## I L L I N O I S 

## O F F I C I A L 

## R E P O R T S Appellate Court

Selective Insu rance Co. of South Carolin a v. Cherrytree Cos. , 2013 IL App (3d) 120959

Appellate Court Caption SEL ECTI VE I NSURANCE COMPANY OF SOUTH CAROL I NA, P l a i n t i f f a n d C o u n t e r d e f

e n d a n t

- A p p e l l e e , v

. C H E R R Y T R E E COMPANI ES, I

NC., d/b/a Macon Gener al C o n t ractors, Def endant and Counterplaintiff-A

ppellant.

District & N o. Third District Docke t No. 3-12-0959

Filed November 4, 2013

Held ( Note : Thi s syl lab us

con st it ute s no par t o

f the opi nio n of the cour t but has bee n pre

par ed by the Repo rt er of D e c i s i o n s f

o r t h e

c o n v e n i e n c e o

f t h e

rea der

. ) I n an action arising from a dispute as to w hether plaintiff insurer had an obliga tion to indemnify d efe ndant insured under the policy defe ndant purcha sed from plaintiff which provided commerc ial g ener al liability

cover ag e and umbrella liabili t y cover ag e with respe ct to the defe ctive
g rain storag e fac iliti es defe ndant constructe d, the trial co u rt err ed in dismiss ing defe ndant’s counter claims alleg ing that plaintiff brea ched its

co n t ra ctual duties and acte d in bad faith by deny ing cover ag e on the
g round that no “suit” was filed, since the indemnification provision of the policy did n o t re q u ire the filing of a “suit” befor e defenda nt could s eek indemnification for the damag es defe n d an t ag ree d to pay the client for whom the fa cilities were constructe d.

Dec ision Under Review Appea l from the Circuit Court of Bu re au County
, No. 11-MR-32; the Hon. Marc P. Ber

nabei, Judge , presiding

.

J udg ment Reverse d and re manded.Counsel on

Appea l Mark P. Standa (ar g ued), of Mark P. Standa, P.C., o f L ake For est, for appellant.

Br ian A. O’Ga llag her (ar g ued) and Kristina M. Be ck
, b oth of Cremer
, Spina, Shaughne ssy , J ansen & Siege rt, L L C, of Chicag o, for a ppellee.

Panel J USTI CE CARTER delivered the judg ment of the c ourt, with opinion.
J ustice Holdridg e conc urre d in the judgme nt and opinion.
J ustice Schmidt specially concur red, w ith opinion.

OP INION

¶ 1 T h e p l aintiff and counter defe ndant-a ppellee, Selective I nsuranc e Company o f S o u t h Carolina (Selective), filed a complaint for declar atory judgme nt ag ainst the defen d an t and
counter plaintiff-a ppellant, Cherry

tree Companies, I nc., d/b/a Macon Gene ral Contractors (Cherr y t ree), which reque sted the circ uit court to rule on whether the insurance policy Cherry tree had with Selective pr ovided cove rag e for problems Cherr

y tree had with a g rain storag e fac ility it h ad b u ilt for another company in Fa irfield, Nebr aska. Along with its

answe r, Cherry

tree filed two counter c la ims, alleg ing that Selective brea ched its contra ct with Cherry tree and that Selective acte d in bad faith in deny ing cover ag e for the Fa irfield incident and another incident with a g rain storag e fac ility in Che ster, Nebr aska. After a hear ing, the circ uit court d is mi s s e d Cherry tree ’s counter claims with prejudice on the pleading s. L ater , the
court denied Cherry

tree ’s motion to rec onsider and g rante d Cherry tree ’s motion for a finding pursuant to I llinois S upreme Court Rule 304(a) (ef f. Fe b. 26, 2010), there by allowing C h er ry t re e to take this appea l. On appea l, Cherry tree arg ues that the court err ed when i t dismiss ed the counter claims with prejudice

. We reve rse and rema nd for further proce eding s.

