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THIRD DIVISION
July 23, 2003

This appeal arises from an order of the circuit court of Cook County granting plaintiff'smotion for summary judgment, holding that plaintiff, Twin City Fire Insurance Company (TwinCity), had no duty to defend or indemnify defendants pursuant to the terms and conditions of the"Public Officials Errors and Omissions Liability" insurance policy it issued to Bloom Township(the Township). Plaintiff instituted this declaratory judgment action against defendants seeking adetermination of its duty to defend and indemnify the insureds in an underlying action (Dieringerv. Somer, No. 99 CH 84721) (hereinafter Dieringer) brought against defendants by taxpayers whoalleged that defendants improperly and illegally conveyed certain property acquired by theTownship at tax scavenger sales.

At the trial level, Twin City moved for summary judgment with respect to its duty both todefend and indemnify defendants. Defendants filed a cross-motion for summary judgment on theissue of Twin City's duty to defend them in the Dieringer action. The trial court granted TwinCity's motion for summary judgment and denied defendants' motion for summary judgment,finding that the underlying action against defendants was based solely upon occurrences that werespecifically excluded under the errors and omissions insurance policy.

The undisputed facts are that on June 8, 1999, Charles E. Dieringer, Jr., and Yolanda Hill,as taxpayers and on behalf of various government entities, filed a complaint for declaratoryjudgment, damages, and other relief against defendants, alleging that Somer, Pilota, and Grossiwere involved in a fraudulent scheme, which consisted of Pilota acquiring certificates of purchasesat delinquent tax scavenger sales conducted by Cook County for seven specific tax delinquentproperties located within the City of Chicago Heights, Illinois. The subject properties werelocated at 1404-06 Park, two parcels collectively known as 1805 East End Avenue, 17th andCenter Streets, 1523 Otto Boulevard, 106 East Main, and 182 East 23rd Street.

The Dieringer lawsuit further alleged that Pilota, in a series of what the complaintcharacterized as "sham transactions," assigned the certificates to the Township, which was underthe control of Grossi prior to May 1997, and Somer after May 1997, both as Townshipsupervisors. The Dieringer plaintiffs alleged that Pilota used the Township to briefly holdownership of the purchase certificates, which allowed the Township, as a governmental unit, towaive the outstanding property taxes owed on those properties, and then transfer the properties toPilota or his designees without satisfying the outstanding tax liens, thereby "cheating" thetaxpayers out of thousands of dollars.

The amended Dieringer complaint alleged the following causes of action:

"Count I - Breach of Fiduciary Duty: This count alleged thatSomer and Grossi as Township Supervisors and Pilota as TownshipAttorney and School Board President, breached their fiduciaryduties to the Township for failing to publicly post for public biddingthe sale of the properties and for failing to have the conveyancesapproved at a meeting of the Township electors, as required by law.

Count II - Conspiracy between Pilota and Grossi: This countalleged that Pilota and Grossi entered into an agreement andconspiracy to, and did commit the acts necessary to acquiredelinquent property and avoid payment of outstanding taxes for thebenefit of Pilota and clients.⁽¹⁾

Count III - Conspiracy between Pilota and Somer: This countalleged that Pilota and Somer entered into an agreement andconspiracy to, and did commit the acts necessary to acquire delinquent property and avoid payment of outstanding taxes for thebenefit of Pilota and his clients.

Count IV - This count sought an accounting and restitution for theproperty taxes which were unpaid, the fair value of the propertiesinvolved and the lost profits.

Count V - This count alleged a cause of action for fraud andsought recovery from defendants for fraudulently obtaining publicfunds through the scheme of acquiring the properties."

In June of 1999, after being served in the Dieringer lawsuit, defendant Bloom Townshipnotified Twin City, requesting coverage under the policy. Twin City issued its denial of coveragein a letter to the Township dated August 13, 1999. In that letter, Twin City stated its reasons fordenying coverage to the defendants under the policy:

"The complaint fails to plead an 'occurrence' resulting in an 'errorsor omissions injury' with a request for 'damages' as required by theInsuring Agreement and defined by the policy.

Furthermore, the individual defendants do not quality [sic] as 'aninsured' under the policy as their actions were not within the scopeof their official capacities.

