Insurance company claims it has no duty to defendants in class action suit over alleged lanlord tenant violations

By Jonathan Bilyk | Jul 1, 2014

The owners of a single-room occupancy residential building in Chicago’s Near West Side could have to face a class action suit over alleged unsanitary conditions, illegal evictions and other violations of the city's landlord-tenant ordinance without the help of its insurer.

On June 24, Richmond, Va.-based insurance carrier James River Insurance Co. filed a complaint for declaratory judgment in Chicago's federal court, asserting it has no duty to either defend or indemnify building management company SRO Operating Company LLC, or the owners affiliated with the company, in an ongoing lawsuit brought by two former tenants on behalf of a class of more than 280 others.

In that suit, filed in June 2013 in Cook County Circuit Court, plaintiffs Peter Gabiola and Jerry Weikle accuse SRO of failing to follow a number of provisions within the city’s Rental Landlord Tenant Ordinance in their operation of the so-called Acacia Hotel in the city’s Fulton River District neighborhood.

Located at West Grand and North Milwaukee avenues, the building is right above Richard's Bar, "a popular tavern," and steps away from La Scarola restaurant, "a historical landmark frequented by many of Chicago's most beloved actors, politicians and socialites," according to the suit.

The plaintiffs’ long list of alleged violations include claims that, during their residency in the Acacia Hotel from 2012 to 2013, the landlords ignored tenants’ repeated requests to deal with infestations of bedbugs and cockroaches, and threatened retaliation against tenants who sprayed insecticide in the building.

The suit also contends the defendants failed to give tenants with copies of the city’s RLTO, provide a receipt for or pay interest on the their security deposits, deposit security deposits in separate accounts, and evicted and seized tenant property without court authorization.

In their suit, the tenants further alleged that the 20-story single-room occupancy hotel also lacked kitchen sinks, and featured filthy common bathrooms on each floor.

The tenant plaintiffs sought a range of damages, including the cash equivalent of months of rent, double their security deposits and at least $9,500 more for the evictions and property seizures.

Among others, the defendants originally named in that case included SRO, as well as individual owners Thomas Harris, Robert Dominic, Susan “Bunny” Dominic, Michael Posner, who the suit indicates is also known as Irving Goldstein, and Florence Posner.

SRO, Harris and the Dominics are named in James River’s complaint as well.

While acknowledging SRO and its owners hold insurance policies with it, James River asserts in its complaint that it has no obligation to help them based on the nature of the underlying class action suit and its policy exclusions.

Particularly, the insurance company points to exclusions in the policy stating coverage doesn't apply in actions in which the insured is accused of knowingly violating the rights of others.

“Any personal injury for which the underlying lawsuit seeks recovery was caused by or at the direction of the SRO defendants with the knowledge that their actions would violate the plaintiffs’ rights and inflict personal injury, and is therefore excluded from coverage under the James River policies,” the insurer asserts.

James River's complaint was filed by attorneys Rachel G. Winthrop and Timothy J. Fagan, of SmithAmundsen LLC in Chicago.

In the underlying suit, the tenant plaintiffs were represented by Chicago attorney Berton N. Ring, and attorneys at Meyer Law Group LLC, Deutsch Levy & Engel and O'Hagan LLC represented some of the defendants.

Electronic records show an agreed order was entered in underlying suit in May and that a request to dismiss, strike or withdraw a specific defendant was allowed on Monday.

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