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American Family Mutual Insurance Co. v. Savickas

Illinois Appellate Court

October 20, 1998


The opinion of the court was delivered by: Justice McNULTY

Appeal from the Circuit Court of Cook County

Honorable Dorothy Kinnaird, Judge Presiding

American Family Mutual Insurance Company sued for a judgment declaring that it had no duty to defend or indemnify its insured, Michael Savickas, in a lawsuit Elizabeth Vinicky brought against him. The trial court granted summary judgment for American Family. Savickas appeals in docket number 1-97-0026 and Vinicky appeals in docket number 1-96-4428. We consolidated the appeals.

After a jury found Savickas guilty of the murder of Thomas Vinicky, Elizabeth Vinicky, administrator of Thomas' estate, sued Savickas for wrongfully causing the death. Savickas tendered defense to American Family. Due to a conflict of interests, American Family refused to defend, but it agreed to reimburse Savickas for defense costs. American Family then brought this suit for a declaratory judgment. Its policy excluded coverage for any bodily injury "which is expected or intended" by the insured.

American Family supported its motion for summary judgment with Vinicky's complaint against Savickas and excerpts from Savickas' testimony in the criminal trial. In the first two counts of her complaint, Vinicky alleged that Savickas intentionally shot and killed Thomas Vinicky. But in the last two counts she alleged that Savickas "[n]egligently shot" Thomas, and Savickas "[n]egligently assessed a need for self defense." In granting summary judgment, the trial court relied primarily on Savickas' testimony and the appellate court's decision affirming the criminal conviction. See People v. Savickas, 230 Ill. App. 3d 322, 594 N.E.2d 1233 (1992).

Our supreme court restated the principles for determining an insurer's duty to defend in Maryland Casualty Co. v. Peppers, 64 Ill. 2d 187, 355 N.E.2d 24 (1976), and Thornton v. Paul, 74 Ill. 2d 132, 384 N.E.2d 335 (1978). In Peppers, Mims sued Peppers, alleging that Peppers shot him intentionally or negligently. Peppers' insurer sued for a judgment declaring that it had no duty to defend or indemnify Peppers. In support the insurer presented undisputed evidence that Peppers intentionally shot at Mims to protect his property from burglary. The trial court found a duty to defend based on the allegations of the complaint, but no duty to indemnify. Our supreme court agreed that the insurer had a duty to defend (Peppers, 64 Ill. 2d at 194), and vacated the judgment regarding indemnity because

"the finding in the declaratory judgment action that the injury was intentionally inflicted could possibly establish the allegations of the assault count in the complaint and might preclude Mims' right to recover under the other theories alleged. [Citations.] In a case quite similar to ours the appellate court held that the ruling and judgment of the trial court in a declaratory judgment action under such circumstances were 'premature' and should be reversed. [Citation.] We agree with that holding. The finding of the trial court in our case that the injury was intentional was not proper in this declaratory judgment action."

Peppers, 64 Ill. 2d at 197.

In Thornton, after a court found Paul guilty of criminal battery on Thornton, Thornton filed a civil suit alleging that Paul negligently struck him in the head. Paul's insurer expressly excluded battery from coverage. The court held:

"As a general rule, the duty of an insurer to defend an action brought against the insured is to be determined solely from the allegations of the complaint. If the complaint alleges facts within or potentially within policy coverage, the insurer is obliged to defend even if the allegations are groundless, false, or fraudulent. [Citations.] In addition, in Illinois the duty is not annulled by the knowledge of the insurer that the allegations are untrue.

*** With the exception of the amended complaint, all the facts, depositions and pleadings in the present case clearly indicate that the claim was based on an intentional battery by Ben Paul, not on negligence. It is equally clear that the plaintiff's attorney was well aware that the defendant's act was a battery and that he filed the amended complaint charging negligence solely for the purpose of bringing the action within potential insurance coverage, thereby intending to obligate the insurer to defend after the insurance company had investigated, learned that the conduct was a battery, and refused. There is no explanation for the procedures followed other than the desire of plaintiff's counsel to maneuver the insurer into a position where it would be obligated to pay the judgment and estopped from raising the defense of noncoverage." Thornton, 74 Ill. 2d at 144-46.

