{ "id": 4259308, "name": "CNA CASUALTY OF CALIFORNIA, Plaintiff-Appellant, v. E.C. FACKLER, INC., et al., Defendants (Michael T. McRaith, Acting Director, The Department of Financial and Professional Regulation-Division of Insurance, in his Capacity as Statutory and Court-Affirmed Liquidator, Defendant-Appellee)", "name_abbreviation": "CNA Casualty of California v. E.C. Fackler, Inc.", "decision_date": "2005-09-20", "docket_number": "No. 1\u201404\u20143707", "first_page": "619", "last_page": "634", "citations": [ { "type": "official", "cite": "361 Ill. App. 3d 619" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "357 Ill. App. 3d 955", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 4135450 ], "year": 2005, "pin_cites": [ { "page": "971", "parenthetical": "\"arising out of\" language should not be interpreted broadly in an exclusion because to do so would expand the exclusion to the advantage of the insurer" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/357/0955-01" ] }, { "cite": "466 N.E.2d 1091", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1984, "pin_cites": [ { "parenthetical": "\" '[a]rising out of has been held to mean 'originating from,' 'having its origin in,' 'growing out of and 'flowing from' \"" } ], "opinion_index": 0 }, { "cite": "126 Ill. App. 3d 150", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3596668 ], "year": 1984, "pin_cites": [ { "page": "154", "parenthetical": "\" '[a]rising out of has been held to mean 'originating from,' 'having its origin in,' 'growing out of and 'flowing from' \"" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/126/0150-01" ] }, { "cite": "386 F.2d 413", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 2088104 ], "year": 1967, "pin_cites": [ { "page": "415" } ], "opinion_index": 0, "case_paths": [ "/f2d/386/0413-01" ] }, { "cite": "416 N.E.2d 758", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1981, "pin_cites": [ { "parenthetical": "defining the phrase as \" 'causally connected with, not proximately caused by,' \" quoting Aetna Casualty & Surety Co. v. Ocean Accident & Guaranty Corp., 386 F.2d 413, 415 (3d Cir. 1967)" } ], "opinion_index": 0 }, { "cite": "92 Ill. App. 3d 1066", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5534140 ], "year": 1981, "pin_cites": [ { "page": "1069", "parenthetical": "defining the phrase as \" 'causally connected with, not proximately caused by,' \" quoting Aetna Casualty & Surety Co. v. Ocean Accident & Guaranty Corp., 386 F.2d 413, 415 (3d Cir. 1967)" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/92/1066-01" ] }, { "cite": "125 F.3d 392", "category": "reporters:federal", "reporter": "F.3d", "case_ids": [ 910725 ], "year": 1997, "pin_cites": [ { "page": "398-400", "parenthetical": "applying Illinois law, the court found a policy's insolvency exclusion, which excluded coverage of claims arising out of insolvency of any organization (directly or indirectly" } ], "opinion_index": 0, "case_paths": [ "/f3d/125/0392-01" ] }, { "cite": "136 F.3d 82", "category": "reporters:federal", "reporter": "F.3d", "case_ids": [ 1235657 ], "weight": 3, "year": 1998, "pin_cites": [ { "page": "84" }, { "page": "87" } ], "opinion_index": 0, "case_paths": [ "/f3d/136/0082-01" ] }, { "cite": "645 N.E.2d 396", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1994, "pin_cites": [ { "parenthetical": "the court noted self-insurance was an alternative to commercial insurance under the Workers' Compensation Act (820 ILCS 305/4 (West 1992))" } ], "opinion_index": 0 }, { "cite": "269 Ill. App. 3d 233", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 365944 ], "year": 1994, "pin_cites": [ { "page": "241-43", "parenthetical": "the court noted self-insurance was an alternative to commercial insurance under the Workers' Compensation Act (820 ILCS 305/4 (West 1992))" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/269/0233-01" ] }, { "cite": "719 N.E.2d 992", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1998, "pin_cites": [ { "page": "996" } ], "opinion_index": 0 }, { "cite": "130 Ohio App. 3d 174", "category": "reporters:state", "reporter": "Ohio App. 3d", "case_ids": [ 89420 ], "year": 1998, "pin_cites": [ { "page": "180" } ], "opinion_index": 0, "case_paths": [ "/ohio-app-3d/130/0174-01" ] }, { "cite": "126 Idaho 178", "category": "reporters:state", "reporter": "Idaho", "case_ids": [ 4892292 ], "year": 1994, "pin_cites": [ { "page": "183" } ], "opinion_index": 0, "case_paths": [ "/idaho/126/0178-01" ] }, { "cite": "758 N.E.2d 353", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 2, "year": 2001, "opinion_index": 0 }, { "cite": "325 Ill. App. 3d 970", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 570853 ], "weight": 4, "year": 2001, "pin_cites": [ { "page": "977" }, { "page": "977" }, { "page": "978" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/325/0970-01" ] }, { "cite": "830 N.E.2d 575", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 2005, "opinion_index": 0 }, { "cite": "215 Ill. 2d 381", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 4059670 ], "weight": 3, "year": 2005, "pin_cites": [ { "page": "393" }, { "page": "393" }, { "page": "393" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/215/0381-01" ] }, { "cite": "759 N.E.2d 23", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 2001, "opinion_index": 0 }, { "cite": "325 Ill. App. 3d 820", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 569772 ], "weight": 2, "year": 2001, "pin_cites": [ { "page": "824" }, { "page": "824" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/325/0820-01" ] }, { "cite": "620 N.E.2d 1073", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1993, "opinion_index": 0 }, { "cite": "156 Ill. 2d 384", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 777543 ], "year": 1993, "pin_cites": [ { "page": "391" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/156/0384-01" ] }, { "cite": "728 N.E.2d 530", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 2000, "opinion_index": 0 }, { "cite": "312 Ill. App. 3d 770", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 411728 ], "year": 2000, "pin_cites": [ { "page": "772" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/312/0770-01" ] }, { "cite": "708 N.E.2d 1122", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1999, "opinion_index": 0 }, { "cite": "186 Ill. 2d 127", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 243917 ], "weight": 2, "year": 1999, "pin_cites": [ { "page": "138-39" }, { "page": "138" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/186/0127-01" ] } ], "analysis": { "cardinality": 1115, "char_count": 33661, "ocr_confidence": 0.792, "pagerank": { "raw": 6.211405838620903e-08, "percentile": 0.38462126556413134 }, "sha256": "0b39ec42833c8c2276ca0562d58ae96da6c3b35ceeffa74a870adf42b85537b4", "simhash": "1:137e654f3d0aa7d4", "word_count": 5173 }, "last_updated": "2023-07-14T19:43:20.596028+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "CNA CASUALTY OF CALIFORNIA, Plaintiff-Appellant, v. E.C. FACKLER, INC., et al., Defendants (Michael T. McRaith, Acting Director, The Department of Financial and Professional Regulation-Division of Insurance, in his Capacity as Statutory and Court-Affirmed Liquidator, Defendant-Appellee)." ], "opinions": [ { "text": "JUSTICE WOLFSON\ndelivered the opinion of the court:\nE.C. Fackler was in the business of administering trusts for employers who wanted to self-insure against workers\u2019 compensation claims. Fackler managed three self-insurance trusts into insolvency. The issue in this case is whether Fackler\u2019s professional liability policy requires its insurance company to cover claims for lost funds.\nPlaintiff CNA Casualty of California (CNA) sought a declaration that it was not required to pay claims asserted against its insured, E.C. Fackler, Incorporated, and a successor corporation, E.C. Fackler Insurance Services, Incorporated (Fackler), by the acting Director of the Illinois Department of Financial and Professional Regulation (the Director). The Director is acting as a statutory and court-affirmed liquidator of three trusts Fackler administered. CNA contends the Director\u2019s claims fall under several exclusions in Fackler\u2019s professional liability insurance policy. The trial court disagreed and entered a final judgment against CNA. The court found CNA was obligated to cover Fackler\u2019s losses under its policy. We reverse and remand with directions to enter judgment for CNA.\nFACTS\nThe professional liability policy (Policy) CNA issued Fackler states: \u201c[CNA] will pay on behalf of [Fackler] all sums which [Fackler] shall become legally obligated to pay as Damages and Claim Expenses resulting from any Claim first made against [Fackler] and reported to [CNA] in writing during the Policy Period for any Wrongful Act of [Fackler] ***.\u201d\nOn the \u201cThird Party Administrators/Insurance Agents and Brokers Endorsement\u201d page, the Policy excluded several claims, including:\n\u201cany Claim arising out of any actuarial act, error, omission or assumptions;\n\u00a1i* v ^\n*** any Claim arising out of or in connection with a governmental intervention, cease and/or desist order, or the insolvency, receivership, bankruptcy, licensing, liquidation or inability to pay of any insurer, trust, organization, or other vehicle directly or indirectly in which [Fackler] has placed or obtained insurance coverage, or placed funds of a client or account.\u201d\nThe Policy states:\n\u201cClaim means any demand received by [Fackler] for Damages alleging a Wrongful Act including a civil action or suit or institution of arbitration proceedings. A Claim does not include criminal or regulatory proceedings or a request or demand seeking non-pecuniary relief including declaratory or injunctive relief or any other provisional remedy. [CNA], at its sole discretion, may choose to defend any regulatory proceedings brought against [Fackler].\u201d\nIn the early 1990s, Fackler solicited employers to participate in three trusts: the Illinois Earth Care Workers\u2019 Compensation Trust (Earth Care Trust), the Illinois Electrical Employers Workers\u2019 Compensation Association (Electrical Trust), and the Illinois Environmental Service Workers\u2019 Compensation Trust (Environmental Trust) (collectively, the Trusts). The Trusts were established pursuant to section 4a of the Workers\u2019 Compensation Act (820 ILCS 305/4a (West 1998)), which allowed trade associations to self-insure their members\u2019 workers\u2019 compensation liability by forming a pool.