State Farm Fire & Cas. Co. v. Hatherley, 1-91-3280

• Citation: 190 Ill.Dec. 170,621 N.E.2d 39,250 Ill.App.3d 333
• Decision Date: 10 June 1993
• Docket Number: No. 1-91-3280,1-91-3280
• Parties: , 190 Ill.Dec. 170 STATE FARM FIRE & CASUALTY COMPANY, a corporation, Plaintiff-Appellee, v. Anthony J. HATHERLEY, Defendant-Appellant (Hidden Lakes Estate Condominium Association and Heritage Standard Bank & Trust Co., Defendants).
• Court: United States Appellate Court of Illinois

Page 39

621 N.E.2d 39

250 Ill.App.3d 333, 190 Ill.Dec. 170

STATE FARM FIRE & CASUALTY COMPANY, a corporation, Plaintiff-Appellee, v. Anthony J. HATHERLEY, Defendant-Appellant (Hidden Lakes

Estate Condominium Association and Heritage

Standard Bank & Trust Co., Defendants).

No. 1-91-3280.

Appellate Court of Illinois,

First District, Fourth Division.

June 10, 1993.

Richard C. Jones, Jr., Michael D. Richman, Dardick & Denlow, Chicago, for defendant-appellant.

Michael Resis, Querrey & Harrow, Ltd., Chicago, for plaintiff-appellee.

Justice JOHNSON delivered the opinion of the court:

Plaintiff, State Farm Fire & Casualty Company, filed a complaint for declaratory judgment in the circuit court of Cook County. Plaintiff sought a determination that it had no duty to defend or indemnify its insured, defendant, Anthony J. Hatherley, in a separate case brought by Heritage Standard Bank and Trust against defendant. Following a hearing, the trial court granted plaintiff's summary judgment motion. Defendant brought this appeal contending that (1) plaintiff's declaratory judgment action was premature, and (2) the trial court improperly granted summary judgment thereby holding that plaintiff had no duty to defend or indemnify in an underlying suit.

We affirm.

The underlying suit is based on a dispute between Heritage Standard Bank and Trust (the Bank) and defendant. The dispute concerns property damage to a condominium unit (the unit) purchased by defendant with a mortgage issued by the Bank. In its four-count complaint against defendant, the Bank alleged that it foreclosed on the unit on November 16, 1984, and later bought the unit at a court-ordered sheriff's sale. The Bank became entitled to possession of the unit on February 21, 1985. On February 27, 1985, the bank took possession of the unit. Prior to that time, however, defendant was in exclusive possession of the unit and had removed certain improvements including lighting fixtures, kitchen cabinets and countertops, electrical fixtures, bathroom fixtures, and carpeting. The Bank claimed the unit was damaged by defendant's removal of the improvements. The Bank later filed a second amended complaint based on negligence, conversion, and intentional trespass.

Pursuant to his homeowners insurance policy, defendant requested plaintiff to defend and indemnify him against any liability arising from the underlying suit. Plaintiff initially agreed to defend under a reservation of rights, but later filed a motion for summary judgment. Prior to the hearing, plaintiff filed a request to admit facts alleging that defendant removed kitchen cabinets and countertops, a whirlpool bathtub, and carpeting from the unit. Defendant filed no response. After the hearing, the trial court granted plaintiff's motion for summary judgment finding that several policy exclusions applied which exempted defendant from liability coverage. Defendant later filed a motion pursuant to Supreme Court Rule 304(a) which the trial court denied. Defendant filed the instant appeal.

We will first consider defendant's argument that plaintiff's declaratory action was premature.

The general rule is that when an insurer is in doubt as to whether it has a duty to defend its insured, it may seek a declaratory judgment to determine its obligations and rights or defend under a reservation of rights. (Fidelity & Casualty Co. v. Envirodyne Engineers, Inc. (1983), 122 Ill.App.3d 301, 304, 77 Ill.Dec. 848, 461 N.E.2d 471.) In response to defendant's request for defense and indemnification, plaintiff initially defended under a reservations of rights, but later filed this declaratory judgment action. Defendant argues that the issue of whether the improvements removed from the unit were "fixtures" should have been adjudicated by the trial court in the underlying suit before a declaratory judgment action could properly proceed. We hold that defendant's argument is without merit.

It is well settled that a court in a declaratory judgment action may not determine whether the insured is actually liable nor may it determine any facts upon which the insured's liability is based. (State Farm Fire & Casualty Co. v. Moore (1981), 103 Ill.App.3d 250, 257, 58 Ill.Dec. 609, 430 N.E.2d 641.) Here, however, the trial court's ruling had no bearing on whether defendant was liable for the property damage, nor on any facts upon which defendant's liability would be based. Rather, the trial court merely determined that no allegations in the underlying complaint brought the case within potential coverage of the given policy exclusions. Regardless of whether the improvements are considered fixtures or personal property, as we shall discuss below, plaintiff, had no duty to defend or indemnify defendant in the underlying suit. (See Fidelity & Casualty Co. v. Envirodyne Engineers, Inc. (1983), 122 Ill.App.3d 301, 77 Ill.Dec. 848, 461 N.E.2d 471.) We find that plaintiff's declaratory judgment action was not brought prematurely.

We now consider whether the trial court properly held that plaintiff had no duty to defend or indemnify defendant in the underlying suit.

Whether an insurer has a duty to defend its insured depends on whether the underlying complaint alleges facts within or potentially within coverage of the insurance policy. (United States Fidelity & Guaranty Co. v. Wilkin Insulation Co. (1989), 193 Ill.App.3d 1087, 1092, 140 Ill.Dec. 907, 550 N.E.2d 1032.) In affirming our decision in Wilkin, the Illinois Supreme Court stated that an insurer may properly refuse to defend its insured if "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." (Emphasis in original.) (United States Fidelity & Guaranty Co. v. Wilkin Insulation Co. (1991), 144 Ill.2d 64, 73, 161 Ill.Dec. 280, 578 N.E.2d 926.) Where the underlying complaint alleges facts which if true would exempt the insured from coverage under the policy, the insurer has no duty to defend. (Associated Indemnity Co. v. Insurance Co. of North America (1979), 68 Ill.App.3d 807, 817, 25 Ill.Dec. 258, 386 N.E.2d 529.) Moreover, where a court properly holds that an insurer has no duty to defend, the court may also hold that the insurer has no duty to indemnify. Altaf v. Hanover Square Condominium Association (1989), 188 Ill.App.3d 533, 542, 136 Ill.Dec. 257, 544 N.E.2d 1032.

Illinois case law holds that where the language of an insurance policy is clear and unambiguous, it will be applied as written. (United States Fire Ins. Co. v. Schnackenberg (1981), 88 Ill.2d 1, 4, 57 Ill.Dec. 840, 429 N.E.2d 1203.) Here, defendant's insurance policy contained several exclusionary clauses, three of which plaintiff used to support its argument that no theory alleged in the Bank's complaint in the underlying action gave rise to potential liability coverage. The exclusions to which plaintiff referenced noted that personal...