Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 1 of 35 PageID #:1692

Transcription

1 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 1 of 35 PageID #:1692 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION GREAT AMERICAN INSURANCE COMPANY, Plaintiff, v. STATE PARKWAY CONDOMINIUM ASSOCIATION, et.al., Defendants. STATE PARKWAY CONDOMINIUM ASSOCIATION Counter-Plaintiff, Third-Party Plaintiff, v. TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, et.al., Third-Party Defendants. STRATHMORE INSURANCE COMPANY, Counter-Plaintiff, Forth-Party Plaintiff, v. STATE PARKWAY CONDOMINIUM ASSOCIATION; LIEBERMAN MANAGEMENT SERVICES, INC.; DONNA WEBER; MICHAEL J. NOVAK, INDIVIDUALLY AND IN HIS REPRESENTATIVE CAPACITY FOR HIS MINOR CHILD T.N. AS PARENT AND NEXT FRIEND; and CHRISTINA BUGELAS NOVAK, Counter-Defendant and Forth-Party Defendants. Case No. 17-cv-3083 District Judge: Hon. Sharon Johnson Coleman Magistrate Judge: Hon. Jeffrey T. Gilbert THIRD-PARTY DEFENDANT STRATHMORE INSURANCE COMPANY S ANSWER TO STATE PARKWAY CONDOMINIUM ASSOCIATION S THIRD-PARTY COMPLAINT, AFFIRMATIVE DEFENSES, COUNTERCLAIM AND FORTH-PARTY COMPLAINT 1

2 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 2 of 35 PageID #:1693 Third-Party Defendant, Strathmore Insurance Company ( Strathmore, by and through its attorney, David J. E. Roe, and for its Answer and Affirmative Defenses to State Parkway Condominium Association s ( SPCA Third- Party Complaint, states as follows: 1. SPCA is an Illinois not-for-profit corporation. It is the association of the unit owners of the condominium building located at 1445 North State Parkway, Chicago, Illinois, and it is responsible for the administration of the building pursuant to the Declaration of Condominium Ownership and of Easements, Restrictions, Covenants and By-Laws for the State Parkway Condominium, dated November 5, Strathmore admits the allegations contained in Paragraph 1 of the Third- Party Complaint. 2. Third-Party Defendant Travelers Casualty and Surety Company of America, ( Travelers is, on information and belief, a Connecticut insurance corporation with a principal place of business in Connecticut. Travelers provided directors and officers liability insurance to SPCA beginning on May 30, 2006, renewed annually, through May Travelers has failed to provide SPCA with complete copies of the insurance policies despite repeated requests, but Travelers described the applicable policies in correspondence. (Exhibit Third-Party Defendant American International Specialty Lines Insurance Company ( AIG is, on information and belief, an Alaska corporation with a principal place of business in New York. It provided umbrella liability insurance to SPCA from May 30, 2005, through May 1, (Exhibit 2 2

3 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 3 of 35 PageID #: Third-Party Defendant Harleysville Lake States Insurance Company ( Harleysville is, on information and belief, a Michigan insurance company with a principal place of business in Michigan. Harleysville provided SPCA with commercial general liability insurance from May 1, 2007, through May 1, (Exhibit 3 5. Third-Party Defendant Steadfast Insurance Company ( Steadfast is, on information and belief, a Delaware insurance company with a principal place of business in Illinois. Steadfast provided SPCA with commercial general liability insurance from May 1, 2008, through May 1, (Exhibit Third-Party Defendant Strathmore Insurance Company ( Strathmore is, on information and belief, a New York insurance company with a principal place of business in New Jersey. Strathmore provided SPCA with commercial general liability insurance from May 1, 2009, through May 1, (Exhibit 5. Strathmore admits it is a New York insurance company. Strathmore denies that its principal place of business in New Jersey. Strathmore admits that its principle place of 3

4 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 4 of 35 PageID #:1695 business is New York. Strathmore admits it issued three insurance policies effective from May 1, 2009, through May 1, 2012 and subject to certain terms, conditions, definitions and exclusions. Strathmore denies that Exhibit 5 is a complete copy of the policy in effect and denies that the policy is a copy of each policy in effect for each of the policy years alleged. 7. Subject matter jurisdiction over this action is proper under 28 U.S.C and Strathmore admits this Court has jurisdiction over the dispute between SPCA and Strathmore. 8. Venue is proper in the District pursuant to 28 U.S.C Strathmore admits venue is proper in this District. 9. Michael Novak and Christina Bugelas Novack, along with their minor child, T.N., reside in the building located at 1445 North State Parkway, Chicago, Illinois. 10. In January 2007, Mr. Novak file [sic] a charge with the Illinois Department of Human Rights alleging, among other things, that SPCA failed to accommodate his disability. Travelers undertook the defense of that claim. Travelers asserted that coverage was afforded under SPCA s Non-Profit Management and Organization Liability Policy in place for the period May 30, 2006, to May 30, That matter was settled in September

