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Johnson v. State Farm Fire and Casualty Co.

February 18, 2004

DENNIS K. JOHNSON, PLAINTIFF-APPELLEE,
v.
STATE FARM FIRE AND CASUALTY COMPANY, DEFENDANT-APPELLANT.



Appeal from Circuit Court of Macon County No. 00L25. Honorable Katherine M. McCarthy, Judge Presiding.

The opinion of the court was delivered by: Justice Steigmann

In March 2000, plaintiff, Dennis K. Johnson, filed a complaint for declaratory judgment and breach of contract against defendant, State Farm Fire and Casualty Company. Johnson alleged that State Farm breached its contract to provide him coverage under a personal liability umbrella policy for a prior judgment against him in favor of a third party, Safeco Insurance Company of America, which arose out of an indemnity contract between Johnson and Safeco. In October 2000, State Farm filed a motion for summary judgment, asserting that the umbrella policy did not cover Johnson's contractual liability to Safeco. In October 2001, Johnson filed a motion for summary judgment, asserting that (1) facts alleged in an underlying complaint and counterclaim from which his liability to Safeco arose triggered his right to coverage under the umbrella policy, and (2) State Farm was estopped from asserting noncoverage.

Following a November 2001 hearing, the trial court granted Johnson's summary judgment motion and denied State Farm's motion for summary judgment. The court later awarded Johnson $43,975.92 in damages, plus costs. State Farm appeals, arguing that (1) it was not estopped from asserting its claim that no duty to indemnify existed under the umbrella policy when it provided Johnson's defense in the underlying lawsuit; (2) it had no duty to indemnify Johnson for the prior judgment in Safeco's favor, where that judgment arose out of Johnson's breach of his contractual indemnity agreement with Safeco; and (3) because the underlying complaint and counterclaim did not allege any event that would qualify as an "accident," they failed to trigger the umbrella policy and State Farm's duty to defend Johnson. Because we agree with State Farm's first and second arguments, we reverse the grant of summary judgment to Johnson.

I. BACKGROUND

In January 1988, the trial court appointed Johnson and Douglas White as coexecutors of the estate of Adella Vallerius. White was Vallerius's grandson. In June 1988, Johnson and White filed a bond with the court that jointly and severally bonded them as principals to faithfully discharge their duties. Safeco was the corporate surety on the bond. In consideration of Safeco's suretyship, Johnson agreed to indemnify Safeco (hereinafter the indemnity agreement). In September 1988, White was arrested for murdering Vallerius. In January 1989, the court removed Johnson and White as coexecutors and appointed the Alton Bank and Trust Company as successor administrator of Vallerius's estate.

During his term as a coexecutor, White misappropriated funds from the estate and damaged Vallerius's residence and vehicle. In January 1990, Alton Bank filed a complaint against Johnson, White, and Safeco (as surety), alleging that Johnson and White breached their fiduciary duty to Vallerius's estate. In March 1990, Safeco filed a counterclaim against Johnson, seeking recovery under the indemnity agreement. Johnson had both a homeowner's policy and an umbrella policy issued by State Farm. In August 1990, Johnson filed a claim under his homeowner's policy regarding the then-pending lawsuit. State Farm provided Johnson's defense under a reservation of rights, allowed Johnson to select his own attorney, and paid the attorney fees. In October 1994, the trial court approved a settlement agreement between Alton Bank and Safeco, in which Alton Bank assigned Safeco its claims against Johnson and White.

In January 1997, the trial court found in Safeco's favor on its counterclaim against Johnson and awarded Safeco $43,975.92, plus costs. The court's judgment was based, in pertinent part, on Johnson and Safeco's indemnity agreement. Johnson appealed that judgment, and in April 1998, the Fifth District affirmed. Alton Banking & Trust Co. v. White, No. 5-97-0235 (April 17, 1998) (unpublished order under Supreme Court Rule 23).

In September 1999, State Farm informed Johnson that he had no right to indemnification of the January 1997 judgment against him and denied coverage under both the homeowner's policy and the umbrella policy. In March 2000, Johnson filed a complaint for declaratory judgment and breach of contract against State Farm. Johnson sought a declaration that State Farm had a duty to indemnify him under his umbrella policy and alleged that by denying him such coverage, State Farm breached its contract with him. (Johnson does not dispute State Farm's denial of coverage under his underlying homeowner's policy.) In October 2000, State Farm filed a motion for summary judgment, asserting, in pertinent part, that (1) it did not have a duty to defend Johnson in the underlying lawsuit; and (2) it did not have a duty to indemnify Johnson for the January 1997 judgment. In October 2001, Johnson filed a motion for summary judgment, asserting that (1) the facts alleged in the underlying complaint and counterclaim showed that the umbrella policy provided coverage for his liability; and (2) State Farm was estopped from asserting noncoverage.

In January 2001, following a hearing, the trial court granted Johnson's summary judgment motion and denied State Farm's summary judgment motion. This appeal followed.

II. ANALYSIS

State Farm argues that the trial court erred by granting summary judgment in Johnson's favor. Specifically, it contends that (1) State Farm was not estopped from asserting its claim that no duty to indemnify existed under the umbrella policy when it provided Johnson's defense in the underlying lawsuit; (2) it had no duty to indemnify Johnson for the prior judgment in Safeco's favor, where that judgment arose out of Johnson's breach of his contractual indemnity agreement with Safeco; and (3) because the underlying complaint and counterclaim did not allege any event that would qualify as an "accident," they failed to trigger the umbrella policy and State Farm's duty to defend Johnson. Because we agree with State Farm's first and second contentions, we reverse the grant of summary judgment to Johnson.

A. Standard of Review

In appeals from summary judgment rulings, we conduct de novo review. The reviewing court must construe all evidence strictly against the movant and liberally in favor of the nonmoving party. Where the pleadings, depositions, and affidavits show no genuine issue of material fact, the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2000). If reasonable persons could draw different inferences from undisputed facts, summary judgment should be denied. ...


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