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Royal Insurance Co. of America v. Insignia Financial Group

June 05, 2001

ROYAL INSURANCE COMPANY OF AMERICA, PLAINTIFF-APPELLEE,
v.
INSIGNIA FINANCIAL GROUP, INC., AND STACIE KELLEY, INDIV. AND AS MOTHER AND NEXT FRIEND OF ROBERT KELLEY, A A MINOR, DEFENDANTS-APPELLEES AND APPELLANTS,
(RELIANCE INSURANCE COMPANY, PLAINTIFF-APPELLANT).



Appeal from the Circuit Court of Cook County No. 99 CH 12605 The Honorable Dorothy Kinnaird, Judge Presiding.

The opinion of the court was delivered by: Justice Cousins

Not Released For Publication

ROYAL INSURANCE COMPANY OF AMERICA, PLAINTIFF-APPELLEE,
v.
INSIGNIA FINANCIAL GROUP, INC., AND STACIE KELLEY, INDIV. AND AS MOTHER AND NEXT FRIEND OF ROBERT KELLEY, A A MINOR, DEFENDANTS-APPELLEES AND APPELLANTS,
(RELIANCE INSURANCE COMPANY, PLAINTIFF-APPELLANT).

Appeal from the Circuit Court of Cook County No. 99 CH 12605 The Honorable Dorothy Kinnaird, Judge Presiding.

The opinion of the court was delivered by: Justice Cousins

This is a dispute over which of two insurance companies has to provide a defense and possible indemnification to Insignia Financial Group, Inc. (Insignia), in connection with an underlying tort case filed in the circuit court of Cook County. The underlying complaint was filed against Insignia and seeks damages for in utero injuries sustained by Robert Kelley when his mother, Stacie Kelley, received an electric shock while she was employed by Insignia. Reliance Insurance Company (Reliance) brought a declaratory judgment action, alleging that it did not have a duty to defend or indemnify Insignia under its employers liability policy. Royal Insurance Company of America (Royal) also sought a declaration that it did not have a duty to defend or indemnify under its general liability policy. Reliance's theory was that Robert suffered a direct injury and that only consequential bodily injuries to a child of an injured employee are permitted under its employers liability insurance. Royal's theory was that Robert suffered a consequential injury, an injury excluded by the general liability policy issued by Royal to Insignia. Royal's motion to consolidate both declaratory actions was granted.

 The trial court denied Reliance's motion for judgment on the pleadings, ruling that Reliance had a duty to defend Insignia in the underlying case. The trial court granted Royal's cross-motion for summary judgment. Reliance and Insignia filed notices of appeal.

On appeal, Reliance argues that the trial court erred in determining that an injury to a fetus caused by an electrical shock to the mother which occurred during the course of employment constituted a "consequential" rather than "direct" injury, thereby triggering Reliance's duty to defend a lawsuit against the employer.

On appeal, Insignia contends that the trial court erred in granting Royal's cross-motion for summary judgment because the question of whether Robert's injury was a "direct consequence" of the shock to Stacie is an unresolved question that cannot be determined on the basis of the complaint alone and requires a full evidentiary hearing on the merits.

BACKGROUND

On May 14, 1998, Stacie Kelley, individually and on behalf of her minor son, Robert Kelly, filed a complaint (Kelley complaint) against her employer, Insignia, seeking damages for in utero injuries allegedly suffered by Robert. On November 19, 1999, Robert Kelley filed a first amended complaint against Insignia that essentially contained the same allegations as the original complaint. According to the complaint, Stacie was employed by Insignia as a swimming pool attendant for the Emerald Courts apartments when the injury occurred. Insignia manages the Emerald Court apartments. The complaint further provides:

"8. On August 30, 1995, Stacie was pregnant with Robert. Robert was born on December 1, 1995.

9. On August 30, 1995, Stacie went into the pool house to turn on the lights for the pool. At that time, Stacie grabbed a metal switch to turn on the pool lights.

10. As Stacie flipped the lever for the pool lights, she received an electric shock that traveled from her hand down through her feet.

11. The electric shock traveled through Stacie's uterus and shocked Robert as well. Robert suffered brain damage as a result of the electric shock. Today he suffers from right spastic hemiparesis, developmental delay and seizures."

Insignia tendered Robert's claim to both Royal and Reliance for a defense and possible indemnification. Insignia had purchased a general liability policy from Royal. Royal's general liability policy excludes coverage for bodily injury to a child of an employee as a consequence of bodily injury to the employee arising out of and during the course of employment. Exclusion "e" of the Royal policy states in pertinent part:

"This insurance does not apply to:

***

e. Employer's Liability

'Bodily injury' to:

(1) An 'employee' of the insured arising out of and in ...


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