arising in Illinois is bound to apply the law of Illinois. See Erie Railroad Co. v. Tompkins, 304
US. 64, 58 S.Ct. 817 (1938); Ace Cycle World, Inc. vy. American Honda Motor Co., 788 F.2d
1255 (7th Cir. 1988).

Il. Analysis

In this case, we must determine whether AAIC is obligated to defend or indemnify
Demons under a commercial general liability policy it has with his previous employer, Loyalty.
An insurer’s duty to defend is determined by comparing the allegations of the underlying
complaint with the relevant provisions of the insurance policy. See Dixon Distributing Co. v.
Hanover Ins. Co., 161 Til.2d 433, 438, 641 N.E.2d 395 (1994). If the underlying complaint
alleges facts within, or potentially within, the policy’s coverage, then the insurer is obligated to
defend the insured. See American States Ins. Co. v. Koloms, 177 11.2 473, 479, 687 N.E.2d 72,
75 (1997).

The threshold issue, then, is one of contract construction. When asked to interpret
insurance policies, courts give effect to the parties’ intent as expressed in their agreement. See
id., 177 Ili.2d at 479-80, 687 N.E.2d at 75. If the policy’s terms are unambiguous, they are given
their plain and ordinary meaning. /d. The construction of an unambiguous provision in an
insurance policy is a question of law, and a policy’s terms are to be applied as written unless
those terms violate public policy. See Roberts v. Northland Ins. Co., 185 Il.2d 262, 705 N.E.2d
762 (1998).

Here, the language of the Policy is straightforward. Referencing such language, AAIC
contends that it does not have a duty to defend Demons in the Clark suit because the Policy

specifically excludes coverage for any “occurrence” that is “expected or intended by the insured.”


asserted, Demons, was a party or in privity with a party to the prior adjudication. Clearly, he was
since he was the person convicted of the sexual assault. Moreover, as the insured in Savickas,
Demons had a full and fair opportunity to litigate all relevant issues in his criminal trial.
We find that the acts committed by Demons against Ms. Clark were intentional and
resulted in bodily injury. As such, the acts are not an occurrence under the Policy. For these
reasons, we find that AAIC has no duty to defend Demons in the Clark suit.
B. Duty to Indemnify
The question whether an insurer has a duty to indemnify is ripe only if the insured has
already incurred liability in the underlying claim. Outboard Marine Corp. v, Liberty Mutual Ins.
Co., 154 Ill.2d 90, 127-28, 607 N.E.2d 1204 (Ill. 1992). At that point, the duty to indemnify
arises if the insured’s activity and any resulting loss actually fall within the policy’s coverage. As
stated above, Demons’ conduct alleged in the Clark suit, does not fall within the coverage of
AAIC’s Policy and, thus, AAIC cannot incur liability. In sum, AAIC has no duty to indemnify
Demons should he be found liable in the Clark suit.
For these reasons we find that:
1. Demons’ criminal conviction establishes his intent to commit criminal acts under
Illinois law;

2. Because the Policy specifically excludes from coverage bodily injury “expected or
intended by any insured,” AAIC has no duty to defend Demons with respect to the
Clark suit; and

3. Because the Policy specifically excludes from coverage bodily injury “expected or
intended by any insured,” AAIC has no duty to indemnify Demons.


CGL Policy, and AAIC owes me no duty to defend with respect to Plaintiff's [Clark’s]
complaint.” Thus, it is apparent that AAIC’s motion for summary judgment clearly is
unopposed.
DISCUSSION

I. Legal Standards

Under Federal Rule of Civil Procedure 56(c), a trial judge must grant summary judgment
if the evidence offered demonstrates that “there is no genuine issue as to any material fact and
[that] the moving party is entitled to judgment as a matter of law.” Anderson v. Liberty Lobby,
Ine., 477 US. 242, 250, 106 S.Ct. 2505 (1986). The moving party initially must inform the court
of the basis for its motion and identify “the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any,” that the movant believes demonstrate
the absence of a genuine issue of material fact. Celotex Corporation v. Catrett, 477 U.S. 317,
333, 106 S.Ct. 2548 (1986) (quoting Federal Rule of Civil Procedure 56(c)); Adickes v. S.H.
Kress & Co., 398 U.S. 144, 153, 90 S.Ct. 1598 (1970). A “genuine” factual issue is one that
properly can be resolved only by a finder of fact because it may reasonably be resolved in favor
of either side. See Anderson v, Liberty Lobby, Inc., 477 U.S. at 250, 106 S.Ct. 2505.

