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Country Mut. Ins. Co. v. Bible Pork, Inc.

Court of Appeals of Illinois, Fifth District

November 20, 2015

COUNTRY MUTUAL INSURANCE COMPANY, Plaintiff-Appellant,
v.
BIBLE PORK, INC., an Illinois Corporation, Defendant-Appellee (Ruth E. Pierson, Della K. Jones, Dale E. Jones, Shirley K. Atchison, William Atchison, Jean Bailey, Robert D. Bailey, Jerry McKnelly, Paige Kincaid, Wilma Kuhlig, Nancy Leach, Joe Leach, Rose Ann Quandt, Theodore Quandt, Emma Jean Sachau, Lisa Sachau, Gary Sachau, Dorothy Schoonover, Glenn Schoonover, Terri Wolfe, and Edgar Wolfe, Defendants)

Page 959

Appeal from the Circuit Court of Clay County. No. 08-MR-14. Honorable Daniel E. Hartigan, Judge, presiding.

For Appellant: Keith G. Carlson, Carlson Law Offices, Chicago, IL; Douglas A. Enloe, Gosnell, Borden, Enloe, Sloss & McCullough, Ltd., Lawrenceville, IL.

For Appellee: Christopher A. Koester, Taylor Law Offices, P.C., Effingham, IL; Julie A. Lierly, Kilpatrick, Townsend & Stockton, LLP, Atlanta, GA; Alexander M. Bullock, Kilpatrick, Townsend & Stockton, LLP, Washington, DC.

JUSTICE GOLDENHERSH delivered the judgment of the court, with opinion. Justice Chapman concurred in the judgment and opinion. Justice Moore dissented, with opinion.

Page 960

OPINION

GOLDENHERSH, JUSTICE

[¶1] Plaintiff, Country Mutual Insurance Company (Country Mutual), appeals from an order of the circuit court of Clay County entering summary judgment in favor of defendant, Bible Pork, Inc. (Bible Pork), a livestock producer and Country Mutual's longtime insured, after the parties filed cross-motions for summary judgment. The trial court found Country Mutual had a duty to defend Bible Pork in an underlying lawsuit, Pierson v. Bible Pork, Inc. (the underlying lawsuit), filed by 21 plaintiffs who owned property near Bible Pork's proposed hog factory facility. The underlying lawsuit sought to have the proposed facility declared a nuisance. In the instant case, the trial court entered judgment in the amount of $2,026,098.93, the cost of defending the underlying lawsuit, plus accrued interest in the amount of $480,068.96. The issue raised in this appeal is whether the trial court erred in finding Country Mutual had a duty to defend the underlying lawsuit. We affirm.

[¶2] FACTS

[¶3] In May 2005, Bible Pork began the process of seeking regulatory approval from the Illinois Department of Agriculture

Page 961

(Department) to construct a new hog factory facility in Clay County. Construction of such a facility requires compliance with the Livestock Management Facilities Act (Act) (510 ILCS 77/1 et seq. (West 2004)) and numerous other state regulations and requirements. Ultimately, the Department approved Bible Pork's plans and construction began in October 2005. It was completed and began operating as a lawfully permitted facility in June 2006.

[¶4] During construction of the facility, 21 plaintiffs filed the underlying lawsuit against Bible Pork, seeking to have the facility declared a nuisance before it became operational. The plaintiffs in the underlying lawsuit insisted Bible Pork's facility would be a source of disagreeable noises, odors, dust particles, surface water contamination, and loss of property values which would interfere with their lives and render the facility a public and private nuisance. The plaintiffs amended their complaint twice. In all three complaints, the plaintiffs sought not only declarations that the facility constituted a public and a private nuisance, but also " such other relief as deemed appropriate." Bible Pork provided timely notice of the underlying lawsuit to its longtime insurer, Country Mutual, and asked for defense and indemnity under two separate policies, an Agriplus Farm Liability Policy (Agriplus policy) (No. A12L2576980) and a Farm Umbrella Liability Policy (umbrella policy) (No. AAU1631730).

