Related Claim Provision Bars Coverage for Discrimination Claims Asserted Over a Six-Year Period

Applying Illinois law, the First District Appellate Court of Illinois has held that a related wrongful acts provision barred coverage for a series of “claims” made over the course of six years because the claims—as the insured conceded—arose out of the same claim. Steadfast Ins. Co. v. State Parkway Condo. Ass’n, 2023 WL 4105252 (Il. App. Ct. June 21, 2023).

In January 2007, a condominium owner lodged a complaint with the Illinois Department of Human Rights (“IDHR”) alleging that his condominium association failed to make reasonable accommodations for his hearing impairment at a board meeting. The primary insurer defended the insured condo association under a full reservation of rights under the claims-made policy it issued for the 2006-2007 policy period, and the complaint was eventually settled in September of that year.

Subsequently in March 2008, the condo association filed an action in the Cook County Circuit Court seeking an injunction against the condo owner for allegedly failing to comply with condo association rules. In response, the condo owner filed counterclaims alleging that the insured engaged in discriminatory and harassing conduct, breached their settlement agreement, retaliated for the 2007 IDHR claim, and failed to accommodate his disability and service dog, among other causes of action. The primary insurer again defended the counterclaims subject to a full reservation of rights.

In November 2010, the condo owner filed a second housing discrimination complaint with the IDHR, and the primary insurer once again defended the insured subject to a full reservation of rights. Then in November 2013, the condo owner filed suit in the United States District Court for the Northern District of Illinois against the condo association for alleged violations of fair housing laws, among other torts. The primary insurer again defended the condo association subject to a full reservation of rights.

In 2017, the primary insurer withdrew its defense, noting it had paid defense costs slightly in excess of its policy limits on the 2006-2007 policy and contending that the claims were related under a “Related Wrongful Acts” provision. The provision defined that term as “Wrongful Acts that arise out of, are based on, relate to or are in consequence of, the same facts, circumstances or situations.” The insured contended that multiple policies applied and, therefore, the applicable limit was not exhausted. 

In the ensuing coverage litigation, the appellate court affirmed the lower court’s grant of summary judgment to the primary insurer, holding that the claims were all related to the 2007 IDHR complaint and that one policy limit applied. In ruling for the primary insurer, the Court held that the Related Wrongful Acts provision was not ambiguous because it was expressly defined in the policy and because all the condo owner’s claims arose out of the insured’s alleged continuous harassing and discriminatory conduct, as well as retaliation for the claimant’s 2007 IDHR claim—as admitted by the insured in its own pleadings. Regarding waiver, the Court ruled that the primary insurer had not waived the right to assert the Related Wrongful Acts provision because it had expressly defended the insured subject to a full reservation of rights. Nor was the insurer estopped from asserting the defense because it had not misled the insured that the defense was unavailable.

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