                           ILLINOIS OFFICIAL REPORTS
                                         Appellate Court




  Metropolitan Property & Casualty Insurance Co. v. Stranczek, 2012 IL App (1st) 103760




Appellate Court            METROPOLITAN PROPERTY AND CASUALTY INSURANCE
Caption                    COMPANY, as Successor in Interest on Certain Policies of Insurance to
                           St. Paul Insurance Company of Illinois, and ECONOMY PREMIER
                           ASSURANCE COMPANY, Plaintiffs-Appellants, v. CHESTER
                           STRANCZEK, Defendant-Appellee.



District & No.             First District, Fifth Division
                           Docket No. 1-10-3760


Filed                      March 30, 2012


Held                       In plaintiff insurers’ action seeking a declaratory judgment that they did
(Note: This syllabus       not have a duty to defend or indemnify defendant in underlying lawsuits
constitutes no part of     alleging that the village of which defendant was the mayor distributed
the opinion of the court   contaminated water to its citizens, the entry of summary judgment for
but has been prepared      defendant was reversed, since the policy issued to defendant covered
by the Reporter of         liability for third-party claims, homeowner’s claims, and vehicle and boat
Decisions for the          claims, but excluded coverage for claims connected to a “business,
convenience of the         profession or occupation” of the insured, and defendant’s position as
reader.)
                           mayor constituted an “occupation” for purposes of the policy, the lawsuits
                           involved risks defendant undertook on behalf of the village, and the
                           exclusion applied; therefore, summary judgment was entered for plaintiff
                           insurers.


Decision Under             Appeal from the Circuit Court of Cook County, No. 09-CH-35410; the
Review                     Hon. Richard J. Billik, Jr., Judge, presiding.
Judgment                   Reversed; summary judgment entered.


Counsel on                 Joseph P. Postel, David S. Osborne, and Jeffrey A. Merar, all of Lindsay,
Appeal                     Rappaport & Postel, LLC, for appellants.

                           Chris C. Gair, Christopher C. Dickinson, Irina Y. Dmitrieva, and
                           Matthew S. Riley, all of Jenner & Block LLP, of Chicago, for appellee.


Panel                      JUSTICE McBRIDE delivered the judgment of the court, with opinion.
                           Presiding Justice Epstein and Justice J. Gordon concurred in the
                           judgment and opinion.



                                              OPINION

¶1           Plaintiffs brought an action for declaratory judgment against their insured, defendant
        Chester Stranczek, seeking a declaration that they did not owe a duty to defend or indemnify
        him in several underlying lawsuits alleging that the Village of Crestwood, of which
        defendant was the mayor, and its municipal officers supplied its residents with contaminated
        drinking water. Plaintiffs claimed that they did not owe a duty to defend or indemnify
        Stranczek because of a “business pursuits” coverage exclusion contained in the insurance
        policies that Stranczek purchased from plaintiffs. On cross-motions for summary judgment,
        the trial court found that the underlying lawsuits fell within the coverage provided by the
        insurance policy and that plaintiffs owed a duty to defend Stranczek in those lawsuits. The
        trial court granted summary judgment in favor of Stranczek, and plaintiffs now appeal that
        judgment. For the reasons that follow, we reverse.
¶2           The relevant facts in this case are not in dispute. According to an unrebutted affidavit
        submitted by Stranczek’s wife, Diane, that was attached to Stranczek’s motion for summary
        judgment, Stranczek served as the mayor of the Village of Crestwood (Village) from 1969
        to 2007. The job of mayor was a part-time position that initially paid Stranczek $1,000 per
        year and never paid him more than $6,000 per year. Stranczek did not retain any of that
        salary as compensation for his service as mayor. Instead, he donated the after-tax portion of
        that salary for charity, used it for projects benefitting the Village, and used it to defray his
        own out-of-pocket expenses incurred as mayor because he did not have an expense account.
        For many years, Stranczek was the president and chief executive officer (CEO) of two
        companies: Cresco Lines, Inc., a nationwide trucking company, and Chicago Marmon
        Trucks, Inc., a company operating maintenance facilities for tractors and trailers. Stranczek
        resigned as CEO of Chicago Marmon Trucks on August 8, 1994, and turned over day-to-day
        management of the company to one of his sons. Stranczek resigned as CEO of Cresco Lines


