Addison Insurance Company v. Fay

Docket No. 105752.
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
ADDISON INSURANCE COMPANY, Appellee, v. DONNA FAY
et al., Appellants.
Opinion filed January 23, 2009.
JUSTICE GARMAN delivered the judgment of the court, with
opinion.
Justices Freeman, Thomas, Kilbride, Karmeier, and Burke
concurred in the judgment and opinion.
Chief Justice Fitzgerald took no part in the decision.
OPINION
Plaintiff, Addison Insurance Company, brought this declaratory
action in the circuit court of Will County against the defendants, the
estates of two young boys who were injured as a result of an Addison
policyholder’s negligent maintenance of its property. The insured’s
liability is not at issue in this case. Rather, this court is asked to
determine whether the injuries to the boys constitute a single or
multiple occurrences under the terms of Addison’s insurance policy.
BACKGROUND
At about 5 p.m. on April 30, 1997, Laura Shackelford watched
her 14-year-old son, Everett Hodgins, leave her home. Hodgins left
with his 15-year-old friend, Justice Carr. Shackelford believed the
two boys had planned to go fishing. The two frequently fished in a
nearby Commonwealth Edison cooling lake.
The two boys did not return that night. Around 10:30 p.m., Donna
Fay, Justice Carr’s mother, reported her son missing. The police
responded that night and conducted a search. However, the police
were unable to locate either boy at that time.
On May 3, 1997, the boys’ bodies were found in an excavation pit
on land near Justice Carr’s home. The land belonged to Donald
Parrish. At the time, Parrish operated a business from the property.
Parrish was insured by the plaintiff, Addison Insurance Company
(Addison).
The pit in which the boys were found was partially filled with
water. The sand and clay around the pit was saturated, creating what
an engineer testified is called a “quick condition.”1 A quick condition
is one where a cushion of water prevents the soil from supporting a
load of weight and can result in that load sinking and becoming
trapped.
Carr and Hodgins fell prey to this condition. The boys were found
at the edge of the pool of water, trapped in the wet clay and sand.
Justice Carr was found facing the north bank of the pit. The lower
half of his body was partially submerged in the water, and both of his
legs were trapped in the sand and clay. Everett Hodgins was found
facing south, toward Carr and the water. Hodgins had one leg trapped
in the sand. His other leg was free. Although the two boys were
facing different directions, both bodies were close in proximity and
indeed were physically touching.
Both boys had been exposed to the cold water and cold weather
during the time they had been missing. The doctor who performed the
autopsy on each of the boys, Dr. Blum, concluded that the immediate
1
All references to witness testimony refer to those witnesses’ statements
during discovery depositions. The parties entered these depositions into
evidence by stipulation. The trial court heard no live testimony.
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cause of Hodgins’s death was hypothermia. Dr. Blum determined that
the immediate cause of Carr’s death was drowning secondary to
hypothermia. Addison’s forensic expert, Dr. Case, concurred with Dr.
Blum’s findings. Neither of the physicians could conclude with any
certainty the time of death of either boy, or how closely in time the
boys had perished.
Witnesses for both parties acknowledged that Hodgins’s and
Carr’s actions between the time they left Shackelford’s home and the
time they were found cannot be known. However, the investigators
at the scene concluded that the boys had been trapped while returning
home to get out of a storm that swept in during the evening of April
30. The boys used the Parrish property as a shortcut to Carr’s house,
which was very close to the pit. Testimony indicated that Carr’s home
was approximately 100 to 150 yards from where the boys were found.
The investigators concluded that when the boys reached the pit
and the water, Carr attempted to jump across the water. In doing so,
Carr became trapped. The investigators also concluded that Hodgins
then attempted to help his friend out of the sand and clay, but became
trapped himself. However, the investigators could not conclude how
much time had elapsed between Carr’s and Hodgins’s entrapments,
or whether the two boys were even together when Carr became
trapped. The families of the two boys initially brought suit against
Donald Parrish. As Parrish’s insurer, Addison agreed to settle the
claims for an amount equal to the policy’s limits. However, the
parties dispute which policy limit applies. Addison’s insurance policy
with Parrish provides for a “General Aggregate Limit” of $2 million.
