Ayers v. Bituminous Ins. Co.

• Decision Date: 05 August 1981
• Docket Number: No. 81-57,81-57
• Citation: 100 Ill.App.3d 33,424 N.E.2d 1316,54 Ill.Dec. 413
• Parties: , 54 Ill.Dec. 413 Robert G. AYERS, Plaintiff-Appellant, v. BITUMINOUS INSURANCE CO., Defendant-Appellee, and Leonard F. Overcash, Third Party Defendant. *
• Court: United States Appellate Court of Illinois

Page 1316

424 N.E.2d 1316

100 Ill.App.3d 33, 54 Ill.Dec. 413

Robert G. AYERS, Plaintiff-Appellant, v. BITUMINOUS INSURANCE CO., Defendant-Appellee and Leonard F. Overcash, Third Party Defendant. ^*

No. 81-57.

Appellate Court of Illinois, Third District.

Aug. 5, 1981.

James J. Elson, Canton, for plaintiff-appellant.

Ross E. Morris, Lewistown, for defendant-appellee.

BARRY, Justice.

Plaintiff Robert G. Ayers appeals from a declaratory judgment of the circuit court of Fulton County in favor of defendant insurer Bituminous Insurance Company.

We affirm.

The facts of this case are as follows. On March 20, 1976, plaintiff Robert Ayers was driving a car owned by Kirk Carmack when he was involved in an automobile accident with Leonard Overcash near Canton, Illinois. Almost two years later, Overcash filed a personal injury action against Ayers in the circuit court of Fulton County. Ayers requested defendant Bituminous Insurance Company to defend him in the Overcash litigation. Bituminous was the insurer under an automobile liability insurance policy issued to Kirk Carmack, which defined a "person insured" under the policy as any person driving the owned automobile with the permission of the named insured. Bituminous declined to tender a defense for Ayers, however, taking the position that an independent investigation had revealed that at the time of the accident with Overcash's vehicle Ayers was driving Carmack's car without his permission. Ayers then brought the subject declaratory judgment action against Bituminous, seeking a judicial determination that he had been driving Carmack's car with Carmack's permission at the time the accident occurred, and consequently should be afforded coverage by the Bituminous policy. Bituminous subsequently filed an answer and a third-party complaint joining tort plaintiff Overcash. In both its answer and third-party complaint, defendant sought the issuance of a favorable declaratory judgment. Following a hearing where conflicting testimony was introduced on the issue of permission, the circuit court entered judgment for the defendant insurer.

On appeal, plaintiff Ayers contends that because tort plaintiff Overcash's personal injury complaint against him raised the possibility of policy coverage, the insurer was legally obligated to afford him a defense. According to plaintiff, Bituminous' refusal to defend estopped it from claiming non-coverage under the policy issued to Carmack in the declaratory judgment proceeding. We find this contention to be without merit. It is well settled law that when a complaint is filed against an insured (or alleged insured) which raises the possibility of coverage under a policy of insurance, and the insurer believes that a defense to the policy exists, two options are available to the insurer: "seek a determination of its rights under the policy or defend under a reservation of rights * * *." (Clemmons v. Travelers Insurance Co. (1980), 88 Ill.App.3d 201, 209, 410 N.E.2d 445, 451, petition for leave to appeal granted (Docket No. 54168, January Term, 1981); accord, Consolidated Rail Corporation v. Liberty Mutual Insurance Co. (1981), 92 Ill.App.3d 1066, 48 Ill.Dec. 485, 416 N.E.2d 758; Sims v. Illinois National Casualty Co. (1963), 43 Ill.App.2d 184, 193 N.E.2d 123). If the insurer fails to exercise either of these two options and refuses to defend an insured who ultimately incurs an adverse judgment, it is estopped from raising noncoverage as a defense to an action brought to recover the policy proceeds. Here, however the insurer utilized the first of the two options afforded by Sims, Clemmons and progeny, and sought a determination of its rights under the policy pursuant to the declaratory judgment procedure (Ill.Rev.Stat.1979, ch. 110, par. 57.1). As a consequence estoppel does not apply. ¹

To argue, as plaintiff does, that defendant insurer's decision not to defend estops it from claiming noncoverage in a declaratory judgment action, the very purpose of which is to determine whether coverage exists under the terms of the policy, results in a "Catch 22" situation. If such an argument were accepted, the declaratory judgment procedure would be rendered useless to insurers in cases where they believe the existence of a policy defense negates...