Pekin Ins. Co. v. McKeown Classic Homes, Inc.

• Decision Date: 29 July 2020
• Docket Number: No. 2-19-0631,2-19-0631
• Citation: 443 Ill.Dec. 407,2020 IL App (2d) 190631,161 N.E.3d 1059
• Parties: PEKIN INSURANCE COMPANY, Plaintiff-Appellee, v. MCKEOWN CLASSIC HOMES, INC. ; Jerome McKeown; JANET H. HULA, Michelle Hula-Miller; and Eric B. Miller, Defendants (McKeown Classic Homes, Inc., and Jerome McKeown, Defendants-Appellants).
• Court: United States Appellate Court of Illinois

2020 IL App (2d) 190631

161 N.E.3d 1059

443 Ill.Dec. 407

PEKIN INSURANCE COMPANY, Plaintiff-Appellee,

v. MCKEOWN CLASSIC HOMES, INC. ; Jerome McKeown; JANET H. HULA, Michelle Hula-Miller; and Eric B. Miller, Defendants(McKeown Classic Homes, Inc., and Jerome McKeown, Defendants-Appellants).

No. 2-19-0631

Appellate Court of Illinois, Second District.

Rule 23 Filed June 16, 2020

Motion to Publish Granted July 29, 2020

Opinion filed July 29, 2020

Anthony G. Barone, Jason W. Jochum, and Zachary McGourty, of Barone Law Group, P.C., of Oakbrook Terrace, for appellants.

Robert Marc Chemers, Richard M. Burgland, and Paula K. Villela, of Pretzel & Stouffer, Chtrd., of Chicago, for appellee.

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

¶ 1 Defendants, McKeown Classic Homes, Inc., and Jerome McKeown (collectively, McKeown), appeal the trial court's entry of summary judgment in favor of plaintiff, Pekin Insurance Company (Pekin), finding that Pekin had no duty to defend McKeown in the underlying action. Additionally, McKeown appeals the trial court's denial of its motion to reconsider the grant of summary judgment to Pekin. For the reasons that follow, we affirm the judgment of the trial court.

¶ 2 I. BACKGROUND

¶ 3 On April 9, 2018, Janet Hula, Michelle Hula-Miller, and Eric Miller (collectively, claimants) filed the underlying action, a two-count complaint against McKeown alleging breach of contract and conversion stemming from McKeown's work on claimants' property pursuant to a construction agreement.¹ Relevant here, count II (conversion) alleged that, in July 2013, McKeown, "without authority and knowledge of [claimants], took hundreds of planks of knotty pine wood, a Dutch door, a hand sink, four windows and [a] glass door knowingly belonging to the [claimants] without [claimants'] consent." Count II alleged that claimants demanded McKeown return the above items, but it refused to do so. Count II stated that, as a proximate result of McKeown's conversion, claimants suffered $25,000 in damages. Claimants further alleged that McKeown's acts were "willful, wanton, malicious, and oppressive and were undertaken with the intent to defraud" and that they "justify the awarding of punitive damages."

¶ 4 On September 17, 2018, after refusing to accept McKeown's tendered defense to claimants' complaint, Pekin filed a complaint for a declaratory judgment that it had no duty to defend McKeown in the underlying action. Pekin stated that the commercial general liability insurance policy (the policy) it issued to McKeown contained certain exclusions applicable to the claimants' conversion claim. Pekin attached to the complaint a copy of the policy issued to McKeown.

¶ 5 Section I of the policy provides, in relevant part, as follows:

"1. Insuring Agreement

a. 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. We may, at our discretion, investigate an ‘occurrence’ and settle any claim or ‘suit’ that may result.

* * *

b. This insurance applies to ‘bodily injury’ and ‘property damage’ only if:

(1) The ‘bodily injury’ or ‘property damage’ is caused by an ‘occurrence that takes place in the coverage territory[.]’ "

The policy defined "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general or harmful conditions." The policy defined "property damage" as

"a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the ‘occurrence’ that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the ‘occurrence’ that caused it."

¶ 6 On October 24, 2018, McKeown filed an answer to Pekin's complaint for declaratory judgment, contending that the damages sought and the allegations contained in claimants' conversion claim were covered by the policy. On October 26, 2018, McKeown filed a counterclaim for declaratory judgment in which it contended that the "materials at issue were mistakenly removed by a subcontractor involved in the demolition of the prior home located at the Subject Property." McKeown's counterclaim stated that the "alleged wrongful removal by subcontractor * * * of these materials amounts to ‘property damage’ as claimants have alleged a resulting ‘loss of use of that property’ as defined by the policy." McKeown further stated that "this loss is a clearly covered ‘occurrence’ as defined by the policy as the subcontractor's mistake in removing property allegedly belonging to [claimants] was an ‘accident.’ " Thus, McKeown alleged, Pekin had a duty to defend it in the underlying action.