The policy also contains an “Each Occurrence” limit of $1 million.
Addison brought this declaratory action to resolve whether the boys’
deaths constituted one or two occurrences, and therefore whether
Addison was obligated to pay $1 million or $2 million to the
defendants.
The trial court found that the injuries to Carr and Hodgins were
the result of two occurrences. The court acknowledged that the
evidence can be viewed “in ways that tend to support both sides [sic]
positions.” However, the court found the evidence sufficient to show
that the causes of death were different, and that the circumstances
immediately prior to the deaths were different.
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The appellate court reversed. Relying on this court’s decision in
Nicor, Inc. v. Associated Electric & Gas Insurance Services Ltd., 223
Ill. 2d 407 (2006), and a decision by a New Jersey appellate court
with similar facts, Doria v. Insurance Co. of North America, 210 N.J.
Super. 67, 509 A.2d 220 (1986), the appellate court concluded that
the boys’ deaths were “so closely linked in time and space as to be
considered by a reasonable person as one ‘occurrence.’ ” 376 Ill. App.
3d 85, 91.
The substantive issue presented to this court is whether the deaths
of Justice Carr and Everett Hodgins constitute a single occurrence or
separate occurrences under the terms of Parrish’s insurance policy.
For the reasons that follow, we conclude that the deaths of Carr and
Hodgins constitute two separate occurrences.
ANALYSIS
I. Standard of Review
The construction of a provision of an insurance policy is a
question of law, subject to de novo review. Nicor, 223 Ill. 2d at 416.
Both parties accept this standard with respect to determining the
meaning of “occurrence” under the policy.
However, Addison contends that the findings of the trial court
should also be reviewed de novo in determining the number of
occurrences. In contrast, defendants argue that the appellate court
improperly disregarded the trial court’s factual findings in concluding
that the boys came to the pit together and were trapped moments
apart. Defendants instead argue that this court should apply a manifest
weight standard in reviewing the trial court’s findings.
Defendants cite three cases in support of their position, Marx
Transport, Inc. v. Air Express International Corp., 379 Ill. App. 3d
849 (2008), Dean Management, Inc. v. TBS Construction, Inc., 339
Ill. App. 3d 263 (2003), and Clean World Engineering, Ltd. v.
MidAmerica Bank, FSB, 341 Ill. App. 3d 992 (2003). Each of these
cases is inapposite.
First, in Marx Transport the standard of review was not at issue.
Both parties agreed that the court should adopt the manifest weight
standard, and the court conducted no analysis as to whether that
standard was correct. Marx Transport, 379 Ill. App. 3d at 854.
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Dean Management and Clean World Engineering also fail to
support defendants’ claim. Nothing within the appellate court’s
opinion in either case indicates that the trial court relied exclusively
on documentary evidence. Indeed, the appellate court in Dean
Management referred to several witnesses’ testimony at trial. Dean
Management, 339 Ill. App. 3d at 268 (“Dostal corroborated Kehm’s
testimony at trial”).
What Dean Management and Clean World Engineering do reflect
is the general proposition that a reviewing court should not overturn
a trial court’s findings merely because it does not agree with the
lower court. Bazydlo v. Volant, 164 Ill. 2d 207, 214-15 (1995).
Instead, the reviewing court should overturn those findings only if
they are against the manifest weight of the evidence. Bazydlo, 164 Ill.
2d at 214-15.
The appellate court in Dean Management cites Bazydlo for that
very proposition. Defendant Shackleford also quotes Bazydlo in its
reply brief. However, the defendants overlook, and indeed omit from
the quotation, language articulating the rationale behind applying a
manifest weight standard to the trial court’s findings.
This court in Bazydlo stated that “[t]he trial judge, as the trier of
fact, is in a position superior to a reviewing court to observe
witnesses while testifying, to judge their credibility, and to determine
the weight their testimony should receive.” Bayzdlo, 164 Ill. 2d at
214-15. See also Clean World Engineering, 341 Ill. App. 3d at 997.
