SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA, Plaintiff and Counterdefendant-Appellee,
CHERRYTREE COMPANIES, INC., d/b/a Macon General Contractors, Defendant and Counterplaintiff-Appellant.
In an action arising from a dispute as to whether plaintiff insurer had an obligation to indemnify defendant insured under the policy defendant purchased from plaintiff which provided commercial general liability coverage and umbrella liability coverage with respect to the defective grain storage facilities defendant constructed, the trial court erred in dismissing defendant’s counterclaims alleging that plaintiff breached its contractual duties and acted in bad faith by denying coverage on the ground that no “suit” was filed, since the indemnification provision of the policy did not require the filing of a “suit” before defendant could seek indemnification for the damages defendant agreed to pay the client for whom the facilities were constructed.
Appeal from the Circuit Court of Bureau County, No. 11-MR-32; the Hon. Marc P. Bernabei, Judge, presiding.
Mark P. Standa (argued), of Mark P. Standa, P.C., of Lake Forest, for Appeal appellant.
Brian A. O'Gallagher (argued) and Kristina M. Beck, both of Cremer, Spina, Shaughnessy, Jansen & Siegert, LLC, of Chicago, for appellee.
Panel JUSTICE CARTER delivered the judgment of the court, with opinion. Justice Holdridge concurred in the judgment and opinion. Justice Schmidt specially concurred, with opinion.
¶ 1 The plaintiff and counterdefendant-appellee, Selective Insurance Company of South Carolina (Selective), filed a complaint for declaratory judgment against the defendant and counterplaintiff-appellant, Cherrytree Companies, Inc., d/b/a Macon General Contractors (Cherrytree), which requested the circuit court to rule on whether the insurance policy Cherrytree had with Selective provided coverage for problems Cherrytree had with a grain storage facility it had built for another company in Fairfield, Nebraska. Along with its answer, Cherrytree filed two counterclaims, alleging that Selective breached its contract with Cherrytree and that Selective acted in bad faith in denying coverage for the Fairfield incident and another incident with a grain storage facility in Chester, Nebraska. After a hearing, the circuit court dismissed Cherrytree's counterclaims with prejudice on the pleadings. Later, the court denied Cherrytree's motion to reconsider and granted Cherrytree's motion for a finding pursuant to Illinois Supreme Court Rule 304(a) (eff. Feb. 26, 2010), thereby allowing Cherrytree to take this appeal. On appeal, Cherrytree argues that the court erred when it dismissed the counterclaims with prejudice. We reverse and remand for further proceedings.
¶ 2 FACTS
¶ 3 On September 14, 2011, Selective filed a complaint for declaratory judgment and other relief against Cherrytree, which Selective insured under a policy that contained commercial general liability (CGL) coverage and umbrella liability coverage. The complaint alleged that in March 2010, Cherrytree contracted with AGP Grain Marketing, LLC, to construct a grain storage facility in Fairfield, Nebraska. Cherrytree had completed 99% of the construction by October 26, 2010, when five to six trusses in the storage facility had sunk approximately one to two feet and the concrete walls in the center of the storage facility had bowed outward. Selective received notice of this problem on October 26, 2010, with a more detailed explanation given on November 4, 2010. Selective began investigating the incident in mid-November 2010 and issued a letter to Cherrytree in March 2011 that stated Selective did not believe the policy covered the problem with the storage facility. Selective stated that it was denying coverage because: (1) the problem with the storage facility did not constitute an "occurrence" under the policy; (2) the "your work" and "your product" exclusions precluded coverage; and (3) the problem with the storage facility did not constitute "property damage" under the policy.
¶ 4 Under the subject policy, the CGL coverage section stated, in relevant part:
"We will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages. However, we will have no duty to defend the insured against any 'suit' seeking damages for 'bodily injury' or 'property damage' to which this insurance does not apply. We may, at our discretion, investigate any 'occurrence' and settle any claim or 'suit' that may result."
¶ 5 The CGL coverage section defined "suit" as:
"[A] civil proceeding in which damages because of 'bodily injury', 'property damage' or 'personal and advertising injury' to which this insurance applies are alleged. 'Suit' includes:
a. An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or
b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent."
¶ 6 The umbrella liability coverage section of the policy stated, in relevant part:
"We will pay on behalf of the insured the 'ultimate net loss' in excess of the 'retained limit' that the insured becomes legally obligated to pay as damages because of 'bodily injury', 'property damage' or 'personal and advertising injury' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages when the 'underlying insurance' does not provide coverage or the limits of 'underlying insurance' have been exhausted. When we have no duty to defend, we will have the right to defend, or to participate in the defense of, the insured against any other 'suit' seeking damages to which this insurance may apply. However, we will have no duty to defend the insured against any 'suit' seeking damages for 'bodily injury', 'property damage' or 'personal and advertising injury' to which this insurance does not apply. At our discretion, we may investigate any 'occurrence' or offense that may involve this insurance and settle any resultant claim or 'suit', for which we have the duty to defend."
¶ 7 The umbrella liability coverage section's definition of "suit" was identical to the definition contained in the CGL coverage section, except that subsection "b." read, "[a]ny other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with ...