Cincinnati Insurance Company v. Bender et al

Filing 18

MEMORANDUM OPINION AND ORDER Signed by the Honorable Harry D. Leinenweber on 7/2/2014:Mailed notice(wp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

CINCINNATI INSURANCE COMPANY,
Plaintiff,
Case No. 13 C 8872

v.

Hon. Harry D. Leinenweber

JANICE BENDER, a/k/a MISSIE
BENDER, PARK AVENUE
ACQUISITIONS CO. d/b/a OLSKY
JEWELERS, and HOWARD BERNSTEIN,
Defendants.

MEMORANDUM OPINION AND ORDER
I.

BACKGROUND

Defendant, Janice Bender (“Bender”), took a set of diamond
earnings to Defendant Olsky Jewelers for repair. Olsky Jewelers is
owned by Defendant, Howard Bernstein (hereinafter collectively
referred

to

as

“Olsky”).

According

to

Bender

the

earrings

disappeared and when she tried to find out what happened to them,
she was given the run-around.

On August 2, 2011, Bender filed a

lawsuit in the Circuit Court of Cook County seeking to recover the
value of her lost earrings.
where Bender

was

The case proceeded to arbitration

successful in

obtaining

a

judgment

for

the

appraised value of the earnings. However Olsky, as permitted under
Illinois law, rejected the award and the case proceeded to trial
which resulted in Olsky obtaining a directed verdict in its favor
on March 9, 2012.

Deeply dissatisfied with this outcome, Bender

posted a statement on Yelp.com, on April 30, 2012.

Yelp is a

website whose purpose is “to connect people with great local
businesses,” through the posting of a review of the particular
local business.

To put it mildly, Bender’s post was not a rave.

Her “review” was as follows:
Beware!
Olsky Jewelers lost my diamond earrings and
won’t make good on them!
I took my earrings in for
repair and when I went back to pick them up they couldn’t
find them. They don’t give you a claim check and even
though the saleswoman admitted that I left them with her,
the owner, Howard Bernstein lied and said I didn’t. To
make matters worse I found out that they have cheap
insurance coverage that doesn’t cover jewelry you leave
for repair if it gets lost! If you ever want to see your
jewelry again don’t take it to Olsky Jewelers!
As a result of this review, on October 17, 2012, Olsky filed
a verified Complaint against Bender, asserting three causes of
action: (1) defamation, (2) commercial disparagement, and (3) for
a

preliminary

injunction.

Olsky

filed

an

Amended

Verified

Complaint on August 20, 2013, which dropped the claim for a
preliminary injunction, but reasserted the claims for defamation
and commercial disparagement.

The prayer of the Amended Complaint

seeks actual and punitive damages. The Complaint is pending in the
Circuit of Cook County, Illinois.
Cincinnati Insurance Company (“Cincinnati”) has issued two
policies of liability insurance to Bender which were in effect at
relevant times.

One is a Homeowner’s Policy and the other is

Personal Umbrella Liability Policy.

The latter provides excess

coverage to the limits of the underlying Homeowners Policy.
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The

policies provide virtually identical coverage relevant to this
case.
which

The policies both provide coverage for “personal injury”
is

defined

to

include

“injury

arising

out

of

.

.

.

[d]efamation of character, including oral or written publication,
in any manner, of material that slanders or libels a person or
organization
products or

or

disparages

services.”

a

person’s

organization’s

goods,

Both policies also contained exclusions

for “property damage which may reasonably be expected to result
from the intentional . . . acts of [the] insured,” and for personal
injury arising out of: “[o]ral or written publication of material,
if done by or at the direction of an ‘insured’ with knowledge of
its falsity. . . .”
Cincinnati is defending Bender under a reservation of rights
and is currently paying for independent counsel chosen by Bender
due to a conflict of interest between it and Bender.

It is to the

advantage of Cincinnati if it is proven that Bender’s conduct fits
within one of the policy exclusions, while it is to Bender’s
advantage if it does not fit within the exclusions. To satisfy its
obligations to defend its insured under its policy, an insurer has
the option of paying defense costs as Cincinnati is currently doing
or file a declaratory judgment suit.
1079, 1083 (Ill. 1981).

