Bonnie Owen Realty, Inc. v. Cincinnati Ins. Co.

Page 1182

670 N.E.2d 1182

283 Ill.App.3d 812, 219 Ill.Dec. 294

BONNIE OWEN REALTY, INC., d/b/a Bonnie Owen Property Management, Plaintiff-Appellee, v. The CINCINNATI INSURANCE COMPANY, Defendant and Counterdefendant-Appellant (Gergana Zlateva, Simona D Dimitrova, Masako Toyota Shin, as Administrator of the Estate of Kimiko Ajioka, Deceased, Sylvia Camacho, Amit Singh, and Chanin Heid Birkhahn, Intervening Counterplaintiffs-Appellees).

No. 5-95-0663.

Appellate Court of Illinois Fifth District.

Sept. 24, 1996.

Evan H. Johnson, Bradley T. Paisley, Erickson, Davis, Murphy, Johnson, Griffith & Walsh, Ltd., Decatur, for Defendant and Counterdefendant-Appellant.

Feirich/Mager/Green/Ryan, Carbondale, for Bonnie Owen Realty, Inc.

G. Patrick Murphy, Marion, for Masako Toyota Shin, as Administrator of the Estate of Kimiko Ajioka, Deceased--Adopted Brief of Bonnie Owen Realty, Inc.

Robert H. Howerton, Harris, Lambert, Howerton & Dorris, Marion, for Sylvia Camacho--Adopted Brief of Bonnie Owen Realty, Inc.

Justice WELCH delivered the opinion of the court:

This case is a declaratory judgment action brought by Bonnie Realty, Inc., d/b/a Bonnie Owen Property Management (plaintiff), against The Cincinnati Insurance Company (defendant) to determine whether the two insurance policies issued by defendant to plaintiff provide coverage for claims filed against plaintiff. On July 24, 1995, the circuit court of Jackson County entered summary judgment for plaintiff, finding that the policies do provide coverage. Defendant appeals.

On December 6, 1992, a tragic fire occurred at an apartment building managed by plaintiff. Several people lost their lives in the fire, and numerous others suffered injury. Some of these victims filed suit against plaintiff, alleging negligence in failing to provide proper security at the apartment building and allowing someone to enter the premises and start the fire, in failing to provide a sufficient number of proper and working smoke alarms, in failing to provide and maintain proper fire-extinguishing devices, in failing to properly equip the property with fire escapes, in failing to provide proper fire walls, in failing to properly maintain the electrical wiring, and in failing to warn of the hazards associated with the property. Plaintiff tendered the defense of the lawsuits to defendant, which denied coverage based on the following exclusions found in the two policies of insurance:

"This insurance does not apply to 'bodily injury' or 'property damage' arising out of:

The rendering or failure to render professional services if such injury or damage arises out of any claim for Professional Liability or Malpractice made against an insured caused by any negligent act, error, or omission of an insured or any other person for whose acts you are legally responsible in the conduct of any business, trade, or profession"; and

"It is agreed that such insurance as is provided by the policy for bodily injury, personal injury, or property damage does not apply if such injury or damage arises out of any claim for Professional Liability or Malpractice made against an insured caused by any negligent act, error, or omission of an insured or any other person for whose acts an insured is legally liable in the conduct of any business, trade, profession, municipal service, such as, but not limited to, law enforcement departments, fire departments (including volunteers), health departments, ambulance services, paramedics, lawyers, or judges."

On plaintiff's motion for summary judgment, the circuit court found (1) that the exclusions in the policies of insurance do not apply to the facts of this case and (2) that defendant is estopped to deny coverage. The trial court found that defendant has a duty to defend plaintiff under both the policies and that defendant is obligated to indemnify plaintiff under each of the policies in the event that judgment is rendered against plaintiff in the underlying suits. On August 1, 1995, the court entered summary judgment against defendant and in favor of plaintiff and ordered that plaintiff shall recover from defendant its attorney fees incurred in prosecuting the declaratory judgment action.

In an appeal from a grant of summary judgment, a reviewing court conducts a de novo review. Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill.2d 384, 390, 189 Ill.Dec. 756, 620 N.E.2d 1073 (1993). The construction of an insurance policy and a determination of the rights and obligations thereunder are questions of law for the court which are appropriate subjects for disposition by summary judgment. Crum & Forster Managers Corp., 156 Ill.2d at 391, 189 Ill.Dec. 756, 620 N.E.2d 1073.