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Finally, coverage for this matter is precluded by the followingpolicy exclusions:

e. Liability arising out of any dishonest, fraudulent, criminal ormalicious act or omission of any insured.

f. Liability arising out of any insured's activities in a fiduciarycapacity or as a trustee or in any similar activity.

h. Liability arising out of any insured obtaining renumeration orfinancial gain to which such insured was not legally entitled; butonly as respects such insured.

i. Liability arising out of the willful violation of a penal statute orordinance committed by or with the knowledge or consent of anyinsured; but only as respects such insured."

On December 2, 1999, an order was entered in the Dieringer lawsuit striking allparagraphs of the complaint alleging a conspiracy to commit felonies. Based upon that order,defendants requested that Twin City reevaluate its denial of coverage and begin providing adefense in the Dieringer matter. However, Twin City denied coverage once again in a letter to theTownship dated April 7, 2000, setting forth the same reasons for its denial of coverage.

Subsequently, Twin City filed a declaratory judgment action on August 9, 2000, seeking adeclaration that it owed no duty to defendants to defend them in the Dieringer lawsuit. Thecomplaint alleged that because the insurance policy did not cover allegedly fraudulent conduct,Twin City was entitled to a declaration that it had no duty to defend or indemnify Somer, Pilota,Grossi, or the Township with respect to any claims raised in the Dieringer lawsuit.

After judgment was entered in the Dieringer lawsuit in defendants' favor, they filed apartial motion for summary judgment on May 4, 2001. The motion argued that summaryjudgment was proper because the allegations in the Dieringer lawsuit fell within the scope ofcoverage under the policy, that each of the defendants was an insured under the policy, that theDieringer lawsuit sought damages, that the Dieringer lawsuit arose out of alleged "occurrences"and "errors and omissions injury," and that the acts alleged in the Dieringer lawsuit were notexcluded by the policy. Defendants sought an order of partial summary judgment on all counts ofTwin City's complaint, a declaration that Twin City had a duty to defend them in the Dieringerlawsuit, and an award of costs incurred in defending the two suits.

On June 1, 2001, Twin City filed a cross-motion for summary judgment and memorandumof law in support of that motion. Twin City sought summary judgment on the basis that: (1) theinjuries alleged were not caused by an "occurrence"; (2) the Dieringer lawsuit did not allege an"errors or omissions injury"; (3) the Dieringer lawsuit did not allege "damages" as defined by thepolicy and required by the insuring agreement; ( 4) the individual defendants did not qualify as"insureds" under the policy inasmuch as their alleged actions fell outside the scope of their officialcapacities; and (5) several specific exclusions barred coverage for the Dieringer lawsuit.

Both motions were heard by the trial court; however, there is no report of thoseproceedings. The court issued its ruling, stating that it was granting Twin City's motion forsummary judgment and denying defendants' motion. The court declared that Twin City did nothave a duty to defend the defendants in the Dieringer lawsuit under the standard outlined inOutboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 107-08 (1992), whichstated that the court must compare the provisions in the insurance policy to the allegations in thecomplaint. The trial court found that the policy issued by Twin City covered defendants fordoing their jobs but specifically excluded coverage for alleged acts of dishonesty, fraud, or actsarising from a breach of their fiduciary duty. The court further noted that the allegations of theDieringer complaint accuse defendants of fraud and of performing their duties to achieve a resultthat benefitted them and not the citizenry of Bloom Township whom they were supposed to beserving in their official capacity as public officials. While defendants argued that one of theallegations of the Dieringer suit was that they failed to include statutorily required language in thedeeds that were issued, which was an "error or omission" covered under the policy, the courtfound that the "gist" of the complaint was for intentional fraud.

The issue presented for our review is whether the underlying Dieringer complaint filedagainst defendants gives rise to a duty to defend by Twin City under the terms of its "PublicOfficials Errors and Omissions" policy issued to defendants.

