Dominick's Finer Foods v. Ind. Ins. Co.

• Decision Date: 01 March 2018
• Docket Number: No. 1–16–1864,1–16–1864
• Parties: DOMINICK'S FINER FOODS, Plaintiff–Appellant, v. INDIANA INSURANCE COMPANY, the Netherlands Insurance Company —A Stock Company, Monterrey Security Consultants, Inc., and Safety Service Systems Security, Inc., Defendants. (Indiana Insurance Company, The Netherlands Insurance Company —A Stock Company, Defendants–Appellees) Monterrey Security Consultants, Inc., Third–Party Plaintiff, v. Scottsdale Insurance Company, Third–Party Defendant.
• Court: United States Appellate Court of Illinois

2018 IL App (1st) 161864

102 N.E.3d 692

DOMINICK'S FINER FOODS, Plaintiff–Appellant,

v.INDIANA INSURANCE COMPANY, the Netherlands Insurance Company —A Stock Company, Monterrey Security Consultants, Inc., and Safety Service Systems Security, Inc., Defendants.

(Indiana Insurance Company, The Netherlands Insurance Company —A Stock Company, Defendants–Appellees)

Monterrey Security Consultants, Inc., Third–Party Plaintiff,

v.Scottsdale Insurance Company, Third–Party Defendant.

No. 1–16–1864

Appellate Court of Illinois, First District, FOURTH DIVISION.

March 1, 2018

Brian O’Gallagher and Kristina M. Beck, of Cremer, Spina, Shaughnessy, Jansen & Siegert, LLC, of Chicago, for appellant.

Michael McCann, of Falkenberg Fieweger & Ives LLP, of Chicago, for appellees.

JUSTICE ELLIS delivered the judgment of the court, with opinion.

¶ 1 This appeal involves a dispute over insurance coverage, after a young woman was killed and a man was injured in a shooting that took place in a parking lot outside Dominick's Finer Foods (Dominick's) on the northwest side of Chicago. When Dominick's was sued by the decedent's estate, it tendered its defense to insurers Netherlands Insurance Company (Netherlands) and Indiana Insurance Company (Indiana) and later sought indemnification as well. The insurers denied coverage, and Dominick's filed suit for a declaration of coverage and damages for the insurers' alleged bad-faith conduct.

¶ 2 After Dominick's and Netherlands filed cross-motions for summary judgment, the trial court ruled in favor of Netherlands and against Dominick's on all counts. The trial court entered language pursuant to Illinois Supreme Court Rule 304(a) (eff. Feb. 26, 2010), allowing an immediate appeal of these claims, while other litigation involving other parties continued in the trial court.

¶ 3 We hold that Netherlands owed Dominick's a duty to defend and indemnify under the relevant language of the insurance policy. We thus reverse the grant of summary judgment in favor of Netherlands and remand this case for the entry of summary judgment in favor of Dominick's on the issue of coverage. But we affirm the trial court's grant of summary judgment in favor of Netherlands on the claims of bad faith under section 155 of the Illinois Insurance Code ( 215 ILCS 5/155 (West 2014) ) because even if we ultimately disagree with the insurers' interpretation of the insurance policy, we do not find their position to have been unreasonable, and a bona fide dispute over coverage existed.

¶ 4 I. BACKGROUND

¶ 5 The entire background of this case is somewhat complicated, involving a lot of moving parts—various parties and different insurance policies—so we will limit our background to what is relevant to this appeal.

¶ 6 On September 6, 2004, a shooting occurred in the parking lot outside of a Dominick's supermarket on the 3300 block of West Belmont Avenue. The shooting claimed the life of Crystal Mustafov and injured Jose Ramirez. The shooters initially confronted the victims inside Dominick's before following them into the parking lot.

¶ 7 The Dominick's store in question was a tenant of the Kennedy Plaza Shopping Center, which was owned by a trio of entities: Kennedy Plaza Associates LLC, Kennedy Plaza BK, and Kennedy Plaza RL, LLC (collectively, Kennedy Plaza).

¶ 8 Less than a month later, a lawsuit was filed by the estate of Crystal Mustafov, which we will call the "Gallo litigation" after the named plaintiff. The Gallo complaint was amended several times, the other individual injured in the shooting (Ramirez) was added as a plaintiff, and the litigation was stayed for several years pending the outcome of criminal proceedings. The defendants ultimately included Dominick's, Kennedy Plaza, and security companies that performed work at that location.

¶ 9 In the sixth amended complaint in the Gallo litigation, both Gallo and Ramirez alleged that Dominick's "possessed, operated and controlled a food store and adjacent parking lot" at 3300 West Belmont; that Dominick's had a "duty * * * to ensure the safety of [its] patrons and invitees"; and that Dominick's breached that duty by negligently failing to supervise or otherwise protect "store patrons and invitees" such as Mustafov and Ramirez from harm.

