Appeal from Circuit Court of Schuyler County No. 09MR7 Honorable Alesia A. McMillen Judge Presiding.
Justices Appleton and Holder White concurred in the judgment and opinion.
¶ 1 On October 26, 2012, the trial court denied plaintiff Country Mutual Insurance Company's (Country) motion for partial summary judgment, finding the pollution exclusion clause in Country's farm umbrella policy (umbrella policy) was ambiguous. On the same day, the court entered an order granting defendants Hilltop View, LLC's (Hilltop) and Professional Swine Management, LLC's (PSM) respective cross-motions for partial summary judgment to the extent Country is responsible for defending Hilltop and PSM (the insureds) in the underlying lawsuit (Schuyler County case No. 08-L-02) filed against them by 14 neighbors of Hilltop's confinement hog farm. Pursuant to the court's Illinois Supreme Court Rule 304(a) (eff. Feb. 26, 2010) finding, Country appeals, arguing the court erred in (1) denying its motion for summary judgment, which relied on the umbrella policy's pollution exclusion clause; and (2) granting the insureds' respective cross-motions for partial summary judgment to the extent Country is responsible for defending the insureds against the neighbors' lawsuit because Country alleged additional, and still unresolved, defenses to coverage under the umbrella policy. We affirm in part, reverse in part, and remand for further proceedings.
¶ 2 I. BACKGROUND
¶ 3 On May 9, 2008, the neighbors filed their initial complaint against Hilltop and PSM. The neighbors have since amended their complaint on more than one occasion. The neighbors' nuisance and negligence claims against Hilltop, PSM, and Steven L. and Linda J. Foglesong are predicated on alleged odors associated with the operation of the confinement hog farm and the land application of manure from the confinement hog farm on property owned by the Foglesongs.
¶ 4 On May 21, 2008, Hilltop delivered a notice of claim and a copy of the neighbors' complaint to Country. Since then, Hilltop has provided copies of all subsequent pleadings to Country, from which it had purchased several insurance policies prior to the neighbors' lawsuit against them, including an "AgriPlus" policy, an umbrella policy, and a pollution liability policy (pollution policy).
¶ 5 On June 13, 2008, Hilltop received notice Country was denying coverage under the "AgriPlus" policy. After receiving no formal response from Country with regard to any of its other policies, Hilltop retained counsel to respond to the neighbors' complaint. On June 19, 2008, Hilltop received a reservation of rights letter from Country addressing coverage under the pollution policy. The letter stated:
"It is Country's understanding that you have engaged and directed [private counsel] to prepare a motion to dismiss the above captioned matter. You have the right to hire, at your own expense, a personal attorney to review the defense being provided to you. However, Country has the right to control the defense of this matter. I did not assign this matter to [private counsel], nor did I authorize [private counsel] to do any work. Therefore, Country will not pay for the charges associated with the preparation of the motion to dismiss. In addition, you are directed not to have anyone file any pleadings nor take any action in this matter without Country's consent. Your cooperation in this matter is a condition precedent to coverage."
¶ 6 On August 14, 2008, the insureds and Country met to discuss the neighbors' lawsuit. Country advised the insureds it would make a determination of coverage under the pollution policy based on the amended complaint to be filed by the neighbors.
¶ 7 On August 28, 2008, Country filed its initial complaint for declaratory judgment against Hilltop, PSM, and the neighbors, alleging it had no duty pursuant to its pollution policy to defend or indemnify the insureds against the neighbors' lawsuit. However, in a letter dated September 9, 2008, Country agreed to provide a defense to the insureds pursuant to the pollution policy, subject to a reservation of rights.
¶ 8 Country provided Hilltop and PSM with a defense under the pollution policy until February 4, 2011. At that time, Country had filed its third amended complaint for declaratory judgment, which sought to rescind the pollution policy based on alleged misrepresentations during the policy application process. In a letter to Hilltop and PSM's privately retained counsel, Country stated it would "no longer advance any defense costs pursuant to any reservation of rights, but instead will be pursuing its rights and remedies as encouraged by Illinois law in the declaratory judgment action."
