2016 IL App (1st) 141595
Ill. App. Ct.2016Background
- Neighbor dispute: McGoey (owner of 941 Tower Road) sought to relocate a driveway easement across her property, claiming the existing easement caused chronic flooding and mold. Defendants Edwards and Mizel own a benefitted lot (939 Tower Road) and refused consent.
- Procedural history: McGoey filed suits (complaint, first amended complaint seeking injunctive and declaratory relief, later a second amended complaint). No request for monetary damages was alleged in the underlying pleadings.
- Settlement effort and motion practice followed; McGoey later sought sanctions under Illinois Supreme Court Rule 137 for defendants’ conduct related to a settlement agreement.
- Travelers (defendants’ homeowner insurer) was tendered the defense and filed a declaratory judgment action seeking a ruling it had no duty to defend or indemnify; it moved for summary judgment.
- The trial court granted summary judgment for Travelers primarily because McGoey did not seek "damages" triggering liability coverage and, alternatively, because the alleged flooding was not an "occurrence" (accident) under the policy.
- On appeal the court affirmed on the alternative ground: the alleged recurring flood damage was the natural and foreseeable consequence of defendants’ repeated refusal to permit relocation of the easement, so it was not an "occurrence" and Travelers owed no duty to defend.
Issues
| Issue | McGoey's Argument | Edwards/Mizel (Defendants') Argument | Held |
|---|---|---|---|
| Whether Travelers had a duty to defend/indemnify because the underlying complaint sought no monetary damages | The complaint sought injunctive/declaratory relief and costs; plaintiff argued relief sought could be characterized as damages or otherwise within coverage | Insurer argued policy covers only claims for damages for property damage caused by an "occurrence," and McGoey sought no monetary damages | Court accepted insurer’s primary ground below (no damages sought) but affirmed on alternative: no duty to defend because no "occurrence" was alleged |
| Whether the alleged property damage (recurrent flooding) was an "occurrence" (an accidental event) under the policy | The flooding harmed McGoey’s property; plaintiff framed the issue as resulting from the easement’s location and sought relief | Defendants/insurer argued the flooding was a foreseeable, natural consequence of defendants’ long-standing refusal to allow relocation, thus not an accident and excluded (expected/intended) | Court held flooding was the natural and reasonably expected consequence of defendants’ repeated refusals; not an "occurrence," so no duty to defend |
| Whether Travelers had a duty to defend against Rule 137 sanctions motion arising from the underlying action | McGoey sought sanctions for defendants’ conduct; if insurer owed duty to defend underlying suit, it should also defend sanctions motion | Insurer argued no duty to defend the underlying action, so no duty to defend a derivative sanctions motion | Court held no duty to defend sanctions motion where insurer had no duty to defend the underlying action; also noted the sanctions issue was moot on separate appeal |
Key Cases Cited
- Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90 (1992) (to determine insurer's duty to defend, compare policy to underlying complaint allegations)
- United States Fid. & Guar. Co. v. Wilkin Insulation Co., 144 Ill. 2d 64 (1991) (insurer's duty to defend arises if complaint allegations fall within or potentially within coverage)
- Monticello Ins. Co. v. Wil-Freds Constr., Inc., 277 Ill. App. 3d 697 (1996) (definition of "accident" for policy coverage)
- Aetna Cas. & Sur. Co. v. Freyer, 89 Ill. App. 3d 617 (1980) (natural and ordinary consequences of an act are not an accident)
- Lyons v. State Farm Fire & Cas. Co., 349 Ill. App. 3d 404 (2004) (focus is whether injury was expected or intended by insured when determining an "occurrence")
- Sears Roebuck & Co. v. Acceptance Ins. Co., 342 Ill. App. 3d 167 (2003) (standard of review for summary judgment in insurance coverage disputes)