Judge Aguirre says insurers don't have to defend Vassen in civil suits

By The Madison County Record | Jul 17, 2014

St. Clair County Associate Judge Richard Aguirre has decided that insurers of John Vassen's real estate business don’t have to defend him in civil suits over a Madison County bid rigging conspiracy.

Aguirre granted judgment on the pleadings to Maryland Casualty Company and Assurance Company of America on June 20, in their suit challenging coverage.

“Alleged ‘pay to play’ misconduct is not insurable as a matter of Illinois public policy,” Aguirre wrote.

Vassen pleaded guilty last year in federal court and agreed to serve 24 months in prison.

He and others were accused of contributing to campaigns of former Madison County treasurer Fred Bathon in return for favoritism at auctions of property tax liens.

In spite of state law requiring competitive bids for interest rates on liens, Bathon’s contributors usually obtained the maximum of 18 percent.

Vassen and other tax buyers face three suits in Madison County, from property owners who paid high interest.

No victim received the restitution available under antitrust law, because U.S. Attorney Stephen Wigginton found it impracticable to determine individual losses.

All three of the suits filed in Madison County propose class actions that would identify victims of the scheme and calculate their damages.

Clinton County circuit judge Dennis Middendorff has taken the cases by special assignment and consolidated them.

When the suits began, Vassen sought legal fees from Maryland Casualty, his insurer from 2003 to 2008, and Assurance, his insurer from 2008 to 2010.

The insurers denied coverage and sued for declaratory judgment in the circuit court of St. Clair County, where Vassen ran his business.

They moved for judgment on the pleadings, arguing that the Madison County plaintiffs sought damages not because of tax liens but because of bid rigging.

Their lawyer, Michael Ward of St. Louis, wrote that it was contrary to public policy to protect against an insured’s intentional participation in a conspiracy.

For Vassen, Paul Slocomb of St. Louis answered that the motion wasn’t seasonable because no discovery had been conducted in this case or the underlying case.

Slocomb wrote that a duty to defend Vassen was triggered under coverage for property damage and coverage for personal and advertising injury.

He wrote that the Madison County plaintiffs “are arguably seeking loss of use damages sustained to their real estate.”

“Even an intentional act will be covered under the policy if it causes an unexpected or unintended result," Slocomb wrote.

“If an injury is not expected or intended by the insured, it is considered an accident.”

He quoted a letter that assistant Madison County state’s attorney John McGuire sent to tax buyer John Scott in 2005, and wrote that Vassen had a right to rely on it.

“The Madison County state’s attorney’s office exhaustively reviewed the procedures and believed they were in full compliance with the law,” Slocomb wrote.

Madison County Circuit Judge Bill Mudge, state’s attorney at the time, said last year that the facts of the annual auction McGuire reviewed were different from the facts at the following five auctions that led to prosecution.

According to Aguirre, the letter did not exculpate Vassen.

“The letter does nothing to counter the allegations in the conspiracy complaints and the allegations of intentional wrongdoing,” Aguirre wrote.

He wrote that the Madison County complaints unequivocally alleged that Vassen illegally rigged auctions and willfully entered into a conspiracy.

He wrote that since Bathon’s resignation, five years ago, every tax sale resulted in an average penalty bid of less than five percent.

“Pure financial or economic loss does not constitute either bodily injury or property damage under Illinois law,” Aguirre wrote.

He wrote that Illinois courts interpret an accident as an unforeseen occurrence, untoward or disastrous, or a sudden event of an inflictive or unfortunate character.

“Further, the natural and ordinary consequences of an act do not constitute an accident,” he wrote.

“Bid rigging or ‘pay to play’ misconduct is simply not an accident.”

He wrote that it is against public policy to compensate a wrongdoer for his own intentional misconduct.

He wrote that allowing coverage would directly compensate Vassen, who would retain money he allegedly received illicitly.

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