5 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 5 of 35 PageID #: In March 2008, SPCA initiated an action in the Chancery Division of the Circuit Court of Cook County ( Chancery Suit against Mr. Novak alleging harassment, among other things, and seeking an injunction. 12. In 2009, Mr. Novak filed a counterclaim and two amended counterclaims against SPCA in the Chancery Suit. (Copies of those counterclaims are attached to Great American Insurance Company s ( GAIC s Complaint for Declaratory Judgment in this action as Exhibits B, C, and D. Among other things, Mr. Novak alleged harassment and defamation spanning from September 2007 through Travelers undertook the defense of the Novak counterclaims in the Chancery Suit. Travelers indicated in a letter dated February 13, 2009, that coverage for the Novak counterclaims in the Chancery Suit was afforded by the policy, with a $1 million limit. (Exhibit 6. Travelers asserted that the charges made in the Illinois Department of Human Rights in 2007, and the allegations in the Chancery Suit counterclaims, were Related Wrongful Acts. In subsequent correspondence, dated October 22, 2009, Travelers stated that coverage of the Novak counterclaims in the Chancery Suit was afforded under the policy, with a $2 million limit, reduced by endorsement pertaining specifically to Mr. Novak to $1 million. (Exhibit 7. 5

6 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 6 of 35 PageID #: In November 2010, Mr. Novak filed a new charge with the Illinois Department of Human Rights against SPCA. Travelers undertook the defense of the claims in that proceeding. In correspondence dated December 6, 2010, Travelers stated that coverage was afforded under the policy. (Exhibit In December 2013, Mr. Novak, individually and on behalf of T.N., and Mrs. Novak, filed suit in the United States District Court for the Northern District of Illinois, Case No. 13 Cv 8861 (the Federal Suit. (A copy of that complaint is attached to GAIC s Complaint in this action as Exhibit E. Travelers undertook the defense of the claims in that Federal Suit without reservation and without an indication of what policies afforded coverage. 15. Travelers appointed the firm of Litchfield Cavo to represent SPCA and the management company it had retained, Lieberman Management Services, Inc. ( Lieberman, in the Chancery Suit, in the Illinois Department of Human Rights, and in the Federal Suit. 16. Travelers has at all times controlled the defense of those actions through its appointed counsel. 6

7 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 7 of 35 PageID #: Travelers has recently taken the position that SPCA s coverage for all of the Novak claims is limited to $1 million, and that the coverage has been exhausted by defense costs. (Exhibit At no time prior to late 2016 did Travelers indicate that coverage might be exhausted. Nor did Travelers at any time prepare litigation budgets or consult with SPCA concerning work to be done on the cases to prevent the policy limits from being exhausted. Count I - Travelers 19. SPCA realleges and incorporates by reference as though set forth fully herein the allegations of Paragraphs 1 through 18 above as the allegations of this Paragraph 19. Strathmore adopts and realleges its answers to each of the allegations contained in Paragraphs 1 through 18 as though fully set forth herein. 20. SPCA purchased Non-Profit Management and Organizational Liability Insurance from Travelers in each year beginning May 30, 2006, to May (Exhibit 1. 7

8 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 8 of 35 PageID #: The Novaks asserted separate claims against SPCA in 2007, 2009, 2010 and Travelers agreed to defend all claims against SPCA in accordance with the terms of its policies. 23. Travelers undertook the defense of each of the Novak claims. 24. Each Travelers policy in place when Novak made a claim against SPCA provides a separate limit of liability. 8

9 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 9 of 35 PageID #: Contrary to Travelers assertion, the limits of liability are not $1 million. Because more than one Travelers policy is implicated in the Novak claims, the available limits for the Novak claims are at least $2 million. 26. Travelers has asserted that SPCA s available limits of insurance are $1 million, and that the coverage has been completely depleted by the defense of the Novak claims. SPCA denies that, but in the event the Court determines that SPCA s available limits of insurance for the Novak claims are limited to $1 million, and that the coverage has been depleted by the defense of the Novak claims, Travelers breached its contractual obligations in connection with the defense of the Novak claims. Travelers had a duty to competently defend those claims. Travelers was obligated to assess what tasks were reasonable and necessary in order to defend the Novak claims so as to not unreasonably impair the available limits of SPCA s insurance. Travelers was obligated to regularly advise SPCA of the actions it was taking and intended to take, the expected cost of those actions, and the effect those actions would have on SPCA s available limits of insurance. Travelers did none of those things. 27. SPCA has been injured by Travelers breaches of its contractual obligations. Among other things, the defense counsel that Travelers assigned to defend the Novak claims has not been paid in several months and has asserted that SPCA is obligated to pay it more than 9