¶ 2 FACTS ¶ 3 On September 14, 2011, Selective filed a complaint for decla ratory judgme nt and other relief ag ainst Cherry

tree , which Selective insured under a policy that contained commerc ial
g ener al liability (CGL ) cover ag e and umbrella liability cover ag e. The complaint alleg ed that in Marc h 2010, Cherry

tree contra cted with AGP Gra in Marke ting, L L C, to construct a g rain storag e fac ility in Fa irfield, Nebr aska. Cherry tree had completed 99% of the construction by October 26, 2010, when five to six trusses in the storag e fac ility had sunk approximately one to two fee t and the concr ete walls in the cente r of the storag e fac ility had bowed outward. Selective rec eived notice of this problem on Oct o b er 26, 2010, with a more detailed explanation g iven on November 4, 2010. Selective beg an investiga ting the incident in mid-

-2-November 2010 and issued a letter to Cherry tree in Marc h 2011 that stated Selective did not believe the policy cover ed the problem with the storag e fac ility

. Selective stated that it was deny ing cover ag e beca

use: (1) the problem with the storag e fac ility did not constitute an “occ urre nce” under the policy ; (2) the “y our work” and “y our product” exclusions prec luded

cover ag e; and (3) the problem with the storag e fac ility did not constitute “prope rty damag e” under the policy

. ¶ 4 Under

the subject policy , the CGL cover ag e sec tion stated, in releva nt part: “We will pay those sums that the insured become s leg ally obliga ted to pay as damag es beca

use of ‘bodily injury ’ or ‘prope rty damag e’ to which this insurance applies. We will have the ri g ht and duty to defe nd the insured ag ainst any ‘suit’ seeking those damag es. Howeve r, we will have no duty to defe nd the insured ag ainst any ‘suit’ seeking damag es for ‘bodily injury ’ or ‘prope rty damag e’ to which this insurance does not apply

. We may , at our discretion, investiga te any ‘occ urre nce’ and settle any claim or ‘suit’ that
may result.” ¶ 5 The CGL

cover ag e sec tion defined “ suit” as: “[A] civil proce eding in which damag es because of ‘bodily injury ’, ‘property damag e’

or ‘per sonal and adver

tising in j u ry ’ t o whi ch this insurance applies are alleg ed. ‘Suit’ includes:

a. An arbitra tion proce eding in which such damag es are claimed and to which the insured must submit or does submit with our consent; or
b. Any other alterna tive dispute resolution proce eding in which such damag es are claimed a nd to which the insured submits with our consent.” ¶ 6 The umbre lla liability cover ag e sec tion of the policy stated, in rele vant par

t: “We will pay on behalf of the insured the ‘ultimate net loss’ in excess of the ‘re tained limit ’ t hat t he ins ured becomes legally obliga ted t o pay as damag es because of ‘bodily injury ’, ‘p roper

ty damag e’ or ‘per sonal and advertising injury ’ t o which thi s insurance applies. We will have the rig ht and duty to defe nd the insured ag ainst any ‘suit’ seeking those damag es when the ‘under ly ing insurance ’ does not provide cover ag e or the limit s of ‘under ly ing insurance ’ have been exhausted. When we have no duty to defe nd, we will have the rig ht to defe nd, or to participa te in the defe nse of, the insured ag ainst any other ‘suit’ seeking damag es to which this insurance may apply

. Howe v er , we wi ll have no duty to defe nd the insured ag ainst any ‘suit’ seeking damag es for ‘bodily injury ’, ‘prope rty damag e’ or ‘per sonal and adver tising injury ’ to which this insurance does not apply

. At our discretion, we may investiga te any ‘occ urre nce’ or offe nse that may involve this insuran ce an d settle any resultant claim or ‘suit’, for which we have the duty to defe nd.” ¶ 7 The umbrella liability cover ag e section’s d ef i n i t i o n o f “s u i t ” wa s i d entical to the definition contained in the C GL cover ag e section, ex cept that subsection “b.” rea d, “[a]ny other alterna tive dispute resolution proceed i n g in which such damag es are claimed and to which the insure d submits wit h our conse nt or the ‘unde rly ing insure r’s’ c onsent.” ¶ 8 Acc ording to the complaint, in J une 2011, counsel for Cherry tree sent a letter to Selective

-3-in which counsel stated that Cherry tree had rea ched a settlement with AGP “in order to avoid costly litigation and bond claims.” I n part, Cherry tree had agr eed “to pay AGP for various
proper ty damag e and conseque ntial damag es.” Th e co m p laint alleg ed that Cherry tree had
reque sted Selective to indemnify it for amounts it paid or incurre d as a result of the problem with the storag e fac ility

. Selective’ s complaint soug ht ruling s that: (1) the amounts for which Cherry tree soug ht indemnification wer e not cover ed under the CGL portion of the policy ; and (2) the amounts for which Cherry tree soug ht indemnification wer e not cover ed under the umbrella liability portion of the policy

