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States District Court,
Municipal League Risk Management Association and Raymond Muniz, Defendants.
Company, Crossclaim Plaintiff,
Muniz, Crossclaim Defendant
Court on the cross-motions for summary judgment filed by plaintiff Patricia
Beil (Doc. 40) and defendant AMCO Insurance Company (“AMCO”) (Doc. 41). AMCO
and defendant/crossclaim defendant Raymond Muniz have responded to Beil’s
motion (Docs. 45 & 47), and Beil has responded to AMCO’s motion (Doc. 43).
AMCO has replied to Beil’s response (Doc. 49).
the Circuit Court of the Twentieth Judicial Circuit, St. Clair County,
Illinois. In the Complaint, Beil sought a declaration that AMCO, which had
issued her a homeowner’s insurance policy, had an obligation to defend and indemnify
her in connection with a state court lawsuit brought by Raymond Muniz, Muniz
v. Beil, Case No. 15-L-606, in St. Clair County. In that underlying
lawsuit, Muniz alleges that Beil, a Trustee for the Village of St. Jacob,
Illinois (“Village”), injured him by making false and defamatory statements
about financial improprieties during Muniz’s tenure as Mayor of the Village
(Doc. 1-4 at 27-32). AMCO removed this case to federal court under 28 U.S.C. §
1441(a), which has original diversity jurisdiction over the controversy under
28 U.S.C. § 1332(a).1 AMCO then filed a counterclaim/crossclaim
seeking a declaration that it owes Beil no duty to defend or indemnify her in
connection with the Muniz lawsuit.
motions, Beil asks for summary judgment only on her claim regarding the duty to
defend; AMCO asks for summary judgment regarding its duty to defend and
the movant shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Spath v. Hayes
Wheels Int’l-Ind., Inc., 211 F.3d 392, 396 (7th Cir. 2000).
underlying lawsuit Muniz filed against Beil. In that lawsuit, Muniz alleged
that he was the Mayor of the Village from May 2001 to May 2013 and that Beil
was a Trustee of the Village from May 2011 through the time the lawsuit was
filed. Muniz Compl. ¶¶ 3-4 (Doc. 11-1 at 1). Muniz alleges that Beil
told a Belleville News-Democrat (“BND”) reporter that Muniz had conducted
financial improprieties as Mayor and called for him to be criminally
investigated. Muniz Compl. ¶ 11 (Doc. 11-1 at 3). Her statements, which
Muniz alleges were false and defamatory, were the basis for an October 24,
2014, BND article. Muniz Compl. ¶ 5 (Doc. 11-1 at 2, 3). The article
recounts that Beil stated she relied on a July 25, 2014, forensic audit report
(“Report”) provided to the Village by an outside accounting firm. Muniz
Compl. ¶ 7 (Doc. 11-1 at 2). The Report was prepared solely for use by the
Village and stated that it should not be used by anyone other than the Village.
Muniz Compl. ¶ 7 (Doc. 11-1 at 2). The Report was incomplete and
misleading in that it named only Muniz and not others potentially responsible
for certain questionable expenses, and it relied on unsubstantiated remarks
from an anonymous Village resident. Muniz Compl. ¶ 7 (Doc. 11-1 at 2).
It did not suggest any criminal activity or actionable wrongdoing by any party.
Muniz Compl. ¶ 8 (Doc. 11-1 at 2). As a Trustee, Beil knew or should
have known that the activities noted as questionable in the Report had actually
been approved, some of them in votes conducted while Beil was present. Muniz
Compl. ¶ 10 (Doc. 11-1 at 2-3). Beil stated she wanted to have information from
the Report published in the newspaper before turning the Report over to the
Madison County State’s Attorney. Muniz Compl. ¶ 12 (Doc. 11-1 at 3). As
a result of Beil’s statements, on October 28, 2014, the BND published a cartoon
depicting Muniz in prison garb reaching into a cookie jar labeled “St. Jacob.” Muniz
Compl. ¶ 13 (Doc. 11-1 at 3).
undisputed, although Muniz did not plead them in his underlying complaint. Beil
received compensation for her role as Village Trustee. By law, the powers of a
municipal Trustee are purely legislative. See 65 ILCS 5/3.1-45-15; 65
take any action in response to the Report. However, Beil wanted to have
information about the Report published in the paper so her constituents would
know about it before she approached the State’s Attorney with the information.
