544 N.E.2d 1082, 188 Ill. App. 3d 643, 136 Ill. Dec. 307 1989.IL.1400
Appeal from the Circuit Court of Cook County; the Hon. Arthur L. Dunne, Judge, presiding.
JUSTICE COCCIA delivered the opinion of the court. MURRAY, P.J., and PINCHAM, J., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE COCCIA
Insurance Company of Illinois brought this declaratory judgment action in the circuit court of Cook County to determine coverage under its homeowner's policy issued to defendants Stellios Markogiannakis (Markogiannakis) and his wife, Pauline Markogiannakis, for their Chicago home. ICI sought a declaration that it had no obligation to defend or indemnify Markogiannakis under the terms of this policy in connection with a personal injury lawsuit brought against him by Julia Crawley (Crawley), also a defendant in the declaratory action. After the court in the underlying personal injury suit found Markogiannakis liable for negligence in causing Crawley's injuries, and awarded her $17,000 in damages, the court in the declaratory proceeding granted ICI's motion for summary judgment. The trial court ruled that by operation of two exclusionary provisions in the policy, ICI had no duty to defend or indemnify Markogiannakis in the Crawley suit, or to reimburse him for the costs of his defense. The court also denied Markogiannakis' cross-motion for summary judgment. After their motions for reconsideration were denied, the defendants filed this appeal.
The following facts, brought out during the trial of the personal injury suit, also appear in the record of the declaratory action now under review. On March 19, 1984, Markogiannakis, a professional musician, went to a condominium building located at 6151 West Marshall, Chicago Ridge, Illinois, in order to personally collect rent from John Mason. Markogiannakis owned the condominium unit in which Mason resided, but had rented it to Mason on a continuing basis for about three years. After visiting Mason's apartment and collecting the $350 monthly rent payment in cash, Markogiannakis was walking away from Mason's unit. Julia Crawley, an officer in the building's condominium association, called him into her unit, which was across the hall. Because Markogiannakis had apparently not paid required condominium association fees, Crawley had intercepted him in an attempt to collect them. Inside the Crawley apartment, a heated Discussion ensued. While there is some dispute as to exactly what was said by Crawley and Markogiannakis, it is clear that Markogiannakis refused to give Crawley any money or payments. Markogiannakis became upset during this Discussion, and Crawley was either knocked to the floor by a door in her unit or knocked down by Markogiannakis directly. In either case, she suffered physical injuries as a result of what the trial Judge ultimately determined was Markogiannakis' negligent conduct.
Crawley filed a simple two-count complaint against Markogiannakis in December 1984. In the complaint, she alleged that she was the owner of a certain residential condominium unit at 6151 West Marshall in Chicago Ridge, Illinois; that on or about March 19, 1984, Markogiannakis was present in her condominium unit; and "that at [this] time and place, the defendant was guilty of [certain] acts." Count I alleged that the defendant "negligently and carelessly pushed open the door which came in contact with [her]" and/or "bumped into [her]," causing her to be knocked to the floor with such force that she was required to seek costly medical care for her injuries. Count II, based on the same occurrence, alleged that defendant's "intentional and/or willful and wanton acts," including harsh language and hitting or pushing her, caused her injuries. The complaint contained no statements or allegations relating to a Discussion between Crawley and Markogiannakis, or to what the topic of any conversation between them might have been. Nor did it allege or indicate any business-related or other purpose of the defendant in being in Crawley's unit or building on the day in question. It requested an award of $15,000 in damages.
Markogiannakis notified ICI about the Crawley suit in June 1985. In response, ICI sent Stellios and Pauline Markogiannakis a letter, stating that it was forwarding the matter to its attorneys for consideration, but was also reserving its rights under the policy conditions, "due to intentional act allegations . . . and the possibility that [Markogiannakis] w[as] acting in a professional capacity at the time of the incident." ICI further suggested that Markogiannakis retain his own attorney, "due to the possible conflict." A follow-up letter of August 29, 1985, advised the insureds that their policy did not provide coverage for the Crawley incident "because Mr. Markogiannakis was acting intentionally and in a professional capacity" at the time. ICI again suggested that Markogiannakis hire his own attorney to defend him in the Crawley litigation. Having refused to defend, ICI took no part in those proceedings. Private attorneys retained by Markogiannakis conducted his defense.