\nFackler formed service agreements with the Trusts to act as their third-party administrator. For example, the Earth Care Trust service agreement (Service Agreement) stated Fackler was responsible for, among other things, processing applications, collecting and depositing all contributions in the trust fund depository, claims processing, procuring reinsurance, and other management-related services. Employers participating in the Earth Care Trust signed pooling agreements. The pooling agreements also listed Fackler\u2019s responsibilities, including to \u201ccollect and deposit to the Trust bank depository all contributions and assessments, if any.\u201d\nFackler\u2019s renewal application for the Policy indicated 99% of the services it rendered were as \u201cTPA/Pool administrator (Workers\u2019 Compensation Only).\u201d Fackler listed the Trusts as its three largest clients and that it provided pool administration services to the Trusts.\nIn 1998, the Director began an examination of Fackler and found its negligent management jeopardized the Trusts\u2019 financial status. On November 4, 1999, the Director revoked Fackler\u2019s license to administer and manage trusts. CNA characterizes the order of revocation as a \u201ccease and desist\u201d order. Orders of liquidation of the three Trusts were entered as follows: the Earth Care Trust on October 26, 2000; the Electrical Trust on November 3, 2000; and the Environmental Trust on March 22, 2001. The circuit court appointed the Director as the Trusts\u2019 liquidator. In that capacity, the Director filed two suits \u2014 on behalf of the Earth Care Trust on November 30, 2000, and on behalf of the Electrical and Environmental Trusts on September 19, 2001, against Fackler, the Trustees, and Illinois Zephyr, Incorporated\u2014 Fackler\u2019s \u201cmajor insurance producer\u201d \u2014 on behalf of the Trusts. CNA defended Fackler in the underlying lawsuits.\nIn the underlying suits, the Director claimed Fackler was liable for breaching its fiduciary duty to the Trusts, negligent misrepresentation, and aiding and abetting the breach of fiduciary duty. The Director\u2019s claims were based in part on Fackler\u2019s failure to charge sufficient premiums.\nThe trial court found none of the policy\u2019s exclusions barred the Director\u2019s recovery. The trial court found the insolvency exclusion did not apply because Fackler did not \u201cplacet ] or obtain[ ] insurance coverage, or placet ] funds of a client\u201d into the insolvent trusts. The court found coverage was not excluded by the policy\u2019s governmental intervention language because the Director\u2019s claim was for losses that occurred before the government initiated proceedings against Fackler. The court also decided the policy\u2019s exclusion for actuarial acts did not apply.\nDECISION\nI. Standard of Review\nCNA appeals the trial court\u2019s denial of its motions for judgment on the pleadings and its entry of a judgment in favor of the Director. A motion for judgment on the pleadings is similar to a motion for summary judgment but is limited to the pleadings and written instruments attached to the pleadings as exhibits. Employers Insurance of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127, 138-39, 708 N.E.2d 1122 (1999). A judgment on the pleadings is proper if no genuine issue of material fact exists and the parties\u2019 rights can be decided as a matter of law. Employers Insurance of Wausau, 186 Ill. 2d at 138. Accordingly, this court applies de novo review. Kim v. State Farm Fire & Casualty Co., 312 Ill. App. 3d 770, 772, 728 N.E.2d 530 (2000).\nII. Insolvency Exclusion\nCNA contends the policy\u2019s insolvency exclusion bars the Director\u2019s claims.\nThe trial court found the exclusion did not apply because Fackler did not place or obtain insurance coverage or place funds of a client or account. The court relied in part on the Illinois Workers\u2019 Compensation Pool Law (Pool Law) (215 ILCS 5/107a.01 et seq. (West 2002)), effective January 1, 2001. The trial court said:\n\u201cAs stated by CNA themselves, the Illinois Worker\u2019s [sic] Compensation Pool Law provides that, rather than purchasing commercial insurance, certain employers may pool their worker\u2019s [sic] compensation risk through agreements with administrators, who in turn manage self-insured pools to provide workers\u2019 compensation benefits to participant employers. [Citation.] Thus, CNA\u2019s argument that Fackler placed the funds of its clients into the pools contradicts the above cited workers compensation law as it is the employers who place funds into the pools, not Fackler, who is the pool administrator and manager.\u201d (Emphasis in original.)\nWe must \u201cconstrue 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.\u201d Crum & Forster Corp. v. Resolution Trust Corp., 156 Ill. 2d 384, 391, 620 N.E.2d 1073 (1993). As with any contract, we must ascertain CNA and Fackler\u2019s intent when they signed the. Policy by looking at its language. Benedict v. Federal Kemper Life Assurance Co., 325 Ill. App. 3d 820, 824, 759 N.E.2d 23 (2001). When doing so, if the court finds that the language of the Policy is susceptible to more than one meaning, then an ambiguity is present, and we may consider parol evidence to resolve the ambiguity. Benedict, 325 Ill. App. 3d at 824. Any unresolved ambiguity will be construed against the insurer. Gillen v. State Farm Mutual Automobile Insurance Co., 215 Ill. 2d 381, 393, 830 N.E.2d 575 (2005). Undefined terms are given their plain, ordinary, and popular meaning. Gillen, 215 Ill. 2d at 393. In this case, our analysis focuses on the Policy\u2019s exclusions, which will be read narrowly and will be applied only where the terms are clear, definite, and specific. Gillen, 215 Ill. 2d at 393.