. Alterna tively
, the complaint soug ht ruling s that: (1) Selective ha d no duty

to indemnify beca

use C herr y tree did not establish that it was leg ally obliga ted to pay damag es; (2) the policy did not cover voluntary pay ments; and (3) Cherry tree brea ched its contra ct with Selective by ref using to pay outstanding premiums on a diffe rent policy

. ¶ 9 On October 17, 2011, Cherry tree filed its answe r and counter claims. I n its statement of the case, C herr

y tree listed three subcontrac tors i t u s ed to construct the storag e facility and stated:
“On Oc tober 26, 2010, the r oof of the flat g rain stora g e building ow ned by AGP in Fa irfield, Nebr aska collapsed, the walls continued to move outward near the cente r of the building and the hooped trusses had additional failure s, resulting in a larg e volume of
g rain spewing out of the building side walls and damag e to AGP proper ty , including the
g rain stored at the fac ility
, as well as the aer ation, convey or and elec trical sy stems, all of which we re pur chase d or obtained dire ctly by AGP.” Cherry tree alleg ed that the damag es we re e stimated to ex cee d $1.5 milli on. ¶ 10 Cherry

tree also alleg ed t h at i t p ar t icipated in the construction of another g rain stora g e fac ility in Chester, Nebr aska, wh i ch also suffe red a roof collapse. Cherry tree stated that it i n fo rm ed Selective of the problem with the Chester storag e fac ility
, but that Selecti v e “r efuse d to even acknow ledg e the claim and failed to rese rve any rig hts on the Ch es t er claim.” ¶ 11 The two counter claims that Cherry tree set forth wer e for: (1) brea ch of contra ct; and (2) damag es under section 155 of the I llinois I nsuranc e Code (the I nsuranc e C ode) (215 I L CS 5/155 (West 2010)). Wit h reg ard to the first counte rc l aim, Cherry tree alleg ed that “SEL ECTI VE brea ched its obliga tions under the subject policy by its fa ilure and ref usal to provide cover ag e or indemnify CHERRYTREE f or losses sustained as a result of the AGP claim and Chester claim, and failure to proper ly investiga te or respond to those claims.” Wit h
reg ard to the second counter claim, Cherry tree alleg ed that Selective acte d in bad faith when it denied cover ag e for the problem with the Fa irfield storag e fac ility and when it ignor ed the claim Cherr

y tree made f

or the proble m with the Chester storag e fa cility

. ¶ 12 On December 15, 2011, Selective f

iled sever al motions, including a m otion to dismiss Cherry tree ’s counter claims. Selective arg ued, inter alia
, that Cherry tree ’s brea ch of contra ct counter claim should be dismiss ed beca use: (1 ) t h e p ro per action to deter mine a cover ag e dispute is a decla

ra t o ry judgme nt action, not a brea ch of contra ct action; (2) the policy require d a “suit” t o b e fi l ed befor e cover ag e would apply
, and no “suit” had been filed
ag ainst Cherry

tree ; and (3) reg arding the problem with the Chester storag e fac ility
, Selective

-4-was still i n v es t i g ating the problem and had not decide d whether cover ag e applied to that

problem y et. I n that arg ument section, Selec tive mentioned sec tion 2-619.1 of t he C ode of Civil P ro ce dure (735 I L CS 5/2-619.1 (West 2010)) but it did not specify whether the
arg ument was being made pursuant to section 2-615 or to section 2-619 of the Code of Civil Procedur e (735 I L CS 5/2-615, 2-619 (West 2010)). I n a later pleading
, Selective stated that the first of its three arg uments on this issue was being broug ht pursuant to section 2-615 and the other two a

rg uments were being broug ht pursuant to section 2-619. ¶ 13 Selective also arg ued that Cher r y tr e e ’ s s e cond counter claim should be dismiss ed bec ause Selective’s h an d ling of the claim had not been vexatious and unrea sonable. Specifica lly
, Selective arg ued that: (1) a bona fide co v er age dispute exis ted, there by making a damag e

awa rd under section 155 of t he I nsuranc e C ode inappropriate; (2) g eneral l y , CGL policies do not provide cove rag e for defe ctive workmanship; and (3) the policy require d a “suit” to be filed befor e cover ag e would apply
, and no “suit” had been filed ag ainst Cherry tree

. I n that
arg ument section, Selective stated that it was making its arg ument pursuant to section 2-619 of the Code of

