Mutlu v. State Farm Fire and Cas. Co.

• Decision Date: 11 February 2003
• Docket Number: No. 1-02-0816.,1-02-0816.
• Citation: 337 Ill. App.3d 420,271 Ill.Dec. 757,785 N.E.2d 951
• Parties: Han MUTLU, Plaintiff-Appellant, v. STATE FARM FIRE AND CASUALTY COMPANY, an Illinois Corporation, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

785 N.E.2d 951

337 Ill. App.3d 420

271 Ill.Dec. 757

Han MUTLU, Plaintiff-Appellant, v. STATE FARM FIRE AND CASUALTY COMPANY, an Illinois Corporation, Defendant-Appellee.

No. 1-02-0816.

Appellate Court of Illinois, First District, Third Division.

February 11, 2003.

David A. Shapiro, Laser, Pokorny, Schwartz, Friedman & Economos, P.C., Chicago, for Appellant.

Michael Resis, O'Hagan, Smith & Amundsen, L.L.C., Chicago, for Appellee.

Justice HALL delivered the opinion of the court:

The plaintiff, Han Mutlu, filed a three-count complaint against the defendant, State Farm Fire and Casualty Company, alleging a breach of contract (count I), a violation of section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2000)) (count II) and a breach of the common law duty of good faith and fair dealing (count III). The plaintiff voluntarily dismissed count III. The circuit court granted summary judgment to the defendant on both counts of the complaint. The plaintiff appeals.

On appeal, the plaintiff raises the following issues: whether the circuit court erred when it entered partial summary judgments for the defendant and whether the circuit court abused its discretion when it failed to compel the defendant to comply with discovery prior to ruling on the defendant's motions for partial summary judgment. We affirm the judgment of the circuit court.

BACKGROUND

I. The Policy

The plaintiff purchased from the defendant a condominium unit owners insurance policy, which provided coverage between November 24, 1997, and November 24, 1998. The policy provided coverage for claims made against the plaintiff because of bodily injury or property damage due to an occurrence. The policy defined "occurrence" as meaning:

"an accident, including exposure to conditions, which results in:

a. bodily injury; or

b. property damage;

during the policy period."

Property damage is defined as:

"physical damage to or destruction of tangible property, including loss of use. Theft or conversion of property by an insured is not property damage."

In addition, the policy also provided that policy did not provide coverage for:

"a. bodily injury or property damage:

(1) which is either expected or intended by an insured; or

(2) to any person or property which is the result of willful and malicious acts of the insured."

II. The Litigation

The plaintiff filed the instant lawsuit on April 9, 2001. The following facts are taken from the allegations contained in the complaint.

On October 6, 1997, the plaintiff filed suit against the 1550 Lakeshore Drive Condominium Association (the Association) (Mutlu v. 1550 Lake Shore Drive Condominium Ass'n, No. 97 CH 12528). The Association filed a counterclaim against the plaintiff seeking injunctive relief and alleging that he continuously ran the hot water in his unit to the detriment of his neighbors and in violation of Illinois law. On or about March 12, 1998, the plaintiff tendered the defense of the Association's counterclaim to the defendant. On May 8, 1998, the defendant denied coverage and refused to defend the plaintiff on the Association's counterclaim. As a result, the plaintiff expended in excess of $100,000 in defense and investigation expenses in connection with the Association's counterclaim.

In another suit filed by the plaintiff (Mutlu v. Brodny, 97 L 10292), Phyllis Brodny, a resident of the condominium building in which the plaintiff resided, filed a counterclaim against the plaintiff. After initially agreeing to defend the plaintiff against Ms. Brodny's counterclaim, the defendant subsequently notified the plaintiff that it did not have a duty to indemnify him and declined to defend him against any of the counterclaims filed against him by Ms. Brodny.

Eventually, the Association paid the plaintiff $700,000 and issued a letter explaining that the plaintiff was not responsible for the hot water deficiencies and apologizing to the plaintiff.

After the suit in this case was filed, the plaintiff served interrogatories and a production of documents request on the defendant. However, State Farm refused to answer them.

On September 14, 2001, the defendant filed a motion for partial summary judgment as to count I of the complaint. In support of its motion, the defendant argued that the plaintiff failed to allege that any property damage had occurred or that any physical damage was the result of an occurrence as defined by the insurance policy in this case because it was the result of deliberate, intentional and malicious acts by the plaintiff.