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     on July 10, 1995, and turned over day-to-day operations of the company to another one of
     his sons. After these resignations, Stranczek continued to serve as chairman of the board of
     both companies until he resigned that position at Cresco on July 13, 2009, and at Marmon
     on August 10, 2009. In his role of chairman, Stranczek was closely involved in overseeing
     the companies’ finances and overall operations until his medical condition started to
     deteriorate in 2008. Between 1984 and at least 1991, Stranczek received a salary of more
     than $100,000 for his work at both companies. Beginning in 1998, Stranczek was
     compensated principally through distributions from the companies, and although those
     distributions varied from year to year, they were never less than $189,000 and were
     frequently much more.
¶3       The pleadings and other evidentiary materials in the record reveal the following
     additional undisputed facts. From October 1995 through October 2009, Stranczek purchased
     and renewed, on an annual basis, “PAK II Personal Package” insurance policies from St. Paul
     Insurance, its successor in interest Metropolitan Property and Casualty Insurance Company,
     and Economy Premier Assurance Company. Each of the policies was issued under the trade
     name “PAK II” and contained substantially the same terms and conditions.1 Therefore, for
     purposes of this appeal, the policies will be referred to collectively as the PAK II policies.
¶4       Each PAK II policy provides primary liability coverage in a section entitled “Personal
     Liability Coverage,” and additional liability coverage in a section entitled “Personal
     Umbrella Liability Endorsement.” The “General Policy Information” section describes the
     PAK II policy as a “new kind of policy” that provides “broad personal protection.” It further
     states that PAK II provides “all the personal coverage you may need” in that it combines
     several types of insurance coverage, including personal liability for third-party claims,
     homeowners property insurance, and vehicle and boat coverage. The “Legal Liability
     Protection” provides that under the PAK II policy, “[the insured is] covered when someone
     makes a claim against [him or her].” The section further states that the PAK II policy will
     “cover [the insured’s] legal liability resulting from an occurrence in which there is actual
     accidental property damage, personal liability or death, anywhere in the world, subject to the
     limitations and exclusions” in the policy. The policy defines an “occurrence” as “an event,
     including continuous or repeated exposure to the same conditions, resulting in personal
     injury or property damage neither expected nor intended by anyone insured by PAK II.”
¶5       The PAK II policies contain the following coverage exclusion, referred to by the parties
     as the “business pursuits” exclusion:
         “PAK II doesn’t cover accidents happening on your business premises. And we do not
         cover any liability or claims connected with your business, profession or occupation. For
         example, malpractice claims. But we do cover business use of the private passenger
         automobiles listed in the Coverage Summary. Other coverage for incidental business




            1
              The parties do not dispute that there is no substantive difference between the relevant
     provisions of the insurance policies.