10 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 10 of 35 PageID #:1701 $100, SPCA was recently forced to call for a special assessment to meet the on-going legal expenses that Travelers has ceased funding. 28. Travelers s conduct has been vexatious, unreasonable and in bad faith in violation of the Illinois Insurance Code. 215 ILCS 5/ Because Travelers has breached its duty to defend, it should be estopped from asserting any defenses to coverage should that be necessary. Count II - AIG 30. SPCA realleges and incorporates by reference as though set forth fully herein the allegations of Paragraphs 1 through 18 above as the allegations of this Paragraph 30. Strathmore adopts and realleges its answers to each of the allegations contained in Paragraphs 1 through 18 as though fully set forth herein. 31. AIG insured SPCA under a Commercial Umbrella insurance policy beginning on May 30, 2005, through May 1, (Exhibit 2. 10

11 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 11 of 35 PageID #: AIG agreed in its policies that it has a duty to defend the claims brought by the Novaks: A. We will have the right and duty to defend any Suit against the Insured that seeks damages for Bodily Injury, Property Damage, or Personal Injury and Advertising Injury covered by this policy, even of the Suit is groundless, false or fraudulent when: 1. The total applicable limits of Scheduled Underlying Insurance have been exhausted by payment of Loss to which this policy applies and the total applicable limits of Other Insurance have been exhausted; or 2. the damages sought because of Bodily Injury, Property Damage or Personal Injury and Advertising Injury would not be covered by Scheduled Underlying Insurance or any applicable Other Insurance, even if the total applicable limits or either the Schedule Underlying Insurance or applicable Other Insurance had not been exhausted by the payment of Loss. (Ex. 2, Page 3 of 25 (emphasis in original. 33. Travelers undertook to defend the various claims made by the Novaks under D&O policies issued to SPCA. 11

12 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 12 of 35 PageID #: SPCA has been advised that the amount spent defending the Novak claims exceeds $1 million and that Travelers asserts that the coverage under its policies has been exhausted. No other insurance company has agreed to undertake the defense of the Novak claims. 35. AIG agreed to defend the Novak suits. 36. In light of Travelers s and the other insurers positions, AIG is obligated to pay for the defense of those claims. 37. SPCA provided notice of the Novak suits and Travelers position with respect to the available limits. 12

13 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 13 of 35 PageID #: AIG wrongfully denied that it is obligated to defend those claims. 39. AIG s conduct has been vexatious, unreasonable and in bad faith in violation of the Illinois Insurance Code. 215 ILCS 5/ Because AIG has breached its duty to defend, it should be estopped from asserting any defenses to coverage should that be necessary. Count III Harleysville 41. SPCA realleges and incorporates by reference as though set forth fully herein the allegations of Paragraphs 1 through 18 above as the allegations of this Paragraph 41. Strathmore adopts and realleges its answers to each of the allegations contained in Paragraphs 1 through 18 as though fully set forth herein. 13

14 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 14 of 35 PageID #: Harleysville issued a commercial general liability insurance policy to Lieberman for period from May 1, 2007, to May 1, (Ex SPCA is an additional insured under that policy. 44. That policy requires Harleysville to defend suits seeking damages for, among other things, bodily injury, personal injury and advertising injury. (Ex. 3, pp. 1 of 15 and 5 of The Novak suits allege bodily injury, personal injury and advertising injury occurring within the policy period of the Harleysville policy. (See, e.g., Exhibit B to the GAIC Complaint, 8, 19, 21, 40, 50, Harleysville is obligated to defend SPCA against those allegations. 14

15 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 15 of 35 PageID #: Harleysville has refused to defend SPCA against the Novak suits. 48. Harleysville wrongfully denied that it is obligated to defend those claims. 49. Harleysville s conduct has been vexatious, unreasonable and in bad faith in violation of the Illinois Insurance Code. 215 ILCS 5/ Because Harleysville has breached its duty to defend, it should be estopped from asserting any defenses to coverage should that be necessary. 15