Based on the unsupported allegation of negligence in the amended complaint, and in the face of the uncontested evidence of intentional battery, the court held that the insurer "was obligated to provide a defense of the amended complaint to the insureds and that this obligation must be satisfied by reimbursing the insureds for the costs thereof." Thornton, 74 Ill. 2d at 162. The court explained that, due to their conflicting interests, "the insurer should not be *** permitted to participate in the defense of the case. Its obligation to provide a defense should be satisfied by reimbursing the insured for the costs of the defense." Thornton, 74 Ill. 2d at 152. In the suit to determine the duty to indemnify, to begin after Conclusion of the underlying civil suit, the criminal conviction would constitute prima facie evidence that Paul committed a battery.

Here, as in Thornton, the court had reason to believe that Vinicky alleged negligence solely to bring her suit within the ambit of Savickas' insurance coverage. Here, too, the defendant had a criminal conviction and all depositions and other testimony showed he expected injury to result from his intentional acts. Under Thornton, these facts cannot relieve the insurer of the duty to defend. As the court said in Management Support Associates v. Union Indemnity Insurance Co., 129 Ill. App. 3d 1089, 1096, 473 N.E.2d 405 (1984), "the insurer can safely and justifiably refuse to defend only when the allegations clearly show on their face that the claim is beyond policy coverage." The allegation of negligence in Vinicky's complaint, like the allegation in Thornton, triggered the duty to defend, and the complaint on its face does not here allege conflicting facts sufficient to relieve the insurer of that duty. Under Peppers, the court should not yet decide the duty to indemnify.

The trial court relied on Allstate Insurance Co. v. Carioto, 194 Ill. App. 3d 767, 551 N.E.2d 382 (1990), in finding no duty to defend or indemnify. In that case the court said that Peppers and Thornton "recognize that in instances where bona fide controversies arise over the issue of negligence versus intentional conduct, declaratory judgment actions are generally inappropriate." Carioto, 194 Ill. App. 3d at 774. The court then found that all of the evidence, including depositions and a criminal conviction, showed that the insured acted intentionally, and only the complaint against the insured alleged negligence. Because the court found no bona fide controversy concerning intent, it affirmed the trial court's decision to grant Allstate a judgment declaring it had no duty to defend its insured.

Our supreme court did not limit the application of Thornton to cases involving bona fide controversies over issues needed to determine coverage. In Thornton itself the court recognized the parties had no bona fide dispute, and the plaintiff alleged negligence solely to bring the cause of action within the insurance coverage. The court stressed that all of the evidence, including depositions and the criminal conviction, showed the insured acted intentionally; against that evidence, the underlying complaint alleged negligence. That allegation required the insurer to defend.

We cannot reconcile Carioto with Thornton. In Carioto the court effectively sought to overrule Thornton, as the limitation to bona fide controversies would have required a result on the facts of Thornton contrary to the result our supreme court reached. Under Thornton, the issue of the pleader's good faith, like all other issues in the underlying suit, must be resolved in that suit and not in the ancillary declaratory judgment proceedings.

"[O]nce the supreme court has declared the law on any point, we may not refuse to follow it, no matter what our personal views might be, because the supreme court alone has the power to overrule or modify its decisions." Clark Oil & Refining Corp. v. Johnson, 154 Ill. App. 3d 773, 780, 506 N.E.2d 1362 (1987). The court exceeded its authority when it sought to modify, and effectively overrule, Thornton. Accordingly, we decline to follow Carioto.

In Carioto this division emphasized the rare facts of that case. There, the insured judicially admitted, in the context of the personal injury suit, that he acted intentionally, and he specifically repeated the admission after an attorney expressly warned that the admission would negate his insurance coverage. Here, by contrast, we have no similar admissions in the context of the personal injury suit. If our supreme court should fashion a modification of Thornton to accommodate the result in Carioto, we still would need to reverse the trial court's decision here. Unless our supreme court overrules Thornton, American Family has the duty to pay for Savickas' defense of Vinicky's lawsuit.

