Court Opinion

ID: 9962021
Source: CourtListenerOpinion
Date Created: 2024-04-22 15:04:10.779758+00
Date Added: 2024-06-11T08:19:40.278314
License: Public Domain

2024 IL App (1st) 230224

                                                                                    FIRST DISTRICT,
                                                                                    FIRST DIVISION
                                                                                        April 22, 2024
     No. 1-23-0224

      CHRYSOULA DANA,                                     )      Appeal from the
                                                          )      Circuit Court of
             Plaintiff-Appellee,                          )      Cook County
                                                          )
      v.                                                  )      No. 2020 CH 04775
                                                          )
      GREAT NORTHERN INSURANCE                            )      Honorable
      COMPANY,                                            )      Eve M. Reilly,
                                                          )      Judge Presiding.
             Defendant-Appellant,

            JUSTICE COGHLAN delivered the judgment of the court, with opinion.
            Presiding Justice Fitzgerald Smith and Justice Pucinski concurred in the judgment and
            opinion.

                                               OPINION

¶1          Plaintiff Chrysoula Dana filed a complaint against defendant Great Northern Insurance

     Company (Great Northern) for declaratory judgment and breach of contract after Great Northern

     denied coverage for the loss of her engagement ring diamond. Plaintiff filed a claim under an

     insurance policy issued by Great Northern after learning that the real diamond in her engagement

     ring had been replaced with a synthetic diamond. Great Northern denied coverage under the

     misappropriation exclusion of the policy. Upon completing limited discovery, plaintiff and Great

     Northern filed cross-motions for summary judgment.

¶2          The trial court granted Great Northern’s motion for summary judgment on counts II and

     V, finding the misappropriation exclusion clearly excludes coverage “where one of the insureds

     took the ring and replaced the real diamond with an imitation diamond.” However, the court also

     found that “[t]he innocent insured doctrine applies where the policy does not contain a clear
     No. 1-23-0224

     statement that the policy is void as to all insureds, in the event of wrongdoing by one of the

     insureds.” The trial court held that Great Northern’s policy did not contain such language but

     denied plaintiff’s motion for summary judgment because whether plaintiff was an innocent insured

     was “a question of material fact.” After the parties stipulated that plaintiff was “an innocent

     insured,” the trial court ruled that plaintiff was entitled to coverage and entered judgment in the

     amount of $176,356.68 in favor of plaintiff.

¶3           On appeal, Great Northern asserts that the trial court “improperly engrafted an innocent

     insured exception on the policy’s misappropriation exclusion.” On cross-appeal, plaintiff argues

     that the trial court “disregarded the plain ordinary meaning of misappropriation” in construing the

     terms of the misappropriation clause. For the reasons that follow, we affirm the judgment of the

     circuit court.

¶4                                           BACKGROUND

¶5           On July 3, 2017, Great Northern issued a Chubb Masterpiece insurance policy for

     plaintiff’s engagement ring, a white gold ring with one 3.57 carat pear-shaped diamond valued at

     $139,906. Plaintiff and her husband, George Dana, were both named insureds under the policy.

     Sometime in March 2018, George took plaintiff’s ring after an argument. During a conversation

     recorded a few weeks later, George told plaintiff she would never see the ring again. On May 21,

     2018, after filing a dissolution of marriage petition, plaintiff obtained an emergency order of

     protection against George. Among other things, George was ordered to return plaintiff’s

     engagement ring. On June 1, 2018, a gemologist confirmed plaintiff’s suspicion that the natural

     diamond in her ring had been replaced with a synthetic diamond.

¶6           On January 14, 2019, plaintiff initiated a claim for the loss of her diamond. Plaintiff told

     claim representative Travoy Bynum that she believed George had replaced her natural diamond

     with a synthetic stone because he had threatened to take the ring from her “a lot of times before.”

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     No. 1-23-0224

     Great Northern’s investigation of plaintiff’s claim included obtaining examinations under oath

     (EUO) from plaintiff and George.