                                               -3-
         liability is further explained *** under ‘Incidental Business Liability.’ ”2
¶6       The record further shows that in 2009, a series of lawsuits were filed by Crestwood
     residents against the Village and its municipal officers, including its former mayor,
     Stranczek. Those lawsuits alleged that in the late 1980s, the Environmental Protection
     Agency (EPA) advised Village officials, including Stranczek, that its tap water was
     contaminated with toxic chemicals, including a dry-cleaning solvent, that were linked to
     cancer and other health problems. Village officials told the EPA that it was obtaining its tap
     water from Lake Michigan and that the contaminated well tap water would only be used in
     an emergency. The Village placed its well water on “emergency backup” status to avoid tests
     for chemical pollutants and assured its residents that the drinking water was safe and
     obtained exclusively from Lake Michigan. Stranzcek, as the mayor and the “official
     custodian” of the Village’s water supply, signed and certified reports given to consumers and
     the EPA stating that Crestwood’s water was safe and purchased indirectly from the City of
     Chicago, which drew its water from Lake Michigan. Despite these assurances, the Village,
     in an effort to save money, continued to draw water from the contaminated well and relied
     upon that water for up to 20% of the Village’s water supply. The complaints alleged that
     Stranczek, as mayor and official custodian of the Village’s water, knew of and participated
     in the decision to draw water from the contaminated well and to supply that water to the
     Village’s residents and businesses. The complaints alleged that residents suffered personal
     injury, death, and/or property damage due to use or ingestion of the contaminated water,
     including but not limited to breast cancer, stomach cancer, and lymphoma. The lawsuits
     asserted causes of action for negligence, wrongful death, willful and wanton misconduct,
     fraud, and public nuisance. The State of Illinois also filed a lawsuit alleging a number of
     statutory violations based upon the failure to provide Crestwood residents with safe drinking
     water.
¶7       Stranczek notified the insurers of the underlying lawsuits and requested that they defend
     and indemnify him. The insurers refused to do so and instead filed the present declaratory
     judgment action. As relevant to this appeal, the insurers alleged that the Village “contracted
     with one or more insurance companies to provide Public Officials Liability insurance
     coverage” during the relevant time periods and that these policies were intended to apply to
     liability asserted against Stranczek “for his acts or omissions within the scope of his duties”
     as mayor. The insurers further alleged that the parties intended the PAK II policies to be
     mutually exclusive to the coverage provided by the Village’s public officials liability
     insurance policies. Finally, the insurers alleged that they had no duty to defend or indemnify
     Stranczek in the underlying lawsuits based upon the “business pursuits” coverage exclusion
     contained in the PAK II policies.
¶8       Stranczek responded by filing a counterclaim and a partial motion for summary


             2
               The “Incidental Business Liability” section states that the insured is “not covered for claims
     that arise from occurrences on your business premises. ‘Business Premises’ is any property used in
     a business or rented for a profit. But we do cover your liability for one-, two-, three- and four-family
     dwellings that you own and rent to others, as long as the renters don’t use it for a business purpose.”

                                                  -4-
       judgment, asserting a claim for breach of contract by the insurers and seeking a declaration
       that the insurers were obligated to defend him in the underlying lawsuits. The insurers
       responded to the counterclaim and filed a cross-motion for summary judgment, arguing that
       they did not owe a duty to defend or indemnify Stranczek in the underlying lawsuits because
       of the “business pursuits” coverage exclusion in the PAK II policies.
¶9         Following a hearing, the trial court granted Stranczek’s motion for partial summary
       judgment and denied the insurers’ cross-motion for summary judgment. The court found that
       under Illinois law, a business pursuit must involve a “continuous or regular activity done for
       the purpose of returning a profit.” The court further noted that the only evidentiary
       submission in the case was offered by Strancek and consisted of an affidavit from his wife,
       Diane, which was not contradicted in substance or challenged as to admissibility by the
       insurers and therefore had to be taken as true for purposes of summary judgment. The court
       found that considering the allegations in the underlying complaints, the language of the
       “business pursuits” exclusion, and the uncontradicted facts in the submitted affidavit, the
       insurers had failed to establish that the exclusion applied to preclude coverage because there
       was no evidence that Stranczek had a profit motive or economic consideration in serving as
       mayor. Accordingly, the court found that the insurers had a duty to defend Stranzcek in the
       underlying lawsuits and also found that there was no just reason to delay enforcement or
       appeal of the court’s ruling. The issue of whether the insurers owed a duty to indemnify
       Stranczek for any judgment that may be entered against him in the underlying lawsuits was
       stayed pending the resolution of those suits. This appeal followed.
¶ 10       The insurers contend that the trial court erred by entering summary judgment in favor of
       Stranczek. They claim that the “business pursuits” exclusion applies to his former position
       as mayor and that they therefore do not owe a duty to defend Stranczek in the underlying
       lawsuits.
¶ 11       “The construction of an insurance policy and a determination of the rights and obligations
       thereunder are questions of law for the court which are appropriate subjects for disposition
       by way of summary judgment.” Crum & Forster Managers Corp. v. Resolution Trust Corp.,
       156 Ill. 2d 384, 391 (1993). Summary judgment is appropriate where the pleadings,
       depositions, and admissions on file, together with any affidavits and exhibits, when viewed
       in the light most favorable to the nonmoving party, indicate that there is no genuine issue of
       material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-
       1005(c) (West 2008). We review cases involving summary judgment de novo. Ragan v.
       Columbia Mutual Insurance Co., 183 Ill. 2d 342, 349 (1998). Where, as in this case, the
       parties file cross-motions for summary judgment, they invite the court to decide the issues
       presented as a matter of law. Liberty Mutual Fire Insurance Co. v. St. Paul Fire & Marine
       Insurance Co., 363 Ill. App. 3d 335, 339 (2005).
¶ 12       To determine whether an insurer is obligated to defend its insured, we generally compare
       the allegations of the underlying complaint to the relevant provisions of the insurance policy.
       Fremont Compensation Insurance Co. v. Ace-Chicago Great Dane Corp., 304 Ill. App. 3d
       734, 738 (1999). “If the underlying complaints allege facts within or potentially within policy
       coverage, the insurer is obliged to defend its insured even if the allegations are groundless,
       false, or fraudulent.” Northbrook Property & Casualty Co. v. Transportation Joint