On October 22, 2014, Beil sent an email to the BND from her home using her
personal computer and personal email account. The email stated, in pertinent
Trustee. I hope you’ll publish this Press Release calling for a public
investigation by State’s Attorney Tom Gibbons into what may be specific
financial improprieties of former St. Jacob Mayor Mr. Raymond Muniz. I base my
request for a public investigation upon an Independent Forensic Audit conducted
by Auditors from Kenneth E. Loy and Company for the Village of St. Jacob.
release” entitled “ST. JACOB TRUSTEE CALLS FOR INVESTIGATION OF FORMER MAYOR,
RAYMOND MUNIZ,” which began, “St. Jacob Village Trustee, Pattie Beil, today
called on State’s Attorney Tom Gibbons to investigate former St. Jacob Mayor
Raymond Muniz for financial improprieties while Muniz was Mayor of St. Jacob,”
and which concluded, “For further information contact: Mrs. Pattie Beil,”
followed by Beil’s telephone number (Doc. 47-1 at 117). A BND reporter then
called Beil on her home telephone, and Beil returned the call and talked to the
reporter from her home telephone. Beil did not give the Report a copy of the
Report but directed her to the Village Hall to obtain a copy. Beil received no
compensation specifically for her communications with the BND.
knowingly and maliciously making false statements about Beil to a third party
that harmed Muniz (Count I), for intentional infliction of emotional distress
by her defamation (Count II) and for invading Muniz’s privacy by placing him
before the public in a false light in a way that would be offensive to a
reasonable person (Count III).
Beil a homeowner’s insurance policy (Policy No. HA 0012437637-2) (“the Policy”)
that covered the time period of the events described in the Muniz
lawsuit. Coverage E of the policy provides personal liability coverage.
AMCO believes apply to negate any coverage for the Muniz dispute:
amended by Premier Homeowners Endorsement at 3-4 (Doc. 1-3 at 33-34). The
Policy defines “business” as:
full-time, part-time or occasional basis; or
compensation, except the following;
than payment for expenses incurred to perform the activity….
AMCO Policy, Definitions at 1 (Doc.
1-3 at 35). AMCO also points to another exclusion for expected or intended
suit to AMCO, but AMCO declined the tender. AMCO argues that it does not have a
duty to defend Beil because Counts I (defamation) and III (false light) are
excluded by the “business pursuits exclusion” and the “civic or public
activities performed for pay exclusion.” It further believes Count II
(intentional infliction of emotional distress) does not fall within the Policy
coverage or is excluded from coverage under the “expected or intended injury
exclusion.” AMCO concludes that since it has no duty to defend, it cannot owe
Beil the narrower duty to indemnify.
communications with the BND did not constitute a “business pursuit” or a “civic
or public activity” and, on the contrary, were undertaken in her personal
capacity outside her role as Trustee, which is a purely legislative role. She
believes her conduct falls squarely under the Policy’s coverage and is not
law applies to this case.
an obligation to defend its insured in an underlying lawsuit if the complaint
in the underlying lawsuit alleges facts potentially within the coverage of the insurance
policy, even if the allegations end up being groundless, false or fraudulent. General
Agents Ins. Co. of Am., Inc. v. Midwest Sporting Goods Co., 828 N.E.2d
1092, 1098 (Ill. 2005). To determine if the underlying suit alleges a situation
potentially within the insurance coverage, the Court compares the complaint to
the relevant provisions of the insurance policy. Id. This is sometimes
called the “eight-corners rule” because the Court compares the “the four
corners of the underlying complaint with the four corners of the policy,
according both the complaint and the policy a liberal construction.” Madison
Mut. Ins. Co. v. Diamond State Ins. Co., 851 F.3d 749, 2017 WL 106555, at
*3 (7th Cir. 2017). The Court’s focus is on what is actually alleged
rather than what could have been alleged. Id. However, under
certain unusual or compelling circumstances, the Court may look beyond the
underlying complaint, as long as it does not determine an issue critical to the
underlying lawsuit. Pekin Ins. Co. v. Wilson, 930 N.E.2d 1011, 1019, 1022
(Ill. 2010) (considering allegations in underlying counterclaim that, if true,
would show that exception to coverage exclusion applies); Title Indus.