¶7          In a letter dated February 20, 2023, plaintiff was advised that Great Northern had

     completed its investigation and “denies any liability” under the misappropriation exclusion of the

     policy. This exclusion stated, in relevant part: “We do not cover any loss caused by the taking or

     other misappropriation by or directed by a person named in the Coverage Summary, that person’s

     spouse, a family member, or a person who lives with you.” Great Northern explained:

            “No coverage is afforded under the policy because our investigation has determined that

            the loss of the diamond contained in [the engagement ring] *** was caused by the taking

            or other misappropriation by or directed by a person named in the Coverage Summary, that

            person’s spouse, or a family member.”

¶8          Plaintiff requested clarification regarding the denial of her claim. Great Northern

     responded that plaintiff reported that George “substituted a synthetic diamond for the real

     diamond,” but George indicated that the diamond “may have been substituted by a pawn shop” or

     by plaintiff’s father in order to “frame” George. Great Northern reasoned that the only question of

     fact it needed to resolve was whether the pawn shop was responsible because “the other

     possibilities presented by the insureds were either not covered under the misappropriation

     exclusion or did not constitute a loss.” Regardless of whether plaintiff or George was responsible

     for the loss, Great Northern concluded that neither of them were entitled to recover because they

     were both insured under the policy.

¶9          On June 30, 2020, plaintiff filed a complaint against Great Northern for declaratory

     judgment and breach of contract. She alleged, inter alia, that the misappropriation exclusion was

     “vague, ambiguous, and undefined” and she was entitled to coverage under the innocent insured

     doctrine. Both parties subsequently filed cross-motions for summary judgment.

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       No. 1-23-0224

¶ 10           On October 6, 2022, the trial court granted Great Northern’s motion for summary judgment

       on counts II and V of the complaint, finding that “the misappropriation clause is clear and excludes

       coverage where one of the insureds took the ring and replaced the real diamond with an imitation

       diamond.” Relying on West Bend Mutual Insurance Co. v. Salemi, 158 Ill. App. 3d 241 (1987),

       the trial court held that “[t]he innocent insured doctrine applies when the policy does not contain

       a clear statement that the policy is void as to all insureds, in the event of wrongdoing by one of the

       insureds.” Because the plain language of the policy did not contain such a statement, the court

       concluded that the innocent insured doctrine would apply if plaintiff was an innocent insured,

       which constituted a material issue of disputed fact.

¶ 11           On January 18, 2023, before the case proceeded to trial, the parties stipulated that, “based

       on the evidence, a trier of fact would conclude that [plaintiff] did not participate in the substitution

       of the property that is subject to this action, and is therefore an innocent insured.” The trial court

       subsequently entered judgment in favor of plaintiff and against Great Northern in the amount of

       $176,356.68.

¶ 12                                                ANALYSIS

¶ 13           Great Northern argues that the trial court “improperly engrafted an innocent insured

       exception on the policy’s misappropriation exclusion.” On cross-appeal, plaintiff challenges the

       trial court’s finding that Great Northern properly denied coverage based on the misappropriation

       exclusion. Plaintiff argues that the court “disregarded the plain ordinary meaning of

       misappropriation” and based its ruling on a disputed fact (i.e., that a coinsured was responsible for

       the swap).

¶ 14           “Summary judgment is appropriate where, when viewed in the light most favorable to the

       nonmoving party, the pleadings, depositions, admissions, and affidavits reveal no genuine issue of

       material fact and the movant is entitled to judgment as a matter of law.” Atchison, Topeka & Santa

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       No. 1-23-0224

       Fe Ry. Co. v. St. Paul Surplus Lines Insurance Co., 328 Ill. App. 3d 711, 714 (2002) (citing 735

       ILCS 5/2-1005(c) (West 1998)). “Where a case is decided through summary judgment, our

       standard of review is de novo.” Direct Auto Insurance Co. v. Beltran, 2013 IL App (1st) 121128,

       ¶ 43. Furthermore, “[t]he construction of an insurance policy is a question of law subject to de novo

       review.” Atchison, 328 Ill. App. 3d at 714.

¶ 15                                       Misappropriation Exclusion

¶ 16          The trial court observed that, “regardless of what the plain ordinary meaning of

       misappropriation is, this policy explicitly states that the clause applies when there is a ‘taking or

       other misappropriation’ by an insured.” Accordingly, the court found that the policy language

       clearly “excludes coverage where one of the insureds took the ring and replaced the real diamond

       with an imitation diamond.” (Emphasis added.)