In this case, the trial court heard no live testimony. Both parties
acknowledged at oral argument that all testimony was submitted by
admitting discovery depositions into evidence. The trial court was not
required to gauge the demeanor and credibility of witnesses. See State
Bank of Clinton v. Barnett, 250 Ill. 312, 315 (1911). Instead, the trial
court made factual findings based upon the exact record presented to
both the appellate court and to this court. Without having heard live
testimony, the trial court was in no superior position than any
reviewing court to make findings, and so a more deferential standard
of review is not warranted. Thus, although this court has not done so
recently, we reiterate that where the evidence before a trial court
consists of depositions, transcripts, or evidence otherwise
documentary in nature, a reviewing court is not bound by the trial
court’s findings and may review the record de novo. State Bank of
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Clinton, 250 Ill. at 315; Delasky v. Village of Hinsdale, 109 Ill. App.
3d 976, 980 (1982); Wolverine Insurance Co. v. Jockish, 83 Ill. App.
3d 411, 413-14 (1980). In the case at bar, this court will review the
trial court’s findings de novo, and to the extent that the appellate court
reviewed the record de novo, we hold that the appellate did not err in
doing so.
II. Burden of Proof
The parties also dispute whether Addison or defendants bear the
burden of proving whether this accident constitutes one or two
occurrences.
This court has long established that the burden is on the insured
to prove that its claim falls within the coverage of an insurance
policy. Waste Management, Inc. v. International Surplus Lines
Insurance Co., 144 Ill. 2d 178, 204 (1991). Once the insured has
demonstrated coverage, the burden then shifts to the insurer to prove
that a limitation or exclusion applies. Fidelity & Casualty Co. v.
Sittig, 181 Ill. 111, 113 (1899); Stoneridge Development Co. v. Essex
Insurance Co., 382 Ill. App. 3d 731, 749 (2008); Village of Hoffman
Estates v. Cincinnati Insurance Co., 283 Ill. App. 3d 1011, 1013-14
(1996).
Addison contends that it is the defendants who must prove the
number of occurrences in order to establish coverage. Addison cites
Reedy Industries, Inc. v. Hartford Insurance Co., 306 Ill. App. 3d 989(1999). In Reedy, a company filed a claim with its insurer, asserting
that an employee had stolen a large number of canisters containing
freon. The insurance company denied the claim. In subsequent
litigation the appellate court held that Reedy had failed to prove the
number of occurrences and failed to prove that each occurrence
exceeded the per-occurrence deductible.
The issue in Reedy, however, was not whether there was more
than one occurrence. Reedy did not argue that the entire loss was a
single occurrence, and both sides appeared to recognize that the loss
occurred at different times. Rather, the court indicated that Reedy was
unable to put forward any evidence of the number of occurrences or
the amount of each loss. This was critical to the case in determining
whether Reedy was required to pay separate deductibles.
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The instant case is distinguishable. Here, the defendants have
provided the necessary facts to demonstrate that their claims fall
within the coverage of the policy. Those facts are that the injuries
suffered by Hodgins and Carr are the types of injuries covered by
Parrish’s insurance policy and occurred on the property insured by
Addison. The defendants have also established the value of the loss.
Addison acknowledges these facts in part by Addison’s willingness
to settle the defendants’ claim up to the policy limits.
Only after the defendants demonstrated coverage under the policy
did Addison bring this declaratory action in an effort to limit coverage
under the policy. The defendants originally claimed damages in
excess of the policy limits. They settled for damages equal to the
policy limits, which they contend is $2 million. Now, Addison seeks
to limit recovery by applying the stricter policy limit. Therefore, we
hold that Addison bears the burden of proving that the deaths of Carr
and Hodgins constitute one occurrence.
III. Single or Multiple Occurrences
Lastly, we consider whether the trial court erred in concluding
that the boys’ deaths constitute two occurrences under the insurance
policy.
The policy itself defines “occurrence” as “an accident, including
continuous or repeated exposure to substantially the same general
harmful conditions.” However, as in Nicor, Inc. v. Associated Electric
& Gas Insurance Services Ltd., 223 Ill. 2d 407 (2006), the meaning
of occurrence is not in dispute. See Nicor, 223 Ill. 2d at 417-18.
Instead, because the policy itself does not indicate when an injury will
be treated as a separate occurrence, we must construe the policy by
applying the facts of this case.