[¶5] The Agriplus policy was for the policy period of June 1, 2005, to December 1, 2005, and was a renewal of an earlier policy. It was renewed several times thereafter through June 1, 2009. The umbrella policy was for the policy period of January 25, 2005, to January 25, 2006, and was also a renewal of an earlier policy. The umbrella policy was also renewed several times through January 25, 2010. In a letter dated January 4, 2006, Country Mutual notified Bible Pork it was refusing to defend or indemnify Bible Pork in the underlying lawsuit under the Agriplus policy. Similarly, in a letter dated May 8, 2006, Country Mutual notified Bible Pork it was denying coverage under the umbrella policy.

[¶6] Country Mutual denied coverage for three reasons: (1) the complaint in the underlying lawsuit sought only a declaratory judgment and did not seek damages for personal injury or property damage; (2) no bodily injury or property damage occurred during the policy period so there was no " occurrence" as defined by the policies; and (3) " pollutants" were specifically excluded. We will not recite specific policy language in setting forth the facts, but instead will address the specific language of the policies during our analysis.

[¶7] The underlying lawsuit went on for over six years. Count I for criminal public nuisance was dismissed on January 8, 2009, while count II for common law public nuisance was dismissed on January 14, 2009. The claims for private nuisance went to trial. After a jury trial, a verdict was returned in favor of Bible Pork. On appeal, this court found the trial court properly granted summary judgment in favor of Bible Pork on the issue of public nuisance and properly denied the plaintiffs' motion for a new trial after the jury verdict in favor of Bible Pork on the issue of private nuisance. Pierson v. Bible Pork, Inc., 2011 IL App. (5th) 090308-U.

[¶8] With regard to the instant litigation, despite Country Mutual's denial of coverage, Bible Pork continued to advise Country Mutual regarding developments in the underlying lawsuit. For example, after the facility became operational, Bible Pork provided Country Mutual with the trial

Page 962

court's ruling that an actual controversy existed regarding whether the livestock facility was a public and/or private nuisance. Bible Pork also informed Country Mutual of statements made by Fred Roth, plaintiffs' attorney, that plaintiffs sought both monetary damages and injunctive relief. Bible Pork requested Country Mutual reconsider its earlier denials, but on August 5, 2008, Country Mutual again denied coverage.

[¶9] On September 30, 2008, Country Mutual filed the instant action, a complaint for declaratory judgment, seeking a declaration it had no duty to defend or indemnify its insured, Bible Pork, under either the Agriplus policy or the umbrella policy. Discovery ensued. Ultimately, both parties filed cross-motions for summary judgment on the question of whether Country Mutual had a duty to defend the underlying lawsuit. On April 26, 2013, the trial court entered an order granting Bible Pork's motion for summary judgment, finding Country Mutual owed Bible Pork a duty to defend in the underlying lawsuit. The trial court made four specific findings with regard to why there was a duty to defend.

[¶10] The trial court found: (1) the underlying lawsuit was a suit for damages under the Agriplus policy and a suit seeking damages under the umbrella policy because the complaint specifically asked for " other relief deemed appropriate" ; (2) there was an " occurrence" as defined by the policies and the " expected or intended injury" exclusion in the Agriplus policy did not apply; (3) the allegations of " water contamination and depletion," " damage to Plaintiff's property," and similar allegations were sufficient to constitute " physical injury to or destruction of physical property" under both policies; and (4) the pollution exclusions were ambiguous and, therefore, inapplicable. The trial court ordered Country Mutual to reimburse Bible Pork for all legal fees incurred as a result of the underlying lawsuit, plus interest. The trial court entered judgment in the amount of $2,026,098.63, plus accrued interest in the amount of $480,068.96. Country Mutual filed a timely notice of appeal.

[¶11] ANALYSIS

[¶12] There is no question of indemnity in the instant case because the jury found in favor of Bible Pork in the underlying lawsuit, and this court affirmed. The only issue raised in this appeal is whether the trial court erred in finding Country Mutual had a duty to defend Bible Pork in the underlying lawsuit. On appeal, Country Mutual takes issue with all the findings of the trial court and asks us to reverse the trial court's entry of summary judgment finding a duty to defend.

