APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY No. 97-CH-6165 THE HONORABLE RONALD C. RILEY, JUDGE PRESIDING.
The opinion of the court was delivered by: Presiding Justice Cousins
Plaintiff, the Hartford Insurance Company of Illinois (the insurance company), brought an action against its policyholder, Robert Kelly, seeking a declaration that it owed no duty to defend or indemnify its insured under a homeowner's policy for an underlying lawsuit brought by Tiffany Hawkins in the circuit court of Cook County. On cross-motions for judgment on the pleadings, the circuit court entered judgment for Kelly and against the insurance company, reasoning that the insurance company owed Kelly a duty to defend because there were sufficient facts pled in the underlying complaint to give rise to coverage. The insurance company appeals, contending that: (1) since Kelly's insurance policy excluded coverage for bodily injuries that are "expected or intended," the underlying complaint against him for sexual misconduct against a minor absolves the company's duty to defend under the policy; and (2) the lower court erred in granting Kelly's cross-motion for judgment on the pleadings, as it never ruled on the other policy provisions establishing no coverage.
For the reasons articulated below, we reverse.
The insurance company issued a new homeowner's policy to Kelly for the time period of March 16, 1994, to March 16, 1995, at an annual premium of $976. The policy protected Kelly for personal liability losses and provided:
"If a claim is made or a suit brought against [Kelly] for damages because of bodily injury or property damage caused by Liability [sic] an occurrence to which this coverage applies, [the insurance company] will: *** provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent."
"Occurrence" is defined therein as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period in: (a) bodily injury, or (b) property damage." The policy further provided, however, that it did not apply to bodily injury or property damage that was "expected or intended" by the insured.
On February 18, 1997, Hawkins filed a 24-count first amended complaint at law against Kelly and seven separate corporate entities. As to Kelly, an entertainer and recording artist known as "R. Kelly," the complaint contained a series of allegations under separate counts of negligence, intentional sexual battery and sexual harassment. In both the negligence and intentional sexual battery counts of the underlying complaint, it was alleged:
"2. Commencing on or about the year of 1991, the defendant, ROBERT KELLY, engaged in improper sexual conduct including intercourse with the plaintiff, TIFFANY HAWKINS, in that the plaintiff, TIFFANY HAWKINS, was a minor. 3. Beginning in 1991 up to and including October of 1994, defendant, ROBERT KELLY, was negligent in one or more of the following ways:
a. Engaged in inappropriate sexual contact with the plaintiff, TIFFANY HAWKINS, including but not limited to, engaging in group sexual intercourse with the plaintiff, TIFFANY HAWKINS, and other minors; b. Encouraged and engaged in inappropriate, intimate sexual contact with a minor; c. Was in violation of criminal statutes of the State of Illinois in engaging in sexual intercourse with a minor; d. Encouraged and engaged in conduct which defendant, ROBERT KELLY, knew or should have known was likely to cause severe emotional harm to plaintiff, TIFFANY HAWKINS."
The sexual harassment count alleged similar facts but was later dismissed by the circuit court.
Upon receipt, Kelly tendered the complaint to the insurance company for defense under his homeowner's policy. The insurance company denied Kelly's request for a defense and, instead, filed an amended complaint for declaratory judgment in the circuit court of Cook County on May 19, 1997. Therein, the insurance company sought a declaration that it had no duty to defend or indemnify Kelly in connection with the civil action against him, alleging six reasons for excluding coverage under Kelly's policy: (1) the allegations within the underlying complaint constituted "intentional behavior" that did not give rise to an "occurrence" under the policy; (2) Kelly did not give the insurance company notice of an "occurrence" as soon as possible, as was required under the policy; (3) the underlying complaint alleged "bodily injury" that was outside of the policy period; (4) the allegations within the underlying complaint constituted "intentional behavior" that falls within the "expected and intended" exclusion of the policy; (5) to the extent the allegations of the underlying complaint arose out of Kelly's business pursuits, they fell within the policy exclusion for damages "arising out of or in connection with a business engaged in by [Kelly]"; and (6) the allegations of the underlying complaint "may constitute a loss in progress" or a "known loss."
On December 8, 1997, Kelly answered and counterclaimed, alleging that the insurance company breached its obligation to defend in that the underlying complaint, at a minimum, gave rise to potential coverage under applicable Illinois law and the terms of the policy.
In response, on February 23, 1998, the insurance company filed a motion for judgment on the pleadings, contending that, because allegations of direct sexual misconduct by Kelly were contained in the underlying complaint, they gave rise, as a matter of law, "to inferred specific intent to harm, and thus coverage [was] precluded under Kelly's homeowner's policy." On March 23, 1998, Kelly filed a cross-motion for judgment on the pleadings, requesting a declaration that the insurance company had a duty to ...