Zalma on Insurance
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May 25, 2022
Estoppel Cannot Create Insurance Coverage

Lack of Bodily Injury, Personal Injury or Occurrence Bars Coverage

Read the full article at https://lnkd.in/gK-3eQtY and at https://zalma.com/blog plus more than 4200 posts.

Cambridge Mutual Fire Insurance Company (Cambridge) sued seeking a declaratory judgment that it did not owe Defendants Terry Gaca and Janet Waymen (collectively, “Defendants”) a duty to defend an underlying lawsuit under the terms of their insurance policy. Thomas J. Frederick sued in Illinois state court, alleging Defendants maintained a boarding house and a parking facility for large trucks on their property (the “Underlying Suit”). The Underlying Suit alleged public nuisance, conspiracy to create a public nuisance, and nine violations of City of Naperville (“Naperville”) zoning ordinances under the Adjoining Landowner Act, 65 ILCS 5/1113-15.

In Cambridge Mutual Fire Insurance Company v. Terry L. Gaca, and Janet L. Wayman, individually and as trustee of The Janet L. Wayman Trust, No. 20 C 2447, United States District Court, N.D. Illinois, Eastern Division (May 17, 2022) Cambridge moved for summary judgment.
BACKGROUND

Cambridge sued seeking a declaratory judgment that it did not owe Defendants Terry Gaca and Janet Waymen (collectively, “Defendants”) a duty to defend an underlying lawsuit under the terms of their insurance policy.

Defendants’ policy with Cambridge includes Homeowner’s Liability Insurance and Personal Umbrella Liability Insurance (the “Policy”). The Policy provides:

If a claim is made or a suit is brought against an “insured” for damages because of “bodily injury” or “property damage” caused by an “occurrence” or “personal injury” caused by an offense to which this policy applies, we:

1. Will provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent.

“‘Bodily injury’ means bodily harm, sickness or disease, including required care, loss of services and death that results.” “‘Property damage’ means physical injury to, destruction of, or loss of use of tangible property.” “‘Personal injury’ means injury arising out of . . . [t]he wrongful eviction from, wrongful entry into, or invasion of right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor . . .”. Finally, “‘[o]currence’ means an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results . . . in: ‘bodily injury’ or ‘property damage.’”

The Policy also contains several exclusions. Coverage does not apply to:

“Bodily injury” or “property damage” which is expected or intended by an “insured” even if the resulting “bodily injury” or “property damage”;

is of a different kind, quality or degree than initially expected or intended; or

is sustained by a different person, entity, real or personal property, than initially expected or intended….

“Personal injury”:

caused by or at the direction of an “insured” with the knowledge that the act would violate the rights of another and would inflict “personal injury”….

Based on these events, Cambridge alleged the Underlying Suit does not involve “property damage, ” “personal injury, ” or an “occurrence” under the Policy and moved for summary judgment.
DISCUSSION

The parties agree Illinois law applies. In Illinois, the construction of an insurance policy is a question of law. An insurance policy is to be construed as a whole and requires the court to ascertain and give effect to the true intentions of the contracting parties.

If the underlying complaint alleges facts that fall “within or potentially within” the coverage of the policy, the insurer is obligated to defend its insured even if the allegations are “groundless, false, or fraudulent.” United States Fidelity & Guar. Co. v. Wilkin Insulation Co., 144 Ill.2d 64, 73 (1991) (emphasis in original).

FIRST: an “occurrence” is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Cambridge specifically argues there is no “accident.” Illinois courts have defined “accident” for the purpose of insurance coverage disputes as “an unforeseen occurrence, usually an undesigned sudden or unexpected event of an inflictive or unfortunate character.” [W. Am. Ins. Co. v. Mw. Open MRI, Inc., 2013 IL App (1st) 121034, ¶ 22]

The relevant inquiry is “whether the injury is expected or intended by the insured, not whether the acts were performed intentionally.”

The complaint in the Underlying Suit asserts public nuisance, conspiracy to create public nuisance, and violations of Naperville ordinances The complaint alleges Defendants intentionally conspired to violate the public’s rights and avoid enforcement of Naperville’s ordinances. Further, the complaint establishes Defendants knew their use of the property as a boarding house and truck lot violated Naperville ordinances, and even sued Naperville to challenge the legality of the ordinances. The complaint in the Underlying Suit establishes the injuries were intentional, not accidental. Therefore, there was no “occurrence” as that term is defined in the Policy.

SECOND: Defendants must be the “owner, landlord, or lessor” of the “room, dwelling or premises” where the alleged invasion occurred. Because Frederick is the owner of the property that was “invaded,” there is no “personal injury” alleged in the Underlying Suit.
Estoppel

To establish equitable estoppel under Illinois law, Defendants must show:

[Cambridge] misrepresented or concealed material facts;

[Cambridge] knew at the time [it] made the representations that they were untrue;

[Defendants] did not know that the representations were untrue when they were made and when they were acted upon;

[Cambridge] intended or reasonably expected that [Defendants] would act upon the representations;

[Defendants] reasonably relied upon the representations in good faith to [their] detriment; and

[Defendants] would be prejudiced by [their] reliance on the representations if [Cambridge] is permitted to deny the truth thereof.

Defendants failed to establish equitable estoppel. Defendants have not shown Cambridge misrepresented any material facts. The undisputed facts show Cambridge denied coverage at all times. Defendants do not show they detrimentally relied on any misrepresentation by Cambridge.

Defendants say Cambridge is estopped from denying coverage because an insurance company cannot deny coverage and file a declaratory judgment suit. This argument is unsupported by the facts and applicable law. The estoppel doctrine cannot create coverage where none existed in the first place. Because Cambridge followed Illinois law and does not have a duty to defend under the Policy, Defendants’ estoppel arguments fail.

THIRD: Defendants argue Cambridge is estopped from denying coverage because it waited too long to file this action. The Underlying Suit was filed in August 2019, while this action was filed in March 2020. But we need not determine if this delay was unreasonable because, as with Defendants’ second estoppel argument, the doctrine does not apply if the insurer did not breach its duty to defend.

The Court granted Cambridge’s Motion for Summary Judgment.
ZALMA OPINION

Liability insurance covers a large possibility of claims made against an insured that could potentially be covered by the policy. However, no insurance policy covers every possible loss and never will cover intentional torts. Since the claims were all intentional the insured’s tried to claim that the actions of Cambridge estopped them from denying the request for defense and indemnity. They failed for lack of evidence.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

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. He is available at http://www.zalma.com and [email protected].

Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe.

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.

Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.

In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.

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Zalma’s Insurance Fraud Letter – June 1, 2025

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Posted on June 2, 2025 by Barry Zalma

Post 5087

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Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf

Zalma’s Insurance Fraud Letter – June 1, 2025

See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.

ZIFL – Volume 29, Issue 11

The Source for the Insurance Fraud Professional

Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF

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 ...

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May 30, 2025
Plain Language of Policy Enforced

No Coverage if Home Vacant for More Than 60 Days

Failure to Respond To Counterclaim is an Admission of All Allegations

Post 5085

See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.

In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.

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On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.

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May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

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
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Health Care Fraud Trial Results in Murder for Hire of Witness

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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 ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

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April 30, 2025
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Post 5062

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Immigrant Criminals Attempt to Profit From Insurance Fraud

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