\nLooking at the plain language of the insolvency exclusion at issue, we believe the exclusion bars coverage if Fackler (1) placed or obtained insurance coverage in the insolvent trusts, or (2) placed client funds into the insolvent trusts. We now examine whether Fackler did either of these things according to the Policy.\nA. Placing or obtaining insurance coverage\nCNA contends the trial court\u2019s conclusion that Fackler did not place or obtain insurance coverage draws \u201can illogical distinction\u201d between self-insurance trusts and traditional insurance. CNA contends the Policy\u2019s clear language does not treat the Trusts differently since they are a type of self-insurance. The policy\u2019s exclusion covers \u201cany insurer, trust, organization or other vehicle,\u201d which CNA contends conveys the parties\u2019 intent to encompass all forms of insurance, not just insurance offered by commercial carriers.\nRisk-pooling trusts \u2014 a form of self-insurance \u2014 have been described as both \u201cthe \u2018antithesis\u2019 of insurance and the \u2018functional equivalent\u2019 to insurance, depending upon the nature of the analysis and the particular facts and circumstances of each case.\u201d Chicago Hospital Risk Pooling Program v. Illinois State Medical Inter-Insurance Exchange, 325 Ill. App. 3d 970, 977, 758 N.E.2d 353 (2001), comparing State v. Continental Casualty Co., 126 Idaho 178, 183, 879 B2d 1111, 1116 (1994), with Ohio Government Risk Management Plan v. County Risk Sharing Authority, Inc., 130 Ohio App. 3d 174, 180, 719 N.E.2d 992, 996 (1998); see also USX Corp. v. Liberty Mutual Insurance Co., 269 Ill. App. 3d 233, 241-43, 645 N.E.2d 396 (1994) (the court noted self-insurance was an alternative to commercial insurance under the Workers\u2019 Compensation Act (820 ILCS 305/4 (West 1992))).\nIn Chicago Hospital Risk Pooling Program, 325 Ill. App. 3d 970, 758 N.E.2d 353, a doctor carried malpractice insurance through a commercial carrier and through his employer\u2019s self-insurance trust. When the doctor was sued, he selected coverage only under the trust and not under his private policy. The trust settled the case and then brought an equitable contribution action against the commercial insurer to recoup some of the cost. The commercial insurer contended the doctor selectively tendered the claim to the trust, preventing the trust from seeking equitable contribution. The trust contended that, as a self-insurance program, the selective tender rule did not apply to it. The Religious and Charitable Risk Pooling Trust Act stated risk-pooling trusts \u201cshall not be considered insurance companies or to be in the business of insurance.\u201d 215 ILCS 150/25 (West 1998). Nonetheless, this court concluded the statutory language did not exempt the trust from its common law contractual rights, duties, and obligations. Chicago Hospital Risk Pooling Program, 325 Ill. App. 3d at 977. Based on the trust agreement, which purported to be a contract of insurance, the court found the risk-pooling trust should not be treated differently than a traditional insurer for the purpose of applying the selective tender rule. Chicago Hospital Risk Pooling Program, 325 Ill. App. 3d at 978.\nIn this case, both parties contend various statutes support their positions regarding the treatment of self-insurance programs.\nCNA argues the Pool Law (215 ILCS 5/107a.01 et seq. (West 2004)) \u201ctreats self-insured pools or trusts as the authorized legal equivalent to traditional insurance coverage.\u201d On the other hand, the Director contends the Pool Law does nothing to indicate the parties\u2019 intent because it was written after the Policy. The Director contends we should look at the Workers\u2019 Compensation Act (the Act) as it existed when the Policy was written. Before it was repealed, effective January 1, 2001, section 4a of the Act provided:\n\u201cThe Department of Insurance shall adopt rules permitting 2 or more employers with similar risk characteristics or that are members of a bona fide professional, commercial, industrial or trade association to enter into agreements to pool their liabilities under this Act and to pool employers\u2019 liability exposures for the purpose of qualifying as group self-insurers.\u201d 820 ILCS 305/4a (West 1998).\nAccording to the Director, this Act supports his contention that the employers did not obtain insurance but were merely self-insured.\nCNA responds that the new Pool Law specifically includes group self-insurers that already existed under the Act. See 215 ILCS 5/107a.04(a), (d) (West 2004) (group self-insurers with a certificate of authority issued pursuant to the Workers\u2019 Compensation or Workers\u2019 Occupational Diseases Acts \u201cshall then be deemed to be a qualified group workers\u2019 compensation pool and shall be subject to this Article\u201d). CNA further contends the repealed section of the Act does not dispute that the Trusts are an equivalent of insurance. Under the repealed section 4a of the Act, group self-insurers were required to pay into a state-monitored insolvency fund (see 820 ILCS 305/4a(2), (4) (West 1998)). CNA contends the mandatory participation in the insolvency fund shows the parties never intended the Policy to serve as a guarantee of the Trusts\u2019 solvency.