The opinion of the court was delivered by: Miller
JUSTICE MILLER delivered the opinion of the court:
This appeal involves a coverage dispute between plaintiff, Dixon Distributing Co. (Dixon), and one of its insurers. The dispute originated between the parties when Patrick Hanneken filed a retaliatory discharge action against Dixon. Dixon thereafter sought a declaratory judgment that defendants, Commercial Union Insurance Company (Commercial), Hanover Insurance Company (Hanover), Massachusetts Bay Insurance Company (Massachusetts), and International Insurance Company (International), must defend and indemnify it against the underlying retaliatory discharge action. The circuit court entered summary judgment in favor of defendants, finding there could be no insurance coverage for the underlying claim and, hence, no duty to defend on the part of the various insurance companies. The appellate court affirmed in part, reversed in part and remanded. (244 Ill. App. 3d 837.) We allowed International's petition for leave to appeal (134 Ill. 2d R. 315(a)) and now affirm the judgment of the appellate court.
The facts in this case are not in dispute. Hanneken filed a retaliatory discharge action against Dixon, alleging that he had suffered two work-related injuries during his employment with Dixon and had filed separate workers' compensation claims for each. Hanneken further alleged that Dixon's president, who was also a named defendant, "exhibited bias and prejudice against [him] in the exercise of his rights as an employee under the Worker's Compensation Act," and his discharge from employment was a "wilful, intentional and wrongful" act in violation of section 4(h) of the Workers' Compensation Act (Act) (Ill. Rev. Stat. 1985, ch. 48, par. 138.4(h)) and the public policy of Illinois. The complaint sought Hanneken's reinstatement to a "suitable position" and compensatory and punitive damages. This complaint was later dismissed, and Hanneken filed an amended complaint. The amended complaint alleged that Hanneken's discharge and Dixon's refusal to rehire him was "intentional and in retaliation of and solely for the exercise of [his] rights under the Illinois Worker's Compensation Act in violation of the * * * public policy of the State of Illinois." This complaint again sought Hanneken's reinstatement to a "suitable position" and compensatory and punitive damages.
Following initiation of the suit, Dixon tendered defense of the underlying action to defendants under a package of comprehensive commercial insurance policies that it had purchased simultaneously from defendants. Hanover initially defended Dixon, under a reservation of rights, but later withdrew and discontinued all defense. International and Massachusetts refused entirely to defend Dixon, contending that their policies excluded from coverage the tort of retaliatory dischargeand, even if their policies did not exclude it, the public policy of Illinois would preclude insurance against such an act. Although Commercial represented Dixon in connection with the workers' compensation claims, it similarly refused to defend Dixon in the instant action. Because of defendants' refusal to defend it, Dixon instituted this declaratory judgment action, seeking a declaration that one or all of defendant insurance companies had a duty to defend and indemnify it in the underlying retaliatory discharge action.
Relying primarily on the Seventh Circuit's opinion in United States Fire Insurance Co. v. Beltmann North American Co. (7th Cir. 1989), 883 F.2d 564, which held that actual malice was a component of a retaliatory discharge claim in Illinois and that an insurance policy excluding offenses committed with actual malice necessarily excluded coverage for a retaliatory discharge claim, the circuit court ruled in favor of defendants on the parties' cross-motions for summary judgment. Following the opinion in Beltmann, the circuit Judge found there could be no insurance coverage for damages involved in a retaliatory discharge action. With no possibility of coverage for the underlying claim, the Judge found no duty to defend on the part of defendants.
Dixon appealed the judgment, except as it applied to Commercial, and the appellate court affirmed in part, reversed in part, and remanded. (244 Ill. App. 3d 837.) It summarily upheld the circuit court's ruling granting summary judgment in favor of Hanover and Massachusetts, reasoning that it was clear from their policies that neither included any possibility of coverage for the tort of retaliatory discharge. (244 Ill. App. 3d at 841.) The appellate court, however, found that the insurance policy issued by International potentially covered the tort of retaliatory discharge. In reaching this determination, the court disagreed with Beltmann and held thatactual malice was not an element of the tort. (244 Ill. App. 3d at 849.) Consequently, International could not rely on the definition of "occurrence" in its policy, which excluded coverage for offenses committed with actual malice, to exclude coverage. The court then went on to consider whether this potential coverage violated public policy. For various reasons, it concluded it did not. (244 Ill. App. 3d at 850-53.) As a result, the appellate court held International breached its duty to defend Dixon in the action. (244 Ill. App. 3d at 853-54.) While the appeal was pending, the underlying retaliatory discharge action was dismissed pursuant to a settlement agreement. (See 244 Ill. App. 3d at 840.) The appellate court did not reach the indemnification issue.
We allowed International's petition for leave to appeal (134 Ill. 2d R. 315(a)) and, for the reasons that follow, affirm the judgment of the appellate court. The primary issues on appeal are whether, under the terms of International's insurance policy, International owed a duty to defend Dixon against the retaliatory discharge claim, and if so, whether public policy prohibits such coverage. Because the appellate court found Hanover and Massachusetts did not have a duty to defend and Dixon did not appeal this ruling, we are not called upon to decide whether coverage existed under these policies.
In Illinois, an insurer's duty to defend is determined by comparing the allegations in the underlying complaint to the relevant provisions of the insurance policy. ( Outboard Marine Corp. v. Liberty Mutual Insurance Co. (1992), 154 Ill. 2d 90, 107-08, 180 Ill. Dec. 691, 607 N.E.2d 1204; United States Fidelity & Guaranty Co. v. Wilkin Insulation Co. (1991), 144 Ill. 2d 64, 73, 161 Ill. Dec. 280, 578 N.E.2d 926.) An insurer's duty to defend arises if the complaint alleges facts that fall within, or potentiallywithin, the policy's coverage. ( Wilkin, 144 Ill. 2d at 73; Zurich Insurance Co. v. Raymark Industries, Inc. (1987), 118 Ill. 2d 23, 52, 112 Ill. Dec. 684, 514 N.E.2d 150.) Refusal to defend is unjustifiable unless it is clear from the face of the underlying complaint that the allegations fail to state facts that bring the case within, or potentially within, the policy's coverage. Wilkin, 144 Ill. 2d at 73.
Turning to the policy at issue here, International's policy is a commercial umbrella policy that insures against general liability claims asserted by third parties in excess of the coverage provided by Dixon's general liability insurance carriers. While International's policy is an excess policy, it acts as primary insurance where the claim falls within the policy's coverage, ...