[¶13] We first point out that a trial court's decision to grant summary judgment will be affirmed if the reviewing court concludes there is no issue of genuine fact and the movant is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2012); Williams v. Manchester, 228 Ill.2d 404, 417, 888 N.E.2d 1, 8-9, 320 Ill.Dec. 784 (2008). Summary judgment appeals are reviewed de novo. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90, 102, 607 N.E.2d 1204, 1209, 180 Ill.Dec. 691 (1992). Construction of an insurance policy and the determination of rights and obligations under the policy are questions of law for the court and appropriate for disposition via summary judgment. Illinois Emcasco Insurance Co. v. Waukegan Steel Sales Inc., 2013 IL App. (1st) 120735, ¶ 11, 996 N.E.2d 247, 374 Ill.Dec. 800. We now turn to the specific findings made by the trial court.

Page 963

[¶14] I. Damages

[¶15] Country Mutual first contends the trial court erred in finding the underlying lawsuit constituted a claim for covered damages, or seeking covered damages, because the language in the complaint " other relief deemed appropriate" is not a factual claim determined in construing potential coverage. Country Mutual insists the allegations of fact in the complaint when construed and compared to the policy language simply do not assert a claim, and, if the trial court's ruling is upheld, we would be dramatically expanding the duty to defend to virtually every type of lawsuit. We disagree.

[¶16] " An insurer may not justifiably refuse to defend an action against its insured unless it is clear from the face of the complaint that the allegations fail to state facts which bring the case within, or potentially within, the policy's coverage." Conway v. Country Casualty Insurance Co., 92 Ill.2d 388, 393, 442 N.E.2d 245, 247, 65 Ill.Dec. 934 (1982). The duty to defend is much broader than the duty to indemnify because the duty to defend is triggered if the complaint potentially falls within a policy's coverage, whereas the duty to indemnify is triggered only when the resulting loss or damage actually comes within a policy's coverage. Stoneridge Development Co. v. Essex Insurance Co., 382 Ill.App.3d 731, 741, 888 N.E.2d 633, 644, 321 Ill.Dec. 114 (2008). To determine if a claim is potentially covered under an insurance policy, a court must compare the allegations in the underlying complaint to the policy language. General Agents Insurance Co. of America, Inc. v. Midwest Sporting Goods Co., 215 Ill.2d 146, 154, 828 N.E.2d 1092, 1098, 293 Ill.Dec. 594 (2005). It is well settled that both the underlying complaint and the insurance policy should be liberally construed in favor of the insured and against the drafter of the policy, the insurer. United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill.2d 64, 74, 578 N.E.2d 926, 930, 161 Ill.Dec. 280 (1991). The duty to defend extends to cases in which the complaint contains several theories or causes of action against the insured and only one of the theories is within the policy's coverage limits. International Insurance Co. v. Rollprint Packaging Products Inc., 312 Ill.App.3d 998, 1011, 728 N.E.2d 680, 692, 245 Ill.Dec. 598 (2000).

[¶17] According to the Agriplus policy, Country Mutual is liable as follows:

" If a claim is made or a suit is brought against an 'insured' for damages because of 'bodily injury' or 'property damage' caused by an 'occurrence' to which this coverage applies, 'we' will:
1. Pay up to 'our' limit of liability for the damages for which an 'insured' is legally liable. Damages include prejudgment interest awarded against an 'insured'; and
2. Provide a defense at 'our' expense by counsel of 'our' choice, even if the suit is groundless, false or fraudulent. 'We' may investigate or settle any claim or suit that 'we' decide is appropriate. 'Our' duty to settle or defend ends when 'our' limit of liability for the 'occurrence' has been exhausted by payment of a judgment or settlement."

According to the umbrella policy, Country Mutual is further liable as follows:

" The company will indemnify the insured for ultimate net loss in excess of the applicable underlying or retained limit hereafter stated which the insured may sustain by reason of liability imposed upon the insured by law for damages because of:
1. Personal Injury
2. Property ...

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