Tapp v. Wrightsman-Musso Insurance Agency

Citations: 441 N.E.2d 145; 109 Ill. App. 3d 928; 65 Ill. Dec. 353; 1982 Ill. App. LEXIS 2376Docket: 17603

Court: Appellate Court of Illinois; October 13, 1982; Illinois; State Appellate Court

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The Illinois Appellate Court affirmed the trial court's judgment that Aetna Casualty and Surety Company had no obligation to defend Kenneth Greff and Donald D. Dodson in an action filed by plaintiffs Gene T. Tapp and Margie Tapp. The plaintiffs, as assignees of Greff's insurance rights under a policy with Aetna, contended that Aetna should have provided a defense following an injury sustained by Gene Tapp while assisting Greff during a building dismantling operation. The plaintiffs’ complaint specified that Greff and Dodson were insured by Aetna at the time of the incident, and they argued that Aetna was required to defend Greff based on the policy's language guaranteeing a defense for bodily injury claims, regardless of the allegations' veracity.

Aetna, however, refused to defend Greff, leading to a default judgment against him. The court noted that Aetna's motion to dismiss was granted, emphasizing that even with multiple parties involved, the case could proceed without all parties present. The court highlighted the legal principles regarding an insurer's duty to defend, indicating that when a complaint suggests potential coverage, the insurer must either seek a declaratory judgment or defend under a reservation of rights. The decision reaffirmed that Aetna did not fulfill its duty to defend Greff in the initial complaint.

The insurer is required to defend a complaint if it alleges facts that fall within the policy's coverage, even if such coverage is only potentially applicable. The courts favor a broad interpretation of complaints, resolving any coverage doubts in favor of the insured. If an insurer wrongfully refuses to defend a claim within coverage, it is liable for breach of contract, with damages typically being the judgment amount against the insured or a reasonable settlement, along with incurred expenses. After a breach due to failure to defend, the insurer cannot enforce exclusion provisions against the insured. 

When considering a motion for judgment on the pleadings, the court assesses whether the pleadings present a material issue of fact, accepting the well-pleaded facts of the opposing party and their reasonable inferences. The discussion focuses on counts VII and VIII, relevant claims against Greff and Dodson. Aetna argues exclusion (g) applies, which denies coverage for injuries related to operations on premises not insured. The initial complaint indicates a contract for a building near Taylorville, with operations occurring outside the insured premises. Aetna claims the injury arose from operations controlled by Greff, as the building was allegedly owned by him at the time of the incident. The plaintiffs do not dispute the location of the injury but argue that Greff didn't own the building at that time. However, there are adequate allegations suggesting Greff and Dodson controlled the premises, particularly through their contract to purchase, dismantle, and remove the building.

Greff and Dodson are alleged to have controlled the building from which Tapp was injured during dismantling, leading to counts VII and VIII inferring their responsibility for preventing such injuries. Aetna, the insurer, invoked exclusion (g) to deny coverage, asserting no duty to defend since Greff and Dodson controlled the premises where the injury occurred. Plaintiffs argued potential coverage based on provisions regarding insured property, claiming the injury involved materials intended for construction. However, Aetna countered that the materials were outside the designated premises, making the provision inapplicable. The plaintiffs also claimed coverage based on a provision stating Aetna would cover damages arising from the use of insured premises. They argued Tapp's injury was related to the maintenance or use of the Virden property, but Aetna contended that the initial complaint contained no allegations linking the incident to the insured premises or business. The contract specified the purchasers' address at 131 Liberty Street, with no connection to the insured premises at Church and George streets in Virden. The plaintiffs maintained that since the complaint did not explicitly exclude a connection to the insured property, Aetna was obligated to provide a defense.

The court asserts that for an insurer to refuse to defend a case, the lack of coverage must be unmistakably clear when the complaint is compared to the policy. However, this principle assumes that the complaint suggests the relevance of the insurance policy to the facts at hand. In this instance, counts VII and VIII of the complaint do not indicate any connection between the dismantling of the building in Taylorville and the insured premises or business. Consequently, the defendant was not made aware of any potential coverage under the policy. The court concludes that no facts were alleged that could potentially be covered by the policy, thus affirming the trial court's judgment. Justice Webber concurs, noting that the pleadings confirm Greff and Dodson’s control over the premises where the building was being demolished, establishing the applicability of exclusion (g), which overrides any other coverage provisions. He refrains from commenting on potential coverage that may exist without the application of exclusion (g).