No. 5-95-0810
IN THE
APPELLATE COURT OF ILLINOIS
FIFTH DISTRICT
_________________________________________________________________
STATE FARM FIRE AND CASUALTY ) Appeal from the
COMPANY, ) Circuit Court of
) Madison County.
Plaintiff-Appellant, )
)
v. ) No. 93-MR-374
GREGORY LEE MARTIN, SR., )
SCOTT LEWIS, as Special )
Administrator of the Estate of )
Timmie Lee Lewis, Deceased, and )
ETHELYN J. GORHAM, Executrix of )
the Estate of Gary Porter, )
Deceased, ) Honorable
) David Herndon,
Defendants-Appellees. ) Judge, presiding.
_________________________________________________________________
JUSTICE KUEHN delivered the opinion of the court:
Plaintiff, State Farm Fire and Casualty Company (State Farm),
filed a declaratory judgment action seeking a determination of
whether it owed its insured, Gregory Lee Martin, Sr. (Martin), a
defense and indemnification in two underlying wrongful death suits.
These suits were based upon Martin's involvement in an arson which
resulted in the death of two firemen. State Farm appeals from
trial court orders finding that it had a duty to defend and to
indemnify Martin. We affirm.
This case originated with an arrangement between Martin and
Delaney Gordon, Sr. (Gordon), to destroy a building. Martin owned
the designated building. The building was located in Alton,
Illinois. Gordon was one of Martin's tenants, and in exchange for
his participation, Martin offered him a reduced rental rate.
On October 24, 1992, at approximately 2 a.m., Gordon ignited
the fire by leaving an unattended candle in a hamper in the
basement. An accelerant was used. By the time the fire was
reported and firemen responded, the building was in flames. As the
fire intensified, the building's second floor collapsed onto some
of the firemen. Firemen Timmie Lee Lewis and Gary Porter perished.
Martin and Gordon were indicted by a federal grand jury for
damaging by fire a building used in interstate commerce, directly
causing a death, in violation of section 844(i) of the Anti-Arson
Act of 1982. 18 U.S.C. §844(i) (1988).
Defendants Scott Lewis (Lewis) and Ethelyn J. Gorham (Gorham)
were appointed executors of the estates of Timmie Lee Lewis and
Gary Porter, respectively. Lewis filed a wrongful death suit
against Martin and Gordon on or about June 7, 1993. Gorham filed
her suit on or about July 7, 1993. Both suits alleged that Martin
negligently started the fire with the knowledge that firemen would
respond.
State Farm insured Martin's building. Martin tendered both
wrongful death suits to State Farm. State Farm denied coverage and
refused to defend Martin. Martin did not answer the suits.
State Farm filed the declaratory judgment action on August 20,
1993, alleging that the underlying actions did not constitute an
occurrence as defined in the policy and that Martin's actions
triggered two coverage exclusions. Defendants Lewis and Gorham
sought to stay the declaratory judgment action until the federal
criminal cases then pending against Martin and Gordon were
resolved. State Farm opposed the stay. The trial court entered an
order on February 24, 1994, staying the declaratory judgment
action. The order further stated that any party could move to lift
the stay upon resolution of the criminal cases. The wrongful death
suits were not stayed.
On September 23, 1994, Martin was found guilty on the
indictment and in December 1994 was sentenced to 50 years'
imprisonment.
During the summer of 1995, Gorham and Lewis defaulted Martin
on the wrongful death suits. On August 8, 1995, the trial court
entered judgment on the negligence counts of Gorham's wrongful
death suit against Martin in the amount of $10 million. On
September 5, 1995, the trial court entered judgment on Lewis's suit
against Martin in the amount of $9 million. Sometime in late
September 1995, after default judgments were taken in both suits,
State Farm offered Martin a defense.
The record contains no order lifting the stay imposed upon the
declaratory judgment action following the criminal case's conclu-
sion. However, on April 18, 1995, approximately seven months after
Martin's conviction, State Farm filed a summary judgment motion in
the declaratory judgment action seeking a determination that it had
no duty to defend and indemnify Martin in the underlying suits. On
August 30, 1995, the trial court found that coverage existed, and
the court denied State Farm's motion for summary judgment.