16 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 16 of 35 PageID #:1707 Count IV Steadfast 51. SPCA realleges and incorporates by reference as though set forth fully herein the allegations of Paragraphs 1 through 18 above as the allegations of this Paragraph 51. Strathmore adopts and realleges its answers to each of the allegations contained in Paragraphs 1 through 18 as though fully set forth herein. 52. Steadfast issued a commercial general liability insurance policy to Lieberman for period from May 1, 2008, to May 1, (Ex SPCA is an additional insured under that policy. 54. That policy requires Steadfast to defend suits seeking damages for, among other things, bodily injury, personal injury and advertising injury. (Ex. 3, pp. 1 of 16 and 6 of The Novak suits allege bodily injury, personal injury and advertising injury occurring within the policy period of the Steadfast policy. (See, e.g., Exhibit B to the GAIC Complaint, 62, 84,

17 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 17 of 35 PageID #: Steadfast is obligated to defend SPCA against those allegations. 57. Steadfast has refused to defend SPCA against the Novak suits. 58. Steadfast wrongfully denied that it is obligated to defend those claims. 59. Steadfast s conduct has been vexatious, unreasonable and in bad faith in violation of the Illinois Insurance Code. 215 ILCS 5/ Because Steadfast has breached its duty to defend, it should be estopped from asserting any defenses to coverage should that be necessary. 17

18 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 18 of 35 PageID #:1709 Count V Strathmore 61. SPCA realleges and incorporates by reference as though set forth fully herein the allegations of Paragraphs 1 through 18 above as the allegations of this Paragraph 61. Strathmore adopts and realleges its answers to each of the allegations contained in Paragraphs 1 through 18 as though fully set forth herein. 62. Strathmore issued a commercial general liability insurance policy to SPCA from May 1, 2009, through May 1, (Exhibit 5. Denied. It is denied that Strathmore issued a single policy covering a three year term from May 1, 2009 through May 1, It is denied that Exhibit 5 is a complete and accurate copy of the policies in force during the alleged time. It is admitted that Strathmore issued three policies to State Parkway Condominium Association bearing policy number 8112M17278 effective May 1, 2009 to May 1, 2010, May 1, 2010 to May 1, 2011, and May 1, 2011 to May 1, That policy requires Strathmore to defend suits seeking damages for, among other things, bodily injury, personal injury and advertising injury. (Ex. 5, pp. 1 of 16 and 6 of 15. Denied. The allegation fails to set forth a factual allegation and is a legal conclusion and is therefore denied. Strathmore denies the allegation as an incomplete and/or inaccurate summary of the terms, conditions, definitions and exclusions contained with the three policies issued by Strathmore. 18

19 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 19 of 35 PageID #: The Novak suits allege bodily injury, personal injury and advertising injury occurring within the policy period of the Strathmore policy. (See, e.g., Exhibit D to the GAIC Complaint, 75-82; Ex. E to the GAIC Complaint, 44-45, , Denied. The allegation fails to set forth a factual allegation and is a legal conclusion and is therefore denied. Strathmore denies the allegation as an incomplete and/or inaccurate summary of the terms, conditions, definitions and exclusions contained with the three policies issued by Strathmore. 66. Strathmore is obligated to defend SPCA against those allegations. Denied. The allegation fails to set forth a factual allegation and is a legal conclusion and is therefore denied. Based upon the terms, conditions, definitions and exclusions contained with the three policies issued by Strathmore, there is no duty to defend or indemnify any insured under the policies. 67. Strathmore has refused to defend SPCA against the Novak suits. Admitted. 68. Strathmore wrongfully denied that it is obligated to defend those claims. Denied. The allegation fails to set forth a factual allegation and is a legal conclusion and is therefore denied. Based upon the terms, conditions, definitions and exclusions contained with the three policies issued by Strathmore, there is no duty to defend or indemnify any insured under the policies and, consequently, Strathmore is permitted to deny coverage in this matter. 69. Strathmore s conduct has been vexatious, unreasonable and in bad faith in violation of the Illinois Insurance Code. 215 ILCS 5/

