Prime Realty of America, Inc. v. Auto-Owners Insurance Co.

2021 IL App (5th) 210072-UNOTICE
NOTICE
Decision filed 12/22/21. The
text of this decision may be
NO. 5-21-0072 This order was filed under
Supreme Court Rule 23 and is
changed or corrected prior to
the filing of a Peti ion for IN THE not precedent except in the
Rehearing or the disposition of limited circumstances allowed
under Rule 23(e)(1).
the same. APPELLATE COURT OF ILLINOIS
FIFTH DISTRICT
PRIME REALTY OF AMERICA, INC., d/b/a S.I. ) Appeal from the
Property Management, and DALE ) Circuit Court of
HALLIDAY, ) Jackson County.
)
Plaintiffs-Appellants, )
)
v. ) No. 20-MR-18
)
AUTO-OWNERS INSURANCE COMPANY, ) Honorable
) Michael A. Fiello,
Defendant-Appellee. ) Judge, presiding.
______________________________________________________________________________
JUSTICE MOORE delivered the judgment of the court.
Justices Welch and Vaughan concurred in the judgment.
ORDER
¶1 Held: The circuit court did not err in granting summary judgment to insurance company
on the plaintiffs’ complaint for a declaratory judgment seeking a declaration of
coverage under a commercial general liability policy and bad faith damages
pursuant to section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West
2018)) because an exclusion for damage to the property of the named insured
clearly applied to exclude coverage.
¶2 The plaintiffs, Prime Realty of America, Inc., doing business as S.I. Property Management
(Prime Realty), and Dale Halliday, appeal the February 8, 2021, order of the circuit court of
Jackson County that granted a summary judgment in favor of the defendant, Auto-Owners
Insurance Company (Owners), 1 as to their complaint seeking a declaration of insurance coverage
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In its entry of appearance in the trial court, and in its brief on appeal, the defendant asserts that its
correct name is Owners Insurance Company, and that it is incorrectly named as Auto-Owners Insurance
Company.
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under a general liability policy of insurance issued by Owners to Patterson Industries, LLC
(Patterson). For the following reasons, we affirm.
¶3 I. BACKGROUND
¶4 On January 28, 2020, the plaintiffs filed their complaint in the circuit court of Jackson
County, alleging the following relevant facts. Prime Realty managed and maintained an apartment
complex owned by Patterson, and Halliday was employed by Prime Realty. On or about January
2, 2018, the apartment complex was damaged by fire. Pursuant to an insurance policy Owners had
issued to Patterson (the Owners policy), Owners paid Patterson for the damage to the apartment
complex because of the fire. On April 29, 2019, Owners, as Patterson’s subrogee, filed suit against
Prime Realty and Halliday, claiming they were negligent in causing the fire that damaged the
apartment complex.
¶5 The complaint alleges that the plaintiffs are additional insureds under the Owners policy,
which is attached to the complaint as Exhibit 1, and that under the policy, Owners has a duty to
defend and indemnify the plaintiffs “for damage to property.” The complaint further states that,
“at no relevant time did either [of the plaintiffs] own, rent, occupy or use the property.” Count I of
the complaint seeks a declaratory judgment that Owners is required to provide a defense to the
plaintiffs as well as to indemnify the plaintiffs for their liability for the damage to the subject
property. Count II of the complaint seeks penalties pursuant to section 155 of the Illinois Insurance
Code (215 ILCS 5/155 (West 2018)) based on Owners’ “unreasonable and vexatious” refusal to
defend and indemnify the plaintiffs.
¶6 On October 5, 2020, the plaintiffs filed a motion for summary judgment as to both counts
of their complaint. The plaintiffs attached their affidavits attesting to the fact that they did not own,
rent, occupy, or use any portion of the property. On November 30, 2020, Owners filed a cross-
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motion for summary judgment, arguing that, as a matter of law, Patterson’s insurance policy
excluded coverage for the plaintiffs’ liability for the fire. On February 8, 2021, the circuit court
entered an order granting Owners’ motion for summary judgment, finding that the policy excluded
coverage and entering judgment in favor of Owners. On March 8, 2021, the plaintiffs filed a notice
of appeal.
¶7 II. ANALYSIS
¶8 We begin our analysis with the principles we must apply in reviewing an order granting
summary judgment:
“In appeals from summary judgment rulings, we conduct a de novo review. [Citations.]