\nIn addition to the above statutes, we also consider the trust agreement, as the court in Chicago Hospital Risk Pooling Program did. Here, the trust agreement states:\n\u201c[T]he Participants desire to create a trust vehicle to provide workers\u2019 compensation, occupational disease and other employer liability coverage for the benefit of its Participants\u2019 employees on a group basis;\nTrustees have undertaken and agree to be the legal owner of and to hold funds in trust, for the purpose of providing a group self-insurance program ***.\u201d\nUnder a section titled \u201cPurpose of Trust,\u201d the trust agreement stated, \u201cThe Trust is created for the purposes of providing and maintaining workers\u2019 compensation, occupational diseases and employers\u2019 liability benefits on a group basis ***.\u201d\nThe Trusts would serve to make payments of benefits as provided under the above-mentioned statues and similar employer liability laws. The trust agreement also stated participants became parties to the agreement by agreeing to any pooling agreement. The pooling agreement included in the record further outlined the participants\u2019 obligations and the coverage provided by the Trusts.\nBased on the trust and pooling agreements, we conclude the Trusts were the functional equivalent of insurance for the participant employers. Additionally, looking at the Policy as a whole, we find the parties intended the phrase \u201ctrust *** in which [Fackler] has placed or obtained insurance coverage\u201d to include the risk-pooling Trusts. Fackler indicated on its renewal application that 99% of its business consisted of pool administration for the Trusts. The exclusions page was clearly titled, \u201cThird-Party Administrators!Insurance Agents and Brokers Endorsement.\u201d (Emphasis added.) We find it unlikely that CNA, knowing the nature of Fackler\u2019s business, intended the Policy\u2019s exclusions to apply to only 1% of Fackler\u2019s activities. If CNA intended to exclude coverage in the event Fackler brokered insurance with an insolvent traditional carrier, why would CNA then assume coverage of three self-insurance trusts that were subject to the same obligations, especially where the Trusts made up the bulk of Fackler\u2019s business activities?\nAccordingly, we conclude Fackler bought the Policy to cover its administration of the Trusts, and CNA added the exclusions to limit its risk exposure under certain circumstances, including the insolvency of the Trusts. Both knew what the Policy was intended to cover and what it excluded.\nB. Placing client funds\nCNA contends the trial court also erred when it found Fackler did not \u201cplace funds of a client\u201d when it collected and deposited employers\u2019 contributions in the fund. The trial court reasoned the employers, and not trust administrators like Fackler, placed their money into the Trusts based on the Pool Law.\nThe Pool Law allows employers to pool their money into trusts as a method of self-insurance for workers\u2019 compensation claims. 215 ILCS 5/107a.01 et seq. (West 2004). CNA contends this statute simply allows employers to join trusts like those that became insolvent in this case. It does not dictate or limit what method employers use to pay their contributions, either directly or through a third-party administrator like Fackler. Additionally, CNA points out that both the Trusts\u2019 service agreements and the pooling agreements signed by the employers state Fackler was responsible for collecting and depositing employer contributions into the Trusts\u2019 depositories.\nThe Director contends Fackler did not place client funds by collecting and depositing the employers\u2019 trust contributions because the Trusts, not the employers, were Fackler\u2019s clients. Because Fackler did not place the Trusts\u2019 funds in an insolvent insurer or other vehicle, the Director contends the policy\u2019s, insolvency exclusion does not bar coverage. Although the Policy does not define \u201cclient,\u201d the Director argues we should construe \u201cclient\u201d to mean the Trusts, because Fackler\u2019s application for renewal lists the Trusts as its largest clients. Likewise, the service agreements formed between Fackler and the Trusts define \u201cclient\u201d as the Trusts, not the participant employers.\nThe Director relies on Alexander & Alexander Services, Inc. v. These Certain Underwriters at Lloyd\u2019s, London, 136 F.3d 82 (2d Cir. 1998). In that case, the United States Court of Appeals for the Second Circuit determined the term \u201cclient\u201d was ambiguous and required further inquiry in the trial court. There, the policy excluded coverage for \u201cany claim arising from the financial inability to pay of any insurer or reinsurer with which the Assured has placed or obtained coverage for a client or an account.\u201d Alexander, 136 F.3d at 84. Although the exclusion in Alexander is similar to the one in this case, the facts are not.