20 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 20 of 35 PageID #:1711 Denied. The allegation fails to set forth a factual allegation and is a legal conclusion and is therefore denied. Based upon the terms, conditions, definitions and exclusions contained with the three policies issued by Strathmore, there is no duty to defend or indemnify any insured under the policies and, consequently, Strathmore is permitted to deny coverage in this matter and its conduct has not been vexatious, unreasonable or in bad faith in violation of the Illinois Insurance Code. 215 ILCS 5/ Because Strathmore has breached its duty to defend, it should be estopped from asserting any defenses to coverage should that be necessary. Denied. The allegation fails to set forth a factual allegation and is a legal conclusion and is therefore denied. Based upon the terms, conditions, definitions and exclusions contained with the three policies issued by Strathmore, there is no duty to defend or indemnify any insured under the policies and, consequently, Strathmore is permitted to deny coverage in this matter and is not barred from raising any defense. Affirmative Defenses Further answering the Third-Party Complaint, and without waiver of the denials contained in its Answer, Strathmore sets forth separate and distinct affirmative defenses to the Third-Party Complaint. By listing an affirmative defense, Strathmore does not assume the burden of proof as to any matter upon which SPCA bears the burden of proof under the applicable law. First Affirmative Defense 71. The Board of Directors of the State Parkway Condominium Association v. Novak, Circuit Court of Cook County, Illinois, Case No. 08 CH 11941, filed September 1, 2009, (the Chancery Suit, and Novak v. Levenfeld Pearlstein, LLC, et al., United States District Court, Northern District of Illinois, Eastern Division, Case No. 13-CV-8861, filed December 12,

21 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 21 of 35 PageID #:1712 (the Novak suit, collectively (the Novak Litigation constitutes an occurrence that took place prior to the inception of the Strathmore policies. 72. Consequently, Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation. Second Affirmative Defense 73. Because the Novak Litigation constitutes an occurrence before the policy periods of each Strathmore policies, the Strathmore policies afford no coverage for the Novak Litigation. 74. Consequently, Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation. Third Affirmative Defense 75. The insured failed to provide notice of an occurrence and notice of a suit regarding the Novak Litigation as required by the policies. 76. Consequently, Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation. Forth Affirmative Defense 77. There is no claim for damages within the Novak Litigation as a result of bodily injury or property damage caused by an occurrence. 78. Consequently, Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation. 21

22 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 22 of 35 PageID #:1713 Fifth Affirmative Defense 79. There are no claims for damages within the Novak Litigation for personal injury or advertising injury as those terms are defined within the policies and therefore no coverage is afforded under the Strathmore policies. 80. Consequently, Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation. Sixth Affirmative Defense 81. The Novak Litigation alleges damages or causes of action based upon intentional conduct of State Parkway Condominium Association and do not allege an occurrence as defined by the policy. 82. Consequently, Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation. Seventh Affirmative Defense 83. Attorney fees alleged within the Chancery Suit Counterclaim fail to satisfy the definition of bodily injury or property damage under the policies. The policies do not provide insurance coverage for attorney fees. 84. Consequently, Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation. 22

23 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 23 of 35 PageID #:1714 Eighth Affirmative Defense 85. The Strathmore policies have effective dates of May 1, 2009 through May 1, The Chancery Suit Counterclaim alleges actions by the Board that are stated to have begun in The policies provide that coverage may potentially exist only if the bodily injury or property damage occurs during the policy period. A similar requirement exists for Personal and Advertising Injury wherein the offense must be committed during the policy period. 86. Consequently, Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation. Ninth Affirmative Defense 87. The Novak Litigation alleges damages that occurred prior to the inception date of the policies. The policies do not provide coverage for damages that occurred outside of the policies terms. There is no potential for coverage under the policies for the damages alleged within the Counterclaim that began prior to the inception of the policies. 88. Consequently, Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation. Tenth Affirmative Defense 89. SPCA s claims for damages under 215 ILCS 5/155 are barred, because (a Strathmore has no obligation under the Strathmore Policies to pay for SPCA s defense in the Novak Litigation, (b there is a bona fide dispute over coverage for the Novak Litigation, and (c Strathmore s denial of coverage to SPCA for its defense and/or indemnification in the Novak Litigation was reasonable and not vexatious. 23

24 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 24 of 35 PageID #: Consequently, Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation. Eleventh Affirmative Defense 91. SPCA s claims may be barred, in whole or in part, by other terms, conditions or exclusions of the Strathmore policies, and/or applicable law. 92. Consequently, Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation. Twelfth Affirmative Defense 93. Strathmore reserves the right to supplement its Affirmative Defenses as additional facts and potential defenses are revealed in discovery. 94. Consequently, Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation. WHEREFORE, Strathmore Insurance Company respectfully requests that this Court enter judgment in its favor and against Third-Party Plaintiff State Parkway Condominium Association on SPCA s Third-Party Complaint against Strathmore, declare that Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation, and award Strathmore its costs, attorneys fees and such other and further relief as this Court deems just and proper under the facts and circumstances. 24

