Exclusion of Injuries To Resident is Effective
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Posted on February 9, 2022 by Barry Zalma
Defendant, Cynthia Donnelly, sued her landlords after she injured herself when an allegedly defective stair collapsed under her at the rental property. The landlords, defendants Vidyasagar Cheekati and Vijaya Kasireddy (collectively, the Insureds), informed their insurer, plaintiff Farmers Insurance Exchange (Farmers), of the injury and the lawsuit, but Farmers disclaimed coverage, claiming two policy exclusions precluded coverage for Donnelly’s injuries.
In Farmers Insurance Exchange v. Vidyasagar Cheekati, Vijaya Kasireddy, Cynthia Donnelly, Deana Todi, a/k/a Bina Todi, Apex Properties, Inc., a/k/a Remax Choice, d/b/a JP Finley & Remax Rising, Vidyasagar Cheekati and Vijaya Kasireddy, 2022 IL App (4th) 210023, Nos. 4-21-0023, 4-21-0024, Court of Appeals of Illinois, Fourth District (February 7, 2022) the Illinois Court of Appeal resolved the disputes that arose when Farmers refused to defend or indemnify the Insureds in Donnelly’s lawsuit and sought declaratory judgment, stating it rightly disclaimed coverage and, therefore, need not defend the Insureds.
The litigation culminated in a hearing on Farmers’ motion for judgment on the pleadings, which the trial court granted. The Insureds and Donnelly appeal.
BACKGROUND
In 2016 and 2017, the Insureds owned a home located in Bloomington, Illinois. They insured the property through Farmers with a homeowners policy. The Insureds, unable to sell the house, entered into a two-year lease agreement with Donnelly who rented the insured home as a tenant. On January 25, 2017, Donnelly allegedly sustained physical injuries while in the rented home when a defective staircase collapsed under her.
On January 24, 2019, Donnelly filed her complaint initiating the underlying action by alleging she sustained injuries due to the Insureds negligence. On March 7, 2019, Farmers sent the Insureds a letter disclaiming coverage for Donnelly’s injuries. Citing the resident and business exclusions in the homeowners policy, Farmers found their application excluded coverage because “[a]t the time of her alleged injury, Ms. Donnelly was a tenant in your home.”
Farmers moved to dismiss the Insureds’ claim and the trial court issued a four-paragraph order granting Farmers’ motion for judgment on the pleadings and dismissing the case.
ANALYSIS
Judgment on the pleadings is proper when the pleadings disclose no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.
An Insurer’s Duty to Defend its Insured
An insurer has a duty to defend its insured “[i]f the facts alleged in the underlying complaint fall within, or potentially within, the policy’s coverage.” Illinois State Bar Ass’n Mutual Insurance Co., 2018 IL App (4th) 170548, ¶ 35.
If an insurer relies on an exclusionary clause to deny coverage and refuses its duty to defend its insured, as Farmers does here, then it must be clear and free from doubt that the exclusionary clause applies.
Interpreting This Insurance Policy’s Resident Exclusion
When construing the language of an insurance policy, a court’s primary objective is to ascertain and give effect to the intentions of the parties as expressed by the words of the policy. If the policy’s words are clear and unambiguous, they will be given their plain and ordinary meaning, but if the policy terms are reasonably susceptible to more than one meaning, they are ambiguous and will be strictly construed against the drafter. Likewise, courts will not strain to find ambiguity in an insurance policy where none exists.
The Insureds’ homeowners insurance policy included certain liability coverage. The Insureds’ homeowners policy, however, also contained a “Liability Exclusions” to “Any insured or other residents of the residence premises. We do not cover bodily injury or personal injury to: (a) any insured; or (b) any resident of the residence premises, whether resident in the dwelling or a separate structure.”
In her underlying complaint, Donnelly identified herself as a tenant lawfully on the premises. The Court of Appeals, obviously, understood that allegat to mean she dwelt in the home. In fact, neither the Insured nor Donnelly denied she lived in the insured home.
Looking at the policy as a whole and considering the type of policy involved, as the Insureds implored the court to do, the court could not conclude the parties intended for the personal liability coverage in this homeowners’ policy to apply to bodily injuries sustained by a person renting the insured home for two years.