Assur. Co., R.R.G. v. First Am. Title Ins. Co., No. 15-3310, 2017 WL
1314934, at *4 (7th Cir. April 10, 2017) (allowing consideration of evidence
beyond the underlying pleading when the insurer files a timely declaratory
judgment action).2 If any theory of recovery in the underlying
lawsuit falls within the insurance coverage, the insurer will have a duty to
defend. Midwest Sporting Goods Co., 828 N.E.2d at 1098.
an insurance policy, even an ambiguous policy, is a matter of law. Crum
& Forster Managers Corp. v. Resolution Trust Corp., 620 N.E.2d 1073,
1077 (Ill. 1993); River v. Commercial Life Ins. Co., 160 F.3d 1164, 1169
(7th Cir. 1998). In interpreting a policy, the Court must attempt to effectuate
the parties’ intention as expressed by the policy. Valley Forge Ins. Co. v.
Swiderski Elecs., Inc., 860 N.E.2d 307, 314 (Ill. 2006). The Court should
“construe the policy as a whole, taking into account the type of insurance
purchased, the nature of the risks involved, and the overall purpose of the
contract.” Nicor, Inc. v. Associated Elec. & Gas Ins. Servs., 860
N.E.2d 280, 286 (Ill. 2006). If the policy is unambiguous, the Court must
construe it according to the plain and ordinary meaning of its terms. Valley
Forge, 860 N.E.2d at 314. On the other hand, if the policy is ambiguous,
the Court must construe all ambiguities in favor of the insured and against the
insurer, who drafted the policy. Id. In making the comparison, the Court
must give the policy and the complaint a liberal construction favor of the insured.
Id. Generally, the insured bears the burden of proving the claim is
covered under a policy’s grant of coverage, and the insurer bears the burden of
proving an exclusion applies. Addison Ins. Co. v. Fay, 905 N.E.2d 747,
752 (Ill. 2009).
of whether the underlying Muniz complaint alleges a situation
potentially covered by the Policy. The Court believes it is appropriate in this
case to also consider the undisputed circumstances of Beil’s service as a
Trustee and the details of her communications with the BND because she relies
on those facts to support her theory that she was acting in her personal
capacity outside her role as a Trustee during those communications. The Court
may consider those facts because they do not tend to determine an issue crucial
to the underlying lawsuit.
intentional infliction of emotional distress, does not fit within the Policy’s
coverage or, in the alternative, falls within an exclusion from coverage. Beil
has not responded to those arguments. Pursuant to Local Rule 7.1(c), the Court
construes her failure to respond as an admission of the merits of AMCO’s
argument that Count II does not state a claim potentially covered by the Policy
and therefore cannot serve as the basis for finding a duty to defend. The Court
therefore turns to Count I (defamation) and Count III (false light) to see if
they state claims potentially covered by the Policy.
Muniz’s claims for defamation and false light are excluded from coverage by the
business pursuits exclusion. Beil claims that, although her overall service as
a Trustee might be a business pursuit, her conduct at issue in the Muniz
suit did not arise out of that business pursuit but instead out of personal
activity on personal time with personal resources outside her Trustee role.
noted earlier, provides that the Policy’s personal injury coverage does not
apply to “injury arising out of the ‘business’ pursuits of an ‘insured.’ ” AMCO
Policy, § II—Exclusions at 19-24 (Doc. 1-4 at 4-9), as amended by Premier
Homeowners Endorsement at 3-4 (Doc. 1-3 at 33-34). The Policy defines
“business” to include “[a] trade, profession or occupation engaged in on a
full-time, part-time or occasional basis.” AMCO Policy, Definitions at 1 (Doc.