In response, on October 11, 2001, the plaintiff filed a motion to stay summary judgment proceedings and to compel discovery. On October 24, 2001, the circuit court entered an order continuing generally the plaintiff's motion to stay and compel discovery. On November 26, 2001, the plaintiff filed a response to the defendant's motion for partial summary judgment and a cross-motion for partial summary judgment.

On February 1, 2002, the circuit court issued a memorandum and order granting the defendant's motion for partial summary judgment as to count I of the complaint. On February 7, 2002, the defendant filed a motion for partial summary judgment as to count II of the complaint. The motion was granted by the circuit court on February 19, 2002.

The plaintiff filed a timely notice of appeal.

ANALYSIS

I. Standard of Review

The court reviews the granting of motions for summary judgment de novo. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90, 102, 180 Ill. Dec. 691, 607 N.E.2d 1204, 1209 (1992)

.

II. Policy Construction

The construction of an insurance policy and a determination of the rights and obligations thereunder are questions of law for the court that are appropriate subjects for disposition by way of summary judgment. Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill.2d 384, 391, 189 Ill.Dec. 756, 620 N.E.2d 1073, 1077 (1993).

In construing an insurance policy, the primary function of the court is to ascertain and enforce the intention of the parties as expressed in the agreement. Crum & Forster Managers Corp., 156 Ill.2d at 391, 189 Ill.Dec. 756, 620 N.E.2d at 1078. 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. Crum & Forster Managers Corp., 156 Ill.2d at 391, 189 Ill.Dec. 756, 620 N.E.2d at 1078. If the words of the policy are plain and unambiguous, the court will afford them their plain, ordinary meaning and will apply them as written. Crum & Forster Managers Corp., 156 Ill.2d at 391, 189 Ill.Dec. 756, 620 N.E.2d at 1078. The court will not search for ambiguity where there is none. Crum & Forster Managers Corp., 156 Ill.2d at 391, 189 Ill.Dec. 756, 620 N.E.2d at 1078.

III. Summary Judgment

The plaintiff contends that the circuit court erred in granting the defendant's motions for partial summary judgment because the defendant had an obligation to defend him against the Association's counterclaim under the terms of the liability policy the defendant issued to him.¹

A. Determination of Duty to Defend

To determine an insurer's duty to defend its insured, the court must look to the allegations of the underlying complaint, and if the complaint alleges facts within or potentially within policy coverage, an insurer is obliged to defend its insured even if the allegations are groundless, false or fraudulent. United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill.2d 64, 73, 161 Ill.Dec. 280, 578 N.E.2d 926, 930 (1991). An insurer may not justifiably refuse to defend an action against its insured unless it is clear from the face of the underlying complaint that the allegations fail to state facts which bring the case within, or potentially within, the policy's coverage. United States Fidelity & Guaranty Co.,144 Ill.2d at 73,161 Ill.Dec. 280,578 N.E.2d at 930. Moreover, if the underlying complaint alleges several theories of recovery against the insured, the duty to defend arises even if only one such theory is within the potential coverage of the policy. United States Fidelity & Guaranty Co.,144 Ill.2d at 73, 161 Ill.Dec. 280,578 N.E.2d at 930. The underlying complaint and the insurance policy must be liberally construed in favor of the insured. 144 Ill.2d at 74,161 Ill. Dec. 280,578 N.E.2d at 930.

B. Discussion

Under the terms of the policy at issue in this case, the defendant was required to defend the plaintiff if the Association's counterclaim alleged an occurrence resulting in property damage. The defendant would not be required to defend the plaintiff if the property damage was either expected or intended by the plaintiff or caused maliciously or willfully by the plaintiff. We turn first to the question of whether there was property damage in this case.

The Association's counterclaim and exhibits thereto alleged that the plaintiff, who resided in unit 12A, had caused hot water shortages affecting the lower half (floors 2 through 14) of the condominium building by continually running the hot water in his unit. The Association alleged that the problem first manifested itself on the weekend of November 14, 1997. After residents reported hearing water running in the plaintiff's unit, the plaintiff explained that he was washing his bathtub. The hot water shortages continued. Finally, on the weekend of February 21, 1998, after residents had reported a lack of hot water, it was determined that hot water was running into the plaintiff's bathtub. Failing to rouse the plaintiff, Association members, with the help of a locksmith and accompanied by a police officer, entered the plaintiff's unit. The plaintiff denied he had been running water in his unit.

Under the policy in this case, "property damage"...