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Chandler v. Doherty

November 04, 1998


The opinion of the court was delivered by: Justice Knecht

Appeal from Circuit Court of Champaign County No. 88L1218

Honorable John G. Townsend, Judge Presiding.

American Fire & Casualty Company (American Fire) refused to defend Otis Doherty when Doherty was sued in the circuit court of Champaign County by Verna and James Chandler for injuries received in an automobile accident. Verna was driving the Chandlers' car when it collided with the car driven by Doherty. Doherty had an auto insurance policy with American Fire. A default judgment was entered against Doherty. The Chandlers then sued American Fire to collect the judgment. The trial court granted summary judgment to the Chandlers, holding American Fire breached its contract with Doherty by failing to defend the Chandlers' complaint, which alleged facts raising the potential for coverage. The trial court ruled extrinsic facts are not allowed to de-feat the duty to defend where American Fire did not file a declaratory judgment action.

American Fire appeals, contending all parties involved knew the car being driven by Doherty was not covered under its policy, thus absolving it from a duty to defend. Further, American Fire contends even if it did have a duty to defend, the trial court's award of interest on the judgment obtained by the Chandlers from the date that judgment was rendered is error. We affirm.


In 1984, Doherty purchased a new Chevrolet Celebrity and obtained insurance with American Fire from the Facer agency in Rantoul. American Fire issued an automobile liability policy for the Chevrolet with Doherty as named insured with an effective policy period of March 28, 1987, to March 28, 1988, with single limits of liability of $300,000 for each accident. The policy included an exclusion from coverage, which stated:

"B. We do not provide Liability Coverage for the ownership, maintenance or use of:

2. Any vehicle, other than your covered auto, which is: a. owned by you; or b. furnished or available for your regular use."

In 1986, Doherty received a 1962 Volkswagen automobile as a gift. He replaced the Volkswagen's body with the replica fiberglass body of a 1927 Bugatti; referred to by all parties as "the replicar." Doherty drove the replicar only for recreational purposes such as in parades or for display.

Doherty went to the Facer agency prior to May 1987 to see about adding the replicar to his policy with American Fire. He was told American Fire would not insure the car because it was modified. Doherty did not obtain coverage for the replicar elsewhere. He ultimately succeeded in obtaining insurance with American Fire for the replicar three months after the accident with the Chandlers.

On May 17, 1987, while Doherty was driving the replicar, he was involved in a collision with a car driven by Verna Chandler. Doherty reported the accident to Facer shortly afterward and was told the replicar was not on his policy with American Fire.

On November 15, 1988, the Chandlers filed an action seeking damages from Doherty for personal injuries they allegedly sustained in the accident. In their complaint, the Chandlers alleged Doherty negligently operated "his motor vehicle," thereby causing the collision. Notice of the action was given to Facer on December 20, 1988, in a letter from counsel for Doherty, who requested a defense from American Fire. In that letter, counsel stated if he did not receive a response to the tender within 10 days he would assume coverage was being declined and he would file a declaratory action against American Fire.

On December 23 Facer forwarded the letter to American Fire. American Fire responded on March 3, 1989, by advising Doherty his policy indicated the 1962 Volkswagen was not added to the policy until August 7, 1989, several months after the date of loss and "unfortunately we will be unable to provide you any coverage for this accident." Doherty's counsel was also advised there was no coverage for the replicar. Neither Doherty nor American Fire filed a declaratory judgment action regarding American Fire's coverage.

Doherty did not appear and defend the Chandlers' lawsuit. A default judgment on liability only was entered against him on November 30, 1990. Notice of default was served upon Doherty on April 3, 1991. On April 8, Doherty sent a letter to American Fire with a copy of the notice of default and a letter he received from the Chandlers' attorney advising him it appeared American Fire was wrongfully refusing to defend him. American Fire never responded to Doherty's request for represen-tation.

On August 19, 1993, a jury awarded the Chandlers damages in the amount of $1,618,678 and judgment was entered against Doherty in that amount.

On December 16, 1993, counsel for Doherty demanded American Fire pay the judgment. American Fire responded on March 2, 1994, advising there would be no payment and stating the replicar was not an insured vehicle.

In later citation proceedings, Doherty assigned any rights he had under the American Fire policy to the Chandlers on October 4, 1994. On August 21, 1995, the Chandlers filed their amended complaint for citation and affidavit for order of garnishment against American Fire. American Fire initially answered the amended complaint on February 14, 1996. Both American Fire and the Chandlers filed motions for ...

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