Insurer must defend former Zion mayor, economic development director, but not city, in suit over minor league stadium

By Dana Herra | Jul 31, 2015

The city of Zion cannot rely on its insurance company to cover all of its losses arising from a breach of contract lawsuit filed when the city failed to build a promised stadium for a minor league baseball team, which included actor Kevin Costner among its ownership group.

U.S. District Judge Charles P. Kocoras issued a summary judgment in the case on July 29, limiting the obligation of insurance company OneBeacon to defend or indemnify the suburban city and several individual defendants in the litigation pending in Lake County Circuit Court.

In the case, OneBeacon America Insurance Company claimed the allegations made against the city and other defendants by Grand Slam Sports & Entertainment LLC fall under coverage exclusions in the insurance policy. The court agreed in part, issuing summary judgment on one count in its entirety and declaring, while OneBeacon does not have to defend the city on another count, it must still represent and indemnify former Zion Mayor Lane Harrison and former Zion Economic Development Director Delaine Rogers.

The lawsuit was filed by the Grand Slam Sports group, which owned and operated the Lake County Fielders for one ill-fated season, in Lake County in November 2011. When court proceedings began, the city and other defendants attempted to hand over defense of the case to OneBeacon, which refused and filed an action asking the federal court to relieve it from providing a defense.

The series of events began in 2006 when Rogers approached Grand Slam, the owner and operator of the Lake County Fielders minor-league baseball team, with a business pitch. According to court documents, the city wanted to develop a stadium and was seeking a team to play there.

In its initial lawsuit, Grand Slam says it was clear during negotiations that a permanent stadium was necessary for the team, and says city officials repeatedly agreed to build the stadium. Based on that promise, the Fielders agreed to play in the city in temporary facilities. It wasn’t until 2011 when the city council approved the sale of bonds to fund stadium construction and entered into a construction contract to have it built on land owned by real estate company Green Bay Crossing.

However, Grand Slam claims, Rogers, Harrison and a real estate developer decided privately that the construction was too much of a financial risk and postponed the bond sale without informing the city council or the team. From that point on, the lawsuit states, the city officials engaged in a series of lies and misleading statements to keep the team in the city and carry on the impression that the stadium would be built. The deception allegedly included making public statements on the radio that construction was imminent and failing to return the calls of city commissioners who wanted to know why the bonds they approved had never been sold, according to court documents.

Grand Slam claims it suffered losses of about half a million dollars by continuing to field a team with inadequate facilities. It says it lost both ticket and advertiser revenue, and claims it advanced the city more than $90,000 for construction expenses. It also claims the city attacked its reputation, making public claims that the stadium had not been built because Grand Slam was $60,000 in arrears on its rent. Later, according to court documents, the city paid back $70,000 of the $90,000 it owed, but then cut off all communication.

Published reports indicate taxpayers may have suffered losses of as much as $8 million from the defunct stadium deal.

The claims OneBeacon objected to include a fraud claim against Harrison and Rogers for their allegedly false and misleading statements; a breach of contract claim against the city for not fulfilling its construction contract; and a civil conspiracy claim against Harrison, Lane and Green Bay Crossing for conspiring to trick Grand Slam into fielding a team under the belief there would be a stadium. Green Bay Crossing filed a counterclaim asking the city to indemnify it against Grand Slam’s charges.

The court found that the breach of contract claim falls under an exclusion in the city’s policy and said OneBeacon does not have to defend the city on that claim. It also does not have to indemnify the city against the Green Bay counterclaim, but it must defend Harrison and Rogers in the case.

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