1-3 at 35). Caselaw also establishes that “[a] business pursuit is a continuous
or regular activity, done for the purpose of returning a profit.” Badger
Mut. Ins. Co. v. Ostry, 636 N.E.2d 956, 959 (Ill. App. Ct. 1994).
service as a Trustee was a business pursuit, and she does not really dispute
this conclusion. The job of paid municipal Trustee qualifies as a “business”
under the Policy because it is an “occupation engaged in on a[n] … occasional
basis.” AMCO Policy, Definitions at 1 (Doc. 1-3 at 35). It requires oversight
of certain Village functions; preparing for, attending and participating in
Village Board of Trustees meetings; and making decisions regarding the governance
of the Village for the health and wellbeing of its citizens. It further
satisfies the interpretation of business pursuits given by caselaw. Serving as
a municipal Trustee is a continuous or regular activity in that it requires
performing legislative tasks, attending meetings, and performing other
functions incidental to representing the interests of the citizens of the
Village over a Trustee’s term. The pay that Beil received satisfied the profit
requirement. Indeed, municipal officers who serve for pay have been found to be
engaging in an “occupation” that constituted a business pursuit for the
purposes of the business pursuits exclusion. See, e.g., Metropolitan
Prop. & Cas. Ins. Co. v. Stranczek, 968 N.E.2d 717, 723 (Ill. App. Ct.
2012) (insured engaged as mayor for pay was engaging in “occupation” subject to
the business pursuits exception).3
becomes whether the conduct described in the Muniz lawsuit “arose out
of” Beil’s business pursuit. The conduct, specifically, is Beil’s
communications that allegedly defamed Muniz and portrayed him in a false light.
Beil claims her conduct did not “arise out of” her occupation as a Trustee
because it was non-legislative conduct she conducted on her own time using her
own personal resources. She notes she was not required to engage in
communications with the media as part of her Trustee duties. AMCO claims Beil’s
conduct did arise out of her occupation as a Trustee because Beil publicized
information she received as a Trustee only for use by Trustees, she referred to
her role as a Trustee in her email and press release, and she was motivated by
the desire to inform her constituents about municipal concerns.
“arising out of.” The phrase is extremely broad, although the Court should give
it the most limited interpretation possible in favor of the insured when it
appears in an exclusion. Maryland Cas. Co. v. Chicago & N. W. Transp.
Co., 466 N.E.2d 1091, 1094 (Ill. App. Ct. 1984). “ ‘Arising out of’ has
been held to mean ‘originating from,’ ‘having its origin in,’ ‘growing out of’
and ‘flowing from.’ ” Id. (quoting Western Cas. & Sur. Co. v.
Branon, 463 F. Supp. 1208, 1210 (E.D. Ill. 1979)). It has also been held to
mean “ ‘[t]o spring up, originate, to come into being or notice’ or ‘to come
into being,’ ‘to come about: come up: take place.’ ” Allstate Ins. Co. v.
Smiley, 659 N.E.2d 1345, 1351 (Ill. App. Ct. 1995) (internal citations
conduct alleged by Muniz in the underlying complaint arose out of her
occupation as a Trustee, even giving the phrase “arising out of” its most
narrow interpretation. The audit was conducted and the Report was prepared at
the behest of the Board of Trustees while Beil was a Trustee. The auditor presented
the Report to the Trustees solely for the Village’s official use, and it was in
her capacity as Trustee that Beil received a copy of the Report. Although it
was available to the public because it was presented at a public meeting, the
Report existed because the Village Trustees commissioned it, and it was created
solely for the Village’s use.
communications with the BND, she spoke as a Trustee. In her email, she
immediately identified herself as a Trustee and closed by signing off as a
Trustee. This was clearly an effort to wield the authority of Trusteehood to
lend credibility to the content of her press release. As for the press release
itself, she described her call as a Trustee to the State’s Attorney to
investigate Muniz, again invoking the authority and gravitas of her office. And
as a basis for her statements, she cited the Report that had been prepared solely
for use by the Village.
spoke with the BND in an effort to communicate with her constituents about
official business, a crucial function of a legislative representative. She
wanted them to know about possible municipal wrongdoing on which the Board of
Trustees was not going to act. The fact that Beil communicated from her home using
her home computer and email account does not negate the fact that, in all her
communications, she spoke as a Trustee—invoking her title as a Trustee several
times—about the Report prepared solely for the use of Village, and for the
purpose of informing her constituents about Village business. Under no
interpretation of the phrase “arising out of” could Beil’s activity not have
arisen out of her occupation as Trustee.