American Family argues that our supreme court has already implicitly overruled Thornton, at least on the issue of the estoppel effect of a criminal conviction, in Talarico v. Dunlap, 177 Ill. 2d 185, 685 N.E.2d 325 (1997), and In re Scott, 98 Ill. 2d 9, 455 N.E.2d 81 (1983). In Scott, an attorney faced suspension from practice following a conviction for filing false tax returns. The attorney conceded that the conviction constituted conclusive evidence, and not merely prima facie evidence, of his guilt, for purposes of the disciplinary proceedings. Scott, 98 Ill. 2d at 13. Thus, our supreme court did not need to decide whether the conviction collaterally estopped the attorney from relitigating the issues that arose in the criminal case. Moreover, the court had given criminal convictions conclusive effect for disciplinary proceedings long before it decided Thornton. See In re Teitelbaum, 13 Ill. 2d 586, 588, 150 N.E.2d 873 (1958). Scott does not overrule Thornton any more than Thornton overruled Teitelbaum. Although criminal convictions are conclusive evidence of guilt for attorney disciplinary proceedings, they constitute only prima facie evidence for personal injury suits like the one Thornton brought against Paul and the one Vinicky brought against Savickas.

In Talarico the plaintiff sued his doctor for prescribing drugs that caused him to commit a crime. The doctor sought to use the criminal conviction of the plaintiff defensively, to collaterally estop the plaintiff from litigating any issue he could have raised in the criminal case concerning the effect of the drugs on his actions. The court recited minimal standards for the application of defensive collateral estoppel and found even those minimal requirements were not met. Therefore, the court held that the criminal conviction did not estop the plaintiff from litigating the effect of the drugs. Talarico, 177 Ill. 2d at 198.

Although the court allowed that criminal convictions might have conclusive effect in some civil actions, and the court discussed some minimal criteria for defensive estoppel, the court did not purport to establish any standards that would require application of collateral estoppel. The court did not mention Thornton or the Conclusion it reached there that an insurer may not use a criminal conviction of its insured offensively to collaterally estop the insured from relitigating, in a subsequent civil action, issues that may have arisen in the criminal trial. As Talarico involved only defensive collateral estoppel, and the court has emphasized the need for greater care in applying offensive collateral estoppel (see Van Milligan v. Board of Fire & Police Commissioners, 158 Ill. 2d 85, 95, 630 N.E.2d 830 (1994)), we do not find that the decision in Talarico effectively overruled Thornton. If our supreme court chooses to overrule Thornton, it will need to do so more clearly.

American Family asserts that Thornton applies only to cases in which the declaratory judgment would determine an issue that will be crucial to determination of the underlying case. But here the trial court's declaratory judgment established that Savickas shot Thomas Vinicky, and when he did so he expected to injure him. These issues may affect proof of whether Savickas proximately caused the death. See Stojkovich v. Monadnock Building, 281 Ill. App. 3d 733, 738, 666 N.E.2d 704 (1996).

The evidence apart from the complaint here shows no real dispute over the issue of proximate cause, but the evidence apart from the complaint in Thornton also showed no real dispute over Paul's intent. Such evidence does not alter the duty to defend. "A court may look beyond the allegations in the complaint only if the coverage issue involves such ancillary matters as whether the insured paid the premiums or whether he is the proper insured under the policy." Bituminous Casualty Corp. v. Fulkerson, 212 Ill. App. 3d 556, 562, 571 N.E.2d 256 (1991). This case does not involve such issues unrelated to civil liability. See Peppers, 64 Ill. 2d at 193.