Gorham filed her motion for summary judgment on September 20,
1995. On September 29, 1995, State Farm filed a motion to
reconsider the order denying its summary judgment motion. On
October 4, 1995, the trial court granted Gorham's motion for
summary judgment and denied State Farm's motion to reconsider. The
record does not reflect that Lewis filed a motion for summary
judgment, but the October 4, 1995, order stated that he did. The
order granted Lewis's summary judgment motion. The trial court
determined that coverage existed and that State Farm had a duty to
both defend and indemnify Martin. State Farm appeals both orders.
State Farm first maintains that it had no duty to defend
Martin in the wrongful death suits because the underlying com-
plaints alleged no facts within the scope of potential coverage.
We disagree.
Summary judgment should only be granted when the pleadings,
depositions, admissions, and affidavits on file show that there is
no genuine issue of material fact. Myers v. Health Specialists,
S.C., 225 Ill. App. 3d 68, 72, 587 N.E.2d 494, 497 (1992), appeal
denied, 145 Ill. 2d 635, 596 N.E.2d 630 (1992). On appeal, courts
review summary judgment orders de novo. Myers, 225 Ill. App. 3d at
72, 587 N.E.2d at 497.
When an insurer questions whether an insured's claim possibly
falls within the scope of coverage, the insurer essentially has two
options. The insurer must either (1) secure a declaratory judgment
as to its rights and obligations before or pending trial or (2)
defend the insured under a reservation of rights. Shelter Mutual
Insurance Co. v. Bailey, 160 Ill. App. 3d 146, 151-52, 513 N.E.2d
490, 494 (1987); Trovillion v. United States Fidelity & Guaranty
Co., 130 Ill. App. 3d 694, 700, 474 N.E.2d 953, 958 (1985); Reis v.
Aetna Casualty & Surety Co. of Illinois, 69 Ill. App. 3d 777, 782,
387 N.E.2d 700, 704 (1978); Thornton v. Paul, 51 Ill. App. 3d 337,
340-41, 366 N.E.2d 1048, 1051 (1977), aff'd in part & rev'd in
part, 74 Ill. 2d 132, 384 N.E.2d 335 (1978). An insurer can always
refuse to defend the claim and choose to forego seeking a declara-
tory judgment, but the insurer is taking a risk that a court will
later determine that it breached its duty to defend. Maneikis v.
St. Paul Insurance Co. of Illinois, 655 F.2d 818, 821 (7th Cir.
1981).
An insurer's duty to defend is broader than its duty to
indemnify. La Rotunda v. Royal Globe Insurance Co., 87 Ill. App.
3d 446, 451, 408 N.E.2d 928, 933 (1980). The duty to defend is
determined solely from the allegations of the complaint. Thornton
v. Paul, 74 Ill. 2d 132, 144, 384 N.E.2d 335, 339 (1978). If facts
alleged in the complaint are within or potentially within policy
coverage, the insurer must defend the claim even if the allegations
are legally groundless, false, or fraudulent. Thornton, 74 Ill. 2d
at 144, 384 N.E.2d at 339 (citing Maryland Casualty Co. v. Peppers,
64 Ill. 2d 187, 355 N.E.2d 24 (1976), and 7A J. Appleman, Insurance
Law & Practice §4683 (Supp. 1974)).
A "potentially covered" claim exists "whenever the allegations
in a complaint state a cause of action that gives rise to the
possibility of a recovery under the policy." Western Casualty &
Surety Co. v. Adams County, 179 Ill. App. 3d 752, 756, 534 N.E.2d
1066, 1068 (1989) (citing Tews Funeral Home, Inc. v. Ohio Casualty
Insurance Co., 832 F.2d 1037, 1042 (7th Cir. 1987), citing 7C J.
Appleman, Insurance Law & Practice §4683.01, at 67 (1979)). The
language of the complaint does not need to affirmatively bring the
claim within coverage under the policy, because the coverage issue
should not "hinge exclusively on the draftsmanship skills or whims
of the plaintiff in the underlying action." Western Casualty &
Surety Co., 179 Ill. App. 3d at 756, 534 N.E.2d at 1068 (citing
International Minerals & Chemical Corp. v. Liberty Mutual Insurance
Co., 168 Ill. App. 3d 361, 377, 522 N.E.2d 758, 768 (1988), appeal
denied, 122 Ill. 2d 576, 530 N.E.2d 246 (1988)).
The threshold that the complaint must satisfy in order to
present a potential coverage claim is low. La Rotunda, 87 Ill.
