(c) Coercion, demotion, evaluation, reassignment, discipline,
defamation, harassment, humiliation, discrimination or other
employment-related practices, policies, acts or omissions; or

(d) Consequential “bodily injury” or “personal injury” as a result of'a.
through c. above,

This exclusion applies whether the insured may be liable as an employer or in any
other capacity and to any obligation to share damages with or repay someone else
who must pay damages because of the injury.
Olson's Title VII Claim
Hawkeye argues that a cursory examination of the underlying Olson complaint reveals
Olson’s Title VIT discrimination and retaliation claims are excluded from coverage under both
the primary and umbrella insurance policies. Prophcter and Olson argue that Hawkeye fails to
establish that the employee exclusion in the body of the primary policy applies because sexual
discrimination does not “arise out of’ employment. This Court, however, need not reach the
question of whether the employce exclusion applies to Olson’s discrimination claim because as
Hawkeye points out, the Employment-Related Practices Endorsements to both the primary and

umbrella policies unambiguously exclude coverage of discrimination suits like Olson’s. Sce.

¢.g., Dobbs v. State Farm Fire and Cas. Co., 773 N.E.2d 1251, 1254 (I, App. 2002) (holding

that insurer did not have a duty to defend on a gender discrimination claim where the commercial
umbrella policy contained a fire endorsement that very specifically deleted personal injury
coverage for discrimination).

Despite this unambiguous language, Propheter and Olson argue that Hawkeye had a duty

to defend because the Olson complaint alleged facts within or potentially within policy coverage.

Namely, they argue that, under a different endorsement to the insurance policy, Hawkeye agreed



liability policy to Propheter with an effective policy period of March 31, 1999 to March 31, 2000.
Iawkeye also issued a commercial umbrella policy to Propheter with an effective policy period
of March 31, 1999 to March 31, 2000.

On or about May 19, 2000, Olson filed a Firs! Amended Complaint against Propheter in

the United States District Court for the Northern District of Illinois, Eastern Division, captioned

Karen Olson v, Bob Propheter Construction, L.L.C., No. 00 C 0839. The Olson complaint was a

Title VII discrimination and retaliation claim in which Olson alleged that Propheter
discriminated against her by failing to provide her with proper bathroom facilities on a road
construction site thereby causing her to rupture her bladder . Olson alicges Propheter then fired

her in retaliation for exercising her rights. Propheter tendered the Olson claim to its insurance

broker at Hawkeye by a letter dated September 20, 2000. In a letter dated October 24, 2000,
Hawkeye advised Propheter that it was undertaking an evaluation of coverage and that, in the
meantime, Propheter should arrange for its own defense in the Olson lawsuit. By letter dated
February 6, 2001, Hawkeye denied coverage to Propheter based upon the employee exclusions in
the Hawkeye policies.

On May 4, 2001, Hawkcye filed the instant declaratory action. In particular, Count LI]
seeks a declaration that Hawkeye owes no defense or indemnity to Propheter in connection with
the Olson lawsuit based on the application of the employee exclusion and the employment

related practices exclusion endorsements in the primary and umbrella policies. Hawkeyo’s

primary commercial policy provides in part:



to Propheter.? Propheter and Olson filed a cross motion for summary judgment, arguing that,
because there was potential for coverage in the Amended Complaint, Hawkeye had a duty to
defend Propheter and that Hawkeye therefore repudiated the insurance contract by refusing to
defend and is estopped from asserting favorable policy provisions.

As a federal court sitting in diversity jurisdiction, this Court applies state substantive law
and federal procedural law, See Ritchie v. Glidden Co., 242 F.3d 713, 720 (7th Cir. 2001) citing
Erie v. Tompkins, 304 U.S, 64, 78 (1938). The parties agree that Illinois law applies. Under
Illinois law, an insurer’s duty to defend the insured in a third-party suit is broader than its duty to
indemnify. Outboard Marine Corp. v. Liberty Mutual Ins. Co., 607 N.E.2d 1204, 1212-1213 (IL.
1992), Further, to determine whether an insurer has a duty to defend its insured, the court must
look to the allegations in the underlying complaint and compare these allegations to the relevant
provisions of the insurance policy; if the facts alleged fall within, or potentially within, the
policy’s coverage, the insurer’s duty to defend arises. Id, Refusal to defend is unjustifiable
unless it is clear from the face of the underlying complaint that the facts alleged do not fall

potentially within the policy’s coverage. Id.; see also Cincinnati Ins. Co. v. Eastern Atlantic Ins,

Co., 260 F.3d 742, 745 (7th Cir. 2001).