\nIn Alexander, the plaintiff (A&A) was an insurance brokerage conglomerate seeking coverage for losses it incurred defending an action against Mutual Fire, an insolvent insurance company managed by A&A\u2019s subsidiary. The parties disputed whether A&A\u2019s \u201cclients\u201d included policyholders whose business originated with independent brokers and for whom A&A placed Mutual Fire policies. After looking at the customs of the trade, the court determined the term \u201cclient\u201d was ambiguous. As further support for this finding, the court emphasized the parties\u2019 uncertainty during oral argument as to the meaning of the word. Alexander, 136 F.3d at 87.\nIn this case, CNA contends Fackler, as a third-party administrator, acted on behalf of both the Trusts and the participant employers due to the relationship between the Trusts and the employers. According to the trust agreement, the employers were parties to the Trusts. The trust agreement says: \u201cWhereas, the Participants desire to create a trust vehicle to provide worker\u2019s compensation, occupational disease and other employer liability coverage for the benefit of its Participants\u2019 employees on a group basis.\u201d CNA also contends the employers were Fackler\u2019s clients because Fackler solicited them to participate in the Trusts, collected and deposited their premiums into the Trusts, and acted as their agent in handling claims.\nWhen we extrapolate from the exclusion the words that are pertinent to our inquiry, the picture becomes clearer. That is, the policy excludes \u201cany claim arising out of or in connection with the insolvency *** of any *** trust *** in which the insured [Fackler]*** has placed funds of a client.\u201d\nThe Director contends the Trusts were Fackler\u2019s clients. But that would require us to say the exclusion applies when the insured places the funds of a trust into a trust. That would not be a sensible reading. \u201cClient\u201d must mean something other than the Trusts. The only reasonable interpretation of the exclusion is that \u201cclient\u201d was intended to refer to the participants in the Trusts. That is, the employers.\nWe do not believe the term \u201cclient\u201d is an ambiguous term in the Policy based on the facts of this case. CNA has shown Fackler had extensive relationships with the employers participating in the Trusts. Using the \u201cplain, ordinary, and popular\u201d meaning of the word, we believe the employers became \u201cclients\u201d of Fackler when Fackler solicited them to participate in the Trusts and acted as their agent for deposits and claims. The pooling agreements themselves required Fackler to \u201ccollect and deposit to the Trust bank depository all contributions and assessments, if any\u201d on behalf of the employers. (Emphasis added.) As a result, we believe the insolvency exclusion bars the Director\u2019s claim because it arises from the insolvency of a trust in which Fackler deposited its clients\u2019, the employers\u2019, funds. See also Transamerica Insurance Co. v. South, 125 F.3d 392, 398-400 (7th Cir. 1997) (applying Illinois law, the court found a policy\u2019s insolvency exclusion, which excluded coverage of claims arising out of insolvency of any organization (directly or indirectly) in which the insured has placed or obtained coverage or in which an insured has placed the funds of a client, applied where the insured encouraged clients to buy annuities from a company that later became insolvent).\nHaving shown that the employers were Fackler\u2019s clients, and that Fackler placed their funds into the Trusts, the insolvency exclusion applies whether or not forming self-insurance trusts is tantamount to \u201cplacing or obtaining insurance coverage.\u201d\nIII. Governmental Intervention\nA. \u201cGovernmental Intervention\u201d\nCNA contends coverage is excluded under the policy pursuant to the \u201cgovernmental intervention\u201d exclusion. The entire exclusion reads:\n\u201cto any Claim arising out of or in connection with a governmental intervention, cease and/or desist order, or the insolvency, receivership, bankruptcy, licensing, liquidation or inability to pay of any insurer, trust, organization or other vehicle directly or indirectly in which the Insured has placed or obtained insurance coverage, or placed funds of a client or account.\u201d (Emphasis added.)\nCNA says this exclusion applies because the Director is authorized and empowered by the Insurance Code to intervene in any insurer entity for the purpose of wrapping up its business, paying its outstanding claims, and recovering against those responsible for the financial failure of the insurer. CNA maintains the underlying claims arose during the Director\u2019s regulatory examination of Fackler\u2019s business activities and ended with the Director\u2019s lawsuits to recover the trust deficiencies from Fackler. The Director\u2019s standing to bring the underlying lawsuits, CNA says, is based on his statutory right to regulate, intervene, and control the endangered trusts.\nCNA relies for its contention on several sections of the Insurance Code. Section 191 of the Code vests the Director with title to all property, contracts, and rights of action of the company as of the date of liquidation. 