Country Mut. Ins. Co. v. Dahms

58 N.E.3d 118

405 Ill.Dec. 311

COUNTRY MUTUAL INSURANCE COMPANY, Plaintiff and Counterdefendant–Appellee,

v.Charles DAHMS, Defendant and Counterplaintiff–Appellant (Terry Enadeghe, Defendant–Appellee).

No. 1–14–1392.

Appellate Court of Illinois, First District, Fourth Division.

May 19, 2016.

Rehearing Denied June 21, 2016.

Craig M. Sandberg, of Chicago, for appellant.

Keith G. Carlson, of Chicago, for appellee Country Mutual Insurance Company.

No brief filed for appellee Terry Enadeghe.

OPINION

Justice ELLIS delivered the judgment of the court, with opinion.

¶ 1 This declaratory-judgment action involves an insurance coverage dispute as to whether plaintiff-counterdefendant, Country Mutual Insurance Company (Country Mutual), has a duty to defend its insured, defendant-counterplaintiff, Charles Dahms, in an underlying tort lawsuit. The plaintiff in the tort lawsuit against Dahms pleaded causes of action for negligence and battery. About six months after the tort action against Dahms was filed, Dahms was convicted of aggravated battery stemming from the same events.

¶ 2 Country Mutual and Dahms filed cross-motions for summary judgment in the declaratory-judgment action. The circuit court ruled that Country Mutual had a duty to defend Dahms, because Dahms had filed an affirmative defense of self-defense in the tort case. The circuit court later clarified its ruling, finding that the duty to defend did not arise until the date Dahms filed his answer and affirmative defenses in the tort action.

¶ 3 Dahms appeals from the circuit court's decision; he agrees with the trial court's finding of a duty to defend but disagrees as to the trigger date. Country Mutual cross-appeals, arguing for various reasons that it had no duty to defend the underlying lawsuit—including the fact that Dahms's criminal conviction for the same conduct bars coverage under the policy's exclusion for “criminal acts.”

¶ 4 We agree with the trial court that Country Mutual owed a duty to defend Dahms in the tort action, but we hold that this duty arose the moment the tort lawsuit was filed, not when Dahms pleaded his affirmative defenses in that lawsuit. We affirm the trial court's ruling as so modified. We further hold, however, that Country Mutual's duty terminated on the date that Dahms was criminally convicted for the same conduct because, as of that moment, his conduct fit with the policy's criminal-act exclusion. Thus, we affirm the trial court's judgment in part as modified and reverse in part.

¶ 5 I. BACKGROUND

¶ 6 This appeal involves a dispute between Dahms and Country Mutual regarding coverage under a homeowners insurance policy. The underlying incident between Dahms and Enadeghe gave rise to three separate actions: (1) a personal injury action filed against Dahms by Terry Enadeghe (the Tort Case); (2) a criminal case against Dahms (the Criminal Case); and (3) this declaratory-judgment action filed by Country Mutual. Our discussion below includes the procedural history of each action, in somewhat chronological order, necessary to an understanding of the issues on appeal.

¶ 7 A. Underlying Incident

¶ 8 Dahms and Enadeghe had an altercation on October 10, 2011, arising from an incident in downtown Chicago in which Enadeghe pulled his taxi cab up to a crosswalk near Dahms, who was a pedestrian. The complaint alleges, in sum, that Dahms's briefcase made contact with the windshield of Enadeghe's cab; Enadeghe then left his car and pursued Dahms on foot; and a scuffle ensued in which Dahms struck Enadeghe with his briefcase, injuring Enadeghe.

¶ 9 B. The Tort Case

¶ 10 Enadeghe filed a two-count complaint against Dahms on October 9, 2012, in the circuit court of Cook County (No. 2012 L 011436). Count I alleged negligence; count II alleged battery. Each count alleged that Dahms's briefcase “made contact with the motor vehicle occupied by [Enadeghe], causing damage to the windshield.” Each count also alleged that, after Enadeghe confronted Dahms on the street and demanded payment for the damage to the windshield, Dahms “physically struck [Enadeghe] with a briefcase, knocking [Enadeghe] unconscious and causing him to fall to the ground.”

¶ 11 Count II alleged that Dahms's striking of Enadeghe with the briefcase was a battery. Count I called it negligence, alleging that Dahms “[m]ade physical actions with his hands and fists toward [Enadeghe],” “[s]wung a briefcase in close proximity to the body of the [Enadeghe],” and “[f]ailed to warn of one or more of these negligent acts or omissions.” The final paragraph of the negligence count alleged that, as a result of “one or more of these negligent acts or omissions, [Enadeghe] suffered injuries—both temporary and permanent—to his personal and pecuniary interests.”