Construing the provisions of an insurance policy is a matter of law, Qutboard Marine
Corp., 607 N.E.2d at 1212. In construing an insurance policy, the court must ascertain the intent
of the parties to the contract by construing the policy as a whole while giving due regard to the

risk undertaken, the subject matter that is insured, and the purposes of the entire contract. Id.

? Judgment in Hawkeye’s favor on Count III will moot the issues raised by Counts I, TT,
and IV of its complaint, which seek declarations that Propheter had no duty to defend based on
other provisions of the policies.

9.



(e) Employer’s Liability
“Bodily injury” to:
(1) An “employec” of the insured arising out of and in the course of:
(a) | Employment by the insured; or
(b) Performing duties related to the conduct of the insured’s business;
or
(2) The spouse, child, parent, brother or sister of that “employee” as a consequence of
paragraph (1), above.

This exclusion applies:

(1) Whether the insured may be Jiable as an employer or in any other capacity; and
(2) To any obligation to sharc damages with or repay someone else who must pay
damages because of the injury.

This exclusion does not apply to liability assumed by the insured under an insured
contract,

Hawkeye’s primary policy includes an endorsement that states the following:
EMPLOYMENT-RELATED PRACTICES EXCLUSION
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART

A. The following exclusion is added to Section paragraph 2., Exclusions of Section I
- COVERAGE A - BODILY INJURY AND PROPERTY DAMAGE
LIABILITY:

This insurance does not apply to:

“Bodily injury” to:
(1) A person arising out of any
(a) Refusal to employ that person;
(o) Termination of that person’s employment, or
(c) Employment-related practices, policies, acts or omissions,
such as coercion, demotion, evaluation, reassignment,
discipline, defamation, harassment, humiliation or
discrimination directed at thal person; or

-6-



COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY

a.

We will pay those sums that the insured becomes legally obligated to pay as damages
because of “bodily injury” or “property damage” 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” sceking damages
for “bodily injury” or “property damage” to which this insurance does not apply.

eH

COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY

a. We will pay those sums that the insured becomes legally obligated to pay as
damages because of “personal injury” or “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 injury” or “advertising
injury” to which this insurance does not apply.

Hawkeye’s umbrella policy provides in pertinent part:

SECTION I - COVERAGE

1.

Insuring Agreement

We will pay “loss” in excess of the “primary limit” as listed in the Schedule of Primary
pay primary

Insurance or the “retained limit” ) if not covered by “primary” but otherwise covered by this
policy) because of

Coverage A - “Bodily Injury”
Coverage B - “Property Damage”
Coverage C - “Personal Injury”
Coverage D - “Advertising Injury”

Caused by an “occurrence” to which this policy applies and such injury or damage
happening anywhere during the policy period.

Hawkeye’s primary policy includes the following Exclusion under Coverage A:

2.

Exclusions

This insurance does not apply to;

-5-



(b) To any obligation to share damages with or repay someone
else who must pay damages because of the injury.

Hawkeye’s umbrella policy includes an endorsement that contains the following language:
EMPLOYMENT-RELATED PRACTICES EXCLUSION

Exclusion 13, of SECTION LL - Exclusion of the Commercial Umbrella Liability Policy
Coverage Form is replaced by the following:

13. This policy does not apply to “bodily injury” or “personal injury” arising out of

employment practices of the Insured, including:

(a) Refusal to employ;

(b) Termination of employment;

(c) Coercion, demotion, evaluation, reassignment, discipline,
defamation, harassment, humiliation, discrimination or other
employment-related practices, policies, acts or omissions; or

(d) Consequential “bodily injury” or “personal injury” as a result of a.
through c. above.

This exclusion applies whether the insured may be liable as an employer or in any
other capacity and to any obligation to share damages with or repay someone else
who must pay damages because of the injury.

In or about June 2001, Olson entered into a settlement of the Olson lawsuit with
Propheter, for $1,000,000 in which Propheter paid Olson a portion of that amount and assigned
its rights under the Hawkeye insurance policy to Olson to recover, if any, the remaining portion
of the settlement amount from Hawkeye.'

UI. Discussion
At issue in this case is whether Hawkeye had a duty to defend and/or indemnify Propheter

in connection with the Olson discrimination claim. Hawkeye moves for summary judgment on

Count MII of its complaint, which seeks declaration that Hawkeye owed no defense or indemnity

' The settlement terms are confidential and have been submitted to this Court under
seal.

