McFadyen v. North River Ins. Co.

• Decision Date: 31 August 1965
• Docket Number: Gen. No. 65-17
• Citation: 62 Ill.App.2d 164,209 N.E.2d 833
• Parties: Donald J. McFADYEN and Marguerite P. McFadyen, Appellees, v. NORTH RIVER INSURANCE COMPANY, An Insurance Corporation, Appellant. NORTH RIVER INSURANCE COMPANY, an Insurance Corporation, Counter-Plaintiff-Appellant, v. Donald J. McFADYEN and Marguerite P. McFadyen, Counter-Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 833

209 N.E.2d 833

62 Ill.App.2d 164

Donald J. McFADYEN and Marguerite P. McFadyen, Appellees, v. NORTH RIVER INSURANCE COMPANY, An Insurance Corporation, Appellant.

NORTH RIVER INSURANCE COMPANY, an Insurance Corporation, Counter-Plaintiff-Appellant, v. Donald J. McFADYEN and Marguerite P. McFadyen,

Counter-Defendants-Appellees.

Gen. No. 65-17.

Appellate Court of Illinois, Second District.

Aug. 31, 1965.

Thomas & Kostantacos, Rockford, for appellant.

Canfield, Canfield & Franks, Rockford, for appellees.

SEIDENFELD, Justice.

This is an appeal from the Summary Judgment of the Circuit Court of the Seventeenth Judicial Circuit of Winnebago County, Illinois, entered on November 27, 1964, which found that there was no genuine issue as to any material fact in this action and granted recovery to the plaintiffs in the sum of $4,994.65.

The pertinent facts in this case are as follows: an action was brought against Donald J. McFadyen and Marguerite P. McFadyen for personal injuries inflicted by a dog to a minor child, Brett Daniels, while the dog was tied in the yard of the McFadyen home. At the time of the injury, the McFadyens were insured by the appellant, North River Insurance Company, under a homeowner's insurance policy then in full force and effect.

From the pleadings, the facts which bear on the question of notice of the accident and the subsequent claim for injury include:

The answer and affirmative defense directed toward the complaint states that the insurer did not receive 'any notice * * * of * * * injury until on or about January 16, 1963'; the McFadyens answer this by alleging that the occurrence was September 4, 1962 but that it did not come to their attention until September 6, 1962, at which time they called Marshall Grans, an insurance agent who issued the policy, who then came and took a stenographic statement; and there is attached a letter from the purported manager of the insurer's Casualty Claims Department dated October 29, 1963 which in substance is as follows:

Gentlemen: When the case of an alleged dog bite was called to our attention, the matter was investigated and the insured advised but due to the fact a business was being conducted on the property listed as 'premises', a policy of insurance for liability would not be applicable. This policy does not cover business property and we refer you to the policy of insurance itself under the definition of 'premises'.

We do not believe there was, at any time, any misunderstanding of that position and it was made clear to the insured.

We are sorry that the outcome was, as you stated in your letter of October 24, but we must disagree with you as to the liability of the North River Insurance Company.

Yours very truly,

Signed by: A. R. Weimer

Casualty Claims Department Manager.

The McFadyens' motion for summary judgment contained the allegations:

3. That thereafter, during the month of January, 1963, the said insurance company stated that it refused to further consider the said claim against it and refused to in any way defend the plaintiffs here upon the said claim for the reason that it asserted that on the basis of its investigation of the evidence there was no coverage in the policy then issued by the defendant insurance company to the plaintiffs here.

These allegations were admitted by the answer of the insurance company. A counter-affidavit of Marshall Grans stated that he was notified by telephone on October 9, 1962 of the September 4th incident but was given no information except that he was told that McFadyen did not believe the dog in question was his.

The McFadyens defended the Daniels suit personally, the result of which was an adverse judgment of $4,000. The McFadyens then brought this action against North River to recover the $4,000, together with accrued interest, costs and attorney's fees. Summary judgment was entered for the McFadyens by the trial court.

North River argues that there are material factual issues to be decided in this case and, consequently, the McFadyens were not entitled to a judgment as a matter of law. The material factual issues pleaded by North River are essentially centered upon the question of whether the notice provisions of the policy were complied with and whether there was concealment of the alleged business use within the exclusion provisions of the policy. Reliance is placed upon those provisions in conjunction with:

'ACTION AGAINST COMPANY--COVERAGE E: No action shall lie against this Company unless, as a condition precedent thereto, the Insured shall have fully complied with all the terms of this policy applicable to Section II * * *'.

It is the McFadyens' contention that the trial court properly found that the suit brought was within the terms of the policy and that there could be no material issued of fact as to coverage because the failure of an insurer to defend a suit against its insured estops it from asserting any defense as to payment of the claim based on non-coverage under the policy.

The policy contains:

'I COVERAGE E: PERSONAL LIABILITY.

(a) LIABILITY--To pay on behalf of the Insured all sums which the Insured shall be legally obligated to pay as damages because of bodily injury or property damage, and the Company shall defend any suit against the Insured alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy, even if any of the allegations of the suit are groundless, false or fraudulent; but the Company may make such investigation and settlement of any claim or suit as it deems expedient.'

The complaint in the injury suit defended by the insured alleges that Brett Daniels was a child who resided with his family on premises adjacent to insured's premises and unobstructed by any fence; that on the date in question defendant owned a dog which, without provocation, attacked or injured the child while he was conducting himself peaceably and as a result, the injury occurred to his damage.

It is undisputed from the pleadings and affidavits in this case that the North River Insurance Company investigated the matter and advised the insured that 'due to the fact that a business was being conducted on the property listed as 'premises' the policy was considered inapplicable'.

The case of Sims v. Illinois National Casualty Company, 43 Ill.App.2d 184, 193 N.E.2d 123 (1963) lends support to the McFadyens' position. In Sims there was a garnishment action against an insurer of an automobile owner in whose automobile a passenger was injured. The liability insurer failed to defend the suit against its insured and in the subsequent garnishment suit it was held that the insurer was estopped from pleading the...