25 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 25 of 35 PageID #:1716 STRATHMORE INSURANCE COMPANY S COUNTERCLAIM AND FORTH-PARTY COMPLAINT FOR DECLARATORY RELIEF Third-Party Defendant, Counter-Plaintiff, Strathmore Insurance Company ( Strathmore, by and through its attorney, David J. E. Roe, and for its Counterclaim and Forth- Party Complaint For Declaratory Relief (Counterclaim against Third-Party Plaintiff and Counter-Defendant State Parkway Condominium Association ( SPCA and Defendants and Fourth-Party Defendants Lieberman Management Services, Inc., Donna Weber, Michael J. Novak, Individually and In His Representative Capacity For His Minor Child T.N. as Parent and Next Friend; and Christina Bugelas Novak, states as follows: Parties 1. Strathmore is a New York insurance company. Strathmore s principle place of business is New York. 2. Upon information and belief, SPCA is an Illinois not-for-profit corporation. It is the association of the unit owners of the condominium building located at 1445 North State Parkway, Chicago, Illinois, and it is responsible for the administration of the building pursuant to the Declaration of Condominium Ownership and of Easements, Restrictions, Covenants and By- Laws for the State Parkway Condominium and is a citizen of Illinois. 3. Upon information and belief, Michael Novak and Christina Bugelas Novack, along with their minor child, T.N., reside in the building located at 1445 North State Parkway, Chicago, Illinois. 4. Upon information and belief, Lieberman is an Illinois corporation with its principal place of business located in Elk Grove Village, Illinois. Lieberman is, therefore, a citizen of Illinois. 25

26 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 26 of 35 PageID #: Upon information and belief, Weber is an individual domiciled in Florida, and is, therefore, a citizen of Florida. 6. Subject matter jurisdiction over this action is proper under 28 U.S.C and 28 U.S.C Venue is proper in the District pursuant to 28 U.S.C Background 8. This litigation relates to two suits (1 The Board of Directors of the State Parkway Condominium Association v. Novak, Circuit Court of Cook County, Illinois, Case No. 08 CH 11941, filed September 1, 2009, (the Chancery Suit, and (2 Novak v. Levenfeld Pearlstein, LLC, et al., United States District Court, Northern District of Illinois, Eastern Division, Case No. 13-CV-8861, filed December 12, 2013 (the Novak Suit, collectively (the Novak Litigation. 9. Strathmore seeks a declaration, pursuant to 28 U.S.C. 2201, that Strathmore has no duty or obligation to defend, or pay for the defense of SPCA and/or Lieberman Management Services, Inc. ( the insured in the Novak Litigation and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Litigation under any policy of insurance issued by Strathmore to SPCA. Policies 10. Strathmore issued an insurance policy to State Parkway Condominium Association bearing policy No. 8112M17278 and effective from May 1, 2009 to May 1, 2010, subject to certain terms, conditions, definitions and exclusions as set forth therein. A true and accurate copy of the policy effective from May 1, 2009 to May 1, 2010 is attached hereto as Exhibit A. 26

27 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 27 of 35 PageID #: Strathmore issued an insurance policy to State Parkway Condominium Association bearing policy No. 8112M17278 and effective from May 1, 2010 to May 1, 2011, subject to certain terms, conditions, definitions and exclusions as set forth therein. A true and accurate copy of the policy effective from May 1, 2010 to May 1, 2011 is attached hereto as Exhibit B. 12. Strathmore issued an insurance policy to State Parkway Condominium Association bearing policy No. 8112M17278 and effective from May 1, 2011 to May 1, 2012, subject to certain terms, conditions, definitions and exclusions as set forth therein. A true and accurate copy of the policy effective from May 1, 2011 to May 1, 2012 is attached hereto as Exhibit C. 13. The three policies issued by Strathmore Insurance Company to State Parkway Condominium Association bearing policy number 8112M17278 effective May 1, 2009 to May 1, 2010, May 1, 2010 to May 1, 2011, and May 1, 2011 to May 1, 2012 contain the following provisions: Throughout this policy the words you and your refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy. The words we, us and our refer to the company providing this insurance. The word insured means any person or organization qualifying as such under Section II Who Is An Insured. Other words and phrases that appear in quotation marks have special meaning. Refer to Section V Definitions. SECTION I COVERAGES COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY 1. Insuring Agreement 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 seeking damages for 27