8.



‘Minute Order Ferm (06/97)

sos United States District Court, Northern District of Iinois
we @
]| Ss agate dade David H. Coar “than Auiged Judge
CASE NUMBER 01 C3278 DATE 9/27/2002
CASE Hawkeye-Security Ins. Co. v. Bob Propheter Constr., et al.
TITLE
[Un the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd purty plaintiff, and (b} state briefly the nature
MOTION: of the motion being presented.)
Motions for Summary Judgment pursuant to Fed. R. Civ, P. 56
DOCKET ENTRY;
(1) Q Filed motion of [ use listing in “Motion” box above.]
(2) Oo Brief in support of motion duc
(3) Oo Answer briefto motion due____«.. Reply to answer briefdue___.
(4) Oo Ruling/Hearingon__—s set for at.
(5) oO Status hearing[held/continued to] [set for/re-set for] on setfor_ 3 at
(6) Oo Pretrial conference[held/continued to] (set for/re-sct for)}on ___setfor__at__
(7) Oo Trial[set for/te-set for]on at
(8) o [Bench/Jury trial] [Hearing] held/continued to at
(9) QO This casc is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4(m) O General Rule21 OFRCP41(a)(1)  PRCP41(a}(2).

(10) ME [Otherdocketentry] For the reasons set forth in the attached Memorandum Opinion and Order, this
Court this Court GRANTS Hawkeye’s motion for summary judgment on Count II ofits complaint [20-1],
and dismisses as moot Counts I, II, and 1V. Propheter’s and Olson’s cross motion for summary judgment

is DENIED in its entirety [17-1], and its counter-claim ~“y) with prejudice, ‘This (. is closed,
r

di) @ [For further detail see order attached to the original minute order. ]
No tiotices required, advised in open court. Document
. Number
No notices required. sunivy ofaoties
Notices mailed by judge's staff. SEP 3 200
yas x) P 0
Notified counsel by telephone: ‘ ome date dock
_
X_ | Docketing to mail notices.
Mail AO 450 form, cig hfyuy ints
magi 2
Copy to judge/magistrate judge. Lunas bapirn:
LUGS Sab att oem
andstl) courtroom due led notice
deputy's _
initials

Date/time receivéd in ;
central Clerk's Office twiting depty into



(e) Employer’s Liability
“Bodily injury” to:
qd) An “employee” of the insured arising out of and in the course of:
(a) Employment by the insured; or
(b) Performing duties related to the conduct of the insured’s business;
or...

This exclusion applies:

(1) Whether the insured may be liable as an employer or in any other capacity; and
(2) To any obligation to share damages with or repay someone else who must pay
damages because of the injury.

The primary policy also contains the following endorsement expanding on its exclusions:
EMPLOYMENT-RELATED PRACTICES EXCLUSION
This cndorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART

A, The following exclusion is added to Section paragraph 2., Exclusions of Section I

- COVERAGE A - BODILY INJURY AND PROPERTY DAMAGE
LIABILITY:

This insurance does not apply to:
“Bodily injury” to:

(1) Aperson arising out of any
(a) Refusal to employ that person;
(b) — Termination of that person’s employment; or
(c) Employment-related practices, policies, acts or omissions,
such as coercion, demotion, evaluation, reassignment,
discipline, defamation, harassment, humiliation or
discrimination directed at that person; or

This exclusion applies:
qd) Whether the insured may be liable as an employer or in any other
capacity; and

(2) To any obligation to share damages with or repay someone else
who must pay damages because of the injury.

-1l1-



When possible, the court should construe the contract so that all provisions are given effect and
are in harmony, making them consistent and workable, and courts should interpret the contracts
as complete documents rather than isolated parts. Knoll Pharm. Co. v. Automobile Ins. Co. of

Hartford, 210 F. Supp. 2d 1017, 1022 (N.D. Ill. 2002); Welborn v. IIL. Nat’! Cas. Co., 106 N.E.2d

142, 143 (1952). When the words of the policy are unambiguous, they are afforded their plain,
ordinary and popular meaning. Weiss v. Bituminous Cas. Corp., 319 N.E.2d 491, 495 (ill.
1994); Outboard Marine Corp., 607 N.E.2d at 1217. If the words are susceptible to more than
one interpretation, however, they are ambiguous and ate to be construed in favor of the insured
and against the insurer. Outboard Marine Corp., 607 N.E.2d at 1217; see also Employers Ins. of
Wausau v. James McHugh Constr. Co., 144 F.3d 1097, 1104 (7th Cir. 1998), With these
principles in mind, this Court turns to the parties’ contentions.
The Plain Language of the Insurance Policies

