FIRST DIVISION

March 4, 2002

No. 1-01-1519

Justice McNulty delivered the opinion of the court:

The City of Chicago and Cook County sued a number of gunmanufacturers and distributors, including Midwest Sporting Goods,for negligently entrusting guns to inappropriate purchasers andthereby creating a public nuisance. Midwest tendered defense ofthe lawsuit to its liability insurer, General Agents InsuranceCompany of America (Gainsco). Gainsco filed this action seekinga judgment declaring that it had no duty to defend or indemnifyMidwest. The trial court granted summary judgment in favor ofGainsco and Midwest appeals. We hold that the pattern of salespractices the plaintiffs will need to prove for recovery cannotqualify as an accident within the meaning of the policy. Accordingly, we affirm the judgment of the trial court.

The city and the county alleged in the complaint that during1998 undercover police officers went to Midwest's store in CookCounty to test the measures Midwest took to prevent guns fromgetting into criminal hands. One officer purchased a Uzi. According to the complaint:

"The sales clerk said that since they could not legallydeliver the Uzi to him in Cook County, they would haveto write up the purchase order on the forms of theMidwest Sporting Goods' Downers Grove store, and hewould have to pick up the firearm at the Downers Grovestore. The sales clerk used a blank purchase orderwith the Downers Grove masthead, and he called theDowners Grove store and asked them to call in his FOID[firearm owners identification card] number. WhenOfficer 1 said that he wanted to purchase a pistolbarrel for the Uzi, the sales clerk told him that sinceit was illegal to put the pistol barrel on the Uzi, heshould write up the pistol barrel as a separatepurchase from Midwest's Lyons store (the one he was inat the time) rather than the Downers Grove store fromwhich he was technically buying the Uzi. The salesclerk also advised Officer 1 that he should have all ofthe purchases written up on separate orders so as toavoid ATF [United States Bureau of Alcohol Tobacco andFirearms] scrutiny."

When the officer picked up the Uzi in Downers Grove, aMidwest employee advised him "to put the Uzi in his trunk,because he would be arrested if caught with it in Cook County." The same officer purchased six other guns at Midwest betweenSeptember 30 and October 24, 1998. He picked up all seven gunsbetween October 19 and November 5, 1998.

A second undercover officer asked a Midwest sales clerk tohelp her find a concealable but powerful gun to keep at herChicago address. The clerk told her it was illegal to carry ahandgun in Chicago, and that 90% of the store's customers camefrom Chicago. The officer chose two guns. The clerk advised herto order the firearms separately, and pick them up separately, sothat the store would not need to inform ATF of a multiplepurchase.

That same officer on another occasion purchased a gun foranother undercover officer, who accompanied her to the store andpaid the clerk for the gun. Midwest's sales clerk did not askfor the paying officer's identification, and registered the saleto the non-paying officer's FOID number.

The complaint explained that "straw" purchases, by oneperson for the benefit of another (who usually cannot legallypurchase a firearm), contribute disproportionately to crime. Anofficer observed customers unaffiliated with the police make sucha straw purchase from Midwest.

The city and the county further allege that Midwest sellsguns to Chicago residents who indicate that they will use orpossess the guns in violation of Chicago ordinances. Midwestsells guns even to customers who show that they intend totransfer the guns, illegally, to other persons. From dataMidwest receives from ATF, Midwest knows that multiple sales offirearms and sales to Chicago residents create a substantiallygreater likelihood of criminal use and possession of the firearmssold.

According to the complaint, Midwest "intentionally andrecklessly facilitates the illegal possession and use offirearms" with the advice it gives to Chicago customers andcustomers purchasing more than one gun. Midwest and the othergun dealers "know that many of the firearms they sell *** will beobtained by persons who will use *** their firearms illegally." The multiple sales to straw purchasers from Chicago "unreasonablyfacilitate violations of City ordinances, and contribute tophysical harm *** to Chicago residents."

The city and the county seek injunctions and damages,including costs of emergency medical services and the "Bureau ofHealth's costs to treat victims of firearms violence," estimatedto exceed $50,000,000 for the period from 1994 through 1998.

Gainsco agreed to defend Midwest against any claim forbodily injury caused by an occurrence in the policy period. An"occurrence" is "an accident, including continuous or repeatedexposure to substantially the same general harmful conditions." The policy also included an Expected or Intended InjuryExclusion, which states:

"This insurance does not apply to and no duty todefend is provided by us for 'bodily injury' or'property damage' arising from an intentional actwhether or not the resultant 'bodily injury' or'property damage' was intended or expected from thestandpoint of the insured."

After Midwest filed its answer to the complaint fordeclaratory judgment, Gainsco moved for summary judgment. Gainsco argued that the complaint did not allege an occurrence,within the meaning of the policy, and the Expected or IntendedInjury Exclusion precluded coverage. Midwest answered that thecity's complaint alleged occurrences in both the public nuisanceand the negligent entrustment counts. The trial court granted summary judgment in favor ofGainsco.

