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Pekin Insurance Company v. Allstate Insurance Company

March 29, 2002

PEKIN INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
ALLSTATE INSURANCE COMPANY, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County No. 00 CH 11342 The Honorable John K. Madden, Judge Presiding.

The opinion of the court was delivered by: Justice Cousins

UNPUBLISHED

The plaintiff, Pekin Insurance Company (Pekin), filed a complaint for declaratory judgment against the defendant, Allstate Insurance Company (Allstate), on August 3, 2000. Pekin's complaint for declaratory judgment requested that the court declare that Pekin and Allstate were co-insurers for the insured, Trevor Cary. Trevor Cary was being sued for damages in a cause filed on March 7, 1997, that was pending in the circuit court of Cook County.

Allstate filed a counterclaim for declaratory judgment on December 4, 2000, alleging that it did not owe any liability as its policy excludes coverage of liability arising out of business pursuits. Allstate further alleged that it did not owe reimbursement to Pekin for the defense costs. On December 4, 2000, Allstate also filed an answer. On February 9, 2001, Allstate filed a motion for judgment on the pleadings requesting that the court declare that Pekin was the sole primary liability insurer of the insured and his business. The trial court entered judgment on the pleadings in favor of Allstate.

Pekin filed a timely appeal alleging that the trial court erred in allowing judgment on the pleadings because Allstate was estopped from raising defenses to coverage for failure to properly respond to the tender of defense.

BACKGROUND

Pekin's action for declaratory judgment against Allstate arises from an action for damages brought by Rose Stolzenberg and Linda White, individually and as guardian on Nava R. Stolzenberg, an 11-year-old minor. The action named Trevor Cary, French Cary III and Corals & Critters Pet Store (Corals & Critters) as party defendants. The Stolzenberg action alleged that Nava Stolzenberg was attacked and injured by Trevor Cary's dog while in his pet store. On August 7, 2000, in a jury trial, Trevor Cary and Corals & Critters were found liable for the injuries resulting from the dog bite. French Cary III was dismissed from the case. The jury assessed damages at $50,000, jointly and severally, against Trevor Cary and Corals & Critters. Pekin issued an insurance policy to Corals & Critters, under which Trevor Cary was an insured, that was in effect during the time of the incident. Trevor Cary and Corals & Critters tendered its defense to Pekin. Pekin contacted Allstate asking Allstate to extend coverage to Trevor Cary in the defense of the Stolzenberg action. On November 14, 1999, Allstate corresponded with Pekin with carbon copies to Trevor Cary advising that its homeowner's policy was excess to Pekin's commercial policy and did not extend coverage to business pursuits. The correspondence also advised Pekin that the Pekin commercial policy provides that it is undoubtedly primary.

On August 3, 2000, Pekin filed its claim for declaratory judgment against Allstate, four days before the jury in the Stolzenberg action found Trevor Cary and Corals & Critters liable. On December 4, 2000, Allstate filed a counterclaim for declaratory judgment against Pekin alleging that Pekin was the sole primary insurer in the Stolzenberg action. The trial court entered judgment on the pleadings in favor of Allstate pursuant to a motion for judgment on the pleadings filed by Allstate on February 9, 2001. The trial court found that Pekin was the sole primary insurer and Allstate's policy was excess to Pekin's commercial policy.

Pekin appeals. We affirm.

ANALYSIS

I.

This matter arose from the granting of Allstate's motion for judgment on the pleadings pursuant to the Code of Civil Procedure (735 ILCS 5/2-615(e) (West 1992)). The disposition of a judgment on the pleadings is not discretionary; therefore, our standard of review is de novo. Board of Trustees of the University of Illinois v. City of Chicago, 317 Ill. App. 3d 569, 571, 740 N.E.2d 515 (2000). A motion for judgment on the pleadings tests the sufficiency of the pleadings by determining whether the plaintiff is entitled to the relief sought by his complaint. Village of Worth v. Hahn, 206 Ill. App. 3d 987, 990, 565 N.E.2d 166 (1990). The motion requires the trial court to examine the pleadings and determine whether there is an issue of fact or whether the controversy can be resolved as a matter of law. Village of Worth, 206 Ill. App. 3d at 990. On appeal, the reviewing court must ascertain whether the trial court correctly determined that the pleadings presented no issue of material fact and, if there were no such issue, whether the court correctly entered the judgment. TDC Development Corp. v. First Federal Savings & Loan Ass'n of Ottawa, 204 Ill. App. 3d 170, 174, 561 N.E.2d 1142 (1990).

Pekin argues that the trial court erred in granting judgment on the pleadings because Allstate was estopped from raising noncoverage as a defense. Pekin claims that Allstate did not defend the Stolzenberg action under reservation of right or seek a declaratory judgment that no coverage exists after receiving a tender of defense. See La Grange Memorial Hospital v. St. Paul Insurance Co., 317 Ill. App. 3d 863, 870, 683 N.E.2d 947 (2000).

Our supreme court has held that when a complaint against the insured alleges facts within or potentially within the scope of the policy coverage, the insurer taking the position that the complaint is not covered by the policy has two options. It must either defend the suit under reservation of right or seek a declaratory judgment that there is no coverage. State Farm Fire & Casualty Co. v. Martin, 186 Ill. 2d 367, 371, 710 N.E.2d 1228 (1999). If the insurer refuses to defend under reservation or seek declaratory judgment, it may be found to have breached its duty to defend. La Grange, 317 Ill. App. 3d at ...


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