The primary and umbrella policies at issue in this case are commercial general liability
policies. Hawkeye contends that it owed no defense or indemnity to Propheter in connection

with the Olson lawsuit because that suit arose out of a claim by an employce of Propheter and

such a claim is expressly excluded from coverage under the terms of the Hawkeye policies.
Specifically, Hawkeye points to the “employee” exclusions contained within the body of the
primary and umbrella policies and to the “Employment-Related Practices Exclusion”
endorsements that were added to both policies to expand on the original exclusions. The primary
policy contains the following exclusions:

2, Exclusions

This insurance does not apply to:

-10-



This exclusion applies:

a) Whether the insured may be liable as an cmployer or in any other
capacity; and

(2) To any obligation to share damages with or repay someone elsc
who must pay damages because of the injury.

B. The following exclusion is added to Section paragraph 2., Exclusions of Section I
- COVERAGE B - PERSONAL AND ADVERTISING INJURY LIABILITY:

This insurance does not apply to: “Personal Injury” to:

qd) A person arising out of any
(a) Refusal to employ that person;
(b) Termination of that person’s employment; or
(c) Employment-related practices, policies, acts or omissions,
such as coercion, demotion, evaluation, reassignment,
discipline, defamation, harassment, humiliation or
discrimination directed at that person; or

This exclusion applies:

(1) Whether the insured may be liable as an employer or in any other
capacity; and

(2) To any obligation to share damages with or repay somcone else
who must pay damages because of the injury.

Hawkeye’s umbrella policy includes the following Exclusion:
3. This policy does not apply to:

a. Any obligation an insured may have under a workers compensation,
disability benefits or unemployment compensation law, or any similar law;

b. “Bodily injury” to:
qd) (a An employee of the insured arising out of and in the course
of employment by the insured; or
(b) The spouse, parent, child, brother or sister of that employcc
as a consequence of (a) above
(2) This exclusion applies:
(a) Whether the insured may be liablc as an employer or in any
other capacity; and

-7-



and the non-movant “‘must do more than simply show that there is some metaphysical doubt as

to the material fact.” Id, (quoting Matsushita Elec. Indus, Co. v. Zenith Radio Corp., 475 U.S.

574, 586 (1986)); see also Anderson, 477 U.S. at 250, 106 S. Ct. at 2511. Weighing evidence,

determining credibility, and drawing reasonable inferences are jury functions, not those of a

judge deciding a motion for summary judgment. Anderson, 477 U.S. at 255, 106 S, Cl. at 2515.
On cross-motions for summary judgment, each movant individually must satisfy the

requirements of Rule 56. Great West Cas, Co. v. Rogers Cartage Co., No. 00 C 6621, 2001 WL

1607608, at *1 (N.D, TI. 2001); Proviso Ass’n of Retarded Citizens v. Village of Westchester,

914 F. Supp. 1555, 1560 (N.D, Ill. 1996). Thus, the traditional standards for summary judgment
still apply even though both parties have moved for summary judgment. Blum y. Fisher and
Fisher, Attormmeys at Law, 961 F. Supp. 1218, 1222 (N.D. Ill. 1997). This Court considers the
merits of each cross-motion separately and draws all reasonable inferences and resolves all
factual uncertainties against the party whose motion is under consideration. O’Regan v.

Arbitration Forums, Inc., 246 F.2d 975, 983 (7th Cir. 2001). This “Janus-like perspective...

sometimes forces the denial of both motions,” but only where there are material facts in dispute.
Buttitta v. City of Chicago, 803 F. Supp. 213, 217 (N.D. Ill. 1992).
IJ, Background
The following facts are taken from the parties’ Local Rule 56. 1(a)(3) and (b)(3)
Statement of Material Facts, Hawkeye is an Iowa insurance company with its principal place of
business in Des Moines, lowa. Propheter is an Illinois limited liability company with its
principal place of business in Sterling, Ulinois. Olson is an individual citizen of Montgomery,

Illinois and previous employee of Propheter. Hawkeye issued a primary comprehensive general

-3-



to defend Propheter if a suit sought both compensatory and punitive damages against it. The
Punitive or Exemplary Damages Exclusion Endorsement states:
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY,
PUNITIVE OR EXEMPLARY DAMAGES EXCLUSION ENDORSEMENT
Regardless of any other provision of this policy, this policy does not apply to punitive or
exemplary damages. We will, however, provide defense for such action when suit involves both

compensatory and punitive or exemplary damages.