¶ 7 On January 4, 2019, Pekin filed a motion for summary judgment stating that it had no duty to defend McKeown against claimants' underlying complaint for conversion. Pekin argued in its motion that the conversion claim did not allege an "occurrence" as defined in the policy but, rather, an intentional act to deprive claimants of their own property.

¶ 8 McKeown filed a cross-motion for summary judgment on February 19, 2019, arguing that claimants' conversion claim did not clearly delineate whether McKeown negligently or intentionally converted their property. Thus, according to McKeown's motion, an issue of fact existed as to its potential liability for conversion, and Pekin must defend it under the terms of the policy. Further, McKeown argued that the conversion claim alleged $25,000 in damages that could be considered "property damage" as defined in the policy, as claimants alleged a resulting "loss of use of that property."

¶ 9 To support its position that the allegedly converted items were taken by "mistake" and, thus, as the result of an "occurrence" under the terms of the policy, triggering Pekin's duty to defend, McKeown attached claimants' following answer to an underlying interrogatory:

"Identify each and every communication with McKeown related to McKeown's alleged conversion of the ‘hundreds of planks of knotty pine wood, a Dutch door, a hand sink, four windows and a glass door’ as you allege in Count II of the Complaint. For each communication identified, state whether the communication was oral or written; the date of the communication; the name and affiliation of each individual involved in the communication; and the content of the communication.

Answer: Regarding Count II of the complaint. Before the existing house on the lot was demoed[,] Eric Miller spent a couple of weekends removing planks of knotty pine wood, a Dutch door, a hand sink, four windows and glass door knobs from the house. We talked to Jerry McKeown about this because the wood was in good condition and we thought that it would be good to use these items in a club house * * *. At Jerry McKeown's direction, Eric Miller loaded the items onto an existing playset in the rear of the property and covered the items with a blue tarp. When we were on vacation, [McKeown] had the property demoed. When we viewed the pictures sent by Michele Hula's brother, we noticed the playset was not in any of the pictures. We immediately contacted [McKeown] to find out what happened * * * with the items we stored in the playset. [McKeown] informed us that the demo company took those items away along with the playset. He then told us that ‘I will build a better clubhouse than I demo[ed]’ to assure us that he would take care of this miscommunication that occurred on his watch. At the end of construction, we revisited the clubhouse issue and [McKeown's] stance changed drastically. He started to back pedal on the promise he made to us and refused to build the clubhouse. We ended up having the landscaper * * * erect a clubhouse/shed structure in our backyard at our own expense."

¶ 10 On March 22, 2019, claimants, who had been joined as defendants in Pekin's declaratory judgment action, stipulated and agreed to be bound by any judgment. The trial court granted Pekin's motion to voluntarily dismiss claimants pursuant to their stipulation.

¶ 11 On March 26, 2019, the trial court heard arguments from the remaining litigants on their cross-motions for summary judgment. The trial court found that, in their conversion claim, claimants

"allege intentional conduct, and they allege that once that conduct was brought to McKeown's attention, [he] refused to return [the items]. And there is nothing in here that tells me that there is negligence or an accident. What I have got to go on are the allegations of the complaint. * * * There is a refusal to return [items] once they are known. And I go back to the duty to defend in this case is what you are asking the Court to rule on. It rests upon the allegations of the complaint."

The trial court granted Pekin's motion for summary judgment and found that there was no duty to defend McKeown under the terms of the policy.

¶ 12 On April 16, 2019, McKeown filed a motion to reconsider the trial court's March 26, 2019, ruling in favor of Pekin. McKeown argued in its motion that the trial court misapplied the law in granting Pekin's motion, because the underlying complaint's allegations could leave it liable for conversion, potentially covered by the policy. The trial court held a hearing on McKeown's motion to reconsider on June 17, 2019, whereupon it was denied. McKeown timely filed this appeal.

¶ 13 II. ANALYSIS

¶ 14 In this appeal, McKeown contends that the trial court erred in (1) granting Pekin's motion for summary judgment and finding no duty to defend under the terms of the policy and (2) denying its motion to reconsider. We will address each of McKeown's contentions in...