¶ 12 C. Dispute Over Coverage for the Tort Case

¶ 13 The coverage dispute between Dahms and Country Mutual arose before Enadeghe filed suit. On June 27, 2012, Enadeghe's counsel sent a letter to Dahms notifying him of Enadeghe's potential claim. Dahms then requested coverage from Country Mutual, with which Dahms had a homeowner's insurance policy. On September 5, 2012, Country Mutual notified Dahms that it was denying his claim because: (1) the allegations did not constitute an “occurrence” under the homeowner's policy; and (2) even if it did, the policy contained an exclusion for “criminal acts.” As the letter explained, Enadeghe's counsel “state[d] that his client was assaulted during an altercation with [Dahms] on October 10, 2011.”

¶ 14 Dahms retained independent counsel, who faxed a letter to Country Mutual on October 15, 2012. The letter informed Country Mutual that Dahms had exercised his right to retain independent counsel because Country Mutual had expressed interests “divergent” from Dahms. The letter also noted that Enadeghe had filed suit and that his complaint contained at least one claim that was covered under Dahms's homeowner's policy.

¶ 15 D. Country Mutual's Declaratory–Judgment Action

¶ 16 On December 10, 2012, Country Mutual filed this declaratory-judgment action asserting that it had no duty to defend or indemnify Dahms in connection with Enadeghe's underlying lawsuit. Country Mutual noted that, as a result of the October 2011 incident, Dahms had been charged with aggravated battery, and the charge was “still pending.” Similar to the position it took in its September 5, 2012 letter to Dahms, Country Mutual claimed that there was no liability coverage under the policy because the allegations did not constitute an “occurrence,” which the policy defined as an “accident,” and that any claim was barred by the policy's “criminal acts” exclusion. Country Mutual also argued that any potential liability coverage under the policy was barred by the “expected or intended injury” exclusion.

¶ 17 At this point, all three actions—this declaratory-judgment action, the Criminal Case, and the Tort Case—proceeded. Below we summarize the subsequent developments that were relevant to the disposition of the declaratory-judgment action.

¶ 18 1. The Criminal Case

¶ 19 On March 20, 2013, Dahms was convicted of aggravated battery in criminal court. He appealed. On April 23, 2015, this court affirmed Dahms's conviction in an unpublished order. See People v. Dahms, 2015 IL App (1st) 133301–U, 2015 WL 1881242. The Illinois Supreme Court denied Dahms's petition for leave to appeal on September 30, 2015. On March 7, 2016, the United States Supreme Court denied Dahms's petition for certiorari.

¶ 20 2. The Declaratory–Judgment Action

¶ 21 On September 25, 2013, in the declaratory-judgment action now under review, Dahms filed a counterclaim, seeking a declaration that Country Mutual owned him a duty to defend, that it breached its insurance contract, and that it had engaged in bad faith in violation of section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2012) ). On November 21, 2013, Country Mutual amended its complaint for declaratory judgment, to add the fact of Dahms's conviction for aggravated battery in further support of its claim that it had no duty to defend Dahms.

¶ 22 3. The Tort Case

¶ 23 Meanwhile, on March 6, 2013, Enadeghe amended his complaint in the Tort Case. Like the original complaint, the first amended complaint contained two counts, one for negligence and one for battery. The amended complaint modified the battery count, alleging that when Dahms struck Enadeghe with the briefcase, he did so “without consent and with intent to harm.”

¶ 24 On October 31, 2013, Dahms answered Enadeghe's amended complaint and pleaded affirmative defenses, including self-defense. He alleged that he “used reasonable efforts and force to protect himself and/or his property from Enadeghe.” Dahms also filed a two-count counterclaim against Enadeghe, alleging negligence and battery.

¶ 25 4. Summary Judgment in the Declaratory–Judgment Action

¶ 26 In the declaratory-judgment action, Country Mutual and Dahms filed cross-motions for summary judgment in the circuit court. The trial court ruled that Country Mutual was obligated to pay for Dahms's defense, but it later entered an order clarifying that Country Mutual's obligation was limited to the period after Dahms filed his answer and affirmative defenses on October 31, 2013, the first time that Dahms asserted self-defense. Self-defense, the court reasoned, was an exception to the exclusion of coverage in the policy and thus triggered Country Mutual's duty to defend. The court later entered an order containing Rule 304(a) language. Dahms filed the instant appeal, and Country Mutual filed a cross-appeal.¹

¶ 27 E. Relevant Policy Provisions

¶ 28 Dahms had a homeowner's insurance policy with Country Mutual. In the portion concerning liability coverage, the policy states, in pertinent part, that Country Mutual will provide a defense “[i]f a claim is made or a suit is brought against an ‘insured’ for damages because of ‘bodily injury’ or ‘property damage’ caused by an ‘occurrence’ to which this coverage applies.” In the definitions sec...