(Emphasis added by Propheter and Olson). Since the Olson complaint sought compensatory and

punitive damages, they argue that Hawkeye had a duty to defend Propheter. Propheter and Olson
rely heavily on the form statement that appears on all of Hawkeye’s endorsements to the policies,
“THIS ENDORSEMENT CHANGES THE POLICY, PLEASE READ IT CAREFULLY”,
and essentially argue thal this endorsement wipes out all other limitations on coverage in the
policies. This argument, however, is unpersuasive.

While a court liberally interprets insurance policy provisions that limit or exclude
coverage in favor of the insured, it may not read an ambiguity into a policy to provide coverage
for the insured, rather, an ambiguity exists only if the insurance policy is susceptible to

reasonable alternate interpretations. First Ins. Funding Corp. v. Fed. Ins. Co., 284 F.3d 799, 804

(7th Cir. 2002). Here, Propheter and Olson’s interpretation is not reasonable. They attempt to
use an exclusion cndorsement to expand coverage beyond the basic grant of coverage set forth in

the coverage agreement, which it cannot do. See Continental Cas, Co. v. Pittsburgh Coming

Corp,, 917 F.2d 297, 300 (7th Cir. 1990) (holding that an exclusion in an insurance policy cannot

create coverage); Qualls v. Country Mut, Ins, Co., 462 N.E.2d 1288, 1291 (Ill, App. 1984)

(holding that an exception to an exclusion should not be interpreted as granting coverage or

-14-



818, 822 (7th Cir. 1981). Because this Court finds that it was clear from the face of the Olson
complaint that the case did not fall within potential policy coverage, Hawkeye did not wrongfully
refuse to defend Propheter and it is therefore not estopped from enforcing its exclusion
provisions. Summary judgment is granted in favor of Hawkeye on all claims.
IV. Conclusion

For the foregoing reasons, this Court GRANTS Hawkeye’s motion for summary judgment
on Count III of its complaint, and dismisses as moot Counts J, H, and IV. Propheter’s and Olson’s
cross motion for summary judgment is DENIED in its entirety, and its counter-claim is dismissed

with prejudice. This action is closed.

Enter:

David H, Coar

United States District Judge

Dated: September 27, 2002



1, Summary Judgment Standard
Summary judgment is proper “if the pleadings, depositions, answers to interrogatories
and admissions on file, together with the affidavits, if any, show that there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.

R. Civ, P. 56(c); Commercial Underwriters Ins. Co. v. Aires Environmental Servs., Ltd., 259

F.3d 792, 795 (7th Cir. 2001). A genuine issue of material fact exists for trial when, in viewing
the record and all reasonable inferences drawn from it in a light most favorable to the non-
movant, a reasonable jury could return a verdict for the non-movant. Anderson y. Liberty Lobby.
Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510 (1986); Eiland v. Trinity Hosp., 150 F.3d 747, 750
(7th Cir. 1998).

The movant bears the burden of establishing that no genuine issue of material fact exists.
Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 $, Ct. 2548, 2553 (1986); Hedberg v. Indiana
Bell Tel. Co., 47 F.3d 928, 931 (7th Cir, 1995), Tf the movant meets this burden, the non-movant
must set forth specific facts that demonstrate the existence of a genuine issue for trial. Rute

56(e); Celotex, 477 U.S. at 324, 106 S. Ct. at 2553. Because the purpose of summary judgment

is to isolate and dispose of factually unsupported claims, the non-movant must respond to the
motion with evidence setting forth specific facts showing that there is a genuine issue for trial.
Fed.R.Civ.P 56(e); Albiero v. City of Kankakee, 246 F.3d 927, 932 (7th Cir. 2001). To oppose
the motion for summary judgment successfully, the non-movant cannot rest on the pleadings
alone, but must designate specific facts in affidavits, depositions, answers to interrogatories or
admissions that establish that there is a genuine triable issue. Selan vy. Kiley, 969 F.2d 560, 564

(7th Cir. 1992), A scintilla of evidence in support of the non-movanl’s position is insufficient,

-2-



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DisTRIct oF LLINois = DOCKETED

EASTERN DIVISION SEP 3.0 2002
HAWKEYE-SECURITY INSURANCE
COMPANY,
No. 01 C 3278
Plaintiff,
HONORABLE DAVID H. COAR
v

BOB PROPHETER CONSTRUCTION,
L.L.C, a/k/a PROPHETER
CONSTRUCTION EQUIPMENT, INC. and
KAREN OLSON

Defendants.