We review the judgment de novo. Murneigh v. Gainer, 177Ill. 2d 287, 298, 685 N.E.2d 1357 (1997). Our supreme court hasrestated the principles applicable for deciding the extent of aliability insurer's duties to its insured:

"To determine an insurer's duty to defend itsinsured, the court must look to the allegations of theunderlying complaints. If the underlying complaintsallege facts within or potentially within policycoverage, the insurer is obliged to defend its insuredeven if the allegations are groundless, false, orfraudulent. [Citation.] An insurer may not justifiablyrefuse to defend an action against its insured unlessit is clear from the face of the underlying complaintsthat the allegations fail to state facts which bringthe case within, or potentially within, the policy'scoverage. [Citation.] Moreover, if the underlyingcomplaints allege several theories of recovery againstthe insured, the duty to defend arises even if only onesuch theory is within the potential coverage of thepolicy. [Citation.]

The underlying complaints and the insurancepolicies must be liberally construed in favor of theinsured. *** All doubts and ambiguities must beresolved in favor of the insured." United StatesFidelity & Guaranty Co. v. Wilkin Insulation Co., 144Ill. 2d 64, 73-74, 578 N.E.2d 926 (1991).

The policy purports to exclude coverage for any injuryarising from an intentional act, regardless of whether theinsured intended or expected the injury. This clause, readexpansively in favor of the insurer, would nullify coverage foralmost all negligent acts.

"[V]irtually all tortfeasors who embark upon a courseof conduct act 'intentionally' in some measure. (Forexample, a child who accidentally hits a baseballthrough a neighbor's window 'intended' to hit thebaseball, but did not intend to break the window.) ***.

*** If the exclusionary clause denied coverage fornegligent or innocent acts as well, the clause wouldcontradict and swallow the entire personal liabilitypolicy. Whenever possible, courts should construe acontract so that different provisions are harmonizedand not conflicting with one another." Lincoln LoganMutual Insurance Co. v. Fornshell, 309 Ill. App. 3d479, 483-84, 722 N.E.2d 239 (1999).

The court in Lincoln Logan concluded that the exclusionapplied only to intentional acts where the insured specificallyintended to harm someone. Lincoln Logan, 309Ill. App. 3d at483. The complaint here does not allege that Midwestspecifically intended to kill or injure anyone. Following Lincoln Logan, we hold that the exclusion in Gainsco's policydoes not preclude coverage.

But the policy also restricts coverage to accidents. Thepolicy here does not define the term "accident." In construingsimilar policies, Illinois courts have clarified that an eventcounts as an accident only if it is

"an unforseen occurrence, usually of an untoward ordisastrous character or an undesigned sudden orunexpected event of an inflictive or unfortunatecharacter. The natural and ordinary consequences of anact do not constitute an accident." Aetna Casualty &Surety Co. v. Freyer, 89 Ill. App. 3d 617, 619, 411N.E.2d 1157 (1980).

In City of Carter Lake v. Aetna Casualty & Surety Co., 604F.2d 1052 (8th Cir., 1979), the court suggests that forinterpreting the word "accident" in a general liability policy,courts should treat the issue as

"a matter of probability. *** If the insured knew orshould have known that there was a substantialprobability that certain results would follow his actsor omissions then there has not been an occurrence oraccident as defined in this type of policy when suchresults actually come to pass. The results cease to beexpected and coverage is present as the probabilitythat the consequences will follow decreases and becomesless than a substantial probability." Carter Lake, 604F.2d at 1058-59.

As the court explained in a footnote,

"The difference between 'reasonably foreseeable'and 'substantial probability' is the degree ofexpectability. A result is reasonably foreseeable ifthere are indications which would lead a reasonablyprudent man to know that the particular results couldfollow from his acts. Substantial probability is morethan this. The indications must be strong enough toalert a reasonably prudent man not only to thepossibility of the results occurring but theindications also must be sufficient to forewarn himthat the results are highly likely to occur." CarterLake, 604 F.2d at 1059, n.4.

We agree with Carter Lake's interpretation of the term"accident" in general liability policies. The issue before thiscourt, then, is whether the complaint alleges facts under whichMidwest might be liable for injuries which were, from Midwest'sperspective, not highly likely to occur. The complaint pleadstwo basic theories, negligent entrustment and public nuisance. Midwest argues that both counts plead accidents within themeaning of the policy.

To establish a claim for negligent entrustment, the plaintiff must show that thedefendant entrusted a dangerousarticle to another when the defendant knew, or should have known,he was likely to use it in a manner involving an unreasonablerisk of harm to others. Barth v. Massa, 201Ill. App. 3d 19, 27,558 N.E.2d 528 (1990). The plaintiff need not prove that the defendant knew of specific individual propensities for harm; alawsuit may succeed with proof that the defendant entrusted thedangerous article to a member of a larger class, where the defendant knew or should have known that members of the largerclass generally tended to use such articles in a manner involvingunreasonable risk of harm. Semeniuk v. Chentis, 1Ill. App. 2d508, 512, 117 N.E.2d 883 (1954); Moning v. Alfono, 400 Mich. 425,444 n.18, 254 N.W.2d 759, 767 (1977); Restatement (Second) ofTorts