“Premises” Liability (IL App.)shoke2013
Parking lot shooting covered rejecting insurer argument it didn’t result from a defect in the premises.
An Illinois appellate court in the first district, applying Illinois law, reversed the trial court’s grant of summary judgment in favor of an insurer and held the insurer had a duty to defend and indemnify the policyholder for claims filed by two individuals who were shot in the policyholder’s parking lot.
A woman was killed and a man was injured in a shooting that took place in the parking lot outside of Dominick’s Finer Foods (“Dominick’s”). The shooters initially confronted the victims inside Dominick’s before following them into the parking lot. The decedent’s estate sued Dominick’s, and the surviving victim later joined the suit.
The Dominick’s store was a tenant of the Kennedy Plaza Shopping Center (“Kennedy Plaza”). Kennedy Plaza purchased CGL insurance coverage from Netherlands Insurance Company (“Netherlands”) during the relevant time period. It was undisputed that Dominick’s was an additional insured under the Netherlands policy, and that the insurance covered not only the Dominick’s store but the adjacent parking lot where the shooting occurred.
Dominick’s tendered the claim to Netherlands. Netherlands denied coverage, and Dominick’s filed suit for a declaration of coverage and for statutory damages under 215 ILCS 5/155 for the insurer’s alleged bad-faith conduct in denying the claim. Ruling on cross-motions for summary judgment, the trial court agreed with Netherlands that Dominick’s was not entitled to coverage under the policy and that Dominick’s bad faith claim was time-barred. Specifically, the trial court held that only a loss arising from some defect in the premises (e.g., twisting your ankle by stepping in a pothole) was covered by the Netherlands policy. Dominick’s ultimately settled the claims for $1.3 million.
With regard to the duty to defend, the appellate court first looked to the allegations contained in the sixth amended complaint, which alleged: Dominick’s operated a food store and parking lot at Kennedy Plaza; Dominick’s was aware of gang activity near the store; the two shooters “confronted and threatened” plaintiffs while inside the store; the gang members were carrying a loaded gun in the store; the gang members followed plaintiffs into the parking lot, ultimately shooting them; Dominick’s hired security companies to patrol the parking lot, even though Dominick’s knew or should have known that the security companies were not competent. In count IV, the plaintiffs alleged two theories of liability: (1) premises liability, based on Dominick’s status as the occupier of the premises; and (2) voluntary undertaking – that Dominick’s voluntarily assumed a duty to protect patrons by hiring security companies to patrol the parking lot.
The appellate court then looked to the language of the Netherlands policy. In relevant part, the Netherlands policy insured Dominick’s as an additional insured “with respect to liability arising out of”
A.) Your ongoing operations performed for that person or organization; or
B.) Premises or facilities owned or used by you.
The appellate court held that Netherlands had a duty to defend under clause (b), because the complaint could be potentially interpreted as imposing “liability” on Dominick’s “arising out of [the] premises.” The appellate court held that Netherlands had a duty to defend under both of plaintiffs’ theories of liability – premises liability and liability based on voluntary undertaking.
As for premises liability, the appellate court held: “Liberally comparing the policy against the complaint, we do not find it unreasonable in the least to conclude that the ‘liability’ of Dominick’s … [arises out of] the premises. Because it is a reasonable interpretation favoring coverage, it is one we must adopt.” The appellate court rejected Netherlands argument (which the trial court based its decision on) that the loss must occur due to some defect in the premises. Despite finding Netherlands’ position “not an unreasonable interpretation,” the appellate court held: “The problem for Netherlands is that if we find our interpretation reasonable, and it favors coverage, it is the interpretation we must adopt, even if the insurer proffers a reasonable interpretation of its own that denies coverage.”
As for liability based on voluntary undertaking, the appellate court held: “The complaint alleged that Dominick’s … voluntarily undertook a duty to keep the premises safe for its patrons or invitees … And what Dominick’s is accused of doing is not keeping its premises safe for its patrons and invitees … we do not find it unreasonable to view the allegations … liberally construed, as alleging ‘liability’ [arising out of] the premises.” Accordingly, the appellate court held Netherlands had a duty to defend Dominick’s.
The appellate court also held that Dominick’s had a duty to indemnify Dominick’s: “[T]he failure by Dominick’s to keep the premises safe—in violation of either its common-law duty, its voluntarily-assumed duty, or both—actually resulted in ‘liability arising out of the premises.’ Netherlands owed Dominick’s a duty to indemnify.”
The appellate court, however, upheld the trial court’s ruling that Dominick’s could not maintain a bad faith claim against Netherlands. The appellate court noted that whether conduct is vexatious and unreasonable is determined by examining the totality of the circumstances: “Though we have disagreed with Netherlands’s interpretation of the policy language at issue, we do not believe that its position was so unreasonable as to warrant damages under section 155 … The fact that an able and experienced trial judge agreed with Netherlands is further evidence that Netherlands’s arguments and conduct do not warrant sanctions.” Dominick’s Finer Foods v. Indian Ins. Co., 2018 Il App (1st) 161864 (Mar. 1, 2018).