FIRST DIVISION

March 29, 2002

1-01-1594

JUSTICE COUSINS delivered the opinion of the court:

The plaintiff, Pekin Insurance Company (Pekin), filed acomplaint for declaratory judgment against the defendant,Allstate Insurance Company (Allstate), on August 3, 2000. Pekin's complaint for declaratory judgment requested that thecourt declare that Pekin and Allstate were co-insurers for theinsured, Trevor Cary. Trevor Cary was being sued for damages ina cause filed on March 7, 1997, that was pending in the circuitcourt of Cook County.

Allstate filed a counterclaim for declaratory judgment onDecember 4, 2000, alleging that it did not owe any liability asits policy excludes coverage of liability arising out of businesspursuits. Allstate further alleged that it did not owereimbursement to Pekin for the defense costs. On December 4,2000, Allstate also filed an answer. On February 9, 2001,Allstate filed a motion for judgment on the pleadings requestingthat the court declare that Pekin was the sole primary liabilityinsurer of the insured and his business. The trial court enteredjudgment on the pleadings in favor of Allstate.

Pekin filed a timely appeal alleging that the trial court

erred in allowing judgment on the pleadings because Allstate wasestopped from raising defenses to coverage for failure toproperly respond to the tender of defense.

BACKGROUND

Pekin's action for declaratory judgment against Allstatearises from an action for damages brought by Rose Stolzenberg andLinda White, individually and as guardian on Nava R. Stolzenberg,an 11-year-old minor. The action named Trevor Cary, French CaryIII and Corals & Critters Pet Store (Corals & Critters) as partydefendants. The Stolzenberg action alleged that Nava Stolzenbergwas attacked and injured by Trevor Cary's dog while in his petstore. On August 7, 2000, in a jury trial, Trevor Cary andCorals & Critters were found liable for the injuries resultingfrom the dog bite. French Cary III was dismissed from the case. The jury assessed damages at $50,000, jointly and severally,against Trevor Cary and Corals & Critters. Pekin issued aninsurance policy to Corals & Critters, under which Trevor Carywas an insured, that was in effect during the time of theincident. Trevor Cary and Corals & Critters tendered its defenseto Pekin. Pekin contacted Allstate asking Allstate to extendcoverage to Trevor Cary in the defense of the Stolzenberg action. On November 14, 1999, Allstate corresponded with Pekin withcarbon copies to Trevor Cary advising that its homeowner's policywas excess to Pekin's commercial policy and did not extendcoverage to business pursuits. The correspondence also advisedPekin that the Pekin commercial policy provides that it isundoubtedly primary.

On August 3, 2000, Pekin filed its claim for declaratoryjudgment against Allstate, four days before the jury in theStolzenberg action found Trevor Cary and Corals & Crittersliable. On December 4, 2000, Allstate filed a counterclaim fordeclaratory judgment against Pekin alleging that Pekin was thesole primary insurer in the Stolzenberg action. The trial courtentered judgment on the pleadings in favor of Allstate pursuantto a motion for judgment on the pleadings filed by Allstate onFebruary 9, 2001. The trial court found that Pekin was the soleprimary insurer and Allstate's policy was excess to Pekin'scommercial policy.

Pekin appeals. We affirm.

ANALYSIS

I

This matter arose from the granting of Allstate's motion forjudgment on the pleadings pursuant to the Code of Civil Procedure(735 ILCS 5/2-615(e) (West 1992)). The disposition of a judgmenton the pleadings is not discretionary; therefore, our standard ofreview is de novo. Board of Trustees of the University ofIllinois v. City of Chicago, 317 Ill. App. 3d 569, 571, 740N.E.2d 515 (2000). A motion for judgment on the pleadings teststhe sufficiency of the pleadings by determining whether theplaintiff is entitled to the relief sought by his complaint. Village of Worth v. Hahn, 206 Ill. App. 3d 987, 990, 565 N.E.2d166 (1990). The motion requires the trial court to examine thepleadings and determine whether there is an issue of fact orwhether the controversy can be resolved as a matter of law. Village of Worth, 206 Ill. App. 3d at 990. On appeal, thereviewing court must ascertain whether the trial court correctlydetermined that the pleadings presented no issue of material factand, if there were no such issue, whether the court correctlyentered the judgment. TDC Development Corp. v. First FederalSavings & Loan Ass'n of Ottawa, 204 Ill. App. 3d 170, 174, 561N.E.2d 1142 (1990).

Pekin argues that the trial court erred in granting judgmenton the pleadings because Allstate was estopped from raisingnoncoverage as a defense. Pekin claims that Allstate did notdefend the Stolzenberg action under reservation of right or seeka declaratory judgment that no coverage exists after receiving atender of defense. See La Grange Memorial Hospital v. St. PaulInsurance Co., 317 Ill. App. 3d 863, 870, 683 N.E.2d 947 (2000).