Civil Procedur e. ¶ 14 On Fe bruar

y 24, 2012, the circ uit court held a hear ing on Selective’ s motion to dismiss Cherry tree ’s counter claims and on other motions filed by the parties. After hear ing
arg uments, the circ uit court issued an o ral ruling

. I nitially
, the court deter mined that Cherry tree ’s counter claims could be dismiss ed without prejudice for sev eral rea sons, althoug h the court stated that it would also addre ss Selective’ s claim that the counter claims should be dismiss ed beca

use no underly

ing suit ag ainst Cherry

tree had been filed reg arding the problems with the Fa irfield and the Chester storag e fac iliti es, as this rea son could result in a dismiss al with prejudice

. The court thoroug hly discussed rele vant case law in issuing its decision, concluding that “ther e is no published I llinois revie wing court decisi o n that was cited by the parties or reve aled by the court’s own rese arc h that holds that there is a duty to indemnify absent a suit in a duty -to-def end policy .” The court place d repe ated emphasis on t h e fa ct that the CGL policy at issue contained both duty to defe nd and duty to in d em n i fy lang u age and used this fac t to analog ize this case to cer tain case s and distinguish it from others. Specifica lly
, the court ruled that it was persua ded by two case s, Lapham-Hick ey Steel Corp. v. Protection Mutu a l In s urance Co.
, 166 I ll. 2d 520 (1995), and the First District’s decision in Zurich Insurance Co. v. Carus Corp.
, 293 I ll. App. 3d 906 (1997), which “both held a suit is nece ssary beca use of the duty -to-def

end lang uag e befor e the duty to indemnify is trig g ere d.” I n so ruling
, the court stated that it disag ree d with two fede ral court case s, Sokol & Co. v. Atlantic Mutual Insurance Co.
, 43 0 F. 3 d 417 (7th Cir. 2005), and Keystone Consolidat ed Industries, Inc. v. Employe rs Insurance Co. of W ausau , 456 F.3d 758 (7th Cir. 2006), in which the United States Seventh Circuit Court of Appea ls interpre ted I llinois state law as not requir i n g a “suit” to trig g er an insurance company ’s duty to indemnify

. At the close of its discussion, the court ruled that beca use no suit had bee n fi l ed, Cherry tree ’s
counter claims wer e dismissed with prejudice. ¶ 15 On October 31, 2012, the circ uit court denied Cherry tree ’s motion to rec onsider, g rante d Cherry tree ’s motion for a Rule 304 (a ) fi nding, and stay ed all other matters pending the outcome of Cher

ry tree ’s appe al from the c ourt’s dismissal order.

-5-¶ 16 ANAL YSI S

¶ 17 On ap p ea l
, C h er ry t re e ar gu es that the circ uit court err ed when it dismiss ed i t s counter claims with prejudice

. Specifica lly
, Cherry tree asser ts that the subject policy did not require a “suit” to trig g er c overa g e and tha t releva nt case law supports such a conclusion. ¶ 18 A m otion to dismiss broug ht pursuant to s ection 2-619 of t he C ode of Civil Procedur e (735 I L CS 5/2-619 (West 2012)) admits the leg al sufficie ncy of the complaint it attacks and

asser ts a defe nse that alleg edly defe ats the complaint’s alleg ations. Patrick Engineering, Inc.

v. City of Naperville
, 2012 I L 1 1 3 1 4 8
, ¶ 31. “When ruling on such motions, a court must

acc ept as true all well-plea ded fac ts, as well as any rea sonable infere nces that may arise from them [citation]
, but a court cannot acc ept as true mere conclusions unsupported by specific fac ts.” Id. We review

a sec tion 2-619 dismis sal under the de novo standard. Id. ¶ 19 The in t er

p re t at i o n o f an i n s u rance policy ’s provisions prese nts a question of law. Travelers Insurance Co. v. Eljer Manufacturing, Inc.
, 197 I ll. 2d 278, 292 (2001). When we construe policy provisions, our g oal is to asce rtain the intent of the parties to the policy and
g ive ef fec t to that intent. Id. To do so, we must view the policy as a w hole and “ ‘take into

acc ount the ty

p e of insurance purcha sed, the nature of the risks involved, and the overa ll
purpose of the contra ct.’ ” Id. (quoting American States Insurance Co. v. Koloms
, 177 I ll. 2d 473, 479 (1997))