28 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 28 of 35 PageID #:1719 bodily injury or property damage to which this insurance does not apply. We may, at our discretion, investigate any occurrence and settle any claim or suit that may result * * * b. This insurance applies to bodily injury and property damage only if: (1 The bodily injury or property damage is caused by an occurrence that takes place in the coverage territory ; * * * c. Bodily injury or property damage will be deemed to have been known to have occurred at the earliest time when any insured listed under Paragraph 1. of Section II --- Who Is An Insured or any employee authorized by you to give or receive notice of an occurrence or claim: (1 Reports all, or any part, of the bodily injury or property damage to us or any other insurer; (2 Receives a written or verbal demand or claim for damages because of the bodily injury or property damage ; or (3 Becomes aware by any other means that bodily injury or property damage has occurred or has begun to occur. * * * The Definitions section of the policy contains the following definitions: SECTION V DEFINITIONS * * * 3. Bodily injury means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time. * * * 13. Occurrence means an accident, including continuous or repeated exposure to substantially the same general harmful conditions. 14. Personal and advertising injury means injury, including consequential bodily injury, arising out of one or more of the following offenses: a. False arrest, detention or imprisonment; b. Malicious prosecution; c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor; 28

29 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 29 of 35 PageID #:1720 d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person s or organization s goods, products or services; e. Oral or written publication, in any manner, of material that violates a person s right of privacy; f. The use of another s advertising idea in your advertisement ; or g. Infringing upon another s copyright, trade dress or slogan in your advertisement. 17. Property damage means: * * * a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the occurrence that caused it. Exhibit A, B, C. 14. The Chancery Suit alleges damages or causes of action based upon intentional conduct of State Parkway Condominium Association and do not allege an occurrence as defined by the policy. Exhibit A, B, C. 15. The Chancery Suit seeks injunctive relief compelling production of certain records in possession of the Board as well as a claim for breach of fiduciary duty. 16. There is no claim for damages within the Chancery Suit as a result of bodily injury or property damage caused by an occurrence. Exhibit A, B, C. 17. There are no claims in the Chancery Suit for damages for personal injury or advertising injury as those terms are defined within the policies and therefore no coverage is afforded under the Strathmore policies. Exhibit A, B, C. 18. Attorney fees alleged within the Chancery Suit fail to satisfy the definition of bodily injury or property damage under the policies. Exhibit A, B, C. 19. The policies do not provide insurance coverage for attorney fees. 29

30 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 30 of 35 PageID #: The Strathmore policies have effective dates of May 1, 2009 through May 1, The Chancery Suit alleges actions by the Board that are stated to have begun in Exhibit A, B, C. 21. The policies provide that coverage may potentially exist only if the bodily injury or property damage occurs during the policy period. 22. A similar requirement exists for Personal and Advertising Injury wherein the offense must be committed during the policy period. Exhibit A, B, C. 23. The Chancery Suit damages are alleged to have occurred prior to the inception date of the policies. 24. The policies do not provide coverage for damages that occurred outside of the policies terms. 25. There is no potential for coverage under the policies for the damages alleged within the Chancery Suit that began prior to the inception of the policies. 26. The policies require that notice shall be sent to Strathmore as soon as practicable whenever the insured has information from which it may conclude that there has been an occurrence which may involve the policy. Exhibit A, B, C. 27. The policies require that an insured Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or suit. Exhibit A, B, C. 28. The insured provided notice of the Chancery Suit over seven years after the filing of the Counterclaim. 30

31 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 31 of 35 PageID #: The notice that was given to Strathmore regarding the Chancery Suit was not timely and was therefore not adequate under the provisions of the policies and under applicable state law due to late notice. 30. The policies provides that if a listed insured or authorized employee knew, prior to the policy period, that the bodily injury or property damage occurred, then any continuation, change or resumption of such bodily injury or property damage during or after the policy period will be deemed to have been known prior to the policy period. Exhibit A, B, C. 31. The insured knew, prior to the policy period, that the alleged bodily injury or property damage in the Chancery Suit occurred. 32. There is no coverage under the policies for the damages alleged in the Chancery Suit due to the damages being deemed to have occurred prior to the inception of the policy. 33. The insured reported the Chancery Suit alleged damages to another insurer, received a demand for damages and/or became aware by other means that bodily injury or property damage occurred. 34. There is no coverage under the policies for the damages alleged in the Chancery Suit due to the damages being deemed to have occurred prior to the inception of the policy. 35. The Novak Suit alleges damages or causes of action based upon intentional conduct of each of the defendant insureds. 36. Intentional conduct claims lack the requisite accidental or fortuitous event do not involve an accident or an occurrence as defined by the policy. Exhibit A, B, C. 37. The Novak Suit alleges damages or causes of action in the nature of emotional and/or mental distress. 31