On September 13, 1985, approximately two weeks after sending the August 29 denial letter, ICI filed a complaint for declaratory judgment against Stellios and Pauline Markogiannakis and Julia Crawley. In count I, ICI asked the court to find that Crawley's personal injury complaint alleged "intentional and/or willful and wanton" conduct which was not covered by the policy issued to Markogiannakis because the policy specifically excluded coverage for medical payments to others for conduct which was "expected or intended" by the insured. Count II alleged that Markogiannakis had been present on the same premises where Crawley's condominium unit was located "for the purpose of collecting rent from his tenant," and that "at such time," Crawley inquired of Markogiannakis "regarding the payment of condominium association fees." Therefore, because the underlying complaint charged its policyholder with "conduct which arose out of the rental of his condominium unit," a policy exclusion for bodily injury liability "arising out of the rental or holding for rental of any premises by any insured" relieved ICI of any responsibility to either defend or indemnify Markogiannakis in connection with that lawsuit.
In his answer to ICI's original complaint (and later in his answer to plaintiff's amended complaint), Markogiannakis admitted (1) that he was on the same premises where Crawley's condominium was located for the purpose of collecting rent, and (2) that Crawley inquired of him regarding the payment of condominium association fees. He denied all allegations of noncoverage. His answer also included a request for all costs incurred in defending the Crawley suit, including attorney fees, and a ruling that ICI be required to indemnify him for any judgment awarded to Crawley.
On March 14, 1986, six months after filing the declaratory suit, ICI amended its complaint to add count III, which alleged that another policy exclusion, relating to medical payments to others "arising out of any premises owned or rented to any insured which is not an insured location," also precluded liability coverage and relieved it of any duty to defend or indemnify. On October 8, 1986, ICI filed a "request for admission of facts and genuineness of documents," which, inter alia, asked Markogiannakis to make the following admissions within 28 days: (1) that on March 19, 1984, defendant was renting a condominium at 6151 West Marshall, Chicago Ridge, Illinois, to John Mason; (2) that John Mason had rented the condominium referred to for approximately three years prior to March 19, 1984; and (3) that it was customary for the defendant to personally go each month to the condominium referred to for the purpose of collecting rent from his tenant, John Mason. Nowhere in the record is there evidence that Markogiannakis responded to this request within the time limit or thereafter. In the absence of denial or objections, these facts were admitted pursuant to Supreme Court Rule 216(c). 107 Ill. 2d Rules 216(a), (b), (c).
In December 1986, the trial in the underlying Crawley suit concluded. The court found in favor of Crawley on count I (negligence) and in favor of Markogiannakis on count II (willful and wanton and/or intentional conduct). Crawley was awarded $17,000 plus costs. On March 4, 1987, following substitution of attorneys for the Markogiannakis defendants, ICI filed a motion for summary judgment in the declaratory proceeding,
On appeal, defendants raise the following issues: (1) whether ICI, by its actions, breached its duty to defend Markogiannakis in the Crawley lawsuit and is therefore liable for the full amount of the judgment entered against him; (2) whether the occurrence of March 19, 1984, arose out of business pursuits or the rental or holding for rental of any part of any premises by an insured, within the meaning of the policy exclusion; and (3) whether Julia Crawley's injuries arose out of any premises owned or rented to any insured which is not an insured location, within the meaning of the policy exclusion. They contend that because ICI failed to secure a declaratory judgment either prior to or during the pendency of the underlying lawsuit, it breached its duty to afford Markogiannakis a defense as required by the policy and by Illinois law and is thereby estopped from raising any exclusionary defenses to indemnification. They also maintain that the policy's exclusionary provisions were not applicable to the occurrence in the Crawley apartment and that, consequently, Markogiannakis' negligent conduct was within the policy's liability coverage.
It is undisputed that the plaintiff issued to Stellios and Pauline Markogiannakis a homeowner's insurance policy with coverage extending from October 24, 1983, to October 24, 1984, and that this policy was in full force and effect at the time of Crawley's injuries. The policy contained the following relevant provisions.
"SECTION II -- LIABILITY COVERAGES
COVERAGE E -- PERSONAL LIABILITY. If a claim is made or a suit is brought against any insured for damages because of bodily injury or property damage to which this coverage applies, we will:
a. pay up to our limit of liability for the damages for which the insured is legally liable; and
b. provide a defense at our expense by counsel of our choice. . . . Our obligation to defend any claim or suit ends when the amount we pay for damages resulting from the occurrence [emphasis added] equals our limit of liability.
COVERAGE F -- MEDICAL PAYMENTS TO OTHERS
We will pay the necessary medical expenses incurred . . . within three years from the date of an accident causing bodily injury. . . . This coverage does not apply to you or regular residents of your household . . . As to others, this coverage applies only:
b. to a person off the insured location [emphasis added], if the bodily injury:
(2) is caused by the activities of any insured; . . .
1. Coverage E -- Personal Liability and Coverage F -- Medical Payments to Others do not apply to bodily ...