¶ 17          “In construing the language of an insurance policy, a court must ascertain and give effect

       to the intention of the parties as expressed in their agreement.” Id. (citing American States

       Insurance Co. v. Koloms, 177 Ill. 2d 473, 479 (1997)). Reviewing courts must assume that every

       provision in an insurance policy was intended to serve a purpose and the policy “is to be construed

       as a whole, giving effect to every provision [citation], and taking into account the type of insurance

       provided, the nature of the risks involved, and the overall purpose of the contract.” Rich v.

       Principal Life Insurance Co., 226 Ill. 2d 359, 371 (2007).

¶ 18          If the words used in the policy are clear and unambiguous, and not specifically defined in

       the policy, they must be given their “plain, ordinary, and popular meaning.” Id.; Atchison, 328 Ill.

       App. 3d at 714. “[A]ll doubts and ambiguities in the policy language must be construed in favor

       of the insured.” Atchison, 328 Ill. App. 3d at 715; see also United States Fidelity & Guaranty Co.

       v. Wilkin Insulation Co., 144 Ill. 2d 64, 74 (1991). A policy is not rendered ambiguous simply

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       No. 1-23-0224

       because the parties disagree on its meaning, and courts “will not strain to find an ambiguity where

       none exists.” Rich, 226 Ill. 2d at 372.

¶ 19          The words used in the misappropriation clause of this policy and, in particular, the phrase

       “loss caused by the taking or other misappropriation” are clear and unambiguous. Our supreme

       court has explained: “The word ‘or’ is disjunctive. As used in its ordinary sense, the word ‘or’

       marks an alternative indicating the various parts of the sentence which it connects are to be taken

       separately. [Citation.] In other words, ‘or’ means ‘or,’ ” and “therefore connotes two different

       alternatives.” Elementary School District 159 v. Schiller, 221 Ill. 2d 130, 145 (2006). Accordingly,

       the phrases prior to the “or” (by the taking) and following the “or” (other misappropriation)

       connote two different alternatives. See Mosby v. Ingalls Memorial Hospital, 2023 IL 129081, ¶ 37.

¶ 20          The term “misappropriation” is not defined in the present policy. Black’s Law Dictionary

       defines “misappropriation” as “[t]he application of another’s property or money dishonestly to

       one’s own use.” Misappropriation, Black’s Law Dictionary (11th ed. 2019). The Merriam-

       Webster Online Dictionary defines “misappropriate” as “to appropriate wrongly (as by theft or

       embezzlement).” Merriam-Webster           Online Dictionary, https://www.merriam-webster.com/

       dictionary/misappropriate (last visited Apr. 11, 2024) [https://perma.cc/5WA3-WCNV]. As a

       verb, “appropriate” is defined as “to take exclusive possession of” or “to take or make use of

       without authority or right.” Merriam-Webster Online Dictionary, https://www.merriam-

       webster.com/dictionary/appropriate (last visited Apr. 11, 2024) [https://perma.cc/5WNK-V89C].

       In this case, since one of the insureds took the ring or otherwise wrongly made use of the diamond,

       the misappropriation exclusion is applicable.

¶ 21          Plaintiff also argues that “Great Northern failed to investigate or explore the other third

       parties that may have replaced the natural diamond.” We disagree. Great Northern denied coverage

       “[a]fter conducting an investigation, which included Plaintiff’s statement that her husband

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       No. 1-23-0224

       switched out the diamond and George’s statement that [plaintiff] pawned the ring to support her

       gambling habit.” The record reflects that Great Northern’s investigation covered all of “the other

       possibilities presented by the insureds.” Based on the findings of its investigation, Great Northern

       reasonably concluded that “the other possibilities presented by the insureds were either not covered

       under the misappropriation exclusion or did not constitute a loss.”