In assessing whether there are any factual issues to be tried, a court must view the facts in
the light most favorable to the nonmoving party and must resolve all ambiguities and draw all
reasonable inferences against the moving party. See United States v. Diebold, Inc., 369 U.S. 654,
655, 82 S.Ct. 993 (1962) (per curiam). If the nonmovant’s evidence is merely colorable, or is not
significantly probative, summary judgment may be granted. See id. at 249-50, 82 S.Ct. 993.

In this case, diversity jurisdiction exists. A federal court sitting in diversity on a case


AAIC cites Demons’ conviction for sexual assault as evidence that he intended or expected harm
to befall Clark and argues that, therefore, he is excluded from the Policy’s coverage.
Additionally, AAIC asserts that it does not have a duty to indemnify Demons because Demons’
activity, and the resulting damage to Clark, do not fall within the Policy’s coverage. For the
reasons set forth below, we agree.
A. Duty To Defend
The Policy in the instant case states the following:
1. Insuring Agreement.
This insurance applies to “bodily injury” and “property damage” only if... [t]he
“bodily injury” or “property damage” is caused by an “occurrence” that takes
place in the “coverage territory.”
2. Exclusions.
This insurance does not apply to . . . (a)... “Bodily injury” or “property damage”
expected or intended from the standpoint of the insured.”
The Policy further provided:
“Occurrence” means an accident, including continued or repeated exposure to
substantially the same general harmful conditions.
AAIC argues that Demons’ criminal conviction for sexual assault provides proof of his
intent to harm Clark and, thus, he is not covered under the Policy.
In American Family Mutual Ins. Co. v. Savickas, 193 I1.2d 378, 739 N.E.2d 445 (2000),
the insured shot and killed a man and was criminally convicted for murder. The estate of the
victim brought a wrongful death action against the insured. The insurance policy specifically

excluded from coverage bodily injury or property damage “expected or intended by any insured.”


CONCLUSION
For the foregoing reasons, we grant plaintiff American Alternative Insurance
Corporation’s motion for summary judgment. (#8-1). Therefore, judgment is granted in favor of

the plaintiff, American Alternative Insurance Corporation. This case is set for status on April 18,

(Ji, CA.

Wayne R. Andersen
United States District Judge

2002 at 10:00 a.m.

Dated: 7UALOK a £, BOO?


Minute Order Form (Ot

United States District Court, Northern District of Illinois

Name of Assigned Jud; si if Or
vor Magistrate Judge Wayne R. Andersen than Assigned Judge
CASE NUMBER 00 C 8057 DATE 3/28/2002
CASE American Alternative Insurance vs. Loyalty Environmental, Inc. et al
TITLE

[In the following box (a) indicate the party filing the motion, e.g,, plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

of the motion being presented,]

MOTION:

DOCKET ENTRY:

(1) oO Filed motion of [ use listing in “Motion” box above.]

(2) Oo Brief in support of motion due

(3) oO Answer brief to motion due___. Reply to answer briefdue__.

(4) Oo Ruling/Hearingon___setfor___at

(5) oO Status hearing[held/continued to] [set for/re-set for]on__setfor____at

(6) oO Pretrial conference[held/continued to] [set for/re-set forlon__setfor___ se at_

(7) Oo Trial{set for/re-set for]on____—at__

(8) Oo [Bench/Jury trial] [Hearing] held/continued to____at

(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) (General Rule 21 CFRCP4i(a)(1) 4 FRCP41(a)(2).

ao [Other docket entry] Enter MEMORANDUM, OPINION AND ORDER: For the foregoing

reasons, we grant plaintiff American Alternative Insurance Corporation’s motion for summary
judgment [8-1]. Therefore, judgment is granted in favor of the plaintiff, American Alternative

Insurance Corporation. This case is set for status on 4/18/2002 @ 10:00 a.m.

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

No notices required, advised in open court.

No notices required. sumber of notices

Notices maited by judge’s staff.

a
rma é

Notified counsel by telephone. te docketed

Y | Docketing to mail notices.

Mail AO 450 form.

