Markel Int'l Ins. Co. v. Montgomery
| Citation | 178 N.E.3d 637,2020 IL App (1st) 191175,449 Ill.Dec. 30 |
| Decision Date | 24 July 2020 |
| Docket Number | No. 1-19-1175,1-19-1175 |
| Parties | MARKEL INTERNATIONAL INSURANCE COMPANY LIMITED, Plaintiff-Appellee/Cross-Appellant, v. Amber MONTGOMERY, as Special Administrator for the Estate of Kyle C. Matthews, Deceased; Tremeice Dangerfield; Valell Corporation, an Illinois Corporation, d/b/a Carolyn's Lounge; and Carolyn Burton, Individually and as President of the Valell Corporation, Defendants-Appellants/Cross-Appellees. |
| Court | United States Appellate Court of Illinois |
2020 IL App (1st) 191175
178 N.E.3d 637
449 Ill.Dec. 30
MARKEL INTERNATIONAL INSURANCE COMPANY LIMITED, Plaintiff-Appellee/Cross-Appellant,
v.
Amber MONTGOMERY, as Special Administrator for the Estate of Kyle C. Matthews, Deceased; Tremeice Dangerfield; Valell Corporation, an Illinois Corporation, d/b/a Carolyn's Lounge; and Carolyn Burton, Individually and as President of the Valell Corporation, Defendants-Appellants/Cross-Appellees.
No. 1-19-1175
Appellate Court of Illinois, First District, SIXTH DIVISION.
July 24, 2020
Eric J. Emerson and Joe Welch, of Emerson & Elder, P.C., of Chicago, for appellants/cross-appellees.
Matthew S. Sorem and Emily R. Steinberg, of Nicolaides Fink Thrope Michaelides Sullivan LLP, of Chicago, for appellee/cross-appellant.
PRESIDING JUSTICE MIKVA delivered the judgment of the court, with opinion.
¶ 1 Plaintiff Markel International Insurance Company Limited (Markel) sought a declaration in the circuit court that it did not owe a duty to defend its insured, Valell Corporation d/b/a Carolyn's Lounge (Carolyn's), a nightclub in Chicago, for an incident that occurred in the Carolyn's parking lot that resulted in the death of Kyle Matthews and the injury of Tremeice Dangerfield. Ms. Dangerfield, Amber Montgomery, as administrator for the estate of Mr. Matthews, Carolyn's, and its owner Carolyn Burton (collectively, defendants) filed a counterclaim arguing that (1) Markel breached its duty to defend Carolyn's in the underlying lawsuit, (2) Markel breached its duty to indemnify Carolyn's, (3)
Markel was estopped from asserting defenses to coverage for the default judgment, and (4) Markel's denial of coverage was vexatious and unreasonable. Both parties moved for summary judgment; the circuit court denied Markel's motion and granted defendants' motion. The circuit court also determined that Markel's indemnity obligation was limited to the policy's $1 million limit per occurrence and that the incident qualified as one occurrence.
¶ 2 Both parties appealed. Defendants argue that the circuit court erred in limiting Markel's indemnity obligation to $1 million. Markel argues that (1) it had no duty to defend the underlying lawsuit, (2) it was not estopped from denying coverage for the default judgment, (3) denial of the coverage was not vexatious and unreasonable, and, in the alternative, (4) the circuit court was correct to cap its obligation at $1 million. For the following reasons, we reverse the judgment of the circuit court as to Markel's duty to defend, which also resolves the other issues in this case.
¶ 3 I. BACKGROUND
¶ 4 A. The Incident
¶ 5 The underlying complaint was filed on October 28, 2013, by Ms. Dangerfield and Ms. Montgomery, against Carolyn's and its owner, Carolyn Burton; Leonard Lee, a Carolyn's security guard; and Arthur Bettis and Maurice Jones, the two alleged assailants. Detailed below are the allegations taken from the complaint in that action.
¶ 6 On October 30, 2011, Mr. Matthews and Ms. Dangerfield were leaving Carolyn's when they were confronted by Mr. Bettis and Mr. Jones—two men who were returning to Carolyn's with handguns after being removed from the premises. In order to keep the two men from entering the nightclub, Mr. Lee secured the door, leaving Mr. Matthews and Ms. Dangerfield in the parking lot with the men. According to the underlying complaint, "[Mr.] Bettis and [Mr.] Jones assaulted and battered [Ms.] Dangerfield in the presence of security." When Mr. Matthews attempted to protect Ms. Dangerfield, Mr. Bettis shot and killed him. This incident is again described later in the complaint, where it is alleged that "[Mr.] Bettis, without any cause or provocation and with intent to do bodily harm to [Ms.] Dangerfield, did severely harm, assault, and batter [Ms.] Dangerfield by striking her in the face" and "without any cause or provocation and with intent to do bodily harm to [Mr.] Matthews, did severely harm, assault, and batter [Mr.] Matthews, by striking him in the face and body and fatally shooting him." Finally, the complaint alleged, "[a]s a direct and proximate result of the intentional acts of [Mr.] Bettis, [Ms.] Dangerfield suffered severe and permanent physical and emotional injuries and [Mr.] Matthews[ ] suffered and died from a fatal gunshot wound."
