Ross and Larson Obtain Judgment on Pleadings, Insurer Recovers All Paid Funds

Brendan Ross and David Larson earned a significant victory in a recent coverage action when our motion for judgment on the pleadings was granted in Cook County.  The original action involved a claim for personal injuries which occurred during the unloading of a semi-trailer. In the underlying complaint, the plaintiff alleged that both our client’s named insured and the company that had hired them owned the tractor and trailer involved in the incident and asserted a potential agency relationship between the parties.

The central issue in the coverage dispute was whether the insurer hiring our client’s named insured was obligated to defend that named insured in the underlying action and whether the other insurer was estopped from asserting policy defenses because they breached their duty to defend our client’s named insured.

In our briefs and during oral argument, we argued that our client’s named insured was an insured on the other insurer’s policy pursuant to the omnibus coverage provided. The provision at issue provided that an insured included both anyone operating a covered vehicle with the named insured’s permission and anyone vicariously liable for the named insured’s conduct.  We further argued that because the other insurer did not file a timely declaratory action, the insurer should be estopped to assert coverage defenses if the Court found a duty to defend.

Counsel for the other insurer claimed that while the complaint contained allegations that could trigger a duty to defend, extrinsic evidence developed at the outset of the underlying action clearly established that our client’s named insured was not an insured because they owned the truck and trailer involved accident. Counsel also asserted that because extrinsic evidence established that it had no duty to defend, a finding the insurer was estopped to raise coverage defenses was improper, even though the other insurer delayed raising the coverage defense before the court for more than two years.

The court adopted our arguments wholly, including that estoppel applied. The ruling reinforces the principle that where a duty to defend is triggered by the allegations of the complaint, even where the insurer knows facts that remove the case from coverage, Illinois law requires the insurer to seek a timely declaration of no coverage or face being estopped from raising coverage defenses if a duty to defend is found based on the allegations in the complaint. Our client was able to recover all monies to defend and indemnify its named insured in the underlying action, which was a considerable sum given that policy limits were paid.