. ¶ 20 The narr ow question befor e this court is whether the policy in this case require d the filing of a “suit” befor e Cherry

tree could seek indemnification for the damag es it ag ree d to pay to AGP. I n the CGLcover ag e sec tion, the policy stated, in rele vant par

t: “We will pay tho se sums that the insured become s leg ally obliga ted to pay as damag es beca

use of ‘bodily injury ’ or ‘prope rty damag e’ to which this insurance applies. We will have the ri gh t and duty to defe nd the insured ag ainst any ‘suit’ seeking those damag es. Howeve r, we will have no duty to defe nd the insured ag ainst any ‘suit’ seeking damag es for ‘bodily injury ’ or ‘prope rty damag e’ to which this insurance does not apply

. We may , at our discretion, investiga te any ‘occ urre nce’ and settle any claim or ‘suit’ that
may result.”
Simi larly , in the umbrella liability section, the policy

stated, in rele vant par

t: “We will pay on behalf of the insured the ‘ultimate net loss’ in excess of the ‘re tained limit ’ t hat t he ins ured becomes leg ally obliga ted t o pay as damag es because of ‘bodily injury ’, ‘property damag e’ or ‘per sonal and advertising injury ’ t o which thi s insurance applies. We will have the rig ht and duty to defe nd the insured ag ainst any ‘suit’ seeking those damag es when the ‘under ly ing insurance ’ does not provide cover ag e or the limit s of ‘under ly ing insurance ’ have been exhausted. When we have no duty to defe nd, we will have the rig ht to defe nd, or to participa te in the defe nse of, the insured ag ainst any other ‘suit’ s ee k i n g d amage s to which this insurance may apply

. Howeve r, we will have no duty to defe nd the insured ag ainst any ‘suit’ seeking damag es for ‘bodily injury ’, ‘prope rty damag e’ or ‘per sonal and adver tising injury ’ to which this insurance does not apply

. At our discretion, we may investiga te any ‘occ urre nce’ or offe nse that may involve this in s u ra n ce and settle any resultant claim or ‘suit’, for which we have the duty to defe nd.”

-6-¶ 21 I n analy zing this lang uag e, the circ uit court in this case discussed sever al case s at leng th. The first of these case s was Lapham-Hick ey

. The circ uit court found that the supreme court’s decision in Lapham-Hick ey provided g uidance for the r esolution of the issue in this case. ¶ 22 I n Lapham-Hick ey , the insured filed a decla ratory judgmen t ac t i o n s eeking to rec over defe nse costs it incurre d from an in v es t iga tion it conducte d into environmenta l contamination on its proper ty

. Lapham-Hick

ey , 166 I ll. 2d at 522. The insured conducte d the investiga tion voluntarily afte r consulting with the Minnesota Pollut ion Control Ag ency

. Id.
at 524-25. The insured’s all-risks policy cover ed, in rele vant part, the following proper ty on any location cove red by

the policy : “ ‘[P] ersona l proper

ty of others in the custody of the I nsured to the extent of t h e I nsured’ s leg al liability for phy si cal loss or damag e of the ty pe insured ag ainst by this Policy

. [The insurer] further ag ree s to defe nd any suit ag ainst the I nsured alleg ing liability for such damag e, destruction or l oss and seeking damag es on acc ount there of,

even if such suit is g roundless, false or fra u d u l en t ; but this company may without prejudice
, make such an investiga tion, neg otiation and settlement of any claim or suit as the Company

deems e x pedient.’ ” Id. at 528. “Suit” was not define d in the policy
, so the supreme court g ave the term its plain and ordinary meaning as an action involving court proce eding s. Id. at 532. Be cause no “suit” had been fi led ag ainst the insured, the supreme court held that the insurance company had no duty to defe nd. Id. The supre me cour t further conclude d that the insured c ould not recove r the costs it incurre d from the investig ation of its property

. Id. at 533. ¶ 23 The circ uit court in this case place d g rea t emphasis on the Lapham-Hick ey decision due
to the supreme court’s statement that “[the insurer] can avoid i t s d u ty to defe nd and to reimburse [t he insured] for the defe nse cos t s if the lang uag e of the policy unambig uously shows that [t he insur er] did not contra ct to defe nd the actions [t he insured] undertook in
response to letters and a proposed consent decr ee issued from the [Environmental Protection Ag ency ] and the [Mi nnesota Pollut ion Cont r ol Ag ency ].” (Emphasis added.) Id. at 529. Even though it wa s only

the duty to indemnify

that was a t issue in Lapham-Hick ey , it appear s to this court that the first sentenc e of the above- quoted policy provision would n o t cover the ty pe of reimburse ment the insured was seeking in Lapham-Hick ey any way , as that sentenc e ref err ed to the “per sonal proper ty of others” and not to damag e to t h e insured’s proper ty

cause d by a third party ( id. at 528). I n addition, the ty pe of policy in Lapham-Hick ey and its specific lang uag e wer e very differ ent from the CGL policy and its specific lang uag e at issue in this case