                                                -5-
       Agreement, 194 Ill. 2d 96, 98 (2000). The threshold for pleading a duty to defend is low, and
       any doubt with regard to such duty is to be resolved in favor of the insured. United Services
       Automobile Ass’n v. Dare, 357 Ill. App. 3d 955, 963 (2005).
¶ 13       The primary function of the court when construing an insurance policy is to ascertain and
       enforce the intentions of the parties as expressed in the agreement. Crum & Forster
       Managers Corp., 156 Ill. 2d at 391. “To ascertain the intent of the parties and the meaning
       of the words used in the insurance policy, the court must construe the policy as a whole,
       taking into account the type of insurance for which the parties have contracted, the risks
       undertaken and purchased, the subject matter that is insured and the purposes of the entire
       contract.” Crum & Forster Managers Corp., 156 Ill. 2d at 391. “[I]nsurance policies are to
       be liberally construed in favor of coverage, and where an ambiguity exists in the insurance
       contract, it will be resolved in favor of the insured and against the insurer.” Dare, 357 Ill.
       App. 3d at 963-64.
¶ 14       The insurer has the burden of demonstrating that a claim falls within a provision of the
       policy that excludes coverage, and an exclusion relied upon to deny coverage must be “free
       and clear from doubt.” Clarendon America Insurance Co. v. B.G.K. Security Services, Inc.,
       387 Ill. App. 3d 697, 705 (2008). “Exclusion provisions that limit or exclude coverage must
       be construed liberally in favor of the insured and against the insurer.” Pekin Insurance Co.
       v. Miller, 367 Ill. App. 3d 263, 267 (2006).
¶ 15       The insurers contend that summary judgment in favor of Stranczek was improper. They
       claim that the coverage exclusion applies because Stranczek’s former position as mayor of
       Crestwood was a “business, profession or occupation” and because the PAK II policies were
       not intended to insure against the type of risks and acts alleged in the underlying complaints.
       Stranczek, on the other hand, contends that there is no dispute that the allegations in the
       underlying complaints allege facts that are potentially within the coverage provided by the
       PAK II policies and that the facts set forth in his wife’s affidavit conclusively establish that
       his former position of mayor was not a “business, profession or occupation” such that the
       coverage exclusion does not apply and the insurers are required to defend him in the
       underlying lawsuits.
¶ 16       As set forth above, the PAK II policies contain what the parties refer to as a “business
       pursuits” coverage exclusion, which states that the insurance policy does not cover any
       liability or claims connected with the insured’s “business, profession or occupation.” The
       Pak II policies do not define what is meant by “business, profession or occupation.”
       Nevertheless, Illinois courts have interpreted homeowners insurance policies that contain a
       “business pursuits” exclusion in which a business pursuit was defined as a “trade, profession
       or occupation.” These cases have defined a business pursuit as a “continuous or regular
       activity, done for the purpose of returning a profit.” Badger Mutual Insurance Co.v. Ostry,
       264 Ill. App. 3d 303, 308 (1994); see also Industrial Indemnity Co. v. Vukmarkovic, 205 Ill.
       App. 3d 176, 182 (1990); Insurance Co. of Illinois v. Markogiannakis, 188 Ill. App. 3d 643,
       655 (1989); State Farm Fire & Casualty Co. v. Moore, 103 Ill. App. 3d 250, 252 (1981).
¶ 17       Stranczek argues that his wife’s affidavit conclusively establishes that his service as
       mayor was not a trade, business or occupation. He claims that the affidavit establishes that