¶ 22                                            Innocent Insured

¶ 23          Great Northern argues that, after finding that the misappropriation exclusion applied to the

       facts of the case, the trial court “improperly engrafted an innocent insured exception on the policy’s

       misappropriation exclusion.” Plaintiff contends that, without language in the policy specifically

       excluding application of the innocent insured doctrine, it should be applied because she was not

       involved in replacing the diamond. We find that the trial court did not err in applying the innocent

       insured doctrine and finding that plaintiff was entitled to recover on her claim.

¶ 24          “The common law innocent insured doctrine operates in cases where there are two or more

       insureds on a policy, and it allows an insured who is innocent of wrongdoing to recover despite

       the wrongdoing of other insureds.” Illinois State Bar Ass’n Mutual Insurance Co. v. Law Office of

       Tuzzolino & Terpinas, 2015 IL 117096, ¶ 20. Such cases “usually involve the enforcement of

       policy exclusions, typically exclusions for intentional acts allegedly committed by an insured other

       than the one challenging the exclusion.” Id. ¶ 24. That is because “the insured’s innocence is

       relevant to whether an intentional act invokes an exclusion to coverage.” Id. “[T]he innocence of

       an insured matters a great deal when another insured’s wrongdoing triggers a policy exclusion,

       and a dispute arises over whether the insurer has a duty to defend the innocent insured under a

       policy that undisputedly was in effect.” Id. ¶ 30.

¶ 25          The parties acknowledge that the “innocent insured” doctrine has typically been applied in

       cases involving arson or vandalism. Id. ¶ 20; see, e.g., Wasik v. Allstate Insurance Co., 351 Ill.

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       No. 1-23-0224

       App. 3d 260 (2004) (plaintiff was entitled to recover losses after his stepson intentionally set fire

       to plaintiff’s garage); State Farm Fire & Casualty Insurance Co. v. Miceli, 164 Ill. App. 3d 874

       (1987) (plaintiffs were not precluded from recovering after their son vandalized property in the

       family’s home); Salemi, 158 Ill. App. 3d 241 (seller of motel was allowed to collect on fire and

       casualty insurance policy after the buyer’s son was suspected of arson); Economy Fire & Casualty

       Co. v. Warren, 71 Ill. App. 3d 625 (1979) (defendant, as an innocent coinsured, was entitled to

       collect on the fire insurance policy after wife started the fire that damaged their house before she

       died).

¶ 26            The appellate court’s decision in Wasik exemplifies the typical application of the innocent

       insured doctrine. In Wasik, a fire destroyed the plaintiff’s garage, and he filed a claim under his

       homeowner’s insurance policy. Wasik, 351 Ill. App. 3d at 261. The “ ‘joint obligations’ ” clause

       in the policy stated, in relevant part: “ ‘The terms of this policy impose joint obligations on persons

       defined as an insured person. This means that the responsibilities, acts and failures to act of a

       person defined as an insured person will be binding upon another person defined as an insured

       person.’ ” (Emphases in original.) Id. at 264-65. The policy’s exclusion section indicated the

       insurance company did not cover loss caused by “ ‘[i]ntentional or criminal acts *** of any insured

       person.’ ” (Emphasis omitted.) Id. at 265. The defendant insurance company denied coverage

       because the plaintiff’s stepson intentionally started the fire. Id. at 261. The plaintiff’s complaint

       alleged that the defendant breached the policy by denying the claim, even though his stepson was

       an insured under the policy. Id. at 261, 264. The defendant filed a motion for summary judgment,

       which the trial court granted. Id. at 263. On appeal, the plaintiff argued that, as an innocent insured,

       he was entitled to recover under the policy despite the alleged wrongdoing of his stepson. Id. at

       264.

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       No. 1-23-0224

¶ 27          After considering prior decisions construing the application of the innocent insured

       doctrine, including Warren, Salemi, and Miceli, the Wasik court determined that

              “[a]lthough the clauses could be read as entirely prohibiting coverage for a loss caused by

              the act or failure to act of ‘any’ insured, they do not clearly state that the policy will be

              void or coverage will be excluded as to all insureds in the event of some improper behavior

              by ‘any’ insured.” Id. at 266.

