2013 IL App (3d) 110861
Ill. App. Ct.2013Background
- Grinnell Mutual issued farm insurance to Hubbs; Mercer claimed damages to cropland due to Hubbs' holding pond and weir construction.
- Mercer alleged the weir and dredging raised groundwater tables, flooding 21 acres of Mercer’s land adjacent to Hubbs’ property.
- Grinnell denied coverage under a policy exclusion for damages from diversion or obstruction of streams or surface water and interference with natural drainage.
- Grinnell filed a declaratory judgment action; after discovery, Grinnell moved for summary judgment arguing the exclusion barred Mercer’s claim.
- The circuit court granted summary judgment for Grinnell; the insured appealed, arguing ambiguity, improper evidence, and reservation-of-rights defense.
- The appellate court affirmed, holding the drainage exclusion apply to both surface and subsurface drainage and that the evidence supported a causal connection.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the drainage exclusion cover subsurface drainage? | Hubbs argues drainage term only covers surface drainage. | Hubbs contends drainage is ambiguous and may be limited to surface drainage. | No; drainage includes both surface and subsurface drainage. |
| Did the weir/pond construction cause Mercer’s damage? | Mercer must show causation from the insured’s actions. | Grinnell contends no proof of damage causation within exclusion. | Yes; evidence shows the weir/pond raised groundwater and flooded Mercer’s land. |
| May the court consider expert testimony to determine duty to defend? | Only the policy terms should be considered. | Court may consider all properly admitted evidence to determine duty to defend. | Yes; Pekin permits consideration of properly admitted evidence beyond the four corners. |
| Was Grinnell entitled to a denial of coverage rather than a defense under a reservation of rights? | Reservation of rights could require defense subject to rights reservation. | Insurer may choose declaratory judgment or defend under reservation of rights. | Grinnell properly pursued declaratory judgment; reservation of rights defense not required. |
Key Cases Cited
- Templeton v. Huss, 57 Ill. 2d 134 (1974) (drainage coverage includes subsurface implications)
- Founders Insurance Co. v. Munoz, 237 Ill. 2d 424 (2010) (exclusionary provisions interpreted as written absent policy policy public policy conflict)
- American States Insurance Co. v. Koloms, 177 Ill. 2d 473 (1997) (construction of insurance policy is a question of law; de novo review)
- Pekin Insurance Co. v. Wilson, 237 Ill. 2d 446 (2010) (consideration of all evidence proper to determine duty to defend)
- Watkins v. Schmitt, 172 Ill. 2d 193 (1996) (summary judgment standards and procedural posture)