¶ 7 The underlying complaint alleged that Carolyn's, Ms. Burton, and Mr. Lee were all negligent. The complaint also alleged a wrongful death claim and a Survival Act claim against Carolyn's on behalf of Mr. Matthews's estate. Finally, the complaint alleged claims of assault and battery, intentional infliction of emotional distress, wrongful death, and a claim under the Survival Act against Mr. Bettis, as well as assault and battery and intentional infliction of emotional distress claims against Mr. Jones.
¶ 8 B. The Policy
¶ 9 Carolyn's general commercial liability insurance—supplied by Markel—for the policy period of February 18, 2011, to February 18, 2012, included among its coverages "bodily injury." The policy detailed:
"We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages. However, we will have no duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply."
¶ 10 "Bodily injury" was defined by the policy as "bodily injury, sickness or disease sustained by a person including death resulting from any of these at any time." The policy detailed that the insurance applied to bodily injury if "[t]he ‘bodily injury’ *** [was] caused by an ‘occurrence’ " and fell within the policy period. The policy defined "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The policy limited the insurance for each occurrence to $1 million. In addition, the policy included an endorsement titled "Exclusion—Assault and Battery" and an endorsement titled "Exclusion—Firearms."
¶ 11 The assault and battery exclusion stated:
"The coverage under this policy does not apply to any claim, suit, cost or expense arising out of assault and/or battery, or out of any act or omission in connection with the prevention or suppression of such acts, whether caused by or at the instigation or direction of any Insured or Insured's employees, patrons or any other person. Nor does this insurance apply to any claim, suit, cost or expense arising out of the alleged negligence or other wrong doing in the hiring, training, placement, supervision or monitoring of others by the insured."
¶ 12 The firearms exclusion stated: "This insurance does not apply to ‘bodily injury’ *** arising out of the existence, ownership, rental, maintenance, use, misuse or accidental discharge of firearms whether by any insured or insured employees, patron, tenant, guest or any other person, regardless of individual, circumstances or location." The policy also contained a liquor liability exclusion endorsement, which, while referenced in the proceedings below, is not relevant on appeal.
¶ 13 C. Procedural Background
¶ 14 In response to the underlying lawsuit, Markel sent Carolyn's a letter, dated November 21, 2013, which disclaimed coverage to Carolyn's for the incident described in the underlying complaint, explaining that the incident fell within the assault and battery exclusion, the firearms exclusion, and the liquor liability exclusion. The letter further stated that where there is no coverage, there is no duty to defend. In accordance with this letter, Markel did not defend Carolyn's in the lawsuit. On June 13, 2016, the circuit court entered a default judgment against Carolyn's, awarding $250,000 to Ms. Dangerfield and $2,788,087 to the estate of Mr. Matthews.
¶ 15 On October 4, 2017, Markel filed a complaint for declaratory judgment, seeking an order stating it did not owe a duty to defend or indemnify Carolyn's in the underlying action. Markel argued that the underlying incident was not an "occurrence" as defined by the policy and that coverage was excluded under the policy's assault and battery exclusion, firearms exclusion, and liquor liability exclusion.
¶ 16 Defendants filed a counterclaim along with their answer to the complaint and affirmative defenses on November 13, 2017. Their counterclaim alleged that Markel breached its duty to defend, breached its duty to indemnify, and was estopped from asserting defenses to coverage
for the default judgment. It also alleged that Markel's, and its denial of coverage was vexatious and unreasonable under section 155 of the Illinois Insurance Code (Code) ( 215 ILCS 5/155 (West 2016) ).
¶ 17 Markel filed for summary judgment on January 25, 2018, and defendants filed their response and cross-motion for summary judgment on March 1, 2018. The circuit court granted defendants' motion for summary judgment and denied Markel's motion for summary judgment on June 27, 2018. In its order, the circuit court found that the underlying complaint asserted a claim that potentially fell within the policy's coverage and...
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