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Thursday, April 14, 2016

Insurance Company Had Duty to Defend City in Anti-Poaching Lawsuit

In a case involving a challenge to the legality of a City's sales tax rebate agreement with a retailer, an Illinois appellate court held that the Illinois Municipal League Risk Management Association (IMLRMA) must provide insurance defense coverage to the City.  IMLRMA v. City of Genoa, 2016 IL App (4th) 150550.

The case involved a sales tax rebate agreement between the City and Boncosky Oil Company. The City agreed to rebate to the Company a portion of the sales tax revenue the City generated by the Company in exchange for the Company moving its sales office to the City. The Regional Transportation Authority (RTA) sued the City, claiming that because of the Company's relocation, sales would no longer occur within RTA territory, meaning the RTA would lose tax revenues. 

Shortly after the suit was filed, the IMLRMA (the insurance pool that covered City claims) filed its own complaint seeking a declaration that it had no duty to defend or indemnify the City against RTA's claims. The IMLRMA argued that the RTA was suing the City for a "wrongful act" (violation of the anti-poaching law that applies to sales tax rebate agreements) and restitution for "stolen" revenues, neither of which fell under the policy's definition of a "loss." The City countered that the RTA asked for compensation for lost revenues and not restitution for stolen revenues, which would fall under the definition of damages within the City's insurance coverage. 

The appellate court agreed with the City that the IMLRMA had a duty to defend the City in this case. The court did not address the substance of the RTA's arguments against the City, which were remanded back to the circuit court for further proceedings.

Post Authored by Julie Tappendorf


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