As noted above, the construction of a provision of an insurance
policy is a question of law, subject to de novo review. Nicor, 223 Ill.
2d at 416. A court’s primary objective in construing an insurance
contract is to ascertain and give effect to the intention of the parties
as expressed in the agreement. Nicor, 223 Ill. 2d at 416. An insurance
contract will be liberally construed in favor of the insured. Lenkutis
v. New York Life Insurance Co., 374 Ill. 136, 140 (1940); United
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Services Automobile Ass’n v. Dare, 357 Ill. App. 3d 955, 963-64
(2005).
We begin with a brief discussion of Nicor, because the parties
disagree over whether the appellate court’s opinion below properly
applied Nicor to the present facts. The definitions of occurrence in
both the Nicor and Addison policies are similar, and the same
question is presented, i.e., whether there were one or more
occurrences.
In Nicor, multiple individuals suffered injury from mercury
contamination. Before 1961, Nicor installed mercury-filled gas meter
regulators in its customers’ homes. After 1961, Nicor began a
program of replacing these regulators with new regulators that did not
contain mercury. Normally, the process was safe. However, in several
cases, while replacing the old regulators, the regulators were tipped
or broken, resulting in mercury being spilled and contaminating that
particular customer’s home. Eventually, this court was asked to
determine whether the separate injuries to Nicor’s affected customers
constituted a single or multiple occurrences under Nicor’s insurance
policy.
In considering the proper way to determine the number of
occurrences under an insurance policy, this court in Nicor considered
which of two competing theories properly represented the law of
Illinois. Under the “cause theory,” a court will determine the number
of occurrences by referring to the cause or causes of the damage.
Nicor, 223 Ill. 2d at 418. Under the “effect theory,” the number of
individual claims or injuries resulting from the accident will
determine the number of occurrences. Nicor, 223 Ill. 2d at 418.
After noting that neither theory inevitably favors one party to an
insurance contract over another, we recognized that the cause theory
represents the law of Illinois. Nicor, 223 Ill. 2d at 419-20. In so doing,
this court observed that Illinois law is in line with that of a majority
of jurisdictions. Nicor, 223 Ill. 2d at 419.
Adopting the cause theory did not end our analysis, however.
Instead, cases both in Illinois and other jurisdictions have required
further refinement of the cause theory in its application to a variety of
factual situations. See Nicor, 223 Ill. 2d at 420-31. Relying on this
body of case law, this court considered whether the cause of the
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victims’ injuries was a systemwide failure to safely remove the old
regulators or the negligent replacement of those regulators in
individual cases.
Ultimately, this court concluded that “where each asserted loss is
the result of a separate and intervening human act, whether negligent
or intentional, or each act increased the insured’s exposure to liability,
Illinois law will deem each such loss to have arisen from a separate
occurrence.” Nicor, 223 Ill. 2d at 431-32. Citing that conclusion,
Addison contends that in this case the cause of both boys’ injuries
was Donald Parrish’s sole negligent act of failing to properly secure
and control his property.
A significant distinction between Nicor and the instant case is that
Nicor primarily discussed affirmative acts of negligence rather than
an ongoing negligent omission. This court determined that the actions
of each individual technician in replacing the old regulators
constituted a separate occurrence under the terms of the insurance
policy. We specifically rejected, as did the appellate court in that case,
the counterargument that Nicor’s negligent systemwide failure to
remove the regulators safely constituted a single cause, and therefore
a single occurrence.
Likewise, a negligent insured’s affirmative acts were at issue in
both Mason v. Home Insurance Co. of Illinois, 177 Ill. App. 3d 454(1988), and Illinois National Insurance Co. v. Szczepkowicz, 185 Ill.
App. 3d 1091 (1989), cases specifically cited by the parties in this
case. In Mason, each individual act of serving tainted sandwiches
constituted a separate occurrence. Mason, 177 Ill. App. 3d at 461. In
Szczepkowicz, a driver committed two separate acts of negligence. He
initially positioned his truck where it would be struck by an
approaching vehicle a first time. Then, he negligently moved the
truck to a position where it could still be, and was, struck a second
time. Szczepkowicz, 185 Ill. App. 3d at 1093.
