Despite Policy, Negligence Claim Snares Insurer

The 1st District Appellate Court recently held that an insurer had a duty to defend an insured under a homeowner’s policy, despite allegations in the underlying complaint that the insured intentionally drugged and raped the plaintiff’s deceased daughter before she died from a drug overdose, because the complaint also contained negligence allegations. Skolnik v. Allied Property and Casualty Insurance Co., 2015 IL App (1st) 142438 (Dec. 22, 2015).

The insureds and underlying claimant were represented by Huck, Bouma P.C. of Wheaton. Lindsay, Rappaport & Postel LLC represented the insurer, Allied.

William Johnson, as special administrator for the estate of his daughter, Haley, brought a wrongful death and survivor action on her behalf. The complaint alleged that Joshua Skolnik met Johnson at a pub in 2012, placed a date-rape drug in her drink, took her to his parents’ home, where she ingested methadone, and raped her.

The complaint also alleged that Johnson became unconscious, which Skolnik disclosed to his parents, and that Johnson’s friends came to check on her, but Skolnik refused to let them see her. She died within a few hours.

The complaint further alleged Skolnik negligently stored methadone in his home, which apparently had been prescribed for him; he and his parents negligently failed to call for medical assistance after finding Johnson incapacitated; and they took other affirmative actions to her detriment.

Allied had issued homeowner’s and umbrella policies to the Skolniks. Both contained a controlled substances exclusion, which excluded coverage for bodily injury arising out of the illegal use of narcotic drugs. The policies also were subject to an expected-or-intended-injury exclusion, which excluded coverage for bodily injury even if of a different kind, quality or degree than initially expected or intended.

Following tender of the underlying complaint to Allied, it brought this declaratory action claiming it had no duty to defend or indemnify. On cross motions for summary judgment, the trial court agreed with Allied, and the Skolniks and Johnson’s father appealed.

Complaint’s Allegations

In an opinion by Justice Michael B. Hyman, the 1st District reversed. He noted as a preliminary matter that, while the allegation of intentional delivery of the fatal drug would remain outside policy coverage, such an allegation may not extinguish the duty to defend where negligence is also alleged.

In trying to establish a defense obligation, Skolnik relied heavily on Flomerfelt v. Cardiello, 997 A. 2d 991 (N.J. 2010), which involved somewhat similar facts. The New Jersey court there held that where it could not be determined from the underlying complaint whether the injury arose out of drug use, which was excluded, or potentially something else, the insurer still had a duty to defend.

Allied, on the other hand, relied on State Farm Fire & Casualty Co. v. Young, 2012 IL App (1st) 103736, where a drug overdose and beating caused the victim’s death. Despite allegations in the underlying complaint that the insured had negligently failed to call 911, the court nonetheless found that the failure to act was intentional and that coverage was excluded under the expected-or-intended exclusion.

According to Hyman, Flomerfelt was more persuasive than Young.

Proximate Cause

Skolnik further contended that the possibility of multiple proximate causes of death, as alleged in the underlying complaint, presented a fact issue. With that proposition Hyman agreed, stating that where a proximate cause of injury is within policy coverage, coverage is not voided simply because the policy excludes another proximate cause of injury. At least this would be the case where the covered cause is a potential separate and independent cause of death.

Allied argued, however, that the “sole proximate cause” test is not the test for determining whether an exclusion applies, citing Allstate Insurance Co. v. Smiley, 276 Ill. App. 3d 971 (2d Dist. 1995). In that case, coverage for a child drowning in a homeowner’s swimming pool was excluded from coverage by a business activities exclusion in the policy, since the child was attending a child day care program operated as a business – despite allegations that the homeowner was negligent in maintaining the pool.

Hyman rejected Smiley, saying simply that its holding would not be extended here.

Finally, Hyman emphasized that the court was deciding only the duty to defend. This was so because the question of Skolnik’s negligence could be resolved only after a full hearing on the facts in the underlying case, and negligence was a possible independent basis for liability. The court thus was not opining on the duty to indemnify.

The 1st District, therefore, reversed summary judgment for Allied and remanded.

Key Point

Where both a covered and an excluded cause of an injury are alleged and the covered cause is pleaded as a separate and independent cause of the injury, the policy exclusion may not be a sufficient basis for finding a lack of a duty to defend.