. For these reasons, we find that Lapham-Hick ey does not provide guidanc e for the re solution of the issue in this case

. ¶ 24 The circ uit c ourt in this case also place d g rea t emphasis on the First District’s decision in Carus in arr iving at its decision to dismiss Cherry tree ’s counter claims with prejudice

. I n Carus
, the insurer filed a decla ratory judgme nt action seeking a ruling that it had no duty to defe nd or indemnify for expenses the insured incurre d while investiga ting potential pollution

reme diation. Carus
, 293 I ll. App. 3d at 908. The i n s ured participa ted in a prog ram that require d it “to conduct a re m ed i al investiga tion and fea sibili ty study ” to deter mine what further action would be nece ssary for the site to come into compliance with pollution control

-7-laws. Id. The policy at issue containe d the following rele vant lang uag e: “ ‘The [i nsurer ] will pay o n behalf of the insured all sums which the insured shall become leg ally

obliga ted to pay as dama g es bec ause of

: Coverag e A. bodily

injury Coverag e B. p ro perty damag e to which this insurance applies, cause d by an

occur renc e, and the [i nsurer ] shall have the rig ht and duty to defe nd any suits ag ainst the insured see king da

mag es ***.’ ” Id. at 907. The insurer claimed that beca use no “suit” had been filed, it had n o d u t y t o d efend or indemnify the insured. Id. at 908. Although it rec og nized that the issue prese nted by the case perta ined to the insurer’ s duty to indemnify
, the First District proce eded to discuss the duty
to defe nd, which was absent beca use no “suit” had been filed. Id. at 908-09. Then, the First District conclude d that the insurer also had no duty to indemnify the insured. Id. at 909-10. I n support of this conclusion, the First District cited to Crum & Forster Managers Corp. v. Resolution Trust Corp.
, 156 I ll. 2d 384 (1993), for a g ener al proposition that “ ‘whe re there is no duty to defe nd, there will be no duty to indemnify .’ ” Caru s , 2 9 3 I ll. App. 3d at 909 (citing Crum , 156 I ll. 2d at 398). 1 ¶ 25 We deter

mine upon our revie w of the Carus and Crum decisions that neither justifies a dismiss al with prejud i ce o f Cherry tree ’s counter claims. First, our examination of Crum shows that Ca r u s ’s relianc e on that decision was misplaced. I n Crum
, the insurers filed a decla ratory judgme nt action claiming that th ey had no duty to defe nd or indemnify the insureds in an unde rly ing a ction that had been fil ed aga inst the i nsureds. Crum , 156 I ll. 2d
at 387. The supreme court held that the insurers h ad n o d u t y t o defe nd the insureds in the underly ing suit beca

use the fac ts all ege d i n the underly ing suit’s complaint “do not fall potentially within the cover ag e aff orded by the policies.” Id. at 395. The supreme court also held that the insurers had no duty to indemnify the insureds for any liability that might arise from the underly ing suit. Id. at 398. Howeve r, it is important to note the context in which the
supreme c ourt’s holding on the duty to indemnify

arose : “I n case s such as the instant case wher e no duty to defe nd exis ts and the fac ts alleg ed do
not even fall potentially within the insurance cover ag e, such fac ts alleg ed could obviously never actually fall within the scope of cover ag e. Under no scena rio could a duty to indemnify arise. Clearly
, wher e there is no duty to de fend, there will be no duty
to indemnify and we find that the plaintiff-insure rs have no duty to defe nd or indemnify the insureds in this case .” (Empha ses in orig inal.) Id.
Fr om this context, it is clea r that Crum does not stand for a g ener al proposition that when an insurer has no duty to defe nd, then it will not have a d u t y to indemnify

. Rather, Crum ’s holding was fac t-specif

ic–the insurers had no duty to indemnify the insureds for any liability they might incur from an underly ing action when: (1) the policy contained both duty -todefe nd and duty -to-indemnify provisions; and (2) the fac ts alleg ed in the underly ing action’s

T he Fir st Di s t r i c t al so rul ed tha t the re was no dut y to ind emnify bec aus e the cos ts 1

ass oci at ed wit h con duc ti ng the volunt ar y inves ti gatio n of the pro per ty wer e not cos ts tha t the ins ure d bec ame “ ‘l egall y obli gated to pay.’ ” Caru s , 293 I ll . App. 3d a t 9 10.

