Williams v. American Country Ins. Co.
| Decision Date | 29 July 2005 |
| Docket Number | No. 1-04-2119.,No. 1-04-0250.,1-04-0250.,1-04-2119. |
| Parties | Thomas WILLIAMS, Plaintiff-Appellee, v. AMERICAN COUNTRY INSURANCE COMPANY, Defendant-Appellant and Counterplaintiff-Appellant. (Thomas Williams, Herman Davila, and Yellow Cab Company, a Corporation, Counterdefendants-Appellees). |
| Court | Illinois Supreme Court |
Madsen, Farkas & Powen, LLC, Chicago (Alan L. Farkas and Suzanne J. Massel, of counsel), for Appellee.
Beerman, Swerdlove, Woloshin, Barezky, Becker, Genin & London, Chicago (Alvin R. Becker and Stefania Pialis, of counsel), for Appellant.
Defendant American Country Insurance Company (American Country) appeals from orders of the circuit court of Cook County granting summary judgment in favor of plaintiff Herman Davila and defendant Thomas Williams, and granting Williams' petition for attorney fees and costs pursuant to section 155 of the Illinois Insurance Code (Code) (215 ILCS 5/155 (West 2002)).
In the underlying action in this case, Davila, a police officer pedestrian, was struck by a taxicab owned by defendant Yellow Cab Company (Yellow Cab) and driven by Williams. Williams was convicted of misdemeanor battery as a result of the occurrence. Plaintiff filed suit against Williams and Yellow Cab Company, alleging negligence. The insurer of both Williams and Yellow Cab, American Country, undertook the defense of the personal injury case.
While the tort action was pending, Williams filed suit seeking a declaration that American Country was obligated to provide him with independent counsel because of a conflict of interest. Davila was granted leave to intervene. American Country filed a counterclaim naming Davila, Williams and Yellow Cab, seeking a declaration that it had no duty to defend Williams. On cross-motions for summary judgment, the trial court granted American Country's motion for summary judgment. After his motion to reconsider was denied, Davila appealed.
On appeal, this court affirmed the trial court's determination that our supreme court's holding in American Family Mutual Insurance Co. v. Savickas, 193 Ill.2d 378, 250 Ill.Dec. 682, 739 N.E.2d 445 (2000), precluded Williams and Davila from contesting the fact that Williams' battery conviction established that his conduct in injuring Davila was intentional. American Country Insurance Co. v. Williams, 339 Ill.App.3d 835, 847, 791 N.E.2d 1268 (2003). However, we vacated the trial court's grant of summary judgment and remanded the case to the trial court to determine whether a conflict of interest was present and whether Williams was prejudiced by American Country's failure to pay for independent counsel to represent Williams. American Country Insurance Co., 339 Ill.App.3d at 847, 274 Ill.Dec. 857, 791 N.E.2d 1268.
On remand, Williams and Davila filed motions for summary judgment arguing that there was a conflict of interest and Williams suffered prejudice as a result of the conflict. The trial court found that American Country had a conflict of interest when it assumed Williams' defense in the underlying case and that Williams was prejudiced as a result of the conflict. Based on these findings, the trial court granted the motions for summary judgment; ordered American Country to provide independent counsel to Williams at American Country's expense; and held that American Country was estopped from asserting any coverage defenses in the underlying action. American Country now appeals the trial court's judgment. Williams filed a petition for attorney fees and costs pursuant to section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2002)). Following a hearing, the trial court granted Williams' petition and entered judgment against American Country in the amount of $150,000 which included $125,000 for attorney fees incurred in both the underlying tort action and the declaratory judgment action and $25,000 as a penalty for vexatious conduct. American Country also appealed that judgment and this court granted American Country's motion to consolidate these appeals.
On October 31, 1996, Davila, an Illinois State Police officer, was on duty outside the Thompson Center in Chicago. Williams was driving a taxicab east on Lake Street adjacent to the Thompson Center. While another police officer was directing traffic on Lake Street, Davila observed Williams repeatedly blowing his car horn. Davila approached Williams' cab, opened the door and leaned inside the cab. While Davila was leaning inside the cab, Williams began driving, forcing Davila to run alongside the cab for 15 feet. Davila suffered injuries from the incident.
