State Farm Fire and Casualty Company v. Perez

SUPREME COURT CASES

Laws-info.com » Cases » Illinois » 1st District Appellate » 2008 » State Farm Fire and Casualty Company v. Perez

State: Illinois

Court: 1st District Appellate

Docket No: 1-07-2601 Rel

Case Date: 12/23/2008

Preview:SECOND DIVISION DECEMBER 23, 2008

1-07-2601 STATE FARM FIRE AND CASUALTY COMPANY, Plaintiff-Appellee, v. DALIA PEREZ, Defendant-Appellant (Oscar Baeza and Miguel Espinoza, Defendants). ) ) ) ) ) ) ) ) ) ) ) ) ) Appeal from the Circuit Court of Cook County.

No. 06 CH 12268

Honorable Stuart Palmer, Judge Presiding.

JUSTICE CUNNINGHAM delivered the opinion of the court: Defendant Dalia Perez (Perez) appeals from an order of the circuit court of Cook County issued August 16, 2007, dismissing with prejudice her motion for judgment on the pleadings. Perez's motion alleged that the homeowner's insurance policy did not exclude coverage for a negligence claim (count II) of her lawsuit against the driver involved in the car accident that injured her on May 15, 2005. On appeal, Perez alleged that plaintiff State Farm Fire & Casualty Company (State Farm Casualty) has a duty to defend and indemnify because: (1) the homeowner's insurance policy provides coverage for the negligence claim (count II); and (2) the negligence claim (count II) does not allege bodily injury arising out of the ownership, maintenance, use, loading or unloading of the vehicle so as to trigger the motor vehicle exclusion. For the following reasons, we affirm.

1-07-2601 BACKGROUND On May 15, 2005, Perez was riding in a car driven by Oscar Baeza (Baeza) when he lost control of the vehicle and struck a tree. Perez, along with another passenger, Miguel Espinosa (Espinosa), was severely injured as a result of the crash. At the time of the accident, Baeza was insured by a homeowner's policy issued by State Farm Casualty to Oliverio Pizano (Pizano) and Alma Jungo (Jungo) for their residence at 225 S. Clifton Avenue, Elgin, Illinois. Baeza is the adult son of Pizano and Jungo and was living at their Elgin residence on May 15, 2005. An automobile insurance policy issued by State Farm Mutual Automobile Insurance Company (State Farm Auto) insured the vehicle involved in the accident. Both policies were in effect on May 15, 2005. On October 7, 2005, Perez and Espinosa filed a civil action against Baeza in the circuit court of Cook County, seeking damages for injuries they sustained in the accident. The fifth amended complaint, filed August 10, 2006, alleged two counts against Baeza1. Count I alleged that Baeza negligently operated the vehicle while under the influence of alcohol (negligent operation claim). Count II alleged that Baeza negligently modified or altered the seats in the vehicle and failed to warn his passengers of the dangers and defects of the modified seats and safety restraint system (negligent modification claim). Baeza then gave notice of the lawsuit to State Farm Auto and State Farm Casualty. State

The lawsuit also named HTF Enterprises, Inc. (HTF), and Sparco Motor Sports, Inc. (Sparco), as defendants. The Perez-Espinosa complaint alleged that HTF engaged in wrongful conduct under the Dramshop Act (235 ILCS 5/6-21 (West 2004)) (count III) and was negligent (count VI). Strict liability (count IV) and negligence claims (count V) were alleged against Sparco. 2

1

1-07-2601 Farm Auto accepted the tender and is currently defending the lawsuit without a reservation of rights. State Farm Casualty, however, denied coverage to Baeza under the motor vehicle exclusion (exclusion) of the homeowner's policy. On June 21, 2006, State Farm Casualty filed a complaint for declaratory judgment in the instant case against Perez, as well as Baeza and Espinoza, seeking a declaration that the homeowner's policy did not provide coverage to Baeza for the civil action brought by Perez and Espinosa against Baeza, and that it had no duty to defend or indemnify Baeza in the lawsuit. Perez filed an answer to the declaratory judgment action, denying that the exclusion applied to bar coverage. Both Baeza and Espinosa failed to answer the complaint and default judgments were entered against them on November 14, 2006, and March 6, 2007, respectively.2 Perez subsequently filed a motion for judgment on the pleadings, alleging that the negligent modification claim (count II) was not excluded from coverage. State Farm Casualty filed a crossmotion for judgment on the pleadings alleging that, on the contrary, the negligent modification claim arose out of Baeza's ownership and use of the vehicle and was thus excluded from coverage under the policy. On August 16, 2007, the circuit court granted State Farm Casualty's motion for judgment on the pleadings, and denied Perez's motion, finding that the injuries arose out of the use and ownership of Baeza's car. Perez now appeals the circuit court's August 16, 2007 judgment, arguing that the negligent