American Family, like the insurer in Thornton, seeks to avoid paying for the defense of a lawsuit where the evidence indicates that the plaintiff raised a negligence claim solely to bring the cause of action within the insurance coverage. American Family seeks dismissal of the negligence counts from Vinicky's suit against Savickas, or at least preclusion of litigation concerning Savickas' intentions or expectations. In effect American Family seeks rulings by which "the order and burden of proof would be oriented to and dictated by the declaratory judgment action and not by the primary litigation, the personal injury suit." Thornton, 74 Ill. 2d at 159. Our supreme court in Thornton precluded such reorientation of the proceedings in the personal injury suit to meet the insurer's needs. Where, in a lawsuit against an insured, the insurer's interests conflict with the interests of the insured, the insured must retain control over the lawsuit. Peppers, 64 Ill. 2d at 199.

Finally, American Family contends that the allegation that Savickas "[n]egligently shot" Thomas Vinicky is not sufficiently factual to support a duty to defend. American Family did not raise this argument in the trial court. At most, the argument presents grounds for a remand so that Vinicky can make more definite the factual allegations of her complaint. See Conway v. Conners, 101 Ill. App. 3d 121, 130, 427 N.E.2d 1015 (1981). This belated contention cannot support the trial court's decision here.

Moreover, American Family raises no objection to the allegation that Savickas "[n]egligently assessed a need for self defense." That allegation creates a duty to defend because the fact that Savickas negligently assessed the need for self defense does not entail a finding that he expected his acts to harm Thomas. In West American Insurance Co. v. Vago, 197 Ill. App. 3d 131, 137, 553 N.E.2d 1181 (1990), and State Farm Fire & Casualty Co. v. Hatherley, 250 Ill. App. 3d 333, 337-38, 622 N.E.2d 139 (1993), the court emphasized that the complaints alleged facts that proved the insurance coverage did not apply. Here, the complaint lacks such allegations. From the face of the complaint we can draw no Conclusions about Savickas' expectations. Therefore, American Family has a duty to pay for Savickas' defense of the lawsuit. See Cowan v. Insurance Co. of North America, 22 Ill. App. 3d 883, 896-97, 318 N.E.2d 315 (1974).

We note that by objecting to the factual insufficiency of the allegations, American Family would require Vinicky to make her complaint against Savickas more specific. This, too, appears to be an effort to control an aspect of Savickas' defense, for which American Family is paying, to minimize American Family's costs. If the court could find no duty to defend because the underlying complaint lacked sufficient factual specificity, the duty to defend would "hinge exclusively on the draftsmanship skills or whims of the plaintiff in the underlying action." Western Casualty & Surety Co. v. Adams County, 179 Ill. App. 3d 752, 756, 534 N.E.2d 1066 (1989). Illinois courts have held that the duty to defend should not depend on such chances. United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 193 Ill. App. 3d 1087, 1092, 550 N.E.2d 1032 (1989), aff'd 144 Ill. 2d 64, 578 N.E.2d 926 (1991).

We see no meaningful distinction between this case and Thornton. Accordingly, we find that American Family has a duty to pay for defense of Savickas, and the trial court should consider the duty to indemnify only after resolution of the case Vinicky brought against Savickas. The judgment of the trial court is reversed and the cause is remanded for proceedings in accord with this opinion.

Reversed and remanded.

TULLY, J., concurs.

RAKOWSKI, J., specially concurs.

JUSTICE RAKOWSKI, specially Concurring:

I too would reverse and remand. In granting summary judgment in favor of American Family, the trial court prematurely decided a bona fide controversy (whether Savickas' conduct was intentional), which is crucial to the underlying tort action. However, because the majority implies that a trial court presiding over a declaratory judgment action may never look beyond the allegations of the complaint in the underlying lawsuit, I write separately to restate what I believe to be the general rule. I also offer support for the exception to the general rule as stated in Mid America Fire & Marine Insurance Co. v. Smith, 109 Ill. App. 3d 1121 (1982), Allstate Insurance Co. v. Carioto, 194 Ill. App. 3d 767 (1990), and State Farm Fire & Casualty Co. v. Leverton, 289 Ill. App. 3d 855 (1997).