with the BND did not constitute a business pursuit because she was not paid for
those communications. Her focus exclusively on her communications is too
narrow. Such a narrow focus ignores the fact that while her powers as a
Trustee were purely legislative, her role as a Trustee was much broader.4
Her communications with the BND occurred in her performance of that broader
Trustee role of representing and communicating with Village citizens about
administration of the Village. While such activities may not be covered by
legislative privilege or immunity because they are not technically within the
scope of legislative powers, Hutchinson v. Proxmire, 443 U.S. 111, 133
(1979) (considering Speech and Debate Clause of United States Constitution); Meyer
v. McKeown, 641 N.E.2d 1212, 1215 (Ill. App. Ct. 1994), they are an
important part, albeit a political part, of an elected representative’s job, see
United States v. Brewster, 408 U.S. 501, 512 (1972) (“It is well known,
of course, that Members of the Congress engage in many activities other than
the purely legislative activities protected by the Speech or Debate Clause.
These include … preparing … news releases…. Although these are entirely
legitimate activities, they are political in nature rather than
legislative….”); Mirshak v. Joyce, 652 F. Supp. 359, 365 (N.D. Ill.
1987). Beil was, in fact, being compensated for her communication because
communication with her constituents was a legitimate part of her job as
Trustee, even if she was not compensated for the specific act of communicating
or compelled to make such communications.
decision in Country Mutual Insurance Company v. Molburg, No. 3-12-0364,
2013 WL 1760594 (Ill. App. Ct. 2013), in support of her argument that her
conduct did not arise out of a business pursuit.
sought coverage from her personal umbrella insurance policy for an underlying
defamation lawsuit based on statements she made about her employer during and
following her employment. Id. at *1. Those statements were “motivated by
her personal insecurity, a desire to keep her employment, and vindictiveness”
rather than financial gain. Id. at *4. Her insurance policy included a
business pursuits exception. Id. at *3. The Illinois Court of Appeals
held that the statements did not arise out of a business pursuit because at
least some of the insured’s statements were motivated by personal reasons
rather than money and were not related to her employment. Id. at *4. The
Molburg case is distinguishable from the case at bar. Here, Beil’s
statements were motivated by her desire to inform her constituents about the
administration of the Village, a purpose clearly central to her occupation as a
Trustee, and were done in furtherance of her service as a Trustee, for which
she was compensated. Molburg is simply not persuasive to this Court.
the business pursuits exclusion of the Policy excludes coverage for liability
from Counts I and III of Muniz’s underlying lawsuit, and AMCO therefore has no
duty to defend Beil in that suit.
Muniz’s claims for defamation and false light are also excluded from coverage
by the civic or public activities performed for pay exclusion. Again, Beil
argues that her conduct was not civic or public activity performed for pay but
rather unremunerated personal conduct on personal time with personal resources
outside her Trustee role.
As noted earlier, the civic or
public activities performed for pay exclusion provides that the Policy’s
personal injury coverage does not apply to “civic or public activities
performed for pay by an ‘insured’.” AMCO Policy, § II—Exclusions at 19-24 (Doc.