2

Baeza and Espinosa are not parties to this appeal. 3

1-07-2601 modification claim (count II) did not fall under the homeowner's policy exclusion.3 ANALYSIS This case stems from the defendant's appeal of the circuit court's judgment on the pleadings in favor of the plaintiff. We have proper jurisdiction over the appeal of final judgments entered by the circuit court and review de novo the circuit court's order in favor of the plaintiff's motion for judgment on the pleadings and the circuit court's construction of the insurance policy terms. 155 Ill. 2d R. 301; 210 Ill. 2d R. 303; Pekin Insurance Co. v. Beu, 376 Ill. App. 3d 294, 297, 876 N.E.2d 167, 170 (2007). A judgment on the pleadings is appropriate "where the pleadings disclose no genuine issue of material fact and the movant is entitled to judgment as a matter of law." Gillen v. State Farm Mutual Automobile Insurance Co., 215 Ill. 2d 381, 385, 830 N.E.2d 575, 577 (2005). All wellpleaded facts and reasonable inferences in the pleadings are taken as true. Gillen v. State Farm Mutual Automobile Insurance Co., 215 Ill. 2d at 385, 830 N.E.2d at 577. Only facts apparent on the face of the pleadings, matters subject to judicial notice, and admissions in the record are considered by the court in ruling on a motion for judgment on the pleadings. Gillen, 215 Ill. 2d at 385, 830 N.E.2d at 577. Thus, in the absence of any issues of material fact, we must determine whether the defendant was entitled to judgment as a matter of law. As an initial matter, we note that Illinois public policy dictates that insurance is "not

On, July 13, 2007, the defendant conceded in her response to the plaintiff's motion for judgment on the pleadings and in reply to the plaintiff's response to her motion for judgment on the pleadings that the negligent operation claim (count I) of her complaint fell within the motor vehicle exclusion and thus is not an issue on appeal. 4

3

1-07-2601 necessarily a private matter between an insurer and its insured," and as such, an injured party's rights against the liability insurer vests at the moment of the accident giving rise to the underlying claim. Skidmore v. Throgmorton, 323 Ill. App. 3d 417, 422, 751 N.E.2d 637, 641 (2001); Record-A-Hit, Inc. v. National Fire Insurance Co. of Hartford, 377 Ill. App. 3d 642, 645, 880 N.E.2d 205, 207 (2007); Reagor v. Travelers Insurance Co., 92 Ill. App. 3d 99, 102-03, 415 N.E.2d 512, 514 (1980). Such vested rights may not be defeated by the joint efforts of the insured and the insurer. Skidmore, 323 Ill. App. 3d at 421, 751 N.E.2d at 640; see also Pratt v. Protective Insurance Co., 250 Ill. App. 3d 612, 619, 621 N.E.2d 187, 192 (1993) ("[t]he insurer and the insured may not conspire to defeat the rights of an injured party"). The injured party's relationship with the liability insurer is that of a beneficiary, who becomes a real party in interest in the insurance contract at the time of the occurrence giving rise to his injuries. Skidmore, 323 Ill. App. 3d at 421, 751 N.E.2d at 641; Reagor, 92 Ill. App. 3d at 103, 415 N.E.2d at 514. While the policy of the State prohibits direct actions by an injured party against an insurer before judgment has been rendered against its insured, such policy is not violated as long as the issue of coverage is effectively severed from any issue of the insured's liability and the assessment of damages. Reagor, 92 Ill. App. 3d at 103-04, 415 N.E.2d at 515 ("the rationale underlying this policy is that disclosure of liability coverage at a trial against an insured for injuries resulting from his negligence constitutes prejudicial error"). Here, Perez's rights against State Farm Casualty, as an injured passenger, vested at the time of the car accident. The consequences of Baeza's failure to answer State Farm Casualty's complaint for declaratory judgment, which resulted in a default judgment against him, could not be imputed to Perez because her vested rights against State Farm Casualty may not be defeated by Baeza's 5

1-07-2601 behavior. Because the issue of coverage by the homeowner's policy is severed from the issue of Baeza's liability in the underlying personal injury lawsuit filed by Perez, she has standing to defend herself in State Farm Casualty's complaint for declaratory judgment, in which she was named as a necessary party with sufficient interest in the controversy. See Record-A-Hit, Inc., 377 Ill. App. 3d at 645, 880 N.E.2d at 207 ("[a] tortclaimant in an underlying action has a substantial right in the viability of a policy of insurance that might be the source of funds available to satisfy the tort claim"). It is against this backdrop that we determine whether the homeowner's policy exclusion applied to bar coverage so as to render a judgment on the pleadings in favor of State Farm Casualty. An insurer may not refuse to defend an underlying claim "unless the allegations in the underlying complaint clearly fail to state facts that bring the case within or potentially within the policy coverage." Beu, 376 Ill. App. 3d at 296, 876 N.E.2d at 170. The duty to defend is broader in scope than the duty to indemnity. Beu, 376 Ill. App. 3d at 296, 876 N.E.2d at 170. To determine an insurer's duty to defend its insured, we must compare the allegations in the underlying complaint with the terms of the policy. Beu, 376 Ill. App. 3d at 296, 876 N.E.2d at 170. Policy construction functions to ascertain and honor the intention of the parties, as expressed in the policy language. Gillen, 215 Ill. 2d at 393, 830 N.E.2d at 582. Both the policy terms and the allegations in the underlying complaint are liberally construed in favor of the insured, and any doubts and ambiguities are resolved against the insurer. Beu, 376 Ill. App. 3d at 296, 876 N.E.2d at 170. Ambiguous terms in the policy include those that are prone to more than one reasonable meaning. Gillen, 215 Ill. 2d at 393, 830 N.E.2d at 582. However, unambiguous policy terms will be given 6

1-07-2601 their plain and ordinary meaning and will be applied as written. Beu, 376 Ill. App. 3d at 296-97, 876 N.E.2d at 170. Furthermore, any undefined terms in the policy will be given their "plain, ordinary and popular meaning"

Download State Farm Fire and Casualty Company v. Perez.pdf