Duty to Defend against Insured: Pursuant to an Exclusion of Acts by Insured for any Business Entity in which Insured has a Controlling Interest
In American Zurich Insurance Company v. Wilcox, American Zurich Insurance brought a declaration that it had no duty to defend. Zurich issued a lawyers professional liability insurance policy insuring Wilcox & Christopoulos, L.L.C., (the Wilcox law firm) and Mark Wilcox (Wilcox). Zurich alleged that the law firm and lawyer engaged in a civil conspiracy to open and operate a restaurant/lounge by illegal means.
The court addressed the issue of whether the insurer had a duty to defend the action against the insured. The duty of an insurer to defend an insured is determined by the allegations of the underlying complaint.
American Zurich contended that it had no duty to defend Wilcox law firm against an investor’s complaint, because exclusion E of the policy applies to acts or omissions of “any insured” “for any business entity” in which “any insured” has a “controlling interest.” American Zurich asserted that Wilcox was an insured attorney under the policy and, therefore, any acts by him for a business in which he had a controlling interest are excluded form coverage. Zurich contended that the circuit court found that Wilcox had a controlling interest in Liquor License Solutions, and thereby it triggered exclusion E.
In order to determine whether Zurich had a duty to defend the Wilcox law firm, the court first addressed whether there is a duty to defend the attorney Wilcox, individually. Without a doubt, Wilcox was an insured under the policy, since he was listed as a lawyer in the application for the policy on the day of the policy’s inception. The question becomes whether, within the meaning of exclusion E, Wilcox, as an insured, was acting “for” a company in which he had a controlling interest. If Wilcox was acting for Panacea Partners, which he had no controlling interest, then the exclusion does not apply, and Zurich has a duty to defend. If, however, Wilcox was acting for Liquor License Solutions, a company he admitted to managing and which he had a controlling interest, then exclusion E applies, and American Zurich is not obligated to defend him in the underlying lawsuit. Therefore, the court had to interpret the term “for” in the exclusion and determine whether the term was sufficiently ambiguous, so as to require the court to construe it against American Zurich as the drafter of the policy. The court took the term “for” and considered it in the context of the entirety of exclusion E. The parties implicitly acknowledge that the term “for” in exclusion E essentially means for the “benefit of,” disagreeing only as to whose benefit Wilcox’s actions were aimed. This implicit acknowledgment is supported by the American Heritage Dictionary’s definition of the term “for” as: (1) “used to indicate the recipient or beneficiary of an action”; or (2) “on behalf of”; or (3) “in favor of,” all of which essentially mean “for the benefit of.” American Heritage Dictionary 685 (5th ed. 2011). Accordingly, in this context, we fail to see two reasonable interpretations of the term “for.” All three of these definitions essentially define “for” as “for the benefit of” and we therefore find the term unambiguous. Even if Wilcox was acting for the benefit of both, there can be no doubt, nor does the Wilcox law firm attempt to deny, that Wilcox was also acting for the benefit of his company, Liquor License Solutions. There can be no doubt that Wilcox acted for the benefit of Liquor License Solutions, so as to trigger exclusion E of the American Zurich policy. American Zurich, therefore, has no obligation to defend Wilcox under that provision.
The next question is whether American Zurich must defend Wilcox law firm pursuant to exclusion E. The exclusion is applicable to all insureds under the policy based upon the conduct or interest of any one insured. The language of exclusion E explicitly precluded coverage of “alleged acts or omissions by any Insured * * * for any business enterprise * * * in which any Insured has a Controlling Interest.” The court determined that Wilcox is an insured under the policy, since he was listed as a lawyer in the application for the policy on the day the policy’s inception. Accordingly, since Wilcox, as an insured, acted for the benefit of Liquor License Solutions, in which he has a controlling interest, exclusion E also applies to the entire law firm. Therefore, pursuant to exclusion E, American Zurich need not defend the Wilcox law firm.
The court held that under policy exclusion insurer had no duty to defend law firm or lawyer, as lawyer was working for his liquor licensing business when he obtained liquor license for restaurant/lounge.
American Zurich Insurance Company v. Wilcox, 984 N.E.2d 86 (Ill.App. 1 Dist. 2013)).