App. 3d at 451, 408 N.E.2d at 933. The complaint must be liberally
construed with all doubts resolved in the insured's favor. La
Rotunda, 87 Ill. App. 3d at 451, 408 N.E.2d at 933. The insurer
can "safely and justifiably refuse to defend only when the
allegations of the complaint clearly show that the claim is beyond
the policy coverage." Reis, 69 Ill. App. 3d at 784, 387 N.E.2d at
706. If the complaint alleges multiple theories, only one of which
is potentially covered, the insurer still has a duty to defend.
United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144
Ill. 2d 64, 73, 578 N.E.2d 926, 930 (1991) (citing Maryland
Casualty Co. v. Peppers, 64 Ill. 2d 187, 194, 355 N.E.2d 24, 28
(1976)).
If an insurer wrongfully refuses to defend its insured, the
insurer is estopped from alleging that the insured lacked coverage
under the policy or that coverage was excluded by policy defenses.
La Rotunda, 87 Ill. App. 3d at 452, 408 N.E.2d at 934 (citing Elas
v. State Farm Mutual Automobile Insurance Co., 39 Ill. App. 3d 944,
947, 352 N.E.2d 60, 62 (1976)).
In keeping with these tenets, we turn to State Farm's
insurance policy and the allegations of the underlying complaints.
In its policy, State Farm agrees to provide business liability
coverage for claims made or suits brought against its insured for
damages because of bodily injury caused by an occurrence arising
from the ownership, maintenance, or use of the insured premises.
The policy definition of "bodily injury" includes death resulting
from bodily harm, sickness, or disease. Occurrence is defined as
"an accident, including exposure to conditions, which results in:
(a) bodily injury *** during the policy period." Bodily injuries
"expected or intended by an insured" and/or "the result of willful
and malicious acts of an insured" are excluded from coverage.
State Farm does not dispute that it issued a liability policy
to Martin covering the date of incident. State Farm does not
contend that Martin provided it no opportunity to defend the
wrongful death suits. Therefore, the only question is whether the
underlying complaints alleged facts potentially covered. A
comparison of the two complaints and the policy language does not
clearly illustrate a lack of coverage. Martin's complaint alleged
that Martin knew or should have known that firemen would respond to
the fire and could be injured, and that Martin was guilty of one or
more of several negligent acts or omissions related to the fire and
the firemen's response. Gorham's complaint made virtually the same
allegations.
State Farm argues that while the complaints sound in negli-
gence, Martin's involvement in the arson does not qualify as an
accident. As previously stated, completely false allegations
against the insured do not obviate potential coverage. Further-
more, this court has defined "an accident" as one in which the
injury was not "expected or intended from the standpoint of the
insured." State Farm Fire & Casualty Co. v. Watters, 268 Ill. App.
3d 501, 506, 644 N.E.2d 492, 496 (1994), appeal denied, 161 Ill. 2d
540, 649 N.E.2d 425 (1995). Martin and Gordon acknowledged that
their intent was to destroy a building. They contend that the
firemen's deaths were an unexpected event. While their participa-
tion in the crime resulting in death was obviously criminal, it
does not clearly follow that Martin expected or intended the
deaths. See Taylor v. John Hancock Mutual Life Insurance Co., 11
Ill. 2d 227, 142 N.E.2d 5 (1957) (holding that the arson-related
death of an arson coconspirator was not intended and was therefore
an "accident" within the meaning of an accident insurance policy).
Moreover, except in situations involving sexual abuse and
assault and battery where intent to injure is inferred, coverage is
not excluded unless Martin acted with a specific intent to cause
personal injury with conscious knowledge that the deaths were
practically certain to occur. Scudder v. Hanover Insurance Co.,
201 Ill. App. 3d 921, 927, 559 N.E.2d 559, 562 (1990); Grinnell
Mutual Reinsurance Co. v. Frierdich, 79 Ill. App. 3d 1146, 1148,
399 N.E.2d 252, 254 (1979); Bay State Insurance Co. v. Wilson, 96
Ill. 2d 487, 493-94, 451 N.E.2d 880, 882-83 (1983). The negligence
counts of the complaints in issue do not allege a specific intent
to injure the firemen.