215 ILCS 5/191 (West 2002). Section 193 authorizes the Director to deal with the property, business, and affairs of the company in his name as director, or to bring a suit or claim against the directors or officers of the company on behalf of the creditors, members, policyholders or shareholders. 215 ILCS 5/193(1), (3) (West 2002). Section 464a provides that service agencies for group self-insurance must be licensed by the Department of Insurance and are subject to supervision and examination by the Department. 215 ILCS 5/464a (West 2002). Article 13 of the Code authorizes the Director to intervene in the insurer\u2019s business by commencing judicial proceedings to close, rehabilitate, or liquidate an insurer\u2019s business and distribute the assets to its creditors. 215 ILCS 5/187 et seq. (West 2002).\nIn response, the Director contends the liquidations of the pools are not \u201cgovernmental interventions.\u201d Because the provision specifically references \u201cliquidation,\u201d \u201cinsolvency,\u201d and \u201creceivership,\u201d the term \u201cgovernmental intervention\u201d cannot be synonymous with those terms. Thus, the term \u201cgovernmental intervention\u201d is ambiguous because it is not defined in the policy or in the Insurance Code. The Director also says the order of revocation was entered against Fackler, not any of the pools, and the order of revocation is not mentioned in any of the complaints filed by the Director against Fackler. The mere fact that both Fackler and the Director made separate claims to CNA does not mean the claims are related to each other.\nWe agree with CNA\u2019s interpretation of the language in the exclusion. The Insurance Code contains a statutory scheme allowing the Director to intervene in self-insured pools. The term \u201cgovernmental intervention\u201d is not rendered ambiguous by use of the words \u201cliquidation,\u201d \u201cinsolvency,\u201d and \u201creceivership\u201d elsewhere in the exclusion. The language in the exclusion following the \u201cgovernmental intervention\u201d language appears to describe separate risks that are excluded under the policy. The liquidation proceedings brought under the authority of the Insurance Code are appropriately classified as a \u201cgovernmental intervention.\u201d\nB. \u201cArising Out Of\u201d\nThe trial court found the language, \u201carising out of or in connection with a governmental intervention,\u201d ambiguous and subject to different interpretations. The court found:\n\u201cBased on [the language in the exclusion], it is unclear whether the actual losses constituting the claim must have resulted from governmental intervention or whether the exclusion applies to claims involved in governmental intervention at some stage after the losses were incurred.\u201d\nCNA contends the court erred in finding the exclusion ambiguous because the word \u201closses\u201d does not appear in the language of the exclusion. Instead, \u201cany claim\u201d arising out of or in connection with a governmental intervention is excluded. The word \u201cclaim\u201d is defined in the policy as:\n\u201cany demand received by the Insured for Damages alleging a Wrongful Act including a civil action or suit or institution of arbitration proceedings. A Claim does not include criminal or regulatory proceedings or a request or demand seeking non-pecuniary relief including declaratory or injunctive relief or any other provisional remedy.\u201d\nThe Director contends the exclusion does not apply because the losses alleged in the complaints resulted from errors and omissions committed by Fackler prior to any \u201cgovernmental intervention.\u201d Nor did the claim arise out of the governmental intervention, contends the Director, because the demand received by Fackler was aimed exclusively at pre-intervention conduct.\nIn our view, when on November 4, 1999, the Director revoked Fackler\u2019s license to manage the trusts, that was governmental intervention. The \u201cclaim\u201d in this case was first made August 22, 2000, when the Director sent a notice of claim to CNA and Fackler. By then, all three trusts had been placed into conservation \u2014 the result of governmental intervention. And when the trusts were liquidated on October 26, 2000, November 3, 2000, and March 22, 2001, due to the Director\u2019s actions, that was governmental intervention. The Director filed lawsuits against Fackler on November 30, 2000, and September 19, 2001. The Director was seeking to recover money damages resulting from insolvency of the trusts, which, he alleged, resulted from Fackler\u2019s wrongful conduct.\nThe parties disagree about the definition of \u201carising out of.\u201d See Consolidated R. Corp. v. Liberty Mutual Insurance Co., 92 Ill. App. 3d 1066, 1069, 416 N.E.2d 758 (1981) (defining the phrase as \u201c \u2018causally connected with, not proximately caused by,\u2019 \u201d quoting Aetna Casualty & Surety Co. v. Ocean Accident & Guaranty Corp., 386 F.2d 413, 415 (3d Cir. 1967)); Maryland Casualty Co. v. Chicago & North Western Transportation Co., 126 Ill. App. 3d 150, 154, 466 N.E.2d 1091 (1984) (\u201c \u2018[a]rising out of has been held to mean \u2018originating from,\u2019 \u2018having its origin in,\u2019 \u2018growing out of and \u2018flowing from\u2019 \u201d). But see United Services Automobile Ass\u2019n v. Dare, 357 Ill. App. 3d 955, 971 (2005) (\u201carising out of\u201d language should not be interpreted broadly in an exclusion because to do so would expand the exclusion to the advantage of the insurer).