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American Family Mutual Insurance Company v. Westfield Insurance Company

November 16, 2011

AMERICAN FAMILY MUTUAL INSURANCE COMPANY,
PLAINTIFF-APPELLANT,
v.
WESTFIELD INSURANCE COMPANY, AS SUBROGEE OF CENTRAL SUPPLY AND AS SUBROGEE OF THOMAS WELLS; AND SHANNON DENNIS, A MINOR, BY PATRICK DENNIS, HER NATURAL LEE ANN S. HILL, DEFENDANTS-APPELLEES.



Appeal from Circuit Court of McLean County No. 09MR147 Honorable Parent and Guardian, Judge Presiding.

The opinion of the court was delivered by: Justice Cook

JUSTICE COOK delivered the judgment of the court, with opinion. Justices Turner and Steigmann concurred in the judgment and opinion.

OPINION

¶ 1 On September 12, 2005, co-defendant Shannon Dennis, a minor, was convicted of criminal damage to property for recklessly setting fire to the Central Supply Company in Bloomington, Illinois. 720 ILCS 5/21--1(1)(b) (West 2004). At the time of the incident, Shannon was insured under a farm-ranch policy issued to her paternal grandparents by plaintiff, American Family Mutual Insurance Company (American Family).

¶ 2 On October 24, 2006, co-defendant Westfield Insurance Company (Westfield), as subrogee of Central Supply Company, filed suit against Patrick Dennis, as natural parent and guardian of Shannon, a minor, for damages stemming from the fire. American Family retained counsel and provided a defense to Shannon.Prior to Westfield filing suit, American Family sent a reservation-of-rights letter to Patrick. On May 7, 2009, the trial court found Shannon negligently caused the Central Supply Company fire and awarded Westfield damages.

¶ 3 On May 14, 2009, American Family filed a complaint for declaratory judgment seeking a judicial determination that it is not obligated to indemnify Shannon for the judgment entered against her and in favor of Westfield. In response, Shannon filed a motion for summary judgment alleging that American Family (1) was collaterally estopped from asserting that its policy's intentional-injury exclusion provision applied and (2) sent an improper reservation-of-rights letter. The trial court granted the motions. We reverse and remand.

¶ 4 I. BACKGROUND

¶ 5 In July 2004, Shannon and two boys found hundreds of matchbooks in a Dumpster located outside the Coachman Motel in Bloomington, Illinois. At the time, Shannon was nearing her thirteenth birthday. She resided with her paternal grandparents andfather. On July 24, 2004, Shannon and the boys were lighting the Coachman Motel matches and throwing them at each other as well as on the ground. While playing with the matches, the minors walked by the Central Supply Company. A match was thrown through a cracked window at the Central Supply Company property and the property caught on fire.

¶ 6 Central Supply Company was insured by Westfield. As a result of the fire, Westfield paid to or on behalf of Central Supply Company $467,235.36.

¶ 7 In 2005, Shannon was charged with arson (720 ILCS 5/20--1 (West 2004)) and criminal damage to property recklessly by fire (720 ILCS 5/21--1(1)(b) (West 2004)) relating to the Central Supply Company fire. On September 12, 2005, Shannon was convicted of criminal damage to property.

¶ 8 Shannon was insured under a farm-ranch policy issued to her paternal grandparents by American Family. The policy covered Shannon, because at the time of the incident she was a resident of her paternal grandparents' household. The policy was effective from October 26, 2003, to October 26, 2004.

¶ 9 On June 29, 2006, Westfield sent to American Family a copy of a complaint it planned to fileagainst Patrick, as natural parent and guardian of Shannon, a minor, on account of thefire. Following receipt of the document, James Keane, an in-house attorney for American Family, sent a reservation-of-rights letter to Patrick. The letter was sent on September 29, 2006. In the letter, American Family provides that its policy's intentional-act exclusion provision may limit or eliminate coverage for damages stemming from the fire. The letter set forth the policy's intentional-act exclusion provision. The provision states in relevant part: "11. Intentional injury. We will not pay for damages due to bodily injury or property damage expected or intended from the standpoint of the insured."

¶ 10 On October 24, 2006, Westfield filed suit againstPatrick, as natural parent and guardian of Shannon, a minor. American Family retained counsel, at its expense, and provided a defense to Shannon.

ΒΆ 11 On May 7, 2009, the trial court found Shannon negligently caused the fire. The court awarded Westfield $465,735.36 plus costs of $725. The following day, American ...


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