1-4 at 4-9), as amended by Premier Homeowners Endorsement at 3-4 (Doc. 1-3 at
33-34). The Policy does not define “civic or public,” but courts may look to
dictionary definitions to determine the plain and ordinary meaning of terms not
defined in a contract. The Oxford English Dictionary defines “civic” to include
“[o]f, belonging to, or relating to a city, town, borough, or other community
of citizens; esp. of or relating to the administration and affairs of
such a community; municipal.” Civic, Oxford English Dictionary Online
(visited Apr. 11, 2017); see also DeBoer v. Village of Oak Park,
53 F. Supp. 2d 982, 991 (N.D. Ill.) (citing Webster’s II New Riverside Univ.
Dictionary 266 (1984) (defining “civic” as “of, relating to, or belonging
to a city, a citizen, or citizenship”)), rev’d in part on other grounds,
86 F. Supp. 2d 804 (N.D. Ill. 1999), aff’d in part & rev’d in part on
other grounds, 267 F.3d 558 (7th Cir. 2001). “Public” has a number of
definitions in different contexts and usages, but the one that makes the most
sense when paired with “civic” is “[o]f or relating to the people as a whole;
that belongs to, affects, or concerns the community or the nation.” Public,
Oxford English Dictionary Online (Mar. 2017),
(visited Apr. 11, 2017); see also City of Champaign v. Madigan, 992
N.E.2d 629, 637 (Ill. App. Ct. 2013) (citing Merriam-Webster’s Collegiate
Dictionary 941 (10th ed. 2000) (defining “public” to include “of or
relating to business or community interests as opposed to private affairs”)).
certainly a civic or public activity in that it relates to the administration
and affairs of the Village and relates to, affects or concerns the community of
the Village. Beil also served as a Trustee for pay. Thus, her Trustee service
qualifies as a civic or public activity performed for pay under the Policy.
in Muniz’s underlying lawsuit not only arose out of her service as a Trustee,
it was civic or public activity because it was communication with her
constituents about Village business. Thus, the civic or public activities
performed for pay exclusion of the Policy also excludes coverage for liability
from Counts I and III of Muniz’s underlying lawsuit. This is an alternative
reason AMCO has no duty to defend Beil in that suit.
exclusion and the civic or public activities performed for pay exclusion remove
Beil’s conduct alleged in Counts I and III of Muniz’s underlying lawsuit from
the Policy’s coverage. Beil having already conceded that Count II does not
state a claim potentially within the Policy’s coverage, the Court finds that
Muniz has not stated a claim against Beil in the underlying lawsuit potentially
falling within the Policy’s coverage. Therefore, AMCO has no duty to defend
Beil in that lawsuit and is entitled to summary judgment on that issue.
the duty to indemnify. Pekin Ins. Co. v. Wilson, 930 N.E.2d 1011, 1017
(Ill. 2010); Outboard Marine Corp. v. Liberty Mut. Ins. Co., 607 N.E.2d
1204, 1220 (Ill. 1992). Therefore, where the Court concludes there is no duty
to defend, there is necessarily no duty to indemnify. National Cas. Co. v.
McFatridge, 604 F.3d 335, 338 (7th Cir. 2010). Because the Court has found
AMCO has no duty to defend Beil in the Muniz lawsuit, it has no duty to
indemnify her either, and it is entitled to summary judgment with respect to
the duty to indemnify as well.
question of the duty to defend (Doc. 40);
question of the duty to defend and the duty to indemnify (Doc. 41);
Patricia Beil under Homeowners Policy No. HA 0012437637-2, effective January 9,
2014, to January 8, 2015, with respect to any of the conduct alleged in the
Complaint in Muniz v. Beil, Case No. 15-L-606, in the Circuit Court for
the Twentieth Judicial Circuit, St. Clair County, Illinois; and
Once in federal court, Beil amended her complaint to add a new count
against a new defendant, but that claim has been dismissed and is no longer in
“[T]here is no reason why the trial court could not consider relevant,
objective, undisputed facts in deciding the duty to defend, even if those facts
fall outside the pleadings of the underlying lawsuit.” Bartkowiak v.
Underwriters at Lloyd’s, London, 39 N.E.3d 176, 181 (Ill. App. Ct. 2015), app.
denied, 48 N.E.3d 671 (Ill. 2016).
Beil’s service as a Trustee also falls within the second prong of the
definition of “business”: “Any other activity engaged in for money or other
compensation, except … [v]olunteer activities for which no money is received
other than payment for expenses incurred to perform the activity….” AMCO
Policy, Definitions at 1 (Doc. 1-3 at 35). As noted above, Beil received money
for her service as Trustee, so she was not a volunteer even if she did not get
paid specifically for communicating with her constituents.
In fact, Beil describes in her deposition duties of Trustees beyond
strictly legislative functions such as, for example, oversight of the police
department, working with the police chief, and researching grant opportunities
for the Village. Beil Dep. 84:19-85:2 (Doc. 40-1 at 84-85).