-8-co mplaint did not even potentially trig g er the insurers’ duty to defe nd as define d b y t h e

policy

. Id. at 398. Acc ording ly
, we d et er m ine that the Carus court misstated and misconstrued the lawwhen it cited Crum for that g ener al proposition. ¶ 26 Second, this court has previously stated its belief that Carus was incorre ctly decide d. I n Central Illinois Light Co. v. Home Insurance Co. ( C IL C O I ), 342 I ll. App. 3d 940, 958 (2003), we e x presse d our disag ree ment with the Carus court’s state ment that case law had “esta blished as a rule that an insurer’ s duty to defe nd and indemnify is trig g ere d by a suit
ag ainst the insured, and in the absenc e of a lawsuit, no such duty exis ts.” Id. Whil e it is true that the p o l i ci es i n CILCO I wer e indemnity -only policies ( id. at 949), our statement in CILCO I is directly

rele vant to the disposition of the issue presente d by this case. ¶ 27 Third, two decisions of the United States S ev en t h C i rc u i t C o u rt of Appea ls that interpre ted I llinois insurance law had pointed out the afor ementioned fl aw i n the Carus decision. I n both Sokol and Keystone
, the Seventh Circuit discussed the contextual nature of the Crum holding and noted that Carus was an anomaly beca use no other I llinois case s relied

on Crum for a g ener al proposition that if the insurer has no duty to defe nd, then it has no duty to indemnify

. Sokol , 430 F.3d a t 421 n.1; Keystone , 456 F.3d a t 762 n.2. ¶ 28 I n fac t, the Sokol and Keystone decisions are particula rly i n s t ru ct i v e o n t h e i s s u e prese nted by this case

. I n Sokol
, one company had supplied peanut butter packe ts to another
company for inclusion in the latter company ’s cookie mix

. Sokol
, 430 F.3d at 419. The latter

co mpany discovere d that the peanut butter had g one bad, repla ced the peanut butt er at i t s

own exp en s e, then soug ht reimburse ment from the former company for the repla ceme nt costs. Id. The former company then filed a claim with its CGL insurer. Id. After the insurer denied cover ag e, the former company paid the latter company ’s claim and then soug ht indemnification from the insurer. Id. The in s urer once ag ain denied cover ag e. Id. The rele vant policy

lang uag e stated:
“ ‘We will pay those sums that the insured become s leg ally obliga ted to pay as damag es beca use of “bodily injury ” or “prope rty damag e” to which this insurance applies. We will have the rig ht and duty to defe nd the insured ag ainst any “suit” seeking those damag es. Howeve r, we will have no duty to defe nd the insured ag ainst any “suit” seeking damag es for “ bodily

injury ” or “ proper

ty damag e” to whic h this insurance doe s not apply .’ ” Id. at 420. ¶ 29 The fede ral district court g rante d summary judgme nt for the insurer, citing Crum for the

same g ener al proposition for which Carus cited Crum

. Id. at 419. The Seventh Circuit held that the di strict court im proper ly relied on Crum beca use Crum did not stand for a g ener al proposition that when t h ere is no duty to defe nd, there will be no duty to indemnify

. Id. at 421. The Seventh Circuit emphasized that the case befor e it was an indemnification action,
not a duty -to-def

end action, and that “the cover ag e g rant perta ining to indemnification does
not contain the same limit ing langu age requiring the exis tence of a ‘suit.’ ” Id. Fur ther, it stated that “[t] he two duties of the insurer–de fense and indemnification–ar e distinct; while the duty to indemnify may sometimes nest inside the duty to defe nd, that will not alway s be the case .” Id. For these rea sons, the Seventh Circuit ruled that the insurer’ s duty to indemnify

was not limit ed to “suits.” Id. at 422. Whil e the Sev en t h Circuit ultimately aff irmed the

-9-district court’s g rant of summary judgme nt on g rounds that are not at issue in this appea l ( id.