Other appellate court cases cited by this court in Nicor also
addressed affirmative acts of negligence. In Village of Camp Point v.
Continental Casualty Co., 219 Ill. App. 3d 86 (1991), the negligent
act was an attorney’s malpractice in misinterpreting state law. In
Illinois Central R.R. Co. v. Accident & Casualty Co. of Winterthur,
317 Ill. App. 3d 737 (2000), the negligent acts were multiple
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discriminatory hiring decisions made by one of the railroad’s
employees.
The facts in the case at bar vary significantly from these cases.
Here, as Addison suggests, Parrish’s liability arose from his
negligently failing to properly secure and control his property.
Addison is correct that Parrish committed no intervening negligent
act between the injuries of each boy.
However, in light of these facts, applying Nicor in the way
Addison suggests leads to an unreasonable interpretation of Parrish’s
insurance policy. Focusing on the sole negligent omission of failing
to secure the property would allow two injuries, days or even weeks
apart, to be considered one occurrence. The defendants raised this
concern in the trial court. If several injuries suffered over the course
of several weeks could be bundled into a single occurrence, the
likelihood that damages would exceed a per-occurrence limit is
significant, as demonstrated by the damages in the instant case.
Purchasers of insurance such as Parrish would be left unprotected by
their insurance policy, and liable for any amount above the per-
occurrence limit. In accepting a per-occurrence limit, Parrish could
not have intended to expose himself to greater liability by allowing
multiple injuries, sustained over an open-ended time period, to be
subject to a single, per-occurrence limit.
As a result, in situations where a continuous negligent omission
results in insurable injuries, some limiting principle must be applied.
The appellate court in Roman Catholic Diocese of Joliet, Inc. v. Lee,
292 Ill. App. 3d 447 (1997), utilized one particular approach. In that
case, a priest committed multiple acts of sexual molestation against
a child. Because the diocese’s liability was the result of its negligent
failure to supervise the priest, the court held that the cause of the
injury was not each separate act of molestation. Roman Catholic
Diocese of Joliet, 292 Ill. App. 3d at 455.
However, although the court found only one negligent omission,
it did not conclude there was only one occurrence. Instead, it
concluded that negligent supervision of the priest, over the course of
several policy periods, constituted one separate occurrence for each
policy period. Roman Catholic Diocese of Joliet, 292 Ill. App. 3d at
455. The court’s rationale was that the decision not to supervise the
priest was an omission that was “revisited” at a later time. The
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decision at that time to continue to leave the priest unsupervised
triggered the separate occurrence in the subsequent policy period.
Roman Catholic Diocese of Joliet, 292 Ill. App. 3d at 455.
Although analyzing whether a negligent omission was “revisited”
was proper in Roman Catholic Diocese of Joliet, such an approach
may not settle the question under different factual circumstances. In
the instant case, it is clear that Parrish did not “revisit” his negligent
omission, i.e., his failure to properly secure his property, between the
injuries suffered by Carr and Hodgins. The limiting principle
articulated in Roman Catholic Diocese of Joliet therefore is not
instructive here.
The appellate court in this case applied a different limitation. The
court below analyzed the instant case using what has been called a
“time and space” test. In describing this test, the appellate court relied
primarily on a New Jersey appellate court case, Doria v. Insurance
Co. of North America, 210 N.J. Super. 67, 509 A.2d 220 (1986).
The facts in Doria are strikingly similar to the facts in the instant
case. Two brothers gained access to an unused swimming pool area.
The pool had been emptied and negligently maintained. Water had
accumulated within the pool and was covered with a thick layer of
leaves. One brother was injured when he fell into it. The other brother
immediately leaned into the pool, holding a stick for his brother to
grab onto. In doing so, the second brother also fell into the pool and
injured himself.
The New Jersey court applied a time and space test. Under that
test, “if cause and result are simultaneous or so closely linked in time
and space as to be considered by the average person as one event,”
then the injuries will be deemed the result of one occurrence. Doria,
210 N.J. Super. at 74, 509 A.2d at 224, citing C. Drechsler,
Annotation, What Constitutes “Each,” “a Single,” “One,” “Any
One,” “Any,” or “An” Accident or Occurrence, Within Liability
Policy Limiting Insurer’s Liability to Specified Amount, 55 A.L.R.2d
1300 (1957). The court emphasized that the time and space analysis
must be made on a case-by-case basis. Doria, 210 N.J. Super. at 75,
509 A.2d at 224.
The court held that there was but one occurrence. Doria, 210 N.J.
