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Allstate Indemnity Co. v. Contreras

Court of Appeals of Illinois, Second District

July 20, 2018

ALLSTATE INDEMNITY COMPANY, Plaintiff-Appellee,
v.
ALEJANDRA CONTRERAS, ADAN CONTRERAS, JASMINE'S DAY CARE, and JANE DOE, as Mother and Next Friend of Janie Doe and Janet Doe, Minors, Defendants Jane Doe, as Mother and Next Friend of Janie Doe and Janet Doe, Minors, Defendant-Appellant.

          Appeal from the Circuit Court of Lake County. No. 16-L-178 17-MR-709, Honorable Diane E. Winter, Judge, Presiding.

          ZENOFF JUSTICE delivered the judgment of the court, with opinion. Justices Jorgensen and Schostok concurred in the judgment and opinion.

          OPINION

          ZENOFF JUSTICE.

         ¶ 1 Allstate Indemnity Company (Allstate) filed a complaint for declaratory judgment (see 735 ILCS 5/2-701 (West 2016)) in the circuit court of Lake County against Alejandra Contreras, Adan Contreras, Jasmine's Day Care, and Jane Doe, as mother and next friend of Janie Doe and Janet Doe. Allstate claimed that it owes no duty to defend or indemnify Jasmine's Day Care or Alejandra in connection with a lawsuit filed against them by Jane. The court granted Allstate's motion for judgment on the pleadings, agreeing with Allstate that an "expected injury" exclusion in the applicable homeowner's insurance policy precludes coverage. Jane appeals. For the reasons that follow, we reverse and remand.

         ¶ 2 I. BACKGROUND

         ¶ 3 Jane filed a two-count complaint in the circuit court of Lake County on behalf of Janie and Janet against Jasmine's Day Care and Alejandra. That underlying action was docketed in the circuit court as No. 16-L-178. Count I of the complaint pertained to Janie's injuries, and count II pertained to Janet's injuries. Jane alleged as follows. Alejandra owned and operated Jasmine's Day Care, which was a licensed "day care home" in Park City, Illinois. Alejandra was responsible for caring for the children who were enrolled in the day care. In September 2012, Jane enrolled Janie and Janet in Jasmine's Day Care. On or about December 21, 2012, Jane learned that Janie had been repeatedly sexually abused by Alejandra's spouse, Adan, while at the day care.[1] Although Adan resided at the address where the day care operated, he was not an "assistant" of the day care as defined by section 406.10 of title 89 of the Illinois Administrative Code (89 Ill. Adm. Code 406.10 (2016)).[2] Upon discovering that Janie had been abused, Jane removed both of her daughters from the day care. Shortly thereafter, she learned that Janet had also been the victim of sexual abuse by Adan while enrolled at the day care.

         ¶ 4 According to Jane's complaint, as the owner and operator of Jasmine's Day Care, Alejandra was obligated to supervise Janie and Janet while they were under her care. Alejandra was also obligated to protect the children from "exploitation, neglect, and abuse while under her care." Both counts of the complaint alleged that Jasmine's Day Care, through Alejandra, was negligent in the following ways:

"a. Failed to provide adequate supervision while Janie Doe was in her care;
b. Allowed her spouse, Adam [sic] Contreras, who was not an assistant, to be alone with Janie Doe, in violation of 89 Ill. Adm. Code 406.14(k);
c. Failed to adequately protect Janie Doe from exploitation, neglect and abuse while under her care; and
d. Was otherwise careless and negligent."

         Janie and Janet were allegedly "emotionally and physically injured" as a result of these negligent acts and omissions.

         ¶ 5 Allstate subsequently filed a two-count complaint for declaratory judgment against Alejandra, Adan, Jasmine's Day Care, and Jane. This action was docketed in the circuit court as No. 17-MR-709. Only count I of the complaint for declaratory judgment is relevant to this appeal. Allstate alleged that it issued a homeowner's insurance policy to Alejandra and Adan, which was in effect at the time of the misconduct detailed in the complaint in the underlying action. The policy contained an endorsement for home-day-care coverage. Coverage X of the policy also provided family liability protection as follows:

"Subject to the terms, conditions and limitations of this policy, Allstate will pay damages which an insured person becomes legally obligated to pay because of bodily injury or property damage arising from an occurrence to which this policy applies, and is covered by this part of the policy." (Emphases in original.)

         Coverage X contained the following "expected injury" exclusion:

"Losses We Do Not Cover Under Coverage X:
1. We do not cover any bodily injury or property damage intended by, or which may reasonably be expected to result from the intentional or criminal acts or omissions of, any insured person. This exclusion applies even if:
(a) such bodily injury or property damage is of a different kind or degree than that intended or reasonably expected; or
(b) such bodily injury or property damage is sustained by a different person than intended or reasonably expected.

         This exclusion applies regardless of whether or not such insured person is actually charged with, or convicted of a crime." (Emphases in original.)

         ¶ 6 According to Allstate's complaint for declaratory judgment, the injuries that Janie and Janet suffered did not arise out of an accident but were instead the reasonably expected result of the repeated sexual abuse by Adan. Citing multiple cases, Allstate alleged that, "[i]n Illinois, where an adult is accused of sexually abusing a minor[, ] an intent to injure is inferred as a matter of law and an insurer has no duty to defend." Allstate thus maintained that it is not obligated to defend or indemnify Jasmine's Day Care or Alejandra in connection with the claims asserted against them in the underlying action.

         ¶ 7 Allstate subsequently filed a motion for judgment on the pleadings, arguing that the "expected injury" exclusion in the policy bars coverage in connection with the allegations of the underlying action. Jane filed a memorandum opposing Allstate's motion. She emphasized that Adan is not a named defendant in the underlying action and that Jasmine's Day Care and Alejandra are alleged to have acted negligently, not intentionally. In its reply brief, Allstate cited, for the first time, the following "joint obligations" clause from the general definitions section of the policy:

"The terms of this policy impose joint obligations on the person named on the Policy Declarations as the insured and on that person's resident spouse. These persons are defined as you or your. This means that the responsibilities, acts and omissions of a person defined as you or your will be binding upon any other person defined as you or your.
The terms of this policy impose joint obligations on persons defined as an insured person. This means that the responsibilities, acts and failures to act of a person defined as an insured person will be binding upon another person defined as an insured person." (Emphases in original.)

         ¶ 8 The court granted Allstate's motion for judgment on the pleadings. The court's written order indicates that (1) "no liability insurance coverage is available to any insured under Allstate's policy with respect to the bodily injury claims being asserted against them in [the underlying action]" and (2) "Allstate is not obligated to defend or indemnify Alejandra Contreras or Jasmine's Day Care with respect to [the underlying action]." Jane filed a timely notice of appeal.

         ¶ 9 II. ANALYSIS

         ¶ 10 Jane argues that Allstate must defend and indemnify Jasmine's Day Care and Alejandra in connection with the claims asserted against them in the underlying action. Jane concedes that Allstate would have no duty to defend or indemnify Adan for his intentional acts of sexually abusing Janie and Janet. She emphasizes, however, that she did not name Adan as a defendant in the underlying action. To that end, Jane proposes that it is necessary to distinguish between Adan's intentional acts and the "independent" negligent acts of Jasmine's Day Care and Alejandra. Relying principally on Continental Casualty Co. v. McDowell & Colantoni, Ltd., 282 Ill.App.3d 236 (1996), Jane posits that "courts are careful to separate which insureds committed what acts in determining which insured, if any, are entitled to a defense under potentially covered claims." Anticipating ...


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