¶ 10 Kennedy Plaza had purchased a commercial general liability (CGL) insurance policy from Netherlands (Kennedy policy), in effect at the time of the shooting, which insured against claims for bodily injury, property damage, or "personal and advertising injury." It is undisputed that Dominick's was an additional insured on the policy, and that the additional insurance covered not only the Dominick's store but the adjacent parking lot where the shooting occurred. The relevant portion states as follows:

"I. ADDITIONAL INSURED—BY CONTRACT, AGREEMENT OR PERMIT

1. Paragraph 2. Under SECTION II—WHO IS AN INSURED is amended to include as an insured any person or organization when you and such person or organization have agreed in writing in a contract, agreement or permit that such person organization [sic ] can be added as an additional insured on your policy to provide insurance such as is afforded under this Coverage Part. Such person or organization is an additional insured only with respect to liability arising out of:

a. Your ongoing operations performed for that person or organization; or

b. Premises or facilities owned or used by you . * * *

2. This endorsement provision I. does not apply:

a. Unless the written contract or agreement has been executed, or permit has been issued, prior to the ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’, * * * *

* * *d. To ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury arising out of any act, error or omission that results from the additional insured's sole negligence or wrongdoing.’ " (Emphasis added.)

¶ 11 Relying on the policy language, Dominick's tendered its defense of the Gallo litigation to Netherlands, which denied coverage.

¶ 12 The Gallo litigation proceeded. The seventh amended complaint added the various entities we have collectively referred to as "Kennedy Plaza" for the first time as defendants, claiming that Kennedy Plaza owned and operated the parking lot, had a duty to secure and protect that lot, and breached its duty, resulting in the shootings that occurred.

¶ 13 Kennedy Plaza settled out of the Gallo litigation in January 2010 for $40,000. That left Dominick's and two security companies as remaining defendants. In March 2013, by which time a twelfth amended complaint was pending, the remaining defendants settled the litigation, with Dominick's contributing $1.3 million to the settlement.

¶ 14 About a year after settling, Dominick's sued Netherlands, claiming that it had a duty to defend and indemnify Dominick's and asserting a bad-faith claim under section 155 of the Illinois Insurance Code ( 215 ILCS 5/155 (West 2014) ).¹

¶ 15 After cross-motions for summary judgment, the trial court agreed with Netherlands that Dominick's was not entitled to coverage under the policy. The court rejected Dominick's estoppel argument as well. And the court found the section 155 claim time-barred. The court thus entered summary judgment on all counts directed against Netherlands in its favor.

¶ 16 There are other parties, other claims, and other insurance policies involved in this lawsuit that remain pending below. None of them concern this appeal. The trial court entered language pursuant to Rule 304(a), finding no just reason to delay enforcement of or appeal from this order, and thus the order is properly before us on appeal.

¶ 17 II. ANALYSIS

¶ 18 We review the entry of summary judgment de novo . Pence v. Northeast Illinois Regional Commuter R.R. Corp ., 398 Ill. App. 3d 13, 16, 337 Ill.Dec. 1003, 923 N.E.2d 854 (2010). De novo review is independent of the trial court's decision; we need not defer to the trial court's judgment or reasoning. Motorola Solutions, Inc. v. Zurich Insurance Co. , 2015 IL App (1st) 131529, ¶ 114, 393 Ill.Dec. 173, 33 N.E.3d 917. Summary judgment is proper only where the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact, and that the moving party is entitled to judgment as a matter of law.

Mashal v. City of Chicago , 2012 IL 112341, ¶ 49, 367 Ill.Dec. 223, 981 N.E.2d 951. The construction of an insurance policy is also a question of law subject to de novo review. Rich v. Principal Life Insurance Co. , 226 Ill. 2d 359, 370–71, 314 Ill.Dec. 795, 875 N.E.2d 1082 (2007).

¶ 19 The first questions relate to coverage—whether Netherlands had a duty to defend Dominick's in the underlying Gallo litigation and to indemnify Dominick's for all or part of the $1.3 million Dominick's paid to settle that litigation. We begin with the duty to defend.

¶ 20 A. Duty to Defend

¶ 21 The duty to defend is broader than the duty to indemnify. Pekin Insurance Co. v. Wilson , 237 Ill. 2d 446, 456, 341 Ill.Dec. 497, 930 N.E.2d 1011 (2010). To determine whether an insurer has a duty to defend, the court examines the allegations in the underlying complaint. United States Fidelity & Guaranty Co. v. Wilkin Insulation Co. , 144 Ill. 2d 64, 73, 161 Ill.Dec. 280, 578 N.E.2d 926 (1991). If the underlying complaint alleges facts within or potentially within the policy coverage, the insurer must defend the insured. Id.

¶ 22 Both "[t]he underlying complaints and the insurance policies must be liberally construed in favor of the insured." Id. at 74, 161 Ill.Dec. 280, 578 N.E.2d 926. If a provision is subject to more than one reasonable interpretation, it is ambiguous, and "[a]ll doubts and ambiguities must be resolved in favor of the insured." Id. An insurer cannot refuse to defend "unless it is clear from the face of the underlying complaints that the allegations fail to state facts which bring the case within, or potentially within, the policy's coverage." (Emphasis in original.) Id. at 73, 161 Ill.Dec....