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Dominick's Finer Foods v. Indiana Insurance Co.

Court of Appeals of Illinois, First District, Fourth Division

March 1, 2018

DOMINICK'S FINER FOODS, Plaintiff-Appellant,
v.
INDIANA INSURANCE COMPANY, THE NETHERLANDS INSURANCE COMPANY-A STOCK COMPANY, MONTERREY SECURITY CONSULTANTS, INC., and SAFETY SERVICE SYSTEMS SECURITY, INC. Defendants. Indiana Insurance Company, The Netherlands Insurance Company-A Stock Company, Defendants-Appellees MONTERREY SECURITY CONSULTANTS, INC., Third-Party Plaintiff,
v.
SCOTTSDALE INSURANCE COMPANY, Third-Party Defendant.

         Appeal from the Circuit Court of Cook County No. 11 CH 1535 Honorable Kathleen M. Pantle, Judge Presiding.

          JUSTICE ELLIS delivered the judgment of the court, with opinion. Presiding Justice Burke and Justice McBride concurred in the judgment and opinion.

          OPINION

          ELLIS JUSTICE

         ¶ 1 This appeal involves a dispute over insurance coverage, after a young woman was killed and a man was injured in a shooting that took place in a parking lot outside Dominick's Finer Foods (Domini ck's) on the northwest side of Chicago. When Domini ck's was sued by the decedent's estate, it tendered its defense to insurers Netherlands Insurance Company (Netherlands) and Indiana Insurance Company (Indiana) and later sought indemnification as well. The insurers denied coverage, and Dominick's filed suit for a declaration of coverage and damages for the insurers' alleged bad-faith conduct.

         ¶ 2 After Dominick's and Netherlands filed cross-motions for summary judgment, the trial court ruled in favor of Netherlands and against Dominick's on all counts. The trial court entered language pursuant to Illinois Supreme Court Rule 304(a) (eff. Feb. 26, 2010), allowing an immediate appeal of these claims, while other litigation involving other parties continued in the trial court.

         ¶ 3 We hold that Netherlands owed Dominick's a duty to defend and indemnify under the relevant language of the insurance policy. We thus reverse the grant of summary judgment in favor of Netherlands and remand this case for the entry of summary judgment in favor of Dominick's on the issue of coverage. But we affirm the trial court's grant of summary judgment in favor of Netherlands on the claims of bad faith under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2014)) because even if we ultimately disagree with the insurers' interpretation of the insurance policy, we do not find their position to have been unreasonable, and a bona fide dispute over coverage existed.

         ¶ 4 I. BACKGROUND

         ¶ 5 The entire background of this case is somewhat complicated, involving a lot of moving parts-various parties and different insurance policies-so we will limit our background to what is relevant to this appeal.

         ¶ 6 On September 6, 2004, a shooting occurred in the parking lot outside of a Dominick's supermarket on the 3300 block of West Belmont Avenue. The shooting claimed the life of Crystal Mustafov and injured Jose Ramirez. The shooters initially confronted the victims inside Dominick's before following them into the parking lot.

         ¶ 7 The Domini ck's store in question was a tenant of the Kennedy Plaza Shopping Center, which was owned by a trio of entities: Kennedy Plaza Associates LLC, Kennedy Plaza BK, and Kennedy Plaza RL, LLC (collectively, Kennedy Plaza).

         ¶ 8 Less than a month later, a lawsuit was filed by the estate of Crystal Mustafov, which we will call the "Gallo litigation" after the named plaintiff. The Gallo complaint was amended several times, the other individual injured in the shooting (Ramirez) was added as a plaintiff, and the litigation was stayed for several years pending the outcome of criminal proceedings. The defendants ultimately included Domini ck's, Kennedy Plaza, and security companies that performed work at that location.

         ¶ 9 In the sixth amended complaint in the Gallo litigation, both Gallo and Ramirez alleged that Dominick's "possessed, operated and controlled a food store and adjacent parking lot" at 3300 West Belmont; that Domini ck's had a "duty *** to ensure the safety of [its] patrons and invitees"; and that Domini ck's breached that duty by negligently failing to supervise or otherwise protect "store patrons and invitees" such as Mustafov and Ramirez from harm.

         ¶ 10 Kennedy Plaza had purchased a commercial general liability (CGL) insurance policy from Netherlands (Kennedy policy), in effect at the time of the shooting, which insured against claims for bodily injury, property damage, or "personal and advertising injury." It is undisputed that Domini ck's was an additional insured on the policy, and that the additional insurance covered not only the Domini ck's store but the adjacent parking lot where the shooting occurred. The relevant portion states as follows:

         "I. ADDITIONAL INSURED-BY CONTRACT, AGREEMENT OR PERMIT

         1.Paragraph 2. Under SECTION II-WHO IS AN INSURED is amended to include as an insured any person or organization when you and such person or organization have agreed in writing in a contract, agreement or permit that such person organization [sic] can be added as an additional insured on your policy to provide insurance such as is afforded under this Coverage Part. Such person or organization is an additional insured only with respect to liability arising out of:

a. Your ongoing operations performed for that person or organization; or
b. Premises or facilities owned or used by you. ***
2. This endorsement provision I. does not apply:
a. Unless the written contract or agreement has been executed, or permit has been issued, prior to the 'bodily injury', 'property damage' or 'personal and advertising injury',
d. To 'bodily injury', 'property damage' or 'personal and advertising injury arising out of any act, error or omission that results from the additional insured's sole negligence or wrongdoing.' " (Emphasis added.)