In appeals from summary judgment rulings, we conduct a de novo review. AtlanticMutual Insurance Co. v. American Academy of Orthopaedic Surgeons, 315 Ill. App. 3d 552, 559(2000). The reviewing court must construe all evidence strictly against the movant and liberally infavor of the nonmoving party. Atlantic Mutual, 315 Ill. App. 3d at 559. Where the pleadings,depositions and affidavits show that there is no genuine issue of material fact, the moving party isentitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2000); Atlantic Mutual,315 Ill. App. 3d at 559. If reasonable persons could draw different inferences from undisputedfacts, summary judgment should be denied. Atlantic Mutual, 315 Ill. App. 3d at 559.

Defendants first contend that the trial court erred in granting summary judgment to TwinCity based on its finding that there was no duty to defend. They argue that several of the claimsin the underlying complaint allege conduct which was covered under the policy. Specifically, theyargue that the policy was intended to cover the risks inherently associated with acts or omissionsrelated to the duties and obligations of elected public officials or persons appointed to act onbehalf of Bloom Township, and that the allegations in the Dieringer complaint involve purportedacts, errors, or omissions of defendants which fall within the scope of coverage under the policy.

In order to determine whether the insurer's duty to defend has arisen, the court mustcompare the allegations of the underlying complaint to the policy language. Outboard MarineCorp., 154 Ill. 2d at 125. The allegations in the underlying complaint must be liberally construedin favor of the insured. Outboard Marine Corp., 154 Ill. 2d at 125. If the court determines thatthese allegations fall within, or potentially within, the policy's coverage, the insurer has a duty todefend the insured against the underlying complaint. Outboard Marine Corp., 154 Ill. 2d at 125. The insurer can safely and justifiably refuse to defend only when the allegations clearly show ontheir face that the claim is beyond policy coverage, for the duty to defend is broader than the dutyto indemnify. Management Support Associates v. Union Indemnity Insurance Company of NewYork, 129 Ill. App. 3d 1089, 1096 (1984).

In United Fire & Casualty Co. v. Jim Maloof Realty, Inc., 105 Ill. App. 3d 1048 (1982),plaintiffs issued a "Real Estate Agents Errors and Omissions" insurance policy to defendant, a realestate broker. The policy provided coverage for any claim against the insured caused by anynegligent act or omission of the insured but did not apply to any "dishonesty, intentional fraud,criminal or malicious act, libel or slander." United Fire & Casualty, 105 Ill. App. 3d at 1049.

A lawsuit was filed against defendant, alleging a breach of his fiduciary duty as a realestate broker whereby he allegedly induced plaintiffs to sell their home at a price grossly below itsfair market value to an agent of defendant, who in turn resold the property at a substantial profit. United Fire & Casualty, 105 Ill. App. 3d at 1049. Defendant tendered his demand to defend toUnited, who denied coverage and refused to undertake the defense. United then filed adeclaratory judgment action seeking a declaration concerning coverage and its duty to defendunder the policy.

The appellate court in United found that the underlying complaint essentially stated onecause of action, that of intentional fraud, and that the complaint must be read as a whole in orderto assess its true nature. The court further held that since the factual allegations of the complaintwere premised upon only one theory of recovery, that of intentional fraud, and did not fall withinthe potential coverage of the insurance policy, United had no duty to defend its insured. UnitedFire & Casualty, 105 Ill. App. 3d at 1050.

In the instant case, the underlying complaint had five counts: count I - breach of fiduciaryduty; counts II and III - conspiracy; count IV - seeking an accounting and restitution; and count V- fraud.

The Twin City policy covered the Bloom Township and Highway Department, and listedas included in its schedule of included/excluded facilities or operations streets, roads, highways orbridges and waterslides. Specifically excluded facilities or operations were airports; amusementparks, carnivals, or circuses; the gas department or gas utility system; hospitals and nursinghomes; and the housing authority and housing projects. Items not designated meant that therewas no such facility or operation at the inception of the policy. Section 1 of the policy indicatedcoverage under the policy and stated: "We will pay on behalf of the insured all sums which theinsured shall become legally obligated to pay as damages because of errors or omissions injury towhich this policy applies. *** No other obligation or liability to pay sums or perform acts orservices is covered unless explicitly provided for under this policy."

Also included in the coverage section of the policy is a list of general exclusions. Underthe general exclusions section, the following are listed, in part, as exclusions from coverage:

"e. Liability arising out of any dishonest, fraudulent,criminal or malicious act or omission of any insured.

f. Liability arising out of any insured's activities in afiduciary capacity or as a trustee or in any similar activity.