Our supreme court has held that when a complaint against theinsured alleges facts within or potentially within the scope ofthe policy coverage, the insurer taking the position that thecomplaint is not covered by the policy has two options. It musteither defend the suit under reservation of right or seek adeclaratory judgment that there is no coverage. State Farm Fire& Casualty Co. v. Martin, 186 Ill. 2d 367, 371, 710 N.E.2d 1228(1999). If the insurer refuses to defend under reservation orseek declaratory judgment, it may be found to have breached itsduty to defend. La Grange, 317 Ill. App. 3d at 870. When aninsurer has breached its duty to defend, it is estopped fromraising any policy defenses based on noncoverage. La Grange, 317Ill. App. 3d at 870.

Allstate responds that the estoppel rule does not apply tothis situation because an action for declaratory judgment wasfiled by Pekin prior to the resolution of the Stolzenberg action. Allstate relies on Sears, Roebuck & Co. v. Seneca Insurance Co.,254 Ill. App. 3d 686, 694, 627 N.E.2d 173 (1993). In that casethe plaintiff brought a declaratory judgment action against thedefendant insurance company to determine the issue of coverage. The court in Sears held that whether the plaintiff or defendantinitiated the declaratory judgment action is irrelevant, and theestoppel rule does not apply when one party actively seeks,through a motion for summary judgment, an adjudication of itsrights and duties. Sears, 254 Ill. App. 3d at 694. See alsoVillage of Melrose Park v. Nautilus Insurance Co., 214 Ill. App.3d 864, 867, 574 N.E.2d 198 (1991); Ayers v. Bituminous InsuranceCo., 100 Ill. App. 3d 33, 35 n. 1, 424 N.E.2d 1316 (1981).

In the instant case, Pekin brought an action for declaratoryjudgment on August 3, 2000. The underlying suit was resolved onAugust 7, 2000. The action for declaratory judgment, even thoughinitiated by Pekin, was brought prior to the resolution of theStolzenberg action. Allstate actively sought an adjudication ofits rights by filing a counterclaim for declaratory judgment anda motion for judgment on the pleadings. As a result, Pekin'sestoppel argument fails. State Farm, 186 Ill. 2d at 374 (holdingthat an insurer will not be estopped from denying coverage merelybecause the underlying case proceeds to judgment before thedeclaratory judgment action is resolved.)

Allstate also argues that it had no duty to defend. Intheir correspondence, Allstate claims that Pekin is solelyresponsible for defending Trevor Cary because it is the primaryinsurer and Allstate's policy is an excess policy. Allstatefurther claims that because Pekin did not reply to Allstate'sletter and proceeded to defend Trevor Cary, Pekin acknowledgedthat Allstate had no duty to defend. However, we need notaddress that issue in light of our holding that Allstate was notbarred by the estoppel doctrine from contesting the claim that ithad a duty to defend because Pekin filed an action fordeclaratory judgment against Allstate while the suit against theinsured was pending.

II

In its counterclaim for declaratory judgment, Allstatefurther contends that its homeowner's policy is excess to Pekin'sprimary commercial policy and, thus, all coverage under Pekin'spolicy must first be exhausted. Universal Underwriters InsuranceGroup v. Griffin, 287 Ill. App. 3d 61, 74, 677 N.E.2d 1321 (1997)(rev'd on other grounds). Pekin claims that both policies areexcess policies and, therefore, both insurers must contributeequally to the defense and loss of the insured. North AmericanSpecialty Insurance Co. v. Liberty Mutual Insurance Co., 297 Ill.App. 3d 595, 598, 697 N.E.2d 347 (1998).

The relevant provisions of Pekin's insurance policy are asfollows:

"H. OTHER INSURANCE

1. If there is other insurance covering the same loss ordamage, we will pay only for the amount of covered loss ordamage in excess of the amount due from that otherinsurance, whether you can collect it or not. But we willnot pay more than the applicable Limit of Insurance.

2. Business Liability Coverage is excess over any otherinsurance that insures for direct physical loss or damage***."

The relevant provision of Allstate's policy is as follows:

"8. Other Insurance - Coverage X - Family Liability Protection. This insurance is excess over any other validand collectible insurance except insurance that is writtenspecifically as excess over the limits of liability thatapply to this policy.

* * *

12. We do not cover bodily injury or property damagearising out of the past or present business activities of aninsured person."

In our view, Pekin's commercial insurance policy is not anexcess policy. Pekin's policy states that "if there is otherinsurance covering the same loss or damage, then [Pekin] will payonly for the amount of covered loss or damage in excess of theamount due from that other insurance." In this case, there is no"other insurance" that covers the "same loss or damage."

The Allstate policy is a homeowner's liability policy thatwas issued to Cary that insures his home and family. Inaddition, Allstate's policy contains an exclusion of coverage forbodily injury resulting from business pursuits. Pekin'scommercial liability policy was issued to Corals & Critters andinsures Carey's business from fire loss, physical damage to thestore and third-party liability from claims arising fromoperations of the business. This incident took place at Cary'splace of business and, therefore, Pekin is the primary insurer. Accordingly, the trial court did not err in granting judgment onthe pleadings in favor of Allstate.

For the forgoing reasons, the judgment of the trial court isaffirmed.

Affirmed.

COHEN, P.J., and McNULTY, J., concur.