In sum, since “resident(s)” is an undefined, unambiguous policy term, the court of appeal adopted its plain, ordinary meaning. Given that meaning-one who dwells in a place permanently or for a considerable amount of time- the court concluded, based on the allegation in the underlying complaint that Donnelly was a tenant in the Insureds’ home, Donnelly was a resident of the residence premises when she allegedly sustained injuries from a defective stair in the home. Consequently, the court of appeal concluded that it was “clear and free from doubt” that the resident exclusion applied to preclude coverage, Farmers had no duty to defend the Insureds, and the trial court rightly granted Farmers’ motion for judgment on the pleadings.
Estoppel
The Insureds also argued Farmers should be estopped from exercising the right to disclaim coverage because it twice informed the Insureds it would cover the claim and then waited two years to disclaim coverage.
Farmers twice informed the Insureds it was investigating their claim, but Farmers did not promise coverage. Similarly, the agent’s comment that Farmers “will take it from there” did not promise coverage. More importantly, though, the Insureds have not alleged prejudice, let alone present clear, concise, unequivocal evidence of prejudice. Because plaintiffs did not assert how they were prejudiced plaintiffs fail to establish a necessary element of estoppel.
The court affirmed the trial court’s dismissal, agreeing that Farmers did not unreasonably delay, nor did it wrongly deny coverage.
ZALMA OPINION
The Illinois Court of Appeal found, as it was required to do by law and precedent, that an insurance policy is a contract that must be interpreted as a whole. Doing so it found that the clear and unambiguous term “resident” means a person living in the house, as did Donnelly, subject to a written lease. Multiple, creative arguments to find coverage failed. Insurance was not the only remedy available to Ms. Donnelly. She can still proceed against the landlords and collect any judgment she may receive from the landlord’s assets, like the house she rented.
© 2022 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.
He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.
Subscribe to “Zalma on Insurance” at https://zalmaoninsurance.locals.com/subscribe and “Excellence in Claims Handling” at https://barryzalma.substack.com/welcome.
You can contact Mr. Zalma at https://www.zalma.com, https://www.claimschool.com, [email protected] and [email protected] . Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
You may find interesting the podcast “Zalma On Insurance” at https://anchor.fm/barry-zalma; you can follow Mr. Zalma on Twitter at; you should see Barry Zalma’s videos on https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/featured; or videos on https://rumble.com/zalma. Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims–library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/
Jury’s Findings Interpreting Insurance Contract Affirmed
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Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.
In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.
BACKGROUND
Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....
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Contract Interpretation is Based on the Clear and Unambiguous Language of the Policy
In Associated Industries Insurance Company, Inc. v. Sentinel Insurance Company, Ltd., No. 23-CV-10400 (MMG), United States District Court, S.D. New York (June 16, 2025) an insurance coverage dispute arising from a personal injury action in New York State Supreme Court.
The underlying action, Eduardo Molina v. Venchi 2, LLC, et al., concerned injuries allegedly resulting from a construction accident at premises owned by Central Area Equities Associates LLC (CAEA) and leased by Venchi 2 LLC with the USDC required to determine who was entitled to a defense from which insurer.
KEY POINTS
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Exclusion Establishes that There is No Duty to Defend Off Site Injuries
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Attack by Vicious Dog Excluded
In Foremost Insurance Company, Grand Rapids, Michigan v. Michael B. Steele and Sarah Brown and Kevin Lee Price, Civil Action No. 3:24-CV-00684, United States District Court, M.D. Pennsylvania (June 16, 2025)
Foremost Insurance Company (“Foremost”) sued Michael B. Steele (“Steele”), Sarah Brown (“Brown”), and Kevin Lee Price (“Price”) (collectively, “Defendants”). Foremost sought declaratory relief in the form of a declaration that
1. it owes no insurance coverage to Steele and has no duty to defend or indemnify Steele in an underlying tort action and
2. defense counsel that Foremost has assigned to Steele in the underlying action may withdraw his appearance.
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ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
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Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
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Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...