Defendant's first issue on appeal is whether the trial court erred in holding that defendant has a duty to defend plaintiff in the underlying lawsuits. In determining whether an insurer has a duty to defend its insured, the court must look to the allegations of the underlying complaint and compare these allegations to the relevant coverage provisions of the insurance policy. Crum & Forster Managers Corp., 156 Ill.2d at 393, 189 Ill.Dec. 756, 620 N.E.2d 1073. The allegations in the underlying complaint must be liberally construed in favor of the insured. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90, 125, 180 Ill.Dec. 691, 607 N.E.2d 1204 (1992). If the facts alleged in the underlying complaint fall within, or potentially within, the policy's coverage provisions, then the insurer has a duty to defend the insured in the underlying action. Crum & Forster Managers Corp., 156 Ill.2d at 393, 189 Ill.Dec. 756, 620 N.E.2d 1073. A refusal to defend is unjustifiable unless it is clear from the face of the underlying complaint that the facts alleged do not fall potentially within the policy's coverage. Outboard Marine Corp., 154 Ill.2d at 108, 180 Ill.Dec. 691, 607 N.E.2d 1204. Unless the complaint on its face clearly alleges facts which, if true, would exclude coverage, the potentiality of coverage is present and the insurer has a duty to defend. Western Casualty & Surety Co. v. Adams County, 179 Ill.App.3d 752, 756, 128 Ill.Dec. 621, 534 N.E.2d 1066 (1989). Any doubts about coverage are to be resolved in the insured's favor. Western Casualty & Surety Co., 179 Ill.App.3d at 757, 128 Ill.Dec. 621, 534 N.E.2d 1066.

Defendant argues that the exclusions in the insurance policies for "professional services" bar coverage. Those exclusions talk about "professional liability" or "malpractice" in "any business, trade or profession" and claims for "professional liability" or "malpractice" in "the conduct of any business, trade, profession or municipal service". Defendant argues that plaintiff was engaged in the business or profession of property management and that the underlying complaints allege negligence in the provision of professional services in the conduct of this profession or business.

In State Street Bank & Trust Co. v. INA Insurance Co., 207 Ill.App.3d 961, 153 Ill.Dec. 327, 567 N.E.2d 42 (1991), this court discussed the definition of the term "professional service" within the context of an insurance policy exclusion. We held that the term is not limited to services performed by persons who must be licensed by a governmental authority in order to practice their professions but refers to any business activity conducted by the insured which involves specialized knowledge, labor, or skill and is predominantly mental or intellectual as opposed to physical or manual in nature. State Street Bank & Trust Co., 207 Ill.App.3d at 967, 153 Ill.Dec. 327, 567 N.E.2d 42. We also held that the exercise of business judgment in conducting banking services fell within the "professional service" exclusion of the insurance policy. State Street Bank & Trust Co., 207 Ill.App.3d at 967-68, 153 Ill.Dec. 327, 567 N.E.2d 42.

This definition of "professional services" apparently derives from Black's Law Dictionary, which defines "profession" as a "vocation or occupation requiring special, usually advanced, education, knowledge, and skill; * * * [t]he labor and skill involved in a profession is predominantly mental or intellectual, rather than physical or manual." Black's Law Dictionary 1210 (6th ed. 1990).

We agree with the trial court that the allegations in the underlying complaints do not allege the conduct by plaintiff of "professional services". The complaints allege simple negligence by plaintiff in the maintenance of the building. None of the allegations of negligence involve any specialized knowledge, labor, or skill, nor do they involve conduct which is predominantly mental or intellectual as opposed to physical or manual in nature.

We note that the exclusions in the insurance policy do not apply to all negligence in the conduct of plaintiff's business, but only to negligence based on the rendering or failure to render professional services or out of any claim for professional liability or malpractice. We conclude that the allegations of negligence in the complaints do not involve "professional services", "professional liability", or "malpractice", although they certainly involve the conduct of plaintiff's business, which is property management. Because the insurer, as drafter of the policy, could have stated exclusions clearly and specifically, exclusionary provisions are applied only where the terms are clear, definite and explicit. State Farm Fire & Casualty Co. v. Moore, 103 Ill.App.3d 250, 256, 58 Ill.Dec. 609, 430 N.E.2d 641 (1981). We state again that any doubt as to coverage must be resolved in favor of the insured. Bituminous Casualty Corp. v. Fulkerson, 212 Ill.App.3d 556, 564, 156 Ill.Dec. 669, 571 N.E.2d 256 (1991).

Here, defendant could have drafted the exclusion to include all claims arising from the negligence of plaintiff in the conduct of her business, be they simple negligence or professional negligence. Defendant did not do so; it excluded only claims...