32 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 32 of 35 PageID #: No coverage is afforded under the policies for emotional and/or mental distress as alleged in the Novak Suit. 39. The Novak Suit alleges damages or causes of action in the nature of emotional and/or mental distress. Emotional and/or mental distress claims are excluded as bodily injury arising out of personal and advertising injury. Exhibit A, B, C. 40. The policies exclude coverage for bodily injury arising out of personal and advertising injury. 41. The Novak Suit seeks an award of attorney fees to the prevailing party which fees fail to satisfy the definition of bodily injury or property damage under the policies. Exhibit A, B, C. 42. The policies do not provide insurance coverage for attorney fees. 43. The Strathmore policies have effective dates of May 1, 2009 through May 1, Exhibit A, B, C. 44. The alleged actions in the Novak Suit are stated to have begun in The policies provide that coverage may potentially exist only if the bodily injury, property damage or Personal and Advertising Injury occurs during the policy period. Exhibit A, B, C. 46. The Novak Suit damages are alleged to have occurred prior to the inception date of the policies. 47. The policies do not provide coverage for damages that occurred outside of the policies terms. 48. There is no potential for coverage under the policies for the damages alleged within the Novak Suit that began prior to the inception of the policies. 32

33 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 33 of 35 PageID #: The Strathmore policies are occurrence policies and do not provide coverage for damages occurring outside of the policies terms. 50. The Novak Suit alleges damages occurring outside of the policies terms. 51. The policies provides that if a listed insured or authorized employee knew, prior to the policy period, that the bodily injury or property damage occurred, then any continuation, change or resumption of such bodily injury or property damage during or after the policy period will be deemed to have been known prior to the policy period. Exhibit A, B, C. 52. The insured knew, prior to the policy period, that the alleged bodily injury or property damage in the Novak Suit occurred. 53. There is no coverage under the policies for the damages alleged in the Novak Suit due to the damages being deemed to have occurred prior to the inception of the policy. 54. The insured reported the alleged Novak Suit damages to another insurer, received a demand for damages or became aware by other means that bodily injury or property damage occurred. 55. There is no coverage under the policies for the damages alleged in the Novak Suit due to the damages being deemed to have occurred prior to the inception of the policy. 56. The policies require that notice shall be sent to Strathmore as soon as practicable whenever the insured has information from which it may conclude that there has been an occurrence which may involve the policy. Exhibit A, B, C. 57. The policies require that notice of a suit shall be sent to Strathmore as soon as practicable. Exhibit A, B, C. 33

34 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 34 of 35 PageID #: The insured provided notice of the Novak Suit over three years after the filing of the complaint. 59. The policies require that an insured Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or suit. Exhibit A, B, C. 60. The notice that was given to Strathmore regarding the Novak Suit was not timely and was therefore not adequate under the provisions of the policies and under applicable state law due to late notice. 61. The definitions, terms, conditions and/or exclusions within the policies provide that the policies do not cover the damages alleged within the Novak Litigation or otherwise exclude coverage under the policies and Strathmore has no duty or obligation to defend, or pay for the defense of SPCA and/or Lieberman Management Services, Inc. in the Novak Suit and/or Chancery Suit and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment in the Novak Suit and/or Chancery Suit under any policy of insurance issued by Strathmore to the insured WHEREFORE, Strathmore Insurance Company respectfully requests that this Court enter judgment in its favor and against Third-Party Plaintiff State Parkway Condominium Association on SPCA s Third-Party Complaint against Strathmore, declare that Strathmore has no duty or obligation to defend, or pay for the defense of, SPCA and/or Lieberman Management Services, Inc. in the Novak Suit and/or Chancery Suit and no duty to reimburse, indemnify or otherwise pay for any damages, liability or judgment(s in the Novak Suit and/or Chancery Suit, and award Strathmore its costs, attorneys fees and such other and further relief as this Court deems just and proper under the facts and circumstances. 34

35 Case: 1:17-cv Document #: 62 Filed: 01/22/18 Page 35 of 35 PageID #:1726 Respectfully Submitted, STRATHMORE INSURANCE COMPANY By: /s/ David J. E. Roe David J. E. Roe Attorney for Strathmore Insurance Company 1699 Wall Street, Suite 104 Mount Prospect, IL Telephone: ( Facsimile: ( CERTIFICATE OF SERVICE I, an attorney, certify that on January 22, 2018, I electronically filed the foregoing document with the Clerk of the Court using the CM/ECF system which will send notification of such filing to all parties of record in this case by operation of the Court s electronic filing system. Parties may access this filing through the Court s system. /s/ David J. E. Roe 35