Appeal from the Circuit Court of St. Clair County. No. 95-MR-561 Honorable David Herndon and Randall A. Bono, Judges, presiding.
The opinion of the court was delivered by: Presiding Justice Goldenhersh
Plaintiff, Catherine Douglas, assignee of Patricia Cowsert, appeals from an order of the Circuit Court of Madison County granting summary judgment in favor of defendant, Allied American Insurance Company, also known as Gallant Insurance Company (hereinafter Allied). Allied had filed a third-party complaint against attorney Randall Kelley. The trial court found in favor of Kelley on Allied's third-party complaint for contribution, and that finding was not appealed by Allied. Therefore, the issue before this court is whether the trial court erred in granting summary judgment in favor of Allied. We reverse and remand.
On January 19, 1993, plaintiff was involved in an automobile accident with Patricia Cowsert near Medora in Macoupin County. At the time of the accident, Cowsert was 20 years old and insured under a policy issued by Allied. The insurance policy had limits of $20,000 per person and $40,000 per accident.
As a result of the accident, plaintiff filed suit against Cowsert. Three other individuals also filed suit against Cowsert, including Mary Susan Watts, a passenger in the Douglas vehicle, and Laura Hose and Misty Parkerson, passengers in the Cowsert vehicle. Allied hired attorney Randall Kelley to represent Cowsert in the underlying litigation. On July 5, 1994, Allied tendered the policy limits of $40,000 to the court for disbursement to the plaintiffs. On July 14, 1994, Kelley withdrew as counsel for Cowsert. Cowsert was without funds to hire an attorney to defend her in the pending actions, so Cowsert was unrepresented during trial. On August 30, 1994, the trial court entered summary judgment in favor of the plaintiffs and against Cowsert on the issue of liability. On September 7, 1994, the cases were called for hearing on the issue of damages, after which the trial court entered judgment in favor of Parkerson, Hose, Watts, and plaintiff and against Cowsert in the amount of $320,108, $60,917, $654,695, and $404,335, respectively.
On September 28, 1995, plaintiff herein received an assignment from Cowsert for any claim Cowsert might have against Allied for breach of duty to defend. On November 6, 1995, plaintiff filed a declaratory judgment action against Allied pursuant to the assignment from Cowsert. Count I alleged breach of contract and count II alleged bad faith. The parties then engaged in discovery.
During discovery, Allied admitted that it hired Kelley to represent Cowsert and that Kelley filed a motion to withdraw from Cowsert's case; however, Allied denied "that any such motion to withdraw was filed at the instruction, or with the knowledge or approval, of [Allied]." Allied also denied that it had authorized or instructed Kelley not to represent Cowsert at the hearings on plaintiff's motions for summary judgment and damages. Kelley testified contrary to Allied's assertions during his deposition on July 22, 1997.
According to Kelley, Allied "generally" told him what to do concerning the representation of Cowsert. For example, they told him how far they wanted him to go in terms of working up the file, what depositions they wanted him to attend, what discovery they wanted him to engage in, and what court appearances they wanted him to make. Kelley explained that once the check was accepted into the court file, Allied told him not to participate in distribution of the funds or do anything else on the file because Allied believed it had fulfilled its contractual obligations to Cowsert. Kelley testified that Allied never asked his opinion about whether or not it was a good idea to withdraw, nor did they ever ask him to review the policy to determine whether it would be proper to withdraw at that time.
After written discovery and depositions, all parties moved for summary judgment in the declaratory judgment action. The trial court held that Kelley was an agent of Allied, and the court entered summary judgment in favor of Allied and against plaintiff. The trial court also entered summary judgment in favor of Kelley on the third-party complaint. Plaintiff now appeals. Allied did not appeal the trial court's finding in favor of Kelley on the third-party complaint.
It is well-settled in Illinois that a reviewing court will conduct a de novo review of an appeal from the grant of a summary judgment. See Espinoza v. Elgin, Joliet & Eastern Ry. Co., 165 Ill. 2d 107, 113, 649 N.E.2d 1323, 1326 (1995). The determination of the rights and obligations under an insurance policy is a question of law that is appropriate for disposition by way of summary judgment. See Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384, 391, 620 N.E.2d 1073, 1077 (1993). A court must construe the policy as a whole and determine the intentions of the parties based on the policy's express terms, taking into account the type of insurance for which the parties have contracted, the risks undertaken and purchased, and the subject matter that is insured, along with the purposes of the entire contract. See Crum & Forster Managers Corp., 156 Ill. 2d at 391, 620 N.E.2d at 1078. The interpretation of insurance contracts is governed by the rules for interpreting contracts generally, and whether a policy is ambiguous is a question of law for the court. If the court decides the contract is ambiguous, the construction of the contract becomes a question of fact. See Dash v. Messenger Service, Inc. v. Hartford Insurance Co., 221 Ill. App. 3d 1007, 582 N.E.2d 1257, 1260 (1991). With these principles in mind, we begin an analysis of the issue presented.
Plaintiff contends that the trial court erred in entering summary judgment against her because there was a genuine issue of law whether Allied breached its duty to defend its insured when it tendered the policy limits to the court without obtaining a release or settlement and withdrew representation of its insured. Plaintiff asserts there is an ambiguity created by the contract language and that Allied had a duty to defend Cowsert until the policy limits were exhausted by payment of a judgment or a settlement. We agree.
The general rule in Illinois is that an insurer's duty to defend and its duty to indemnify are separate and distinct, with the duty to defend being broader than the duty to indemnify. See Crum & Forster Managers Corp., 156 Ill. 2d at 393-94, 620 N.E.2d at 1080. To determine whether the insurer had a duty to defend an insured, a court must look to the allegations in the underlying complaint and compare those allegations to relevant provisions of the insurance policy. See Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 107-08, 607 N.E.2d 1204, 1212 (1992). If the facts alleged in the underlying complaint fall within, or even potentially within, the policy's coverage, the insurer's duty to defend arises. See Outboard Marine Corp., 154 Ill. 2d at 108, 607 N.E.2d at 1212. A refusal to defend is ...