co. v. Smiley, 276 Mi. App. 3d 971, 978 (1995). Illinois courts have held “arising out

-12-



judgment of the bankruptcy court is affirmed.
CONCLUSION

For the reasons stated herein, the decision of the bankruptcy court is affirmed.

ol

Joh; . Darrah, Judge
United States District Court

IT IS SO ORDERED,

Date: 4s f: V5, 2BXR

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