Murphy v. Urso, 430 N.E.2d

Cincinnati, currently taking the former

route, now seeks to end its obligation to pay Bender’s defense
cost, by pursuing the declaratory route.

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II.
Cincinnati

bases

its

DISCUSSION
claim

for

non-coverage

on

Olsky’s

verified allegations in its suit against Bender for defamation and
commercial disparagement, on two allegations, specifically that
“the defamatory statements were made by [Bender] with the malicious
and specific intent of damaging the plaintiffs,” and that “the
statements made by the defendant were and are false, the defendant
knew they were false, and they were made with the malicious intent
to demean and disparage the quality of the plaintiffs’ goods and
services.”
Bender

contends

that

Cincinnati’s

argument

ignores

the

Illinois law of defamation and commercial disparagement and has
moved the Court to dismiss or stay this litigation until the
underlying lawsuit brought by Olsky is resolved.

Specifically, it

contends that under Illinois law a plaintiff, pursuing a defamation
and/or commercial disparagement claim need only prove negligence or
recklessness and need not prove malice, citing Cincinnati Insurance
Co. v. American Hardware Manufactures Association, 898 N.E.2d 216,
237. (Ill App. 1Dist. 2008).

Thus, when and if the case is tried,

Olsky can and probably will tender an issues instruction that
merely requires proof of negligence, and separately submit a malice
instruction with its claim for punitive damages.
responds

that

the

Olsky

Complaint,

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including

Cincinnati
the

malice

allegations,

is

under

oath

and

thus

constitutes

a

judicial

A

judicial

admission and must prove malice in order to recover.
Cincinnati

is

wrong

on

the

last

statement.

admission is a clear, unequivocal statement by a party about a
concrete fact within that party’s knowledge. Elliott v. Industrial
Commission of Illinois, 707 N.E.2d 228, 230 (1st Dist. 1999).
Certainly an opinions as to someone else’s state of mind would not
be such a concrete fact.

Moreover the statement was not made by

Olsky in this case where it is merely a technical defendant and it
would be hard to make the case that Bender would seek to bind Olsky
to that opinion in the underlying case.
For Olsky, a non-public figure, to recover from Bender for
defamation or commercial disparagement, it need only prove that
Bender behaved negligently or even recklessly but not necessarily
with malice.

This is certainly within the realm of possibility

that a jury could believe that Bender mistakenly thought that Olsky
had lost her earrings and refused to make amends.
have acted without malice.

Thus, she could

Illinois law is clear that to obtain

punitive damages a plaintiff, in addition to proof of tortious
conduct, must prove that the defendant committed the tort “with
fraud, actual malice, delegate violence or oppression, or when the
defendant acts willfully, or with such gross negligence as to
indicate a wanton disregard of the rights of others.”
Motorola, Inc., 384 N.E.2d 353 (Ill. 1978).

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Kelsay v.

Illinois law is clear

that if a complaint alleges several theories or avenues of recover,
only one of which is potentially within the coverage of the policy,
an insurance company must provide a defense.

General Agents

Insurance Company of America v. Midwest Sporting Goods Company, 828
N.E.2d 1092, 1098 (Ill. 2005).

Since a liberal reading of the

Olsky lawsuit, which Illinois law requires, General Agents Ins. Co.
Of America, Inc. v. Midwest Sporting Goods Co., 828 N.E.2d 1092,
1098 (Ill.

2005),

shows

a

claim

for

ordinary

defamation

and

commercial disparagement, as well as a claim for punitive damages,
the

Complaint

sufficiently

states

a

claim

within

the

policy

language to require Cincinnati to continue to provide a defense to
Bender.

The issue of indemnification will, of course, await the

results of the trial.

A decision at this time would be premature.
III.

CONCLUSION

For the reasons stated herein, the Court stays this case until
the proceeding (Case No. 2012 L 9551) in the Circuit Court of Cook
County, Illinois is concluded.

IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
Date:7/2/2014
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