                                                 -6-
       his primary income was from his work in the trucking companies, that he worked only part-
       time as mayor, that he received between $1,000 and $6,000 a year as a salary for that work,
       and that he did not retain any of that salary for his own benefit or pecuniary gain.
¶ 18        We disagree with Stranczek’s contention and find, for the reasons set forth below, that
       his former position of mayor was an “occupation” within the meaning of the PAK II policies.
       The coverage exclusion is written in the disjunctive and therefore the coverage exclusion
       applies if Stranczek’s potential liability arose from a business, profession or occupation. The
       very nature of Stranczek’s position as mayor indicates that he was engaged in an
       “occupation.” As the mayor of Crestwood, he was the elected governmental leader of a town
       who performed numerous official acts in that capacity. One of these responsibilities was the
       official custodian of the Village’s water supply, and in this capacity, he purchased and
       certified the safety of the Village’s water supply. His position of mayor was an activity that
       he pursued on a “continuous and regular” basis because he was occupied as the mayor of
       Crestwood for 38 years. His position also satisfies the profit requirement because for 38 years
       he was compensated for his work as mayor in the form of a yearly salary of between $1,000
       and $6,000. Based upon these undisputed facts, we find that Stranczek’s position of mayor
       was a continuous and regular activity for which he received a profit. The position of mayor
       was thus an “occupation” and to characterize it otherwise is contrary to any reasonable
       understanding of the term’s meaning.
¶ 19        The facts set forth in the affidavit of Stranzcek’s wife do not compel a conclusion to the
       contrary. The fact that the position of mayor was part-time and that he received his primary
       income from the trucking companies does not mean that it was not an occupation because
       even a part-time or supplemental income activity is a business pursuit if it is a continuous or
       regular activity done for the purpose of earning a profit. See, e.g., Badger Mutual Insurance
       Co., 264 Ill. App. 3d at 308; Moore, 103 Ill. App. 3d at 252 (paid baby-sitting in one’s home
       on a regular, continuous basis). As this court has recognized, “[i]t is not uncommon for an
       insured to have a business in addition to his regular and customary occupation which he may
       pursue primarily or even wholly for purposes other than pecuniary gain; but such collateral
       business would nonetheless constitute a business or an occupation while so pursued.”
       Allstate Insurance Co. v. Hoffman, 21 Ill. App. 2d 314, 319 (1959). Moreover, the fact that
       Stranczek gave his yearly salary away does not convert his position of mayor into anything
       other than an occupation. We accept as true that Stranczek either donated the after-tax
       portion of his salary to charity, used it for projects benefitting the Village or used it to defray
       his own out-of-pocket expenses. These facts do not establish that Stranczek did not receive
       a salary or a profit for his work as mayor but, instead, they simply illustrate how he chose to
       spend that salary or profit. There are numerous people who are engaged in a profession,
       business or occupation who donate portions of their salary to charity but this does not mean
       that they were not paid or did not receive a profit for their work. The same is true in this case,
       and Stranczek cites no authority indicating that a person can change the terms or applicability
       of an insurance policy based upon the way that person spends the money he or she earns.
¶ 20        Our conclusion that Stranczek’s position of mayor was an “occupation” becomes all the
       more clear when considered in context of the terms of the PAK II policies and the allegations
       in the underlying complaints. Initially, we do not agree with Stranczek’s statement that there

