Undefined term “customers” is given plain and ordinary meaning in automobile dealership’s umbrella and
excess insurance policies that excluded “customers”
as insureds, thereby precluding coverage for test driver sued for wrongful death and personal injury claims
after accident involving dealership’s vehicle.
Despite intentional acts exclusion in homeowner’s
policy, insured was entitled to a defense in malicious
prosecution action, because policy covered “personal
injury” defined to include malicious prosecution; furthermore, Illinois public policy does not prohibit insuring against this type of intentional conduct.
Czapski v. Maher, 954 N.E.2d 237 (Ill. App. 1st Dist. 2011),
was a declaratory judgment action concerning an automobile dealership’s umbrella and excess insurance policies.
The underlying action resulted in a $13 million wrongful
death judgment in favor of the family of Roger Czapski, a
salesperson of the dealership killed while riding as a passenger on a test drive in one of the dealership’s vehicles.
The declaratory judgment action was filed by his family
seeking coverage for the test driver against whom the $13
million judgment was entered.
In Ill. Farmers Ins. Co. v. Keyser, 956 N.E.2d 575 (Ill. App.
3rd Dist. 2011), the insurer filed a declaratory judgment
action seeking a determination that it was not obligated to
defend its insured in connection with an underlying malicious prosecution lawsuit filed against the insured. The
insurer argued its homeowner’s policy did not cover the
insured because the underlying lawsuit alleged the insured
had committed intentional acts, and the policy contained
an intentional acts exclusion. The insured emphasized,
however, that the policy covered “personal injury resulting
from an occurrence” and defined “personal injury” in part
as “any injury arising from false arrest, imprisonment, malicious prosecution and detention.” The circuit court agreed
with the insured’s position and granted summary judgment
in her favor.
On cross-motions for summary judgment, the case turned
on the meaning of the undefined term “customers” in
the following provision: “Your customers are not ‘named
insureds’ or ‘insureds’ as defined in this policy.” The family members argued the test driver was not a customer
because he did not purchase a vehicle and was merely
test-driving one at the time of the accident. The circuit
court agreed, but the First District reversed, noting that if
the term “customers” were so limited, the exclusion in the
policy would be meaningless. Because an interpretation
rendering a provision meaningless is unreasonable, the
First District held the plain and ordinary meaning of the
term “customers” includes individuals test-driving automobiles, and reversed and remanded with instructions to
enter summary judgment in favor of the insurers.
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The Third District affirmed, holding that to exclude coverage for malicious prosecution under the intentional acts exclusion would render the provision defining personal injury
superfluous. Furthermore, if the insurer’s argument were
“taken to its logical conclusion,” the policy “would not make
any sense,” and would “provid[e] coverage in one sentence
and then tak[e] it away.”
The court also rejected the insurer’s public policy argument, noting there is no absolute bar against coverage
for intentional acts in Illinois, which distinguishes between
serious crimes such as murder and less serious intentional
acts such as defamation and retaliatory discharge. Malicious prosecution falls into the latter category and therefore may be covered for a premium willingly paid by an
insured and accepted by an insurer.
Lawyer’s professional liability insurer properly applied $100,000 limit of liability rather than $300,000 aggregate limit
when indemnifying a law firm and its attorneys in connection with multiple lawsuits and claims filed by clients of firm,
following embezzlement by firm’s paralegal.
In Continental Cas. Co. v. Howard Hoffman & Assoc., 955 N.E.2d 151, (Ill. App. 1st Dist. 2011), the insurer sought a declaratory judgment concerning the extent of its indemnity obligation under a lawyer’s professional liability policy. Underlying the action were a number of claims and lawsuits filed against the insured law firm and its attorneys in connection with an embezzlement scheme concocted by a paralegal of the law firm. The insurer argued its indemnity obligation was subject to a $100,000
limit for multiple related claims, rather than a $300,000 aggregate limit for unrelated claims. The insureds, however, argued
the policy’s use of multiple undefined terms such as “each claim,” “single claim,” and “all claims” in various policy provisions
(including a “Limit of liability—each claim” provision and a “Multiple insureds, claims and claimants” provision) rendered the
policy ambiguous. On cross-motions for summary judgment, the circuit court agreed with the insurer’s position, applying a
single $100,000 limit.
On appeal, the case turned on the policy’s definition of “related claims” as “all claims arising out of a single act or omission
or arising out of related acts or omissions in the rendering of legal services.” All claims and lawsuits brought against the law
firm and its attorneys were based on an embezzlement scheme perpetrated by the firm’s paralegal. This scheme constituted
a single act, and all claims were logically and causally connected to that scheme. As such, the First District refused to “create ambiguity where none exists.” The court therefore affirmed summary judgment in favor of the insurer, holding that the
$100,000 limit applied.
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