Summary judgment is appropriate when there are no genuine issues of material fact and
the moving party is entitled to judgment as a matter of law. [Citation.] Summary judgment
is a drastic measure and should only be granted if the movant’s right to judgment is clear
and free from doubt. [Citation.] Where a reasonable person could draw divergent
inferences from undisputed facts, summary judgment should be denied. [Citation.]”
Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102 (1992).
¶9 Here, the circuit court granted summary judgment in favor of Owners, finding that Owners
had no duty to defend or indemnify the plaintiffs under Patterson’s Owners policy. The standards
we must apply in our review of this decision are as follows:
“To determine whether the insurer has a duty to defend ***, the court must look to the
allegations in the underlying complaint and compare these allegations to the relevant
provisions of the insurance policy. [Citations.] If the facts alleged in the underlying
complaint fall within, or potentially within, the policy’s coverage, the insurer’s duty to
defend arises. [Citations.] Refusal to defend is unjustifiable unless it is clear from the face
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of the underlying complaint that the facts alleged do not fall potentially within the policy’s
coverage. [Citations.]
The construction of an insurance policy’s provisions is a question of law.
[Citations.] In construing an insurance policy, the court must ascertain the intent of the
parties to the contract. [Citations.] To ascertain the meaning of the policy’s words and the
intent of the parties, the court must construe the policy as a whole [citations], with due
regard to the risk undertaken, the subject matter that is insured and the purposes of the
entire contract [citations]. If the words in the policy are unambiguous, a court must afford
them their plain, ordinary, and popular meaning. [Citations.] However, if the words in the
policy are susceptible to more than one reasonable interpretation, they are ambiguous
[citation] and will be construed in favor of the insured and against the insurer who drafted
the policy [citations].” (Emphasis in original.) Outboard Marine Corp., 154 Ill. 2d at 107-
09.
¶ 10 In this case, the underlying complaint alleges that the plaintiffs were negligent and caused
the fire that damaged Patterson’s apartment building. The plaintiffs seek a declaration that Owners
is required to defend and indemnify them pursuant to the Owners policy, which was issued to
Patterson. Accordingly, we turn to the Owners policy. This insurance policy contains two
coverages, the first of which is commercial property coverage, which lists the subject property as
a covered building. Under the terms of that policy, Owners agreed to pay Patterson for direct
physical loss or damage to covered property. It is undisputed that Owners paid Patterson in
accordance with the commercial property coverage, which led to Owners, as a subrogee, suing the
plaintiffs in the underlying action. The commercial property coverage does not apply to the
plaintiffs’ liability for causing the fire, and thus is irrelevant for purposes of our analysis.
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¶ 11 The second type of coverage the insurance policy provides to Patterson is commercial
general liability coverage. Under this portion of the policy, “you” and “your” refer to the named
insured shown in the declarations, which is Patterson, as well as “any other person or organization
qualifying as a ‘Named Insured’ under this policy.” Also, in contrast to a “Named Insured,” this
policy provides that the word “insured” means any person or organization qualifying as such under
section II, which is titled “Who Is An Insured.” Under section IA of this portion of the policy,
Owners promises to 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.”
¶ 12 Immediately following the statement of coverage, the policy contains several exclusions.
Of relevance here, the exclusions state, in subsection (j)(1), that the coverage does not apply to
“ ‘property damage’ to property you own, rent, occupy or use.” Here, it is undisputed, and, in fact,
it is alleged in the complaint, that Patterson owns the property that the underlying complaint alleges
the plaintiffs negligently damaged. Nevertheless, the plaintiffs argue that this exclusion does not
apply because they are to be considered an insured under section II of the policy and they do not
own, rent, occupy, or use the property. Assuming, without deciding, that the plaintiffs qualify as
an insured under section II of the commercial general liability portion of the policy, the policy
makes clear that there is a distinction between an “insured” and a “Named Insured” under the
policy, and the term “you” in the policy only applies to a “Named Insured.” Patterson is the only
“Named Insured” listed in the declarations, and nowhere else in the policy is there any further
definition of “Named Insured.” Accordingly, we find that Patterson is the only “Named Insured”
under its general commercial liability policy, and because the property which the underlying
complaint alleges the plaintiffs damaged is owned by Patterson, section (j)(1) of the exclusions
clearly applies. As such, the allegations do not, even potentially, allege facts to which this
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insurance policy applies, and the circuit court correctly entered a summary judgment in favor of
Owners.
¶ 13 III. CONCLUSION
¶ 14 For the foregoing reasons, we affirm the February 8, 2021, order of the circuit court of
Jackson County that granted a summary judgment in favor of Owners.
¶ 15 Affirmed.
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