                                                  -7-
       is no dispute in this case that the allegations in the underlying complaints fall within the
       terms of the PAK II policies. Nor do we agree that the only issue is the applicability of the
       coverage exclusion. This is too narrow a reading of the issues in this case. Insurance policies
       are construed as a whole, and we must consider the type of insurance for which the parties
       contracted and the purpose of the contract. Therefore, we do not consider the meaning of the
       coverage exclusion by itself but, instead, in context of the entire policy and the risks it was
       intended to protect against. Viewed in this manner, the type of risks covered by the policy
       must be informed by the risks that are not intended to be covered and, more importantly in
       this case, the type of risks intended to be excluded from the policies must be informed by the
       risks that are intended to be covered. Thus, the fact that the insurers focus their arguments
       on the applicability of the coverage exclusion does not amount to a concession that the
       allegations in the complaint otherwise fall within the coverage provided by the policies.
       Instead, the insurers’ argument is that the type of risks alleged in the complaints are not
       covered by the terms of the policy and instead are expressly excluded by the coverage
       exclusion. Moreover, as a court of review, we are not bound by a party’s concessions (People
       v. Horrell, 235 Ill. 2d 235, 241 (2009)) and, as a reminder, we review the granting of
       summary judgment under a de novo standard of review (Ragan, 183 Ill. 2d at 349).
¶ 21       When the PAK II policies are construed in this manner, it is evident that they were not
       intended to insure against the type of risks alleged in the underlying complaints. There is no
       dispute that the policies have a significant homeowners insurance component and that they
       provide protection against personal liability “anywhere in the world,” including protection
       against liability for third-party claims, homeowners property insurance, and vehicle and boat
       coverage. On the other hand, the policies exclude coverage for accidents happening on the
       insured’s business premises and they do not cover liability for claims connected to a
       “business, profession or occupation” of the insured. Thus, the policies clearly delineate the
       type of risks that are intended to be covered and those that are not. The policies cover
       liability arising from personal risks that are taken anywhere in the world by the insured and
       they do not insure against occupational or business-related risks.
¶ 22       There is no dispute that Stranczek committed all of the acts alleged in the underlying
       complaints in his capacity as mayor and on behalf of the Village. The Village was
       responsible for distributing water to its residents and Stranczek was sued in the underlying
       complaints in his capacity as mayor and as the official custodian of the Village’s water
       supply. The complaints allege that in that capacity and on behalf of the Village, Stranczek
       was warned of the contaminated water but nevertheless continued to supply residents with
       the water and also falsely assured residents and the EPA that the contaminated water was not
       being used. Although insurance policies are interpreted broadly and exclusions are
       interpreted narrowly, it would be an unreasonable interpretation of the policy to hold that the
       parties intended the PAK II policies to cover liability based upon large distributions of
       contaminated water to residents by the mayor and official custodian of the water supply of
       the Village of Crestwood. These are not personal risks that Stranczek undertook but instead
       they are occupational risks that he took on behalf of the Village. See Vukmarkovic, 205 Ill.
       App. 3d at 184-85, 187 (stating that when deciding the applicability of a business pursuits
       exclusion, a “court must look to the purpose the insured was pursuing, or the nature of his

                                                -8-
       activities, at the time of the incident that gives rise to a claim for insurance”).
¶ 23       For the reasons discussed above, we conclude that Stranczek’s position as mayor was an
       “occupation” within the meaning of the coverage exclusion in the PAK II policies.
       Accordingly, the coverage exclusion applies to the acts giving rise to the underlying lawsuits
       and the insurers are not required to defend Stranczek in those lawsuits.
¶ 24       For the foregoing reasons, the judgment of the circuit court of Cook County granting
       summary judgment in favor of defendant is reversed and summary judgment is entered in
       favor of plaintiffs.

¶ 25      Reversed; summary judgment entered.




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