APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIRST DIVISION
516 N.E.2d 577, 163 Ill. App. 3d 200, 114 Ill. Dec. 422 1987.IL.1625
Appeal from the Circuit Court of Cook County; the Hon. Arthur L. Dunne, Judge, presiding.
PRESIDING JUSTICE QUINLAN delivered the opinion of the court. BUCKLEY and O'CONNOR, JJ., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE QUINLAN
Defendant Richard S. McGehee (McGehee), administrator of the estate of Susanna M. McGehee, appeals from the order of the circuit court of Cook County which granted plaintiff Safeco Insurance Company (Safeco) summary judgment on its suit for declaratory judgment. The issues before this court are whether Safeco's complaint for declaratory judgment was premature and should have been stricken; whether Safeco's summary judgment motion was improperly granted when a question of fact existed concerning the Brimies' homeowner insurance policy coverage; and whether the motion to vacate was properly denied when the movant failed to call it up for hearing within 90 days. McGehee seeks a reversal of both the circuit court's decision granting Safeco summary judgment and the order denying his motion to vacate the summary judgment order.
McGehee's potential claim against the Brimies' homeowner insurance policy, for which Safeco sought a declaration that it owed no coverage, arose out of a motorbike accident in which Susanna McGehee was fatally injured. At about 7 p.m. on August 20, 1984, Susanna McGehee was a passenger on a motorized dirt bike operated by her boyfriend, Charles J. Brimie. Brimie drove McGehee across a field and through the playground of Horizon School to a convenience store to purchase a package of gum. On the return trip, Brimie rode on a sidewalk in the Horizon playground until the pavement ended near a sandlot. It was here, at the southwest corner of the playground near the sandlot, that Brimie lost control of the dirt bike and both he and Susanna were thrown to the ground. Susanna McGehee died from her injuries later that day. Susanna's father, Richard McGehee, was appointed administrator of her estate.
Mr. McGehee filed a wrongful death action against the American Honda Motor Company (Honda) alleging that the dirt bike, manufactured and sold by Honda, was not reasonably safe for its intended use and that it was the product's inherent instability which caused Charles Brimie to lose control of the dirt bike and proximately caused the fatal injuries to Susanna McGehee on August 20, 1984. Although Charles Brimie was not named as a plaintiff in this wrongful death action sounding in strict products liability, he was named in the allegations of the complaint. McGehee also made a claim against the Brimies' homeowner insurance; however, Safeco, Brimies' insurer, denied that it owed coverage under the policy and proceeded to handle the claim pursuant to a reservation of rights. Thereafter, Safeco filed this declaratory judgment action against Richard S. McGehee on February 11, 1985, based on its belief that Richard McGehee was about to name Charles J. Brimie and his parents, Bonnie and Charles M. Brimie, as additional defendants or that Honda was about to bring them into the wrongful death suit as third-party defendants. Safeco sought a declaration that it owed no duty of coverage to the Brimies by reason of the occurrence pleaded in the underlying action because of its policy exclusions for personal liability, and medical payments to others, arising out of the use of "a motorized land conveyance designed for recreational use off public roads, not subject to motor vehicle regulations and owned by any insured, while on an insured location."
On July 10, 1986, the trial court held a hearing on Safeco's motion for summary judgment and entered judgment in its favor. However, the trial court stayed its order until August 21, 1986; the day after the statute of limitations would run on the wrongful death claim. On August 19, 1986, Richard McGehee filed a suit against Charles M. and Bonnie Brimie, alleging negligent entrustment in allowing their son to use the dirt bike, and against their son, Charles J. Brimie, alleging negligent operation of the dirt bike. Subsequently, on September 19, 1986, McGehee filed a motion to vacate the summary judgment order in favor of Safeco in the declaratory judgment suit. McGehee failed to call up his motion to vacate for a hearing, but Safeco later did so on December 11, 1986. The court summarily denied McGehee's motion to vacate, apparently on the ground that he had not requested a hearing within 90 days as required under circuit court Rule 2.3. Consequently, McGehee now appeals from both the order granting summary judgment to Safeco in the declaratory judgment action and the order denying his motion to vacate the summary judgment.
McGehee argues in this appeal that the declaratory judgment action was premature because at the time summary judgment was granted no "actual controversy" existed between Safeco and McGehee as required under section 2-701 of the Code of Civil Procedure. (Ill. Rev. Stat. 1985, ch. 110, par. 2-701.) McGehee contends that declaratory judgment was premature since "the insured is simply not at risk and has no 'actual controversy' with the insurance company until after he is sued and is denied defense or coverage," citing Gibraltar Insurance Co. v. Varkalis (1970), 46 Ill. 2d 481, 263 N.E.2d 823. Hence, McGehee concludes that declaratory relief was not available to Safeco until a lawsuit had been filed against its insured and the defense tendered to it and it denies a defense or coverage. However, contrary to McGehee's contentions, we do not interpret the Gibraltar decision to require, under circumstances such as here, that an insurer must wait for a lawsuit to be filed against its insured before it can petition a court for a judicial declaration of its rights and obligations under its insurance policy.