At the initial stage of the proceedings--where only the underlying complaint is on file--an insurer's duty to defend is determined by the allegations of that underlying complaint. However, if an insurer opts to file a declaratory judgment action, it may properly challenge the existence of such a duty and offer evidence to prove that the insured's conduct fell within limitations of a policy exclusion. Fidelity & Casualty Co. v. Envirodyne Engineers, Inc., 122 Ill. App. 3d 301, 304 (1983). "To require the trial court to look solely to the complaint in the underlying action to determine coverage would make the declaratory proceeding little more than a useless exercise possessing no attendant benefit and would greatly diminish a declaratory action's purpose of settling and fixing the rights of the parties." Envirodyne Engineers, Inc., 122 Ill. App. 3d at 305; Charles H. Eichelkraut & Sons, Inc. v. Bituminous Casualty Corp., 166 Ill. App. 3d 550, 556 (1988). "Though the action is for declaratory judgment, a court need not wear blinders and be limited to the allegations of the complaint." Travelers Insurance Cos. v. P.C. Quote, Inc., 211 Ill. App. 3d 719, 724 (1991).

The only time such evidence is not permitted is where it tends to determine an issue crucial to the determination of the underlying tort action. Envirodyne Engineers, Inc., 122 Ill. App. 3d at 304-05, citing Maryland Casualty Co. v. Peppers, 64 Ill. 2d 187 (1976). If a crucial issue is not determined, there is simply no reason why the parties seeking declaration of rights should not have the prerogative to present evidence that is generally accorded to a party to a motion for summary judgment in a declaratory proceeding. Envirodyne Engineers, Inc., 122 Ill. App. 3d at 305; see Millers Mutual Insurance Ass'n v. Ainsworth Seed Co., 194 Ill. App. 3d 888, 891-93 (1989) (following Envirodyne by looking beyond the allegations of the complaint where factual matters relevant to the underlying suit were not determined). See also Travelers Insurance Cos. v. Penda Corp., 974 F.2d 823 (7th Cir. 1992).

Although Peppers and Envirodyne use the term "crucial" to describe those issues that a declaratory judgment court may not address, other courts have used other terms: no consideration given to factual matters that could be relevant to issues in the underlying litigation(Ainsworth Seed Co., 194 Ill. App. 3d at 891); declaratory judgment proper where issues in underlying suit and declaratory judgment action are separable (Murphy v. Urso, 88 Ill. 2d 444, 455, (1981); Bituminous Casualty Corp. v. Fulkerson, 212 Ill. App. 3d 556, 561 (1991)); "not appropriate to determine an ultimate issue of fact in [an] underlying action" (Management Support Associates v. Union Indemnity Insurance Co., 129 Ill. App. 3d 1089, 1097 (1984)); and "declaratory judgment action may not determine whether the insured is actually liable nor may it determine any facts upon which the insured's liability is based" (State Farm Fire & Casualty Co. v. Hatherley, 250 Ill. App. 3d 333, 336 (1993)). See also J. Ingram, Conflicts of Interest in the Insurer's Duty to Defend in Illinois, 17 J. Marshall L. Rev. 379 (1984). Nor does Thornton v. Paul, 74 Ill. 2d 132 (1978), require a different result. Although Thornton involved a garnishment proceeding and not a declaratory judgment proceeding, the court stated in dictum that, although the defendant's conviction "does not conclusively establish that there was no duty to defend," the evidence of the defendant's battery conviction "should have been admitted in the garnishment proceeding as prima facie evidence that his striking of the plaintiff constituted a battery." Thornton, 74 Ill. 2d at 151.

From the above, it is clear that the general rule is that a declaratory judgment court may look beyond the allegations in the pleadings of the underlying action and consider extrinsic evidence so long as it does not decide an ultimate fact of or issue crucial to the underlying tort action.

