Crum and Forster Managers Corp. v. Resolution Trust Corp.

• Decision Date: 23 September 1993
• Docket Number: No. 74673,74673
• Citation: 156 Ill.2d 384,189 Ill.Dec. 756,620 N.E.2d 1073
• Parties: , 189 Ill.Dec. 756, 35 A.L.R.5th 813 CRUM AND FORSTER MANAGERS CORPORATION et al., Appellants, v. RESOLUTION TRUST CORPORATION, as Receiver for Mid-State Savings and Loan Association, et al., Appellees.
• Court: Illinois Supreme Court

Page 1073

620 N.E.2d 1073

156 Ill.2d 384, 189 Ill.Dec. 756, 35

A.L.R.5th 813

CRUM AND FORSTER MANAGERS CORPORATION et al., Appellants, v. RESOLUTION TRUST CORPORATION, as Receiver for Mid-State Savings and Loan Association, et al., Appellees.

No. 74673.

Supreme Court of Illinois.

Sept. 23, 1993.

[156 Ill.2d 386] [189 Ill.Dec. 758] John F. Bramfeld, Phebus, Tummelson, Bryan and Knox, Urbana, and Edward F.

Ruberry, Jeffery A. Goldwater and James A. Lupo, Jr., Bollinger, Ruberry & Garvey, Chicago, for appellants.

Ann S. Duross, Colleen B. Bombardier and Maria Beatrice Valdez, Washington, DC, William A. Spence and Brian P. Norton, Chicago, for appellee Resolution Trust Corp.

Richard T. West, Meyer, Capel, Hirschfeld, Muncy, Jahn & Aldeen, P.C., Champaign, for appellees Joseph W. Corley and JoAnn Corley.

Charles L. Palmer and John B. Alsterda, Flynn, Palmer, Tague & Lietz, Champaign, for appellee Donald L. Whitsitt.

Justice BILANDIC delivered the opinion of the court:

This appeal involves an insurance coverage dispute between the plaintiff-insurers and the defendant-insureds. The plaintiff-insurers, Crum and Forster Managers Corporation (Crum & Forster), Illinois Insurance Exchange, Inc., and LWB Syndicate, Inc. (collectively insurers), instituted this declaratory judgment action against the defendant-insureds, Mid-State Savings and Loan Realty, Inc., Mid-State Appraising, Inc., d/b/a Mid-State Realty, Inc. (Mid-State), Joseph and Joann Corley (the Corleys), Donald Whitsitt (Whitsitt) (collectively insureds), and Dependable Realty, Inc. (Dependable), seeking a determination of their duty to defend and indemnify the insureds in an underlying action (Dependable Realty v. Mid-State Realty et al. (Cir.Ct. Champaign Co.), No. 86--L--864) brought against the insureds by Dependable (Dependable action). While the Dependable action was pending, Mid-State was placed in receivership and the Resolution Trust Corporation (RTC) succeeded to Mid-State's rights under the insurance policies at issue and is, therefore, also a defendant in the instant declaratory judgment action.

At the trial level, the plaintiff-insurers moved for summary judgment and for judgment on the pleadings with respect to both their duties to defend and indemnify the insureds. Thereafter, the defendant-insureds filed cross-motions for summary judgment on the issue of the insurers' duty to defend them in the Dependable action but contended that any determination concerning the duty to indemnify would be premature because liability in the Dependable action had not yet been resolved.

The trial court denied the insurers' motions for judgment and granted the insureds' cross-motions for summary judgment, finding that the insurers had a duty to defend the insureds because the claims alleged in the Dependable complaint were at least potentially within the insurance policies' coverage. The trial court also found that any determination concerning the duty to indemnify issue would be premature until liability in the Dependable action had been resolved.

On appeal, a divided appellate court affirmed the trial court's grant of summary judgment in favor of the insureds, finding that the insurers had a duty to defend the insureds in the Dependable action. (236 Ill.App.3d 718, 176 Ill.Dec. 925, 602 N.E.2d 871.) The appellate court also found that any determination concerning the issue of indemnification was premature until the underlying Dependable litigation was resolved. We granted the plaintiff-insurers' petition for leave to appeal (134 Ill.2d R. 315).

In this appeal, the issues which we are called upon to determine are whether: (1) the courts below properly granted summary judgment in favor of the insureds on the duty to defend issue; (2) the insurers are prevented from asserting the defense of noncoverage under the policies; and (3) a declaration concerning the issue of indemnification would be premature at this point in time.

The facts of this case are as follows. In March 1986, the insurers issued "Real Estate Agents and Brokers Professional Liability Insurance Polic[ies]" to the insureds for the period of February 1986 through February 1987. In June 1986, Dependable filed an action against the insureds, which was later amended. Dependable's second-amended complaint alleged, inter alia, that Joseph Corley was employed by Dependable as its real estate sales manager from December 1982 through December 1984 when he left Dependable and joined Mid-State as a real estate agent. The Dependable complaint also alleged that Joann Corley was employed by Dependable as a real estate agent from February 1983 until late 1984 or early 1985 when she too left Dependable to join Mid-State as a real estate agent.