The allegations of the wrongful death complaints were
therefore not clearly outside potential coverage. State Farm
breached its duty to defend Martin. Consequently, State Farm is
estopped from asserting the "expected or intended" and "willful and
malicious acts" exclusionary defenses. Thornton, 74 Ill. 2d at
145, 384 N.E.2d at 340.
State Farm also contends that insurance coverage for the
arson-related activities is against public policy and thus void.
State Farm cites no Illinois authority for this contention. The
four cases State Farm cites as authority are from other states.
All four cases are distinguishable in that none involve an arson-
related death. State Farm Fire & Casualty Co. v. Hackendorn, 605
A.2d 3 (Del. 1991) (assault with a gun); Altena v. United Fire &
Casualty Co., 422 N.W.2d 485 (Iowa 1988) (sexual abuse); Perreault
v. Maine Bonding & Casualty Co., 568 A.2d 1100 (Me. 1990) (sexual
abuse); Atlantic Employers Insurance Co. v. Tots & Toddlers Pre-
School Day Care Center, Inc., 239 N.J. Super. 276, 571 A.2d 300
(1990), cert. denied, 122 N.J. 147, 584 A.2d 218 (1990) (sexual
abuse).
Illinois public policy clearly prevents Martin from recovering
policy proceeds related to an arson in which he was involved.
University of Illinois v. Continental Casualty Co., 234 Ill. App.
3d 340, 359, 599 N.E.2d 1338, 1351 (1992), appeal denied, 147 Ill.
2d 637, 606 N.E.2d 1235 (1992); Checkley v. Illinois Central R.R.
Co., 257 Ill. 491, 496-97, 100 N.E. 942, 944 (1913). However, our
supreme court has held that interpreting an insurance contract to
provide coverage for an intent-based act violates no established
public policy of this State. Dixon Distributing Co. v. Hanover
Insurance Co., 161 Ill. 2d 433, 446-47, 641 N.E.2d 395, 401-02
(1994). Furthermore, public policy encourages the compensation of
victims. University of Illinois, 234 Ill. App. at 358, 599 N.E.2d
at 1350. Coverage in this case was established because State Farm
breached its duty to defend.
We do not expressly find that arson was covered by State
Farm's policy. We simply find that a potential for coverage under
the policy existed, thereby triggering State Farm's duty to defend.
All of the cases cited by State Farm involve sexual abuse and other
intentional torts with expected consequences. If Martin was
seeking coverage for intentionally caused injuries or to profit
from his arson involvement, no court would hesitate to find that
such coverage was beyond the intent of the parties.
We find that no genuine issue of material facts exists, and
for the foregoing reasons, the judgment of the circuit court of
Madison County is hereby affirmed.
Affirmed.
CHAPMAN and WELCH, JJ., concur.
___________________________________________________________________________
STATE FARM FIRE AND CASUALTY ) Appeal from the
COMPANY, ) Circuit Court of
Plaintiff-Appellant, )
v. ) No. 93-MR-374
GREGORY LEE MARTIN, SR., )
SCOTT LEWIS, as Special )
Administrator of the Estate of )
Timmie Lee Lewis, Deceased, and )
ETHELYN J. GORHAM, Executrix of )
the Estate of Gary Porter, )
Deceased, ) Honorable
Defendants-Appellees. ) Judge, presiding.
___________________________________________________________________________
Opinion Filed: October 29, 1996
___________________________________________________________________________
Justices: Honorable Clyde L. Kuehn, J.
Honorable Charles W. Chapman, J., and
Honorable Thomas M. Welch, J.,
Concur
___________________________________________________________________________
Attorney Stephen W. Thomson, Thomson & Behr, P.C., P.O. Box 538,
for Edwardsville, IL 62025
Appellant
___________________________________________________________________________
Attorneys Joseph E. Hoefert, Hoefert & Perica, P.C., 1600 Washington
for Avenue, Alton, IL 62002; John Long, 205 South Main Street,
Appellees P.O. Box 209, Troy, IL 62294 (for Ethelyn J. Gorham)
Samuel A. Mormino, Wiseman, Shaikewitz, McGivern, Wahl,
Flavin, Hesi & Mormino, P.C., 3517 College Avenue, Alton, IL
62002 (for Scott Lewis, as Special Administrator of the
Estate of Timmie Lee Lewis, Deceased)
Ralph J. Mendelsohn, Mendelsohn Law Offices, P.O. Box 3234,
Alton, IL 62002 (for Gregory L. Martin, Sr.)
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