         ¶ 11 Relying on the policy language, Dominick's tendered its defense of the Gallo litigation to Netherlands, which denied coverage.

         ¶ 12 The Gallo litigation proceeded. The seventh amended complaint added the various entities we have collectively referred to as "Kennedy Plaza" for the first time as defendants, claiming that Kennedy Plaza owned and operated the parking lot, had a duty to secure and protect that lot, and breached its duty, resulting in the shootings that occurred.

         ¶ 13 Kennedy Plaza settled out of the Gallo litigation in January 2010 for $40, 000. That left Dominick's and two security companies as remaining defendants. In March 2013, by which time a twelfth amended complaint was pending, the remaining defendants settled the litigation, with Dominick's contributing $1.3 million to the settlement.

         ¶ 14 About a year after settling, Dominick's sued Netherlands, claiming that it had a duty to defend and indemnify Dominick's and asserting a bad-faith claim under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2014)).[1]

         ¶ 15 After cross-motions for summary judgment, the trial court agreed with Netherlands that Dominick's was not entitled to coverage under the policy. The court rejected Dominick's estoppel argument as well. And the court found the section 155 claim time-barred. The court thus entered summary judgment on all counts directed against Netherlands in its favor.

         ¶ 16 There are other parties, other claims, and other insurance policies involved in this lawsuit that remain pending below. None of them concern this appeal. The trial court entered language pursuant to Rule 304(a), finding no just reason to delay enforcement of or appeal from this order, and thus the order is properly before us on appeal.

         ¶ 17 II. ANALYSIS

         ¶ 18 We review the entry of summary judgment de novo. Pence v. Northeast Illinois Regional Commuter RR Corp., 398 Ill.App.3d 13, 16 (2010). De novo review is independent of the trial court's decision; we need not defer to the trial court's judgment or reasoning. Motorola Solutions, Inc. v. Zurich Insurance Co., 2015 IL App (1st) 131529, ¶ 114. Summary judgment is proper only where the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact, and that the moving party is entitled to judgment as a matter of law. Mashal v. City of Chicago, 2012 IL 112341, ¶ 49. The construction of an insurance policy is also a question of law subject to de novo review. Rich v. Principal Life Insurance Co., 226 Ill.2d 359, 370-71 (2007).

         ¶ 19 The first questions relate to coverage-whether Netherlands had a duty to defend Dominick's in the underlying Gallo litigation and to indemnify Dominick's for all or part of the $1.3 million Dominick's paid to settle that litigation. We begin with the duty to defend.

         ¶ 20 A. Duty to Defend

         ¶ 21 The duty to defend is broader than the duty to indemnify. Pekin Insurance Co. v. Wilson, 237 Ill.2d 446, 456 (2010). To determine whether an insurer has a duty to defend, the court examines the allegations in the underlying complaint. United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill.2d 64, 73 (1991). If the underlying complaint alleges facts within or potentially within the policy coverage, the insurer must defend the insured. Id. ¶ 22 Both "[t]he underlying complaints and the insurance policies must be liberally construed in favor of the insured." Id. at 74. If a provision is subject to more than one reasonable interpretation, it is ambiguous, and "[a]ll doubts and ambiguities must be resolved in favor of the insured." Id. An insurer cannot refuse to defend "unless it is clear from the face of the underlying complaints that the allegations fail to state facts which bring the case within, or potentially within, the policy's coverage." (Emphasis in original.) Id. at 73. This rule holds true "even if the allegations are groundless, false, or fraudulent." Id. If there are several theories alleged in that complaint, the insurer has the duty to defend all of them, even if only one theory falls within potential coverage. Id.

         ¶ 23 At the time Dominick's tendered its defense of the Gallo litigation to Netherlands, the sixth amended complaint was pending. In the general allegations of the complaint, the plaintiffs alleged that:

* Domini ck's "possessed, operated and controlled a food store and adjacent parking lot" at 3300 West Belmont;
* Domini ck's was aware of gang activity and other criminal activity in the past near that store, including "armed robberies, assault and batteries, car jackings, narcotic sales and incidents of gang graffiti;"
* on the day in question, two individuals, who were members of a local gang, "confronted and threatened" plaintiff Ramirez while inside the Domini ck's store;
* these two gang members were carrying "a loaded handgun" inside the store at that time; and
* these two gang members followed Ramirez into the parking lot area, "where they continued to confront and threaten" plaintiff Ramirez and plaintiffs decedent, Mustafov, ultimately resulting in the shooting.

         ¶ 24 In count IV, which adopted those allegations, Gallo alleged the following against Dominick's:

"16. That it then and there became the duty of [Dominick's] to ensure the safety of their patrons and invitees.
17. That in addition, [Dominick's] voluntarily assumed the duty to provide safety and security services to its patrons and invitees by hiring [specific security companies, also named defendants] to provide security services and ...

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