2022 IL 128012
Ill.2022Background
- Landlord Ronald McIntosh leased a Pekin, Illinois residence to Monroe and Dorothy Sheckler; lease required landlord to maintain fire insurance and contained an indemnity/exculpation clause for the landlord.
- McIntosh purchased an Auto-Owners policy with (1) dwelling (first‑party) coverage and (2) landlord liability (third‑party) coverage; only McIntosh and his wife were named insureds; the landlord liability coverage excluded property damage to property occupied or rented to an insured.
- A kitchen fire occurred in August 2015 after the Shecklers used the stove; Auto-Owners paid McIntosh under the dwelling coverage and filed a subrogation action against the appliance technician, Workman.
- Workman filed a third‑party contribution claim against the Shecklers; the Shecklers tendered defense to Auto-Owners, which refused; the Shecklers sued for declaratory relief seeking a defense/indemnity.
- The circuit court granted summary judgment for Auto-Owners (no duty to defend/indemnify); the appellate court reversed (applying Dix to find tenants effectively coinsured and owed a duty to defend); the Illinois Supreme Court reversed the appellate court and affirmed the circuit court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Dix makes tenants coinsured under the landlord's policy | Sheckler: Dix treats tenants as coinsured when lease & rent allocation show tenant contributed to insurance premium | Auto-Owners: Dix is a narrow subrogation equity rule and inapplicable here; tenants not named insureds | Court: Dix is a subrogation/equity decision not applicable to duty‑to‑defend analysis; tenants are not coinsureds |
| Whether Auto‑Owners owes a duty to defend/indemnify tenants in a third‑party contribution suit | Sheckler: Even if not named, equitable extension of Dix requires defense/indemnity | Auto-Owners: Duty to defend is determined by the policy language; tenants not insureds and landlord liability exclusion applies | Court: No duty to defend or indemnify; plain policy terms control and do not cover the tenants |
Key Cases Cited
- Dix Mut. Ins. Co. v. LaFramboise, 149 Ill. 2d 314 (Ill. 1992) (equitable subrogation: under specific lease/facts tenant deemed coinsured for subrogation purposes)
- Zurich Ins. Co. v. Raymark Indus., 118 Ill. 2d 23 (Ill. 1987) (insurer’s duty to defend arises from the policy language)
- Valley Forge Ins. Co. v. Swiderski Elecs., 223 Ill. 2d 352 (Ill. 2006) (duty to defend determined by comparing underlying complaint facts to policy provisions)
- Hacker v. Shelter Ins. Co., 388 Ill. App. 3d 386 (Ill. App. 2009) (distinguishable: insurer’s duty to defend not extended where tenant not an insured)