Court Opinion

ID: 9520802
Source: CourtListenerOpinion
Date Created: 2023-08-07 01:50:19.038415+00
Date Added: 2024-06-11T12:46:57.567917
License: Public Domain

Mr. JUSTICE JIGANTI, dissenting: My disagreement with the majority concerns the applicability of the exception stated in Thornton v. Paul (1978), 74 Ill. 2d 132,384 N.E.2d 335, to the general rule regarding the insurer’s duty to defend. As stated by the majority, the general rule is that where there is potential coverage, as demonstrated by the allegations of the complaint, but the insurer believes that in fact no coverage exists, it must (1) defend the insured; (2) secure a declaratory judgment as to its rights and obligations; or (3) defend the tort action under a reservation of rights. (Sims v. Illinois National Casualty Co. (1963), 43 Ill. App. 2d 184,193 N.E.2d 123.) An insurer who does none of these is estopped from later arguing policy defenses or noncoverage in a subsequent action by the insured or a judgment creditor. Sims. The Illinois Supreme court in Thornton established a narrow exception to the general rule set forth in Sims. It stated: “Although the allegations of the complaint determine whether or not the insurer is obligated to provide a defense, when there is a conflict of interests, as in the present case, the insurer should not be obligated or permitted to participate in the defense of the case. Its obligation to provide a defense should be satisfied by reimbursing the insured for the costs of the defense.” (74 Ill. 2d 132, 152.) The Thornton court noted that where such a conflict exists, the insurer’s failure to defend should not estop it from later raising the defense of noncoverage. In a conflict situation the insured has the right to be represented by counsel of Ms own choosing and the right to control his defense; the insurer’s obligation to provide a defense should be satisfied by reimbursing the insured for his defense costs. In the instant case the policy provided coverage to persons using an automobile owned by and with the permission of the named insured. The original complaint alleged that Clancy was the agent of Urso, the named insured. In the amended complaint it was alternatively alleged that Clancy was Urso’s agent or that Urso negligently entrusted the automobile to Clancy. Urso denied all these allegations and filed an affidavit in support of her motion for summary judgment denying agency and alleging that the vehicle was taken without her consent, permission or knowledge. Her affidavit also stated that the vehicle had been stolen. The conflict of interest established by these allegations is patent and prevents Travelers from representing Clancy. Urso, the named insured, denies that Clancy was her agent and denies that Clancy had the vehicle with her consent, permission or knowledge. To be afforded coverage, Clancy must take a position totally contrary to Urso’s position; he must contend he was her agent or a permissive user of the vehicle. The interest of Travelers would have been just as well served by a finding that Clancy was not a permissive user as it would have been by a finding that Clancy was not liable to the plaintiff. As explained in Thornton (74 Ill. 2d 132, 156), this obvious conflict prevents Travelers from either defending Clancy or defending under a reservation of rights, two of the three alternatives posed in Sims. The last alternative allowed under Sims is an action in declaratory judgment. The court stated in Thornton that since the principles of collateral estoppel were applicable it did not believe that an issue crucial to the insured’s liability should be determined in a declaratory judgment action, a purely ancillary proceeding. (74 Ill. 2d 132,156-57.) The issue in a declaratory judgment proceeding would be whether Clancy was a permissive user of the vehicle. That is a crucial issue in the underlying personal injury action. In such an ancillary proceeding, as the Thornton court observed, the injured party would be the defendant rather than the plaintiff, and thus the burdens of proof and of going forward with the evidence would be reversed. (74 Ill. 2d 132,158-59.) The Thornton court also observed that an advance determination of the matter of coverage is not desirable where that question is closely related and directly connected with the issue of the insured’s personal liability to the injured party. (74 Ill. 2d 132,157.) Although the issues in Murphy’s underlying action, agency or negligent entrustment, and the declaratory judgment action, permissive use, are not precisely the same, they are closely and directly connected. In neither Thornton nor Maryland Casualty Company v. Peppers (1976), 64 Ill. 2d 187,335 N.E.2d 24, was the issue in the declaratory judgment action precisely the same as that in the underlying tort action. In my estimation, the Thornton exception is controlling and, therefore, Travelers should not be estopped from raising the defense of noncoverage.