at 422-23), its ruling on whether a “suit” was require d to trig g er the duty t o i n d em n i fy is direc tly on point to the issue presented by this case. ¶ 30 L ike in the policy at issue in Sokol
, the word “suit” does not appea r in the first sentenc es of either the CGLor the umbre lla liability sections of the policy

in this case, which are the
sentenc es that ref

er to S el ec t i v e’s duty to indemnify

. Rather, “suit” appea rs in the second
sentenc es of these sections, which are the sentenc es that ref er to Selective’ s duty to defe nd. As the S ev en t h C i rcuit stated in Sokol under very simil ar circ umstances, “[t] he prese nt dispute, howeve r, is not about the insurer’ s duty to defe nd. This is a claim for indemnification cover ag e, and the cover ag e g rant perta ining to indemnification does not contain the same limit ing lang uag e requiring the exis tence of a ‘suit.’ ” Id. at 421. Wit hout that limit ing lang uag e, we hold that the indemnification provision in the policy in this case did not require the filing of a “s u i t ” b efore Cherry tree could seek indemnification for the damag es it ag ree d to pay

to AGP. See id. at 422. ¶ 31 The Seventh Circui t ’s d ecision in Keystone provides further support for our holding

. Simi lar to what they said in Sokol
, the Seventh Circuit in Keystone noted the proper context of the Crum decision and also cited to our supreme court’s decision in Central Illinois Light Co. v. Home Insurance Co. ( CILCO II ), 213 I ll. 2d 141, 155-62 (2004), for its discussion of indemnity -only policies that did not include any “suit” lang u a g e , in c lu d in g its conclusion that “the policy lang uag e, standing alone, does not require the insured to have been serve d as the defe ndant or responde nt in an adver sarial proce eding b e f o re the duty to indemnify arises” ( id. at 156). Keystone
, 456 F.3d at 762. The S eventh Ci rcuit concluded, “it ap p ea rs fairly well settled that under I llinois law, an insurance policy may entitle the insured to indemnification for c laims that do not arise from the re solution of a lawsuit, so long a s those claims satisfy
any require ments set forth in the rele vant provisions of the policy .” Id. at 761-62. We are in

acc ord with the S ev enth Circuit’s assessment of I llinois law in this are a, including the context in which it cited the CILCO II decision. ¶ 32 For the fore g oing rea sons, we hold that t h e ci rc u i t co u rt er re d wh en it dism issed Cherry tree ’s counter claims with prejudice

. We emphasize that our ruling in t h i s case is a

narr ow ruling and is not to be construed as dete rm i n ative of any other aspec t of the case , including whether the counter claims could be dismiss ed with or without prejudice on other
g rounds, whether the policy does in fac t provi de cover ag e for any part of the settlement Cherry tree negot i at ed with AGP, whether any exclusions would apply
, and any other unresolved issues suc h as the ope n motion for summary judgme nt filed by

Selective.

¶ 33 CONCL USI ON ¶ 34 For the fore g oing rea sons, we reve rse the judgme nt of the circ uit court of Bur eau County and re mand the ca

use for further proce eding s.

¶ 35 Reverse d and re manded.

-10-¶ 36 J USTI CE SC HMI DT, spec ially concur ring

. ¶ 37 I concur with the majority
, but write separ ately to point out that I believe the dispositi ve fac tor is Cherry

tree alleg es that it settled with AGP only afte r Selective denied cover ag e. Had Cherry tree settled with A GP in the absenc e of a denial of cover ag e by Selective, we would have an entirely differ ent animal. I want to make plain that this case should not be construed by any one as standing for the proposition that an insured under a liability policy can g o out and settle with some tort claimant without pr ior knowledg e and consent of the insurer, and then demand indemnity from the insurer. That proposition would cre ate a moral hazard too attrac tive for many con artists to ignor e. I t is also prohibited by policy conditions. This policy , like virtually

ever y liability policy issued in this st ate, pr ovides:
“Section I V–Conditions:
* * *
4. No insureds will, except at the insured’s own cost, voluntarily make a pay ment,

assume any obliga tion, or incur any expe n se other than for first aid, without our consent.” ¶ 38 Howeve r, whe re a s here
, the insurer denies cover ag e, the insure d is entitled to do what he or she can to cut his or her losses, and need not wait until suit is filed to once ag ain make demand on the insurer. That condition (I V(4)) is not at issue in t h i s ca s e. The supreme court’s pronounce ment in Crum & Forster was never in t en d ed to sug g est that a liability insurer’ s duties arise only afte r suit is filed ag ainst its ins ured.

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