Duty to Defend Underlying Complaint to Satisfy “Unexpected” and “Unintentional” Element within Definition of “Wrongful Act”

In American Alternative Insurance Co. v. Lisle-Woodridge Fire, American Alternative Insurance Company (“American Alternative”) filed a declaratory judgment action against Lisle-Woodridge Fire Protection District (the “District”), Chicago Metropolitan Fire Prevention Company (“Chicago Metro”), ADT Security Services, Inc., Alarm Detection Services, Inc., D.M.C. Security Systems, Inc., Illinois Alarm Services, Inc., and SMG Security Systems, Inc. (collectively, the “Alarm Companies”).  American Alternative’s complaint requested a finding that, pursuant to an insurance policy, it did not have a duty to defend the District or Chicago Metro in a related matter in federal court.

American Alternative’s first contention on appeal is that the trial court erred when it determined it had a duty to defend the District and Chicago Metro pursuant to the policy agreement.  In support of this contention, American Alternative argues that “there is no allegation in the underlying complaint [in federal court] that satisfies the ‘unexpectedly and unintentionally’ element within the definition of ‘wrongful act.’ “

The court reviewed whether there was a duty to defend.

In regard to the policy’s language providing coverage for intentional acts, we turn to whether the District’s actions, as alleged in the underlying complaint, “unexpectedly and unintentionally” resulted in damages to others. The Illinois Supreme Court has noted that the terms “intentional” and “expected” in insurance clauses are not treated as synonyms because if they were, no purpose would be served by including them in the same clause.  The Supreme Court concluded that “intent” required a greater degree of proof than establishing an “expectation.” Pursuant to the Supreme Court’s definition of “expected,” the definition of “unexpected” necessarily must be injuries or, in this case, “damages” that should not have been reasonably anticipated by the insured.

The court found in this case that the allegations in the federal lawsuit potentially come within the policy’s coverage provisions.  Therefore, plaintiff has a duty to defend the District. Counts III and IV of the Alarm Companies’ complaint in the federal lawsuit allege violations of the Sherman Act, which requires the Alarm Companies to establish damages. Thus, in order to find in American Alternative’s favor, the court would have to conclude that, as a matter of law, not only did the District’s acts in passing the ordinances result in damages, but those damages were either expected or intended, or both.

Am. Alt. Ins. Co. v. Lisle-Woodridge Fire Prot. Dist., 2014 IL App (2d) 130803.

NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).