Super. at 75, 209 A.2d at 224. In reaching its conclusion, the New
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Jersey court recognized first that the injuries to both boys resulted
from a single cause, the property owner’s negligent maintenance of
the pool area. Doria, 210 N.J. Super. at 75, 209 A.2d at 224. The
court then indicated that the temporal and spatial connection between
the injuries was sufficient to conclude that the average person would
have considered it one event. Doria, 210 N.J. Super. at 75-76, 209
A.2d at 224-25.
In the instant case, we think the appellate court properly adopted
a “time and space” test. The insured’s negligence consisted of an
omission, the failure to maintain the property. Where negligence is
the result of an ongoing omission rather than separate affirmative
acts, a time and space test effectively limits what would otherwise
potentially be a limitless bundling of injuries into a single occurrence.
Nonetheless, although we conclude that the appellate court
properly analyzed the facts under a time and space test, we cannot
accept the court’s opinion that the facts conclusively demonstrate that
the injuries to Hodgins and Carr constitute only a single occurrence.
We review the factual findings of the trial court, in this case, de
novo. The record presented both to the trial court and the appellate
court reflects the fact that what can be known about the events of
April 30, 1997, is far outstripped by what cannot be known. The
record indicates that Justice Carr and Everett Hodgins left together
from Laura Shackelford’s home around 5 p.m., with the apparent
intention to go fishing. The record further indicates that by May 3,
1997, both boys had become trapped in the wet sand on Donald
Parrish’s property and had succumbed to hypothermia, or drowning
secondary to hypothermia.
From the evidence presented at trial, we can infer that the boys
did not become trapped simultaneously. We can also infer that
Hodgins became trapped after Carr, in an attempt to free Carr from
the sand.
Beyond these basic facts and inferences, there is little evidence to
support Addison’s claim that the injuries suffered by these two boys
were the result of a single occurrence. The police investigators could
not determine how closely in time the boys became trapped. They
suggested it could have been seconds or minutes apart, but
acknowledged that there was no way to know. Nor could the medical
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experts give a time of death with certainty, or indicate how closely in
time the two boys had died. Any opinions on these issues of timing
would be inappropriately speculative.
The substantial uncertainty on this issue persuades us that
Addison cannot meet its burden of proving that the two boys’ injuries
were so closely linked in time and space as to be considered one
event. Because Addison cannot meet its burden, we hold that the
injuries to Carr and Hodgins constitute two occurrences. Therefore,
defendants’ claims are subject to the general aggregate limit rather
than the lower per-occurrence limit.
Finally, we note that defendants would ask this court to go even
further and interpret Nicor to hold that Everett Hodgins’s attempt to
rescue his friend constituted a separate and intervening act, which
increased Parrish’s liability. Our conclusion in Nicor did not
expressly include the actions of the injured parties. In Nicor, this
court was confronted with factual circumstances which solely
involved actions of the negligent party, the insured.
The factual circumstances of this case lead us to decline to extend
Nicor in the manner suggested by the defendants. Too much about the
events during the time the boys were missing is, and will remain,
unknown. The separateness and independence of Hodgins’s acts is,
as noted above, mere speculation. Although the speculativeness of
what occurred the night of April 30, 1997, weighs in favor of
defendants with respect to Addison’s burden of proving a single
occurrence, it also presents a dangerous factual foundation for
extending Nicor’s rationale. Without knowing the precise sequence
and timing of events, it would be unwise for this court to make a
determination on this issue. Therefore, we do not address it.
CONCLUSION
We therefore reverse the judgment of the appellate court and hold
that the deaths of Hodgins and Carr constitute two occurrences under
the terms of Addison’s insurance policy. The judgment of the circuit
court is therefore affirmed.
Appellate court judgment reversed;
circuit court judgment affirmed.
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CHIEF JUSTICE FITZGERALD took no part in the consideration
or decision of this case.
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