¶ 9 On August 31, 2011, the insureds asked Country to provide a defense to the neighbors' complaint pursuant to the umbrella policy. On September 26, 2011, Country sent the insureds notice it was denying coverage under the umbrella policy based on the policy's pollution exclusion. According to the letter written by counsel for Country:
"This responds to your letter to me of August 31, 2011[, ] and our subsequent discussions, all on behalf of our respective clients concerning coverage for the underlying litigation under the policies that Country Mutual issued to Hilltop. I, and therefore my client, Country Mutual, was under the impression that we previously had addressed the umbrella policy and that neither Hilltop nor Professional Swine currently was asserting claims under any umbrella policy."
Country stated it would not provide a defense under the umbrella policy and would seek leave to amend its complaint for declaratory judgment to address the absence of coverage under the umbrella policy.
¶ 10 On November 7, 2011, Country filed its fourth amended complaint for declaratory judgment, which contained eight counts addressing coverage defenses to the umbrella policy. One of the eight counts addressed the pollution exclusion and the remaining seven counts asserted other defenses to coverage under the umbrella policy.
¶ 11 On February 2, 2012, Hilltop and PSM filed answers to Country's fourth amended complaint, denying that coverage under the umbrella policy was precluded by the defenses asserted by Country. That same day, Hilltop and PSM each asked for leave to file a third amended counterclaim for declaratory judgment against Country.
¶ 12 On March 2, 2012, Country filed its motion for partial summary judgment, arguing the pollution exclusion bars coverage under the umbrella policy. On March 28, 2012, Hilltop and PSM filed their respective third amended counterclaims.
¶ 13 On April 5, 2012, Hilltop and PSM filed a joint response to Country's motion for partial summary judgment. In their response, Hilltop and PSM argued the pollution exclusion did not bar coverage in this situation. Hilltop and PSM also stated "[t]he only question presented in Country Mutual's Motion [for partial summary judgment] is whether the pollution exclusion in the Umbrella Policy bars coverage and a defense for the Insureds in the Underlying Litigation."
¶ 14 On April 5, 2012, Hilltop and PSM filed their own cross-motions for partial summary judgment, arguing Country was obligated to provide each of them a defense in the underlying lawsuit. The primary focus of each motion was the inapplicability of the "pollution-exclusion clause" of the umbrella policy. However, Hilltop and PSM also both briefly argued Country was estopped from asserting policy defenses under the umbrella policy because it breached that policy by refusing to defend them in the underlying action brought by the neighbors.
¶ 15 On June 12, 2012, Country filed a reply in further support of its motion for partial summary judgment that the pollution exclusion bars coverage under the umbrella policy. The same day, Country also filed a response to Hilltop's cross-motion for summary judgment, incorporating all the arguments it made in its own motion for partial summary judgment and its reply in further support of its motion for partial summary judgment. Country argued it was not estopped from asserting policy defenses to coverage under the umbrella policy. On June 13, 2012, Country filed a similar response with regard to PSM's cross-motion for partial summary judgment. On July 16, 2012, Hilltop and PSM filed a joint reply to Country's responses to their cross-motions for partial summary judgment.
¶ 16 The trial court held a hearing on the summary judgment motions and cross- motions on July 26, 2012. On October 26, 2012, the court entered an order denying Country's motion for partial summary judgment and a separate order granting the insureds' cross-motions for partial summary judgment "to the extent that [Country] is responsible for [the insureds'] defense" pursuant to the same authority and reasons it denied Country's motion for partial summary judgment.
¶ 17 On November 26, 2012, Country filed a motion to vacate and reconsider judgment pursuant to section 2-1203 of the Code of Civil Procedure (735 ILCS 5/2-1203 (West 2010)). Country argued the trial court erred in denying its partial motion for summary judgment. In the alternative, Country argued the court should vacate its order granting Hilltop's and PSM's cross-motions for partial summary judgment because Country's complaint for declaratory ...