In Gibraltar the insurer contended that it did not owe coverage under its policy based on the fact that the insured there had intentionally committed an assault and battery on the victim by pushing her from his automobile and then repeatedly running over her body. However, unlike the situation involved here, the insurer there never denied coverage or gave its insured notice of any denial until it filed a declaratory judgment suit more than five years after the occurrence. The question presented there was whether the declaratory judgment action, seeking to determine that no coverage was provided under the insurance contract, was barred by the statute of limitations, inasmuch as the declaratory judgment suit was not filed until more than five years after the occurrence. In affirming the trial court's dismissal of the declaratory judgment suit on other grounds, our supreme court stated that "no actual controversy arises among the parties until such time as the issuing company is called upon to either pay or defend a claim on behalf of its insured under the terms of the policy in question." (Gibraltar, 46 Ill. 2d at 485, 263 N.E.2d at 826.) There, the supreme court held that an actual controversy did not arise until the estate of the victim had delivered a letter to the insurer advising it that no answer had been filed in an underlying tort action against its insured in that case. However, this was said in the context of whether the insurer's declaratory judgment suit was untimely, i.e., as filed too late in time, in relation to the occurrence for which the insurer was denying coverage. The court there found that, under the circumstances, the actual controversy only arose when the insurer received the notice from the estate of the victim, and thus, the declaratory judgment suit was timely. (46 Ill. 2d at 486, 263 N.E.2d at 826.) Here, there is no issue concerning the timeliness of the suit or of notice to the insureds; Safeco denied coverage after the estate of Susanna McGehee made a claim under the Brimies' homeowner insurance policy and then it began to handle the claim pursuant to a reservation of rights; thus, we believe an "actual controversy" was created at that time. Shortly thereafter, Safeco brought this declaratory judgment action.
It is well settled that declaratory relief is available where a case presents "a concrete dispute admitting of an immediate and definitive determination of the parties' rights, the resolution of which will aid in the determination of the controversy or some part thereof." (Underground Contractors Association v. City of Chicago (1977), 66 Ill. 2d 371, 375, 362 N.E.2d 298, 300; see also Royal Globe Insurance Co. v. Aetna Insurance Co. (1980), 82 Ill. App. 3d 1003, 1005, 403 N.E.2d 680, 682.) It is also a long-standing principle that the courts favor declaratory judgment actions on the issue of policy coverage prior to an adjudication of the underlying claim (Apex Mutual Insurance Co. v. Christner (1968), 99 Ill. App. 2d 153, 240 N.E.2d 742) and that the insurer normally need not wait until the underlying suit is filed or reduced to judgment against its insured before it may seek declaratory relief based on a present denial of coverage (Farmers Automobile Insurance Association v. Janusick (1961), 30 Ill. App. 2d 352, 174 N.E.2d 705). (See 26 C.J.S. Declaratory Judgments § 64 (1956).) Accordingly, Safeco did not need to wait until its insured was actually named in the wrongful death suit to seek a construction of the Brimies' homeowner insurance policy and a declaration of whether coverage existed. La Salle Casualty Co. v. Lobono (1968), 93 Ill. App. 2d 114, 236 N.E.2d 405.
We further note that the "actual controversy" of whether the Brimies' homeowner insurance policy provided coverage for the August 20, 1984, occurrence was unrelated to the issues in the underlying wrongful death suit, and, therefore, a declaratory judgment in this case before a suit was filed against the insured would not work any prejudice toward the estate of Susanna McGehee in its tort action against either Honda or the Brimies. (See Ingram, Conflicts of Interest in the Insurer's Duty to Defend in Illinois, 17 J. Marshall L. Rev. 379, 383 (1984). Cf. Murphy v. Urso (1981), 88 Ill. 2d 444, 455, 430 N.E.2d 1079, 1084; Burlington Northern R.R. Co. v. Illinois Emasco Insurance Co. (1987), 158 Ill. App. 3d 783, 788.) Additionally, we note that McGehee did, in fact, file suit against Charles M. and Bonnie Brimie and their son Charles J. Brimie prior to the effective date of Safeco's judgment on its motion for summary judgment and while the declaratory judgment action was still pending before the trial court, since it was filed during the period the judgment had been stayed.
We find this situation here analogous to that in Fidelity & Casualty Co. v. Envirodyne Engineers, Inc. (1983), 122 Ill. App. 3d 301, 461 N.E.2d 471, where the insurer had filed suit against its insured seeking a declaration that it owed no coverage and that its insured's actions fell within the provisions of one of the policy exclusions. The trial court granted judgment for the insured and this court affirmed, finding that an insurer may properly challenge the existence of coverage in a declaratory proceeding by offering evidence to prove that the underlying facts fall within the limitations of one of the policy exclusions unless such evidence "tends to determine an issue crucial to the determination of the underlying lawsuit." (122 Ill. App. 3d at 304-05, 461 N.E.2d at 474.) Here, as in Fidelity, Safeco sought a declaration that there was no coverage for the occurrence in the Brimies' homeowner insurance policy and submitted certain photographic and ...