Williams was charged with misdemeanor battery as a result of his actions on October 31, 1996. On October 9, 1997, following a jury trial, Williams was convicted of battery to Davila and sentenced to community service and probation.
On May 12, 1998, Davila filed a civil complaint naming Williams and Yellow Cab as defendants. Both Yellow Cab and Williams were insured by American Country. At the time of the occurrence, American Country and Yellow Cab were both subsidiaries of a company known as Great Dane Holdings. The complaint alleged that Williams was the agent and servant of Yellow Cab and was operating a taxicab owned by Yellow Cab. The complaint alleged that Williams and Yellow Cab were negligent in failing to yield to Davila, in driving recklessly, in failing to keep a proper lookout and in operating a vehicle with defective brakes and steering. Davila amended his complaint on October 16, 1998, to add a count of negligent entrustment against Yellow Cab.
American Country undertook the defense in this case, retaining Johnson & Bell to represent Williams and Jesmer & Harris to represent Yellow Cab. Prior to retaining counsel, on October 2, 1997, American Country sent Williams a letter advising him that it was "handling this matter under a complete reservation of rights under the terms and conditions of your policy." The letter informed Williams that an investigation revealed that Williams was cited with criminal battery and that battery and intentional conduct were specifically excluded by Williams' insurance policy. The letter then cited the following provision of Williams' insurance policy:
In his answer to Davila's complaint, the attorney retained by American Country to represent Williams, Robert J. Comfort, denied that Williams was an agent of Yellow Cab. Comfort also asserted an affirmative defense that Davila was guilty of comparative fault.
In an affidavit, Williams averred that the defense provided by American Country was inadequate and represented a conflict of interest. Williams averred that on July 21, 1999, he complained about the inadequacy to American Country and requested appointment of alternative counsel. Williams averred that Johnson & Bell failed to conduct discovery to assist in his defense. Williams averred that American denied his request for alternative counsel.
On October 1, 1999, Williams filed the instant declaratory action against American Country. In count I of the complaint, Williams alleged that American Country failed to warn him of an actual or potential conflict of interest in defending the underlying action. Williams further alleged that there was a conflict of interest in that proof of intentional conduct on the part of Williams would shift responsibility from American Country to Williams. In count II, Williams alleged that American Country breached its duty to defend through numerous acts and omissions and by failing to provide him with access to the East Bank Health Club, in order to locate a potential witness.
On November 1, 1999, American Country filed a motion to dismiss Williams' declaratory judgment complaint. American Country alleged that the intentional acts exclusion of the insurance policy could not give rise to a conflict of interest where the underlying case sounded in negligence. American Country further alleged that it owed no duty to give Williams access to the East Bank Health Club. The trial court denied American Country's motion to dismiss with respect to count I and granted the motion with respect to count II.
On December 13, 1999, Davila was granted leave to intervene in Williams' declaratory action. The parties then filed cross-motions for summary judgment. Williams alleged that his battery conviction created a coverage defense, therefore presenting a conflict of interest. In an affidavit, Williams stated that neither American Country nor Comfort informed him of a conflict of interest in Comfort representing him in the underlying tort action and Williams did not consent to such representation.
American Country's motion maintained that Illinois law has recognized that a conflict of interest arises out of the intentional acts exclusion of an insurance policy only where the underlying complaint alleges both negligence and battery and where punitive damages are sought. Following argument on the motions, the trial court entered an order stating that, in light of our supreme court's recent decision in American Family Mutual Insurance Co. v. Savickas, 193 Ill.2d 378, 250 Ill.Dec. 682, 739 N.E.2d 445 (2000), it could not address the cross-motions until a duty to defend had been determined. The trial court invited briefs in support of or in opposition to the applicability of Savickas to the present case.
On October 26, 2000, American Country filed a counterclaim alleging that Williams' battery conviction established that his conduct was intentional and that he was excluded from coverage under the intentional acts exclusion of his policy. Williams responded that American Country was estopped from denying coverage by reason of prejudice to Williams caused by American directly defending...
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