Court Finds No Homeowners Coverage For Claims Of Tenant Injured In Residence

March 10, 2022 / Writing and Speaking

By Don R. Sampen, published, Chicago Daily Law Bulletin, March 8, 2022

The 4th District Appellate Court recently held that a claim by a tenant residing in the policyholders’ home was excluded from coverage under a homeowners policy provision excluding coverage for bodily injuries to “residents.”

The case is Farmers Insurance Exchange v. Cheekati, 2022 IL App (4th) 210023 (Feb. 7). Farmers was represented by Lewis Brisbois Bisgaard & Smith LLP of Chicago. Jeff W. Lindsay P.C. of Bloomington represented the insured owners, Vidyasagar Cheekati and Vijaya Kasireddy. Robert A. Langendorf P.C. of Chicago represented the tenant, Cynthia Donnelly.

The insureds owned a home in Bloomington that they rented to Donnelly under a two-year lease. In January 2017, Donnelly allegedly sustained injuries when a defective staircase collapsed. She brought suit against the insureds in January 2019.

The Farmers homeowners policy issued to the insureds provided liability coverage for claims against “insureds,” defined as the named insureds and permanent residents of the household who were (a) relatives or (b) other persons under age 21 within the care of the insureds. In addition, the policy contained a liability exclusion applicable to bodily injury to any insured or any resident of the premises.

The insureds notified their Farmers agent of Donnelley’s claim in April and May of 2017, and he said he would “take it from there.” Subsequently, in 2018, the insureds received two letters from Farmers advising that Farmers was investigating and that defending the insureds was “our first priority.”

Within two months of Donnelly filing suit in 2019, however, Farmers denied coverage. Farmers then brought this declaratory action seeking a determination that it had no duty to defend or indemnify.

The insureds responded by raising counterclaims contending that the policy exclusion did not apply, that Farmers was guilty of bad faith under 215 ILCS 5/155, that it breached its duty to defend and settle, and that it was estopped to deny coverage.

The trial court granted Farmers’ motion for judgment on the pleadings, and the insureds and Donnelly appealed.


In an opinion by Justice Craig H. DeArmond, the 4th District affirmed. He observed initially that, while the parties agreed that Donnelly did not qualify as an “insured” under the policy definition, they disagreed as to whether she was a “resident.” If she was a resident, her injury would fall within the policy provision excluding coverage for injuries to residents.

The insureds contended she was not a “resident,” but a “tenant,” and therefore entitled to coverage, because the policy twice mentioned “tenants” in other unrelated parts of the policy. DeArmond disagreed, pointing out that the other provisions did not provide coverage for claims by tenants.

He noted that one of the other provisions, for example, a rental property exclusion, while excluding coverage generally for the rental of the property, did provide an exception to the exclusion for the occasional rental to roomers or boarders. The exception to the rental exclusion, however, did not signal an intent to provide coverage for Donnelly’s injuries.

It did not, said DeArmond, because an exception to an exclusion cannot, under Illinois law, be interpreted as granting coverage or providing an additional basis for coverage. As a result, the policy could not be construed to apply to bodily injuries sustained by a person renting the insured home for two years.

Regarding the insureds’ estoppel argument, DeArmond observed they were required to show they were misled by Farmers, they relied on its conduct or misrepresentation, their reliance was reasonable, and they were prejudiced.

The estoppel claim here was based on the agent’s statement he would “take it from there” and Farmers’ letters concerning its investigation and its “priority” to defend the insureds. But in none of these communications, DeArmond observed, did Farmers promise coverage. The insureds, moreover, did not identify any evidence showing they were prejudiced.

He noted that no duty to defend could have arisen until Donnelly brought suit in January 2019, and within two months of her doing so, Farmers denied coverage. Under these circumstances, the insureds could not meet their burden of demonstrating prejudice.

As for the section 155 claim, DeArmond wrote that the insureds relied on the same facts they raised in support of their estoppel position. In this case, moreover, Farmers had no duty to defend, it could not have breached its duty to defend or settle, there was no unreasonable delay in its denial of coverage, and it therefore did not violate section 155.

The court therefore affirmed the judgment of the trial court in favor of Farmers.

Key Point

An exception to an exclusion cannot be interpreted as providing coverage or an additional basis for coverage, but merely preserves coverage if already granted.

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