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Evergreen Real Estate Services, LLC v. Hanover Insurance Co.

Court of Appeals of Illinois, First District

November 4, 2019

EVERGREEN REAL ESTATE SERVICES, LLC, Plaintiff-Appellee,
v.
HANOVER INSURANCE COMPANY, Defendant-Appellant. HANOVER INSURANCE COMPANY, Counterplaintiff- Appellee,
v.
EVERGREEN REAL ESTATE SERVICES, LLC, (MARTIN LUTHER KING PARTNERS, LP) Counterdefendant(s)-Appellant.

          Appeal from the Circuit Court of Cook County No. 17 CH 8425 Honorable Diane Larsen Judge Presiding.

          PRESIDING JUSTICE GRIFFIN delivered the judgment of the court, with opinion. Justices Hyman and Walker concurred in the judgment and opinion.

          OPINION

          GRIFFIN PRESIDING JUSTICE.

         ¶ 1 This is an insurance coverage action in which plaintiff Evergreen Real Estate Services, LLC sought a declaration that defendant Hanover Insurance Company has a duty to defend Evergreen in a class action case. Evergreen also sought damages for a bad faith denial of its claim under the Illinois Insurance Code (215 ILCS 5/1 et seq. (West 2016)). Hanover Insurance filed a counterclaim against Evergreen and against the building's owner Martin Luther King Partners, LP who sought coverage as an additional insured. The parties filed cross-motions for summary judgment on all claims.

         ¶ 2 The trial court found that the claims asserted in the class action case arguably represented subject matter covered by the policy that Hanover Insurance issued to Evergreen and were not specifically excluded from coverage, so the court ordered Hanover Insurance to provide a defense. The trial court, however, found that Hanover Insurance's refusal to provide a defense did not constitute bad faith under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2016)). Each party appeals the ruling that was adverse to it. We affirm.

         ¶ 3 BACKGROUND

         ¶ 4 Plaintiff Evergreen Real Estate Services manages a rental property located at 3325 West Madison Street in Chicago called Martin Luther King Jr. Plaza. The building is owned by Martin Luther King Partners, LP ("MLK Partners"). In connection with its business operations, Evergreen secured insurance coverage from defendant Hanover Insurance Company. The policy that Evergreen purchased is called a Private Company Advantage Policy.

         ¶ 5 Under the Private Company Advantage Policy that Evergreen purchased from Hanover Insurance, Evergreen secured coverage under a variety of different policies, coverage parts, and insuring agreements. Important to this appeal, Evergreen was entitled to coverage for corporate entity liability and for professional liability. The "entity liability insuring agreement" broadly covers" [l] oss which the Insured Entity is legally obligated to pay due to a Claim first made against the Insured Entity during the Policy Period." The entity liability insuring agreement, however, contains a professional services exclusion. That exclusion provides that coverage is removed under the entity liability insuring agreement for claims arising from the provision of professional services. The "miscellaneous professional liability insurance policy" provides coverage for "any claim made against [Evergreen] arising from a wrongful act in the rendering or failure to render professional services by [Evergreen]." The professional liability policy, however, contains an exclusion for claims arising from "unfair or deceptive business practices" including "violations of any local, state or federal consumer protection laws."

         ¶ 6 Tenants of Martin Luther King Jr. Plaza, Lottie Berry and Derrick Owens, filed a class action complaint against Evergreen, MLK Partners, and Martin Luther King Jr. Plaza in the Circuit Court of Cook County under Case No. 17 CH 5458. In the class action complaint, the tenants allege that Evergreen and MLK Partners committed several violations of the Chicago Residential Landlord Tenant Ordinance (Chicago Municipal Code § 5-12-010 et seq.) ("RLTO"). Evergreen tendered the defense of the case to Hanover Insurance.

         ¶ 7 Hanover Insurance responded to Evergreen's letter tendering the claim by stating that it would not defend or indemnify Evergreen under the policy. Hanover Insurance's reasons for refusing coverage were that: (1) it does not owe coverage under the entity liability insuring agreement because the underlying claims are based upon Evergreen's performance of a professional service which are excluded from coverage, and (2) it does not owe coverage under the professional liability policy because the underlying claims are for a willful violation of the RLTO and breach of contract which are excluded from coverage.

         ¶ 8 Evergreen filed this complaint seeking a declaration that Hanover Insurance has a duty to defend it in the class action case. Evergreen additionally alleged that Hanover Insurance is liable under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2016)) for its bad faith denial of Evergreen's tender of the claim.

         ¶ 9 Hanover Insurance subsequently accepted Evergreen's defense in the underlying class action case under a reservation of rights. Hanover Insurance reasserted its position that the underlying claims involved acts in furtherance of the provision of professional services. Hanover Insurance also reasserted that the underlying claims were for unfair or deceptive business practices in violation of the RLTO.

         ¶ 10 In the trial court in this case, the parties both moved for summary judgment. Hanover Insurance moved first for summary judgment arguing that it has no duty to defend Evergreen in the underlying lawsuit and that it is not liable under section 155 of the Illinois Insurance Code for the bad faith denial of a claim. Evergreen moved for summary judgment arguing that Hanover Insurance has an obligation to provide a defense in the underlying class action case and that it is liable for the bad faith denial of an insurance claim under section 155 of the Illinois Insurance Code.

         ¶ 11 After the cross-motions for summary judgment were filed, Hanover Insurance filed a counterclaim. In its counterclaim, Hanover Insurance made claims against both Evergreen and MLK Partners. The counterclaim, insofar as it is against Evergreen, is basically a recitation of its other documented assertions that it has no duty to defend Evergreen in the underlying class action. The counterclaim, however, also seeks a declaration that Hanover Insurance has no duty to defend MLK Partners. MLK Partners had requested coverage from Hanover Insurance as an additional insured under the policy for the first time a couple days after Evergreen filed its cross-motion for summary ...


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