¶ 28          In Warren, the appellate court determined that the wrongdoing of a coinsured wife who

       committed arson could not be imputed to the innocent husband because the express terms of the

       policy did not so provide. 1 Warren, 71 Ill. App. 3d at 629. In Salemi, the reviewing court stated

       concisely: “If [the insurer] intended for both [insureds] to be barred [from recovery] in the event

       of wrongdoing by one, its intent should have been expressly and clearly stated in the terms of the

       policy.” Salemi, 158 Ill. App. 3d at 249. Finally, in Miceli, the appellate court held that the policy

       language did not preclude a husband and wife from recovering after their son vandalized property

       in the family’s home because it was reasonable for the husband and wife to have “assumed that

       their rights and obligations were not dependent upon those of their children.” Miceli, 164 Ill. App.

       3d at 881.

¶ 29          While Wasik, Warren, Salemi, and Miceli provide a brief overview of the application of

       the innocent insured doctrine, those cases dealt with property that was damaged or destroyed to

       the point that the property was lost. In this case, the natural diamond was taken and replaced with

       a synthetic diamond; it was not lost by damage or destruction. Nevertheless, the court’s reasoning

       in Wasik, Miceli, Salemi, and Warren is equally applicable in the instant case.

              1
               The Warren court did not cite actual language of the policy provision it was interpreting. See
       Wasik, 351 Ill. App. 3d at 265-66.

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       No. 1-23-0224

¶ 30          The provision of the policy under which Great Northern chose to deny coverage, the

       misappropriation exclusion, did not contain a clear statement that the policy was void as to all

       insureds in the event of wrongdoing. If Great Northern intended both coinsureds to be barred from

       recovery in the event of wrongdoing by either one, then it should have employed policy language

       that expressly and clearly stated its intent. See Salemi, 158 Ill. App. 3d at 249. Like the property

       owners in Warren, Salemi, Miceli, and Wasik, plaintiff was deprived of the use of her property

       through no fault of her own.

¶ 31          Great Northern asserts that, “[b]y engrafting an innocent insured exception to the

       misappropriation exclusion, the exclusion would never apply, as any taking of insured property by

       another insured would necessarily involve an innocent insured. The exclusion, with such an

       exception, would never apply and therefore would be rendered meaningless.” (Emphasis added.).

       We disagree. For example, the misappropriation exclusion could apply in situations where none

       of the covered individuals are “innocent” in the misappropriation of the insured property.

¶ 32          In its briefs and at oral argument, Great Northern argued that plaintiff did not have a

       reasonable expectation of coverage based on the nature of her loss. We disagree. Since plaintiff

       had an insurance policy for her diamond, it was reasonable for her to expect coverage when she

       was deprived of the use of her diamond through no fault of her own. It is as unlikely here as it was

       in Warren and Miceli “that a reasonable person would agree to an insurance policy which made

       recovery under the policy contingent upon the actions of another.” Miceli, 164 Ill. App. 3d at 881.

       It was also reasonable for plaintiff to have assumed that her “rights and obligations were not

       dependent” (id.) upon those of her husband, particularly where, as here, the express terms of the

       policy did not so provide. See Warren, 71 Ill. App. 3d at 628-29.

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       No. 1-23-0224

¶ 33          We find that the trial court did not err in holding that plaintiff was entitled to coverage

       based on the innocent insured doctrine. Accordingly, the trial court properly entered judgment in

       favor of plaintiff in the amount of $176,356.68.

¶ 34                                           CONCLUSION

¶ 35          For these reasons, we affirm the judgment of the circuit court of Cook County.

¶ 36          Affirmed.

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No. 1-23-0224

             Dana v. Great Northern Insurance Co., 2024 IL App (1st) 230224

Decision Under Review:       Appeal from the Circuit Court of Cook County, No. 2020-CH-
                             04775; the Hon. Eve M. Reilly, Judge, presiding.

Attorneys                    James E. DeFranco and Matthew K. Suess, of Rynearson, Suess,
for                          Schnurbusch & Champion, LLC, of St. Louis, Missouri, for
Appellant:                   appellant.

Attorneys                    Joseph A. Bosco and Costa Diamond, of LaRose & Bosco, Ltd.,
for                          of Oak Park, for appellee.
Appellee:

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