Court Opinion

ID: 9522242
Source: CourtListenerOpinion
Date Created: 2023-08-07 02:20:39.102364+00
Date Added: 2024-06-11T13:02:25.623155
License: Public Domain

JUSTICE LYTTON, dissenting: I respectfully dissent from the majority’s opinion in this case. The allegations contained in the underlying complaint are sufficient to trigger a duty to defend. Thus, I would affirm the trial court’s decision. To determine if an insurer owes a duty to defend, the court must compare the allegations in the underlying complaint with the relevant portions of the insurance policy. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 107-08, 607 N.E.2d 1204, 1212 (1992). If the facts alleged in the underlying complaint fall within, or potentially within, the policy’s coverage, the insurer has a duty to defend. Outboard Marine Corp., 154 Ill. 2d at 108, 607 N.E.2d at 1212. Here, the underlying complaint against defendants George and Martha Rock alleged in pertinent part: “4. *** Mr. and Mrs. Koss were provided with the Defendants’ Seller’s Residential Real Estate Sales Disclosure. *** 5. On the disclosure form, the Defendants indicated that there were no moisture and/or water problems in the basement, crawl space area, or any other area of the home, that there was not any damage, due to, inter alia, flood, that there had not been or were not any hazardous conditions on the property, such as mold, and that there were not any foundation problems with the improvements. *** 6. These representations were fraudulent misrepresentations, as they were false statements of past and/or existing material facts made by the Defendants, the Defendants made them knowing that they were false and/or made them with reckless ignorance or indifference as to their falsity, and made them to induce Mr. and Mrs. Koss to purchase the real estate. 7. Mr. and Mrs. Koss justifiably relied and acted upon the statements when they purchased the property. 8. Mr. and Mrs. Koss were subsequently injured as a result of their reliance upon the fraudulent misrepresentations contained in the Seller’s Residential Real Estate Sales Disclosure form. 9. Mr. and Mrs. Koss[es]’ injuries and damages include the loss of their bargain, the loss of value to their property, the loss of use of their property, the cost of remediation, and emotional distress and mental anguish. $ $ ^ 15. The aforementioned misrepresentations were negligent misrepresentations. ’ ’ According to the Rocks’ insurance policy, State Farm is obligated to provide a defense if “a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage *** caused by an occurrence.” An “occurrence” is defined as “an accident, including exposure to conditions” that results in bodily injury or property damage. “Property damage” is defined as “physical damage to or destruction of tangible property, including loss of use of this property.” The majority concludes that the underlying complaint does not trigger a duty to defend because it “does not allege that the purportedly false statements made by the Rocks caused any physical damage to or destruction of tangible property” but, rather, alleges only “economic losses.” 395 Ill. App. 3d at 150. I disagree. The allegations against the Rocks are similar to those against the defendants in Jares v. Ullrich, 2003 WI App 156, 266 Wis. 2d 322, 667 N.W.2d 843, where the court found a duty to defend. In that case, the plaintiffs alleged that the defendants were aware of or should have been aware of animal infestation and failed to disclose it to the plaintiffs. They further alleged that they justifiably relied on the defendants’ misrepresentations, which caused them to be unable to occupy the premises for over two months and incur costs to repair the property. The court found that the complaint adequately alleged “property damage” because it referred to “loss of use” and repair costs. Jares, 2003 WI App 156, ¶2, 266 Wis. 2d 322, ¶2, 667 N.W.2d 843, ¶2. The court also found that the plaintiffs adequately pled causation by alleging that the defendants’ misrepresentations resulted in the loss of use of the property. Jares, 2003 WI App 156, ¶24, 266 Wis. 2d 322, ¶24, 667 N.W.2d 843, ¶24. The court rejected the insurer’s argument that the plaintiffs’ damages were purely economic because the complaint specifically alleged physical injury to the property, including loss of use. Jares, 2003 WI App 156, ¶17, 266 Wis. 2d 322, ¶17, 667 N.W.2d 843, ¶17. Likewise, in this case, the Kosses’ complaint alleges “the loss of use of their property” and “the cost of remediation.” Thus, it alleges “property damage.” Additionally, the complaint alleges causation, stating that the Kosses “were injured as a result of their reliance upon the fraudulent misrepresentations contained in the Seller’s Residential Real Estate Sales Disclosure form.” Finally, although the complaint alleges that the Kosses suffered economic damages in the form of “loss of their bargain” and “the loss of value to their property,” it also alleges physical damage to the property through the allegations of “the loss of use of their property” and “the cost of remediation.” Thus, the majority’s conclusion that the underlying complaint does not allege property damage caused by the Rocks’ representations is incorrect. The majority also incorrectly concludes that “[w]e need not determine whether the alleged misrepresentations meet the definition of ‘occurrence’ *** because the underlying complaint does not allege that the misrepresentations caused property damage.” 395 Ill. App. 3d at 150. The complaint adequately alleged both property damage and causation. I also believe that the allegations of the complaint were sufficient to establish an “occurrence.” If a complaint alleges that the insureds made misrepresentations that they knew were false, the misrepresentations do not constitute an “occurrence.” See Allstate Insurance Co. v. Lane, 345 Ill. App. 3d 547, 552, 803 N.E.2d 102, 107 (2003). However, allegations that an insured made “unknowing” misrepresentations or “recklessly disregarded the truth” adequately allege an “occurrence.” See Lane, 345 Ill. App. 3d at 552, 803 N.E.2d at 107, citing Prisco Serena Sturm Architects, Ltd. v. Liberty Mutual Insurance Co., 126 F.3d 886 (7th Cir. 1997); Posing v. Merit Insurance Co., 258 Ill. App. 3d 827, 629 N.E.2d 1179 (1994); TIG Insurance Co. v. Joe Rizza Lincoln-Mercury, Inc., No. 00 C 5182 (N.D. Ill. March 14, 2002). Other jurisdictions agree that a negligent misrepresentation may be an “occurrence,” thus triggering an insurer’s duty to defend. See Allstate Insurance Co. v. Bowen, 121 Wash. App. 879, 886, 91 P.3d 897, 901 (2004); Lampert v. State Farm Fire & Casualty Co., 85 S.W.3d 90, 93-94 (Mo. App. 2002); Wood v. Safeco Insurance Co. of America, 980 S.W.2d 43, 53 (Mo. App. 1998); Sheets v. Brethren Mutual Insurance Co., 342 Md. 634, 658, 679 A.2d 540, 551 (1996). Here, the Kosses alleged that the Rocks’ misrepresentations were made with “reckless ignorance or indifference as to their falsity” and/or negligently. These allegations are sufficient to establish an “occurrence” under the State Farm policy. I find that the facts contained in the underlying complaint fall potentially within State Farm’s coverage. Thus, the trial court’s order should be affirmed.