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Mfa Mutual Ins. Co. v. Crowther

OPINION FILED DECEMBER 12, 1983.

MFA MUTUAL INSURANCE COMPANY, PLAINTIFF-APPELLANT,

v.

CROWTHER, INC., ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. Brian B. Duff, Judge, presiding.

PRESIDING JUSTICE BUCKLEY DELIVERED THE OPINION OF THE COURT:

This appeal arises out of a third-party action brought by MFA Mutual Insurance Company (MFA) against Casualty Insurance Company (Casualty) and Casualty's insured, Crowther, Inc., for allegedly wrongfully refusing to defend an underlying personal injury suit brought under the Structural Work Act (Ill. Rev. Stat. 1981, ch. 48, par. 60 et seq.). The complaint sought reimbursement of the expenses incurred by MFA in defending the personal injury action plus the judgment paid and interest. Additionally, the complaint included counts predicated upon theories of implied indemnity and contribution. Casualty and Crowther, Inc., filed a motion to dismiss the complaint, and the motion was granted by the trial court. MFA appeals from the order of dismissal. We affirm.

The record reveals as follows. MFA insured Lee Crowther on his home in Joliet, Illinois, under a homeowner's insurance policy issued in 1973. Later that year, Lee Crowther contracted with Kofoid & Tilon, a general contractor, to build a family addition to his home. The roofing and gutter work was to be done by Crowther, Inc., of which Lee Crowther was part owner and vice-president. Crowther, Inc., hired Robert Bishop as a loaned employee to perform some of the roofing work. While performing the work, Bishop sustained serious injuries when he fell off a ladder as he carried a bundle of shingles on his shoulders.

Bishop filed a claim for worker's compensation against his employer, Crowther, Inc. Casualty insured Crowther, Inc., and therefore defended the worker's compensation claim. Eventually, through Casualty, Bishop received his worker's compensation benefits and the claim was settled.

Bishop additionally filed a lawsuit predicated on the Structural Work Act against Lee Crowther individually and Kofoid & Tilon. No third-party action was ever filed against Crowther, Inc. MFA defended Lee Crowther in the Structural Work Act suit under a reservation of rights based on the business pursuits and worker's compensation exclusions in the homeowner's policy. The case was tried and the jury returned a verdict against Lee Crowther in the amount of $175,000. Kofoid & Tilon were found not liable. Lee Crowther appealed the judgment, contending, among other things, that he as a private homeowner could not be held liable as a party "in charge of" the work under the Structural Work Act. The appellate court expressly rejected this argument and affirmed the judgment against Lee Crowther. (Bishop v. Crowther (1980), 92 Ill. App.3d 1, 415 N.E.2d 599.) Leave to appeal was denied by the supreme court. 85 Ill.2d 555.

Robert Bishop thereafter filed a garnishment proceeding against MFA upon the homeowner's insurance policy, and MFA filed a declaratory judgment proceeding for a declaration that it was not liable under the policy because of the business pursuits and worker's compensation exclusions in the policy. The trial court held that the exclusions did not apply and it entered a garnishment judgment against MFA in the amount of the judgment recovered by Bishop, plus interest and costs.

MFA appealed, again asserting the argument that a private homeowner is not "in charge of" the work under the Structural Work Act. The appellate court disagreed and affirmed the trial court on the basis of the previous appellate court decision. (Bishop v. Crowther (1981), 101 Ill. App.3d 933, 428 N.E.2d 1021.) The supreme court denied leave to appeal. 88 Ill.2d 549.

MFA subsequently filed a third-party action against Crowther, Inc. and Casualty. MFA alleged that Casualty wrongfully refused to accept MFA's tender of defense and indemnification in the Structural Work Act suit. The complaint additionally pleaded actions for implied indemnity and contribution. Casualty and Crowther, Inc. moved to dismiss the third-party complaint pursuant to section 48 of the Civil Practice Act (now codified as section 2-619 of the Code of Civil Procedure (Ill. Rev. Stat. 1981, ch. 110, par. 2-619)). The two appellate court opinions in this matter were attached in support of the motion. The trial court granted the motion to dismiss the third-party complaint.

I

We first address MFA'S contention that its complaint was improperly dismissed because Casualty had a duty to defend Lee Crowther in the underlying Structural Work Act suit. MFA argues that as a result of Casualty's wrongful failure to defend Lee Crowther, MFA is entitled to recover from Casualty the sum of the judgment plus interest and costs it incurred in defending the action. We find this argument without merit.

In Illinois, an insurer's duty to defend an action against its insured is determined by the allegations of the complaint against him. (Conway v. Country Casualty Insurance Co. (1982), 92 Ill.2d 388, 393, 442 N.E.2d 245; Maryland Casualty Co. v. Peppers (1976), 64 Ill.2d 187, 193, 355 N.E.2d 24.) An insurer may not justifiably refuse to defend an action against its insured unless it is clear from the face of the complaint that the allegations fail to state facts which bring the case within, or potentially within, the policy's coverage. (Conway v. Country Casualty Insurance Co. (1982), 92 Ill.2d 388, 393, 442 N.E.2d 245.) When the allegations of the complaint show that the claim is beyond the policy coverage, the insurer can safely and justifiably refuse to defend. (Reis v. Aetna Casualty & Surety Co. (1978), 69 Ill. App.3d 777, 784, 387 N.E.2d 700.) Hence, it is apparent from these controlling principles that the following two requirements must be met before an insurer has a duty to defend an action: (1) the action must be brought against an insured; and (2) the allegations of the complaint must reveal the potential of policy coverage.

• 1 In the case at bar, neither of the foregoing requirements are met. First, no entity insured by Casualty was named as a defendant in the complaint filed by Robert Bishop; Lee Crowther was sued individually, and Crowther, Inc., was never named as a defendant. No third-party action was filed against Crowther, Inc., at that time. Second, all of the allegations in the complaint were directed against Lee Crowther as owner of the home involved in the incident. There were no allegations that Lee Crowther was acting as an agent of Crowther, Inc. or that Lee Crowther was in any way connected with or acting on behalf of Crowther, Inc. If Bishop's complaint had contained such allegations, his claim would have been barred because he would have been suing a co-employee. (Brooks v. Carter (1981), 102 Ill. App.3d 635, 430 N.E.2d 566.) The allegations against Lee Crowther were carefully drafted to avoid the exclusive remedy provision contained in the Workers' Compensation Act. Ill. Rev. stat. 1981, ch. 48, par. 138.5.

Hence, since the allegations of Bishop's complaint reveal that the action was not brought against Casualty's insured and that there was no potential for coverage under the Casualty policy, Casualty had no duty to defend the underlying action.

MFA cites several cases for the proposition that an insurance company that wrongfully fails to defend its insured will be estopped from any subsequent collateral attack against the underlying proceeding. (Solo Cup Co. v. Federal Insurance Co. (7th Cir. 1980), 619 F.2d 1178, 1184; Reis v. Aetna Casualty & Surety Co. (1978), 69 Ill. App.3d 777, 783, 387 N.E.2d 700; Aetna Casualty & Surety Co. v. Coronet Insurance Co. (1976), 44 Ill. App.3d 744, 748, 358 N.E.2d 914; McFadyen v. North River Insurance Co. (1965), 62 Ill. App.2d 164, 172, 209 N.E.2d 833.) These cases, however, fail to support MFA's position; each case involves a situation wherein a named insured was sued and the insurance company argued it had no duty to defend the action based upon an exclusion contained in the insurance policy. In the present case, ...


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