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h. Liability arising out of any insured obtainingrenumeration or financial gain to which such insured was not legallyentitled; but only as respects such insured.

i. Liability arising out of the willful violation of a penalstatute or ordinance committed by or with the knowledge orconsent of any insured; but only as respects such insured."

"Errors or omissions injury" is defined by the policy as "injury or damage that arises out ofan insured's rendering of or failure to render service within the scope of your facilities oroperations including but not limited to: discrimination, not committed by or at the insured'sdirection; false or improper service of process; or violation of civil rights." "Occurrence" isdefined by the policy as "with respect to errors or omissions injury, an act, error or omission inthe conduct of your facilities or operations not listed as 'excluded' in the Schedule ofIncluded/Excluded Facilities or Operations or covered pursuant to the terms of that Schedulerelating to additional exposures." The policy does not define facilities or operations.

Section IV, entitled "Who is an insured," states as follows:

"Each of the following is an insured:

1. You;
2. Any commission, board, authority, administrativedepartment or other similar unit operated by or under yourjurisdiction;
3. Your employees and authorized volunteers, other thanlicensed medical, nursing, dental or paramedical personnel;but only for acts, errors or omissions within the scope oftheir employment or as authorized by you;
4. Any duly elected or appointed officials and members of yourgoverning body.

The persons or organizations described above are insureds onlywhile acting within the scope of their duties with respect to afacility or operation that is not designated in the Schedule ofIncluded/Excluded Facilities or Operations as 'excluded', orcovered pursuant to the terms of that Schedule relating toadditional exposures." (Emphasis added.)

In the case at bar, the underlying complaint essentially states two causes of action, breachof fiduciary duty and intentional fraud. The complaint must be read as a whole in order to assessits true nature. United Fire & Casualty, 105 Ill. App. 3d at 1050. A breach of fiduciary duty andfraud were specifically excluded in items (e) and (f) of the general exclusions section of the policy. As such, we find that the allegations of the Dieringer complaint did not fall within, or potentiallywithin, the policy's coverage and that the trial court did not err in granting summary judgment toTwin City on this basis.

Defendants next contend that the trial court erred in finding that all of the claims alleged in the Dieringer complaint were based on intentional fraud and, therefore, excluded under the policy. They argue that various portions of the complaint were based on claims seeking declaratoryjudgment as to the violation of statutory procedures and requests to nullify the conveyances madeby the defendants with respect to the tax properties. Defendants also argue that count IV of theunderlying complaint was based on claims seeking equitable relief through an accounting andrestitution and, therefore, not excluded under the policy. Finally, defendants argued that counts IIand III of the underlying complaint were stricken by the trial judge and should not be read as partof the complaint.

As previously stated, the complaint must be read as a whole in order to assess its truenature. United Fire & Casualty, 105 Ill. App. 3d at 1050. It has also previously been stated thatthe two major causes of action were breach of fiduciary duty and fraud, regardless of the reliefsought by the Dieringer plaintiffs, and were specifically excluded under the policy's generalexclusions. As such, the trial court did not err in finding that all of the claims alleged in theDieringer complaint were excluded under the policy because all of the factual allegations of thecomplaint are premised upon only one theory of recovery, that of intentional fraud and aconspiracy to commit fraud, and do not fall within the potential coverage of the insurance policy. Therefore, Twin City has no duty to defend its insured.

Lastly, defendants contend that summary judgment should have been entered in their favor because the trial court erroneously determined that no issue of material fact existed as to TwinCity's duty to defendants, and that the facts supported a finding that Twin City had a duty todefend. Based upon the preceding analysis, this issue need not be further addressed.

Accordingly, the judgment of the circuit court is affirmed.

Affirmed.

HOFFMAN and WOLFSON, JJ., concur.

1. During the pendency of the underlying action, the trial court dismissed all allegations inthe Dieringer complaint which asserted any felonious or criminal conduct on the part of thedefendants and dismissed the portions of the allegations in counts II and III with respect to anypurported acts of conspiracy to commit felonies.