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American Family Mutual Insurance Company, A Mutual Insurance Company v. Michael Guzik

December 13, 2010

AMERICAN FAMILY MUTUAL INSURANCE COMPANY, A MUTUAL INSURANCE COMPANY,
PLAINTIFF,
v.
MICHAEL GUZIK, HELEN GUZIK, THE CITY OF LOCKPORT, ILLINOIS, A MUNICIPAL CORPORATION, COUNTRYWIDE HOME LOANS, INC.,MARJORIE BROWN;
RICHARD CLIFT, AND CAROL CLIFT, INDIVIDUALLY AND AS JOINT TENANTS IN AND TO THAT PROPERTY
COMMONLY REFERRED TO AS 1408 PEACHTREE LANE, LOCKPORT, ILLINOIS;
DORRIS RICH; JENNIFER HENSLEY; GEORGE BABJACK AND
ROSEMARY BABJACK, INDIVIDUALLY AND AS JOINT TENANTS IN AND TO THAT PROPERTY
COMMONLY REFERRED TO AS 1010 DIVISION STREET, LOCKPORT, ILLINOIS;
RONALD DWYER AND CHAROLETTE BECKER, INDIVIDUALLY AND AS JOINT TENANTS IN AND
TO THAT PROPERTY COMMONLY REFERRED TO AS 1401 STRAWBERRY LANE, LOCKPORT, ILLINOIS;
STATE FARM FIRE & CASUALTY INSURANCE COMPANY AS SUBROGEE OF RICHARD CLIFT,
CAROL CLIFT, RONALD DWYER, CHAROLETTE BECKER AND DORIS RICH; AND
ILLINOIS FARMERS INSURANCE COMPANY AS SUBROGEE OF MARJORIE BROWN, DEFENDANTS.
STATE FARM FIRE & CASUALTY COMPANY, INDIVIDUALLY AND AS SUBROGEE OF
RICHARD CLIFT, CAROL CLIFT, JANICE DREYER, AND DORIS RICH,
COUNTERPLAINTIFF,
v.
AMERICAN FAMILY MUTUAL INSURANCE COMPANY AND MICHAEL GUZIK,
COUNTERDEFENDANTS.



Appeal from the Circuit Court of the 12th Judicial Circuit, Will County, Illinois, Honorable Michael J. Powers, Judge, Presiding. No. 07--MR--106

The opinion of the court was delivered by: Justice Holdridge

PRESIDING JUSTICE HOLDRIDGE delivered the opinion of the court:

The plaintiff, American Family Mutual Insurance (American Family), filed a complaint for a declaratory judgment as to whether it owed insurance coverage under a homeowner's insurance policy issued to defendant, Michael Guzik. The complaint related to an explosion and fire that destroyed Guzik's home and damaged neighboring properties. State Farm Fire & Casualty Company (State Farm) filed a counterclaim as subrogee of the neighboring property owners, arguing that American Family owed coverage to Guzik for the damage to the surrounding homes. Both State Farm and American Family filed motions for summary judgment. The trial court granted State Farm's motion for summary judgment, finding that American Family owed Guzik coverage.

American Family appeals.*fn1 We reverse for the reasons below.

FACTS

American Family issued a homeowners insurance policy to Guzik for his home in Lockport, Illinois (premises). The policy was in effect from August 31, 2006, until August 31, 2007, with a liability limit of $500,000.

Section II of the insurance policy provided that American Family will pay up to the policy's coverage limit for "compensatory damages for which any insured is legally liable because of bodily injury or property damage caused by an occurrence covered by this policy." (Emphases in original.) The policy defined "occurrence" as an "accident" resulting in bodily injury or property damage.

Under an exclusionary clause in the policy, coverage was excluded for: "bodily injury or property damage caused intentionally by or at the direction of any insured even if the actual bodily injury or property damage is different than that which was expected or intended from the standpoint of any insured." (Emphases in original.)

On October 5, 2006, an explosion and fire occurred on the premises, causing damage that included: (1) destruction of the premises, rendering it a total loss and requiring demolition and debris removal by the City of Lockport; (2) bodily injuries to Guzik; and (3) damage and loss to four of the surrounding homes, which were insured by State Farm.

An investigation and evidence indicated that prior to the day of the explosion and fire, Guzik had lost his job as a truck driver due to a driving under the influence conviction. He was attempting to sell his home to leave the state. On the day of the incident, Guzik was alone inside the home, the stove was disconnected from the gas line hook up, the gas line connection was open, tools were located near the disconnected stove, an accelerant was detected throughout the home and on Guzik's clothes, and multiple, localized, unusual burn patterns were noted throughout the home. After the explosion and fire, Guzik was hospitalized and had no recollection of events just prior to the incident or of the incident itself. A fire and explosion expert concluded that the explosion and fire were caused by Guzik's deliberate incendiary act of arson.

American Family filed a complaint for a declaratory judgment that it did not owe coverage under the language of policy because the explosion and fire arose out of the intentional acts of Guzik to cause a loss on his premises. Guzik did not file an appearance or answer to American Family's complaint and, consequently, was found in default.

Pursuant to State Farm's insurance policies with the surrounding homeowners, State Farm compensated its insured for their losses. State Farm subrogated the rights of its insured and filed a counterclaim against American Family, claiming that American Family owed coverage to Guzik for State Farm's claims. State Farm claimed that even though Guzik may have intended to damage his premises there was no evidence that he intended to cause damage to the surrounding homes and, as such, he acted negligently by failing to prevent the fire and explosion from communicating to the surrounding homes.

State Farm and American Family both filed motions for summary judgment. The trial court granted State Farm's motion and denied American Family's motion, finding that American Family owed Guzik coverage under the subject policy for the ...


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