The exception to this rule, as set forth in Smith, Carioto, and Leverton, involves those rare situations where a declaratory judgment action may be brought and a crucial or ultimate issue decided prior to the termination of the underlying tort litigation without violating the commands of Peppers and Thornton. In Carioto, for example, the defendant, Carioto, and the co-defendant saw the victim, Jenner Evans, leaving the restaurant after paying for food with a $50 bill. Both men decided to rob Evans and followed him as he left the restaurant. Carioto, armed with a four-inch blade knife, told the co-defendant that "he was going to stab the man and kill him." Carioto, 194 Ill. App. 3d at 770. Carioto approached Evans, brandished his knife and demanded money. Evans threw the money to the ground toward the men. Carioto and the co-defendant then tackled Evans, and Carioto repeatedly stabbed him with his knife using an up and down motion with his arm. After five minutes, the co-defendant retreated, having been stabbed himself by Carioto. Carioto remained, however, and continued to stab Evans. The physicians who examined Evans found 15 to 17 stab wounds on various parts of his body. There was no trial in Carioto. Rather, Carioto pled guilty to attempted murder. At his deposition for the civil lawsuit, the following colloquy took place between counsel and Carioto:

" 'Q. And you read through th[e] complaint [againstyou in this case]?

A. I read through it, yes.

Q. And do you remember reading allegations in that complaint made against you stating that you were careless and negligent in causing these injuries to Mr. Jenner Evans?

A. Yes. The reason why it stands out so much is because it was--well, it just doesn't sound proper.

Q. And why doesn't it sound proper?

A. Well, because of the words, the choice of words that they decided to use. I'm not very smart, but there's not much negligence in doing what was written on it saying what I done and I'm not proud of it and I'm not making some kind of humor or sarcasm here, but that wasn't all the most intelligent way of putting it as far as I'm concerned.

Q. So it wasn't really an accident, it was as careless and negligent might put it out to be, it's more from what you've read the intended acts that you did?

A. It was not--I'd have to say yes because that is what helped determine my pleading of guilty, although this suit wasn't into effect at the time. The facts were the facts on my case and there was no show there of any intent.

Q. So your guilty plea of Attempted Murder was that you intended to attempt murder and that's what the facts were?

A. It's not the way I would like to look at it now,

but it is the truth, yes.' " Carioto, 194 Ill. App. 3d at773.

Two and a half years later, the third amended complaint alleged that Carioto " 'carelessly and negligently fell on and/or came into contact with Plaintiff in such a manner as to cause him injuries,' " that he " 'carelessly and negligently failed to refrain from avoiding Plaintiff,' " and that " '[he] carelessly and negligently struck and/or came into contact with Plaintiff.' " (Emphasis omitted.) Carioto, 194 Ill. App. 3d at 771. The Carioto court found these allegations facetious, given that Carioto announced his intent to stab Evans, brandished his knife in order to effect the robbery, after receiving the object of the robbery, Evans' money, joined his accomplice in the struggle on the ground and stabbed Evans 17 times even after his accomplice withdrew. The court held that no bona fide controversy existed and that Carioto's guilty plea and judicial admissions provided conclusive evidence that the conduct was intentional. I agree.

The majority in the instant case is critical of the Carioto court, saying that Carioto cannot be reconciled with and in fact was an attempt to overrule Thornton. I disagree. Thornton and Pepper, like the instant case, deal with bona fide disputes. Carioto, on the other hand, was a situation where there was no evidence, not even a scintilla, that could establish negligent conduct. Considering Carioto's guilty plea and judicial admissions, the court properly ruled as a matter of law that the conduct was intentional.

Moreover, it is axiomatic that the Carioto court, an appellate tribunal, did not and could not overrule the supreme court decisions in Thornton and Pepper. Rather, the Carioto court responded to the open questions regarding no bona fide dispute--no evidence of negligent conduct. Finally, although not addressed in Carioto, there was no problem with alignment of the parties or burden of proof. See Peppers, 64 Ill. 2d 187; Envirodyne Engineers, Inc., 122 Ill. App. 3d 301.


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