Dependable's complaint contained numerous counts, including: (1) interference with prospective economic advantage; (2) common law tortious interference with contractual relationships; (3) breach of and inducing the breach of a fiduciary duty by an officer and/or director; (4) common law unfair competition; (5) unfair competition and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (Ill.Rev.Stat.1991, ch. 121 1/2, pars. 261 through 272); (6) common law fraud; (7) theft of trade secrets; and (8) various conspiracy counts related to the foregoing counts.

The Dependable complaint essentially alleged that, while employed by Dependable, the Corleys, especially Joseph Corley, formed Mid-State as a competitor of Dependable, induced others on Dependable's sales staff to leave Dependable and join Mid-State's sales staff, refrained from and induced others to refrain from listing properties with Dependable and instead list them with Mid-State, learned and then stole Dependable's confidential sales techniques for the benefit of Mid-State, stole Dependable's clients for Mid-State's benefit, and then left Dependable to join Mid-State.

When Dependable filed the underlying complaint, the insureds retained counsel who in turn tendered the defense of the Dependable action to the plaintiff-insurers. Initially, the insurers accepted the tender of defense without reservation. Six months later, however, the insurers sent the insureds a reservation of rights letter indicating that they accepted the tender of defense but were not waiving any rights or defenses under the policy. The insureds then filed a declaratory judgment action (Mid-State action), seeking a declaration that the reservation of rights was untimely and that the insurers were, therefore, estopped from reserving any rights or policy defenses. The trial court granted summary judgment in favor of the insureds but the appellate court reversed, finding that the insurers' delay in reserving their rights did not prejudice the insureds. Therefore, the appellate court held that the insurers were not estopped from asserting policy defenses. (Mid-State Savings & Loan Association v. Illinois Insurance Exchange, Inc. (1988), 175 Ill.App.3d 265, 271-72, 124 Ill.Dec. 715, 529 N.E.2d 696.) Subsequently, the insurers filed the instant declaratory judgment action, seeking a declaration that they have no duty to defend or indemnify the insureds in the underlying Dependable action.

OPINION

Initially, we note that this appeal was taken from the trial court's orders granting summary judgment in favor of the insureds on the duty to defend issue and denying the insurers' motion for summary judgment. In an appeal from the grant of summary judgment, we conduct a de novo review. (Outboard Marine Corp. v. Liberty Mutual Insurance Co. (1992), 154 Ill.2d 90, 102, 180 Ill.Dec. 691, 607 N.E.2d 1204.) Although summary judgment is a drastic means of disposing of litigation, it is an appropriate measure in cases where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Outboard Marine Corp., 154 Ill.2d at 102, 180 Ill.Dec. 691, 607 N.E.2d 1204.

POLICY CONSTRUCTION

The construction of an insurance policy and a determination of the rights and obligations thereunder are questions of law for the court which are appropriate subjects for disposition by way of summary judgment. (See Outboard Marine Corp., 154 Ill.2d at 108, 180 Ill.Dec. 691, 607 N.E.2d 1204; Zurich Insurance Co. v. Raymark Industries, Inc. (1987), 118 Ill.2d 23, 58, 112 Ill.Dec. 684, 514 N.E.2d 150.) In construing an insurance policy, the primary function of the court is to ascertain and enforce the intentions of the parties as expressed in the agreement. (Outboard Marine Corp., 154 Ill.2d at 108, 180 Ill.Dec. 691, 607 N.E.2d 1204; de los Reyes v. Travelers Insurance Cos. (1990), 135 Ill.2d 353, 358, 142 Ill.Dec. 787, 553 N.E.2d 301.) To ascertain the intent of the parties and the meaning of the words used in the insurance policy, the court must construe the policy as a whole, taking into account the type of insurance for which the parties have contracted, the risks undertaken and purchased, the subject matter that is insured and the purposes of the entire contract. (Outboard Marine Corp., 154 Ill.2d at 108, 115, 180 Ill.Dec. 691, 607 N.E.2d 1204; see Dora Township v. Indiana Insurance Co. (1980), 78 Ill.2d 376, 378, 36 Ill.Dec. 341, 400 N.E.2d 921.) If the words in the policy are plain and unambiguous, the court will afford them their plain, ordinary meaning and will apply them as written. (United States Fire Insurance Co. v. Schnackenberg (1981), 88 Ill.2d 1, 57 Ill.Dec. 840, 429 N.E.2d 1203.) The court will not search for ambiguity where there is none. Schnackenberg, 88 Ill.2d at 5, 57 Ill.Dec. 840, 429 N.E.2d 1203.

The professional liability policies before us provide in relevant part:

"(1) Professional Liability and Claims Made Clause: To pay on behalf of the Insured all sums in excess of the deductible amount stated in the Declarations which the Insured shall become legally responsible to pay in damages as a result of CLAIMS FIRST MADE AGAINST THE INSURED DURING THE POLICY PERIOD:...