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October 29, 1996


Appeal from the Circuit Court of Madison County. No. 93-MR-374. Honorable David Herndon, Judge, presiding.

As Corrected.

The Honorable Justice Kuehn delivered the opinion of the court: Chapman and Welch, JJ., concur.

The opinion of the court was delivered by: Kuehn

The Honorable 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 conclusion. 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 complaints 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, 167 Ill. Dec. 225 (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, 112 Ill. Dec. 76 (1987); Trovillion v. United States Fidelity & Guaranty Co., 130 Ill. App. 3d 694, 700, 474 N.E.2d 953, 958, 86 Ill. Dec. 39 (1985); Reis v. Aetna Casualty & Surety Co. of Illinois, 69 Ill. App. 3d 777, 782, 387 N.E.2d 700, 704, 25 Ill. Dec. 824 (1978); Thornton v. Paul, 51 Ill. App. 3d 337, 340-41, 366 N.E.2d 1048, 1051, 9 Ill. Dec. 537 (1977), aff'd in part & rev'd in part, 74 Ill. 2d 132, 384 N.E.2d 335, 23 Ill. Dec. 541 (1978). An insurer can always refuse to defend the claim and choose to forego seeking a declaratory 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, 42 Ill. Dec. 219 (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, 23 Ill. Dec. 541 (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, 128 Ill. Dec. 621 (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, 119 Ill. Dec. 96 (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, 161 Ill. Dec. 280 (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. Lewis'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 negligence, 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. Furthermore, 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, 205 Ill. Dec. 936 (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 participation 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, 147 Ill. Dec. 386 (1990); Grinnell Mutual Reinsurance Co. v. Frierdich, 79 Ill. App. 3d 1146, 1148, 399 N.E.2d 252, 254, 35 Ill. Dec. 418 (1979); Bay State Insurance Co. v. Wilson, 96 Ill. 2d 487, 493-94, 451 N.E.2d 880, 882-83, 71 Ill. Dec. 726 (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, 175 Ill. Dec. 324 (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, 204 Ill. Dec. 171 (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.


CHAPMAN and WELCH, JJ., concur.


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