MEMORANDUM OPINION AND ORDER

Hawkeye-Security Insurance Company (“Hawkeye”) filed this action for declaratory
judgment seeking a declaration that it owes no defense or indemnity to its insured, Propheter
Construction (“Propheter”), in connection with certain Title VI discrimination claims made
against Propheter by its former employee, Karen Olson (“Olson”). Propheter in turn filed a
counter-claim against Hawkeye for its alleged failure to defend Propheter in the Olson lawsuit in
breach of the insurance contract. Before this Court is Hawkeye’s motion for summary judgment
on Count II]. Simultaneously before this Court is Propheter and Olson’s cross motion for
summary judgment. For the reasons stated below, this Court GRANTS Hawkeye’s motion for
summary judgment as to Count li, and DENIES Propheter and Olson’s motion for summary

judgment in its entirety.

-]-



B. The following exclusion is added to Section paragraph 2., Exclusions of Section |
- COVERAGE B - PERSONAL AND ADVERTISING INJURY LIABILITY:

This insurance does not apply to: “Personal Injury” to:

(i) A person arising out of any
(a) Refusal to employ that person;
(b) Termination of that person’s employment; or
(c) Employment-related practices, policies, acts or omissions,
such as coercion, demotion, evaluation, rcassignment,
discipline, defamation, harassment, humiliation or
discrimination directed at that person; or

This exclusion applies:
qd) Whether the insured may be liable as an cmployer or in any other
capacity; and
(2) To any obligation to share damages with or repay someone else
who must pay damages because of the injury.

Similarly, the umbrella policy contains the following exclusion and endorsement:

3. This policy does not apply to:

a. Any obligation an insured may have under a workers compensation,
disability benefits or unemployment compensation law, or any similar law;
b. “Bodily injury” to:

qd) (a) An employee of the insured arising out of and in the course
of employment by the msured; or...
(2) This exclusion applies:
(a) Whether the insured may be liable as an employer or in any
other capacity; and
(b) To any obligation to share damages with or repay someone
clse who must pay damages because of the injury.

EMPLOYMENT-RELATED PRACTICES EXCLUSION

Exclusion 13. of SECTION Ml - Exclusion of the Commercial Umbrella Liability Policy
Coverage Form is replaced by the following:

13. This policy does not apply to “bodily injury” or “personal injury” arising out of
employment practices of the Insured, including:
(a) Refusal to employ;
(b) Termination of employment;

-12-



providing an additional basis for coverage); Ludwig Candy Co. v. Jowa Nat'l Mut, Ins. Co., 396
N.B.2d 1329 (Ill. App. 1979) (holding that an exclusion in an insurance policy only has relevance
when coverage is otherwise established); see also Hartford Accident and Indemnity Co. v.
Chicago Housing Authority, 12 F3d 92 (7th Cir. 1993) (discussing the general rule that clauses of
limitation in insurance policies do not obligate insurers to pay). Thus, this Court will not read
the Punitive or Exemplary Damages Exclusion Endorsement to provide coverage of Olson’s
otherwise excluded discrimination claim.

Propheter and Olson’s argument that, under the umbrella policy, Hawkeye agrced to
defend Propheter even if the primary policy did not provide coverage is similarly unpersuasive.
The Hawkeye umbrella policy contains the same exclusion of discrimination claims as does the
primary policy. While the umbrella may provide some coverage that the primary policy docs not
provide, it is clear and unambiguous that Olson’s discrimination claim is not one of those
claims.?

Finally, Propheter and Olson argue that Hawkeye is estopped from asserting favorable
policy provisions because it repudiated the contract in refusing to defend Propheter in the Olson
suit. Estoppel, however, arises at the moment the insurance company wrongfully refuses to
defend, and an insurer’s refusal to defend is wrongful if the allegations in the underlying lawsuit

are even potentially within the scope of the policy. Maneikis y. St. Paul Ins. Co. of Il, 655 F.2d

‘In their response brief to Hawkeye’s motion for summary judgment, Olson and
Propheter assert for the first time that there was potential coverage for the Olson
discrimination claim under the Employee Benefits Liability Coverage Endorsement attached to
the Hawkeye policy. As this endorsement provides limited coverage for “errors” in the
“administration” of an “Employee Benefit Program,” which does not apply to Olson’s Title
VII discrimination claim, it does not apply.

~15-