Copy to judge/magistrate judge.

courtroom
TSA deputy’s

initials eet
“Date/titne received ip -f
central Clerk's Office

sailing deputy initia



The Illinois Supreme Court concluded that a criminal conviction for assault conclusively
established intent on the part of the insured and relieved the insurer of the duty to defend in the
subsequent civil case. 193 Ill.2d at 387, 739 N.E.2d at 451,

The Savickas Court held that “estoppel effect may be accorded to a prior criminal
conviction in an appropriate case.” Jd. The Court defined an appropriate case in which to apply
estoppel as one that meets three requirements: 1) the issue decided in the prior adjudication must
be identical to the one presented in the suit in question; 2) there must have been a final judgment
on the merits in the prior adjudication; and 3) the party against whom estoppel is asserted must
have been a party or in privity with a party to the prior adjudication. Jd. Additionally, a court
may not apply estoppel “unless it is clear that no unfairness will result to the party sought to be
estopped.” Jd. at 387.

The issue in the instant case is whether Demons “intended or expected” harm to befall
Clark and, thus, is excluded from coverage under the Policy. Under the first Savickas
requirement, Demons’ conviction is proof of his intent to cause harm and the issues were the
same in both his criminal case and in the Clark suit. Cf State Farm Fire & Casualty Co. v..
Watters, 268 Ill.App.3d 501, 506-07, 644 N.E.2d 492, 496 (1994) (specific intent to harm is
inferred as a matter of law in sexual abuse cases); Aetna Casualty & Surety Co. v. Freyer, 89
Ill. App.3d 617, 619, 411 N.E.2d 1157, 1159 (1980) (injury caused by an assault and battery
normally is not considered to be accidental, even if the specific injury was not intended).

Moreover, Demons’ conviction of sexual assault also meets the second Savickas
requirement because he was convicted prior to a determination of liability in the Clark case,

Finally, this case meets the third Savickas requirement that the party against whom estoppel is


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
AMERICAN ALTERNATIVE )
INSURANCE CORPORATION, a New  )
York Corp., )
)
Plaintiff, ) No. 00 C 8057
) epee
v. ) Wayne R. Andersen DOCKET ED
) District Judge
LOYALTY ENVIRONMENTAL, INC. ) MAR 2 § 2002
BYRON DEMONS, and PAULETTE )
CLARK, )
)
Defendants. )

MEMORANDUM, OPINION AND ORDER

This case is before the Court on the motion of plaintiff, American Alternative Insurance
Corporation for summary judgment against defendant Bryon Demons pursuant to Fed.R.Civ.P.
56. For the following reasons, we grant plaintiff's motion for summary judgment.

BACKGROUND

American Alternative Insurance Corporation (“AAIC”) is a stock insurance company
incorporated under the laws of the State of New York, with its principal place of business in New
York, New York. Loyalty Environmental, Inc. (“Loyalty”) is a dissolved corporation formerly
incorporated in the State of Iilinois, with its former principal place of business in Skokie, Illinois.
Loyalty owned and operated a company employing asbestos abatement workers assigned to
various work sites in the Chicago metropolitan area. AAIC issued a commercial general liability
policy to Loyalty (the “Policy”) for the period of September 30, 1997 through September 30,

1998,

/

\5

On July 1, 1998, Bryon Demons was employed by Loyalty as an asbestos abatement


worker and was working on a project at Ogden Elementary School, in the Village of LaGrange,
Cook County, Illinois. Also on site at the school was Paulette Clark who worked for Northern
Environmental, a contractor whose job it was to monitor Loyalty’s performance on the Ogden
project. Clark alleges that on July 1, 1998, Demons took her against her will into a ladies’
restroom at Ogden Elementary School and assaulted, battered, and sexually abused her. On May
12, 1999, Demons was convicted of criminal sexual assault against Clark in the Circuit Court of
Cook County, Illinois.

PROCEDURAL HISTORY

On March 23, 2000, Clark filed a civil action in the Circuit Court of Cook County,
Illinois against Demons and Loyalty (the “Clark suit”). Clark’s civil complaint consists of the
following four counts: (1) negligent hiring/supervision; (2) negligent infliction of emotional
distress; (3) battery; and (4) intentional infliction of emotional distress. All four counts are
directed against Loyalty; counts two, three, and four are directed against Demons.

The instant case arises from Clark’s civil suit against Loyalty and Demons. Demons and
Loyalty have sought coverage for the Clark suit under the Policy. AAIC denied Demons a
defense and filed an action in this Court on December 26, 2000 for declaratory judgment to
determine the rights and obligations under the Policy. AAIC filed an amended complaint for
declaratory relief on May 23, 2001.

AAIC has filed a motion for summary judgment against Demons. To date, Demons has
failed to file a response to AAIC’s motion for summary judgment. In fact, in an October 15,
2001 letter written by Mr. Demons to Mark Christensen, an attorney for AAIC, Mr. Demons

made the following concession: “I am perfectly aware that there is no coverage for me under the