\nIn this case, whether the claims \u201carose out of\u201d the alleged governmental intervention is only part of the inquiry. The exclusion also provides the claims may be \u201cin connection with\u201d the intervention. The words \u201cin connection with\u201d imply that the timing of the claims is not controlling. The claims made here clearly are in connection with the \u201cgovernmental intervention\u201d alleged by CNA. We believe both parts of the exclusion apply to this case.\nThe use of the word \u201closses\u201d by the Director and the trial court is belied by the language in the exclusion. The exclusion does not refer to losses; it refers, rather, to \u201cany Claim.\u201d Once the Director\u2019s actions are classified as a governmental intervention, it is clear there were claims that were connected with the intervention, and the exclusion would apply.\nC. \u201cPlaced Funds of a Client or Account\u201d\nThe Director contends the exclusion for a claim \u201carising out of or in connection with a governmental intervention\u201d is limited by the phrase at the end of the exclusion, \u201cin which the Insured has placed or obtained insurance coverage, or placed funds of a client or account.\u201d We disagree with the Director\u2019s interpretation. Reading the exclusion as a whole, the limiting language at the end of the exclusion clearly applies only to \u201cthe insolvency, receivership, bankruptcy, licensing, liquidation or inability to pay of any insurer, trust, organization or other vehicle.\u201d The exclusions related to governmental intervention or cease and/or desist orders are not limited by the wording at the end of the paragraph. Thus, the exclusion applies: \u201cto any Claim arising out of or in connection with a governmental intervention, cease and/or desist order.\u201d\nAlthough more precise drafting of the policy would have placed these exclusions into separate paragraphs, the word \u201cor\u201d separates the \u201cgovernmental intervention\u201d and \u201ccease and/or desist order\u201d exclusions from the other exclusions relating to liquidation, insolvency, etc. The latter exclusions are limited by the language regarding placing or obtaining insurance coverage or placing funds of a client or account. At least in this instance, there is no ambiguity.\nIV Actuarial Exclusion\nCNA contends the \u201cactuarial exclusion\u201d provision excludes coverage for \u201cany claim arising out of any actuarial act, error, omission or assumption.\u201d It says Fackler\u2019s alleged failure to properly calculate, assess, and collect premiums to meet the risk of potential claims falls within the plain and ordinary meaning of the actuarial exclusion.\nWe agree with the trial court that the actuarial exclusion does not apply. Although the term \u201cactuary\u201d is not defined in the policy, it is clear that Fackler was not acting as an actuary but as an administrator of the pools. The defendants in the underlying suits alleged Fackler hired an actuarial consulting firm. The claims do not fall within the actuarial exclusion.\nCONCLUSION\nWe believe the Director\u2019s claims are barred under both the insolvency and governmental intervention exclusions, but not under the actuarial exclusion. Because either exclusion defeats the claims, we reverse the trial court\u2019s order granting judgment to the Director and remand with directions to enter the appropriate judgment on the pleadings in favor of CNA.\nReversed and remanded with directions.\nGARCIA, EJ., and SOUTH, J, concur.\nThe trial court consolidated the two suits.\nAlthough the Pool Law did not become effective until January 1, 2001, after the Policy was formed, it states in its definitions section that for purposes of incorporating provisions of the Illinois Insurance Code, \u201c \u2018[plooling agreement\u2019 shall be considered a policy of insurance.\u201d 215 ILCS 5/107a.05(b) (West 2004).", "type": "majority", "author": "JUSTICE WOLFSON" } ], "attorneys": [ "Wilson, Elser, Moskowitz, Edelman & Dicker, of Chicago (Daniel J. McMahon, Rebecca M. Rothmann, and Cinthia Motley, of counsel), for appellant.", "John H. Wickert and Susan Valentine, both of Robinson, Curley & Clayton, P.C., and D. Daniel Barr, J. Kevin Baldwin, and Michael Buresh, all of Office of Special Deputy Receiver, both of Chicago, for appellee." ], "corrections": "", "head_matter": "CNA CASUALTY OF CALIFORNIA, Plaintiff-Appellant, v. E.C. FACKLER, INC., et al., Defendants (Michael T. McRaith, Acting Director, The Department of Financial and Professional Regulation-Division of Insurance, in his Capacity as Statutory and Court-Affirmed Liquidator, Defendant-Appellee).\nFirst District (2nd Division)\nNo. 1\u201404\u20143707\nOpinion filed September 20, 2005.\nWilson, Elser, Moskowitz, Edelman & Dicker, of Chicago (Daniel J. McMahon, Rebecca M. Rothmann, and Cinthia Motley, of counsel), for appellant.\nJohn H. Wickert and Susan Valentine, both of Robinson, Curley & Clayton, P.C., and D. Daniel Barr, J. Kevin Baldwin, and Michael Buresh, all of Office of Special Deputy Receiver, both of Chicago, for appellee." }, "file_name": "0619-01", "first_page_order": 637, "last_page_order": 652 }