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American Country Insurance Company v. Williams

June 13, 2003

AMERICAN COUNTRY INSURANCE COMPANY, COUNTERPLAINTIFF-APPELLEE,
v.
THOMAS WILLIAMS AND YELLOW CAB COMPANY, COUNTERDEFENDANTS
(HERMAN DAVILA, COUNTERDEFENDANT-APPELLANT).



Appeal from the Circuit Court of Cook County Honorable John K. Madden, Judge Presiding.

The opinion of the court was delivered by: Justice Quinn

UNPUBLISHED

MODIFIED UPON REHEARING

In the underlying action in this case, plaintiff, a police officer pedestrian, was struck by a taxicab. The driver was convicted of misdemeanor battery as a result of that occurrence. Plaintiff filed suit against the taxicab driver and the taxicab company, alleging negligence. The insurer of both the driver and the cab company undertook the defense of the personal injury case.

While the tort action was pending, the driver-insured filed suit seeking a declaration that the insurer was obligated to provide him with independent counsel because of a conflict of interest. Plaintiff from the underlying suit was granted leave to intervene. The insurer filed a counterclaim naming plaintiff, the driver and Yellow Cab, seeking a declaration that it had no duty to defend the driver. On cross-motions for summary judgment, the trial court granted the insurer's motion for summary judgment. The plaintiff in the underlying suit filed a motion to reconsider which was denied. Plaintiff in the underlying suit now appeals. The insured driver has not appealed.

For the following reasons, we affirm in part, reverse in part, and remand for further proceedings.

I. BACKGROUND

On October 31, 1996, Herman Davila, an Illinois State Police officer, was on duty outside the Thompson Center in Chicago. Thomas Williams, was driving a taxicab east on Lake Street adjacent to the Thompson Center. While another police officer was directing traffic on Lake Street, Davila observed Williams repeatedly blowing his car horn. Davila approached Williams' cab, opened the door and leaned inside the cab. While Davila was leaning inside the cab, Williams began driving, forcing Davila to run alongside the cab for 15 feet. Davila suffered injuries.

Williams was charged with misdemeanor battery as a result of his actions on October 31, 1996. Transcripts provided in the record on appeal establish that on October 9, 1997, following a jury trial, Williams was convicted of battery and sentenced to community service and probation.

On May 12, 1998, Davila filed a civil complaint naming Williams and Yellow Cab Company (Yellow Cab) as defendants. Both Yellow Cab and Williams were insured by American Country Insurance Company (American). At the time of the occurrence, American and Yellow Cab were both subsidiaries of a company known as Great Dane Holdings. The complaint alleged that Williams was the agent and servant of Yellow Cab and was operating a taxicab owned by Yellow Cab. The complaint alleged that Williams and Yellow Cab were negligent in failing to yield to Davila, in driving recklessly, in failing to keep a proper lookout and in operating a vehicle with defective brakes and steering. American undertook the defense in this case, retaining Johnson & Bell to represent Williams and Jesmer & Harris to represent Yellow Cab. Prior to retaining counsel, American notified Williams by mail that it was "handling this matter under a complete reservation of rights under the terms and conditions of your policy." The letter informed Williams that an investigation revealed that Williams was cited with criminal battery and that his policy provided an exclusion for intentional injury. In his answer to Davila's complaint, Williams' attorney denied that Williams was an agent of Yellow Cab.

In an affidavit, Williams averred that the defense provided by American was inadequate and represented a conflict of interest. Williams averred that on July 21, 1999, he complained about the inadequacy to American and requested appointment of alternative counsel. Williams averred that Johnson & Bell failed to conduct discovery to assist in his defense. Williams averred that American denied this request.

On October 1, 1999, Williams filed the instant declaratory action against American. In count I of the complaint, Williams alleged that American failed to warn Williams of an actual or potential conflict of interest in defending the underlying action. Williams further alleged that there was a conflict of interest in that proof of intentional conduct on the part of Williams would shift responsibility from American to Williams. In count II, Williams alleged that American breached its duty to defend by failing to provide him with access to the East Bank Health Club, in order to locate a potential witness. Williams also listed numerous acts and omissions that constituted breaches of American's duty to defend. Williams sought a court order requiring American to provide Williams independent counsel and access to the East Bank Health Club.

On November 1, 1999, American filed a motion to dismiss Williams' declaratory judgment complaint. American alleged that Williams had not pled the type of conflict of interest that would require American to give up the right to control Williams' defense. Namely, American alleged that the intentional acts exclusion of the insurance policy could not give rise to a conflict of interest where the underlying case sounded in negligence. American further alleged that it owed no duty to give Williams access to the East Bank Health Club. The trial court denied American's motion to dismiss with respect to count I, and granted the motion with respect to count II. The dismissal of count II has not been raised on appeal.

On December 13, 1999, Davila was granted leave to intervene in Williams' declaratory action. The parties then filed cross-motions for summary judgment. Williams alleged that his battery conviction created a coverage defense, therefore presenting a conflict of interest. American's motion maintained that Illinois law has recognized that a conflict of interest arises out of the intentional acts exclusion of an insurance policy only where the underlying complaint alleges both negligence and battery and where punitive damages were sought. Following argument on the motions, the trial court entered an order stating that, in light of the recent decision in American Family Mutual Insurance Co. v. Savickas, 193 Ill. 2d 378 (2000), it could not address the cross-motions until a duty to defend had been determined. The court invited briefs in support of or in opposition to the applicability of Savickas to the case at bar.

American subsequently filed a counterclaim alleging that Williams' battery conviction established that his conduct was intentional and that he was excluded from coverage under the intentional acts exclusion of his policy. The policy provided:

"B. EXCLUSIONS

1. EXPECTED OR INTENDED INJURY

'Bodily injury' or 'property damage' expected or intended from the ...


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