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Insurance Law

No Reasonable Person Would Believe Contract Exclusion Applies to Wrongful Eviction

By Jill Berkeley, Partner, Neal, Gerber & Eisenberg LLP

In John Doyle Trust, et al. v. Country Mutual Insurance Co., 2014 IL App (2d) 121238, [enhanced version available to subscribers], the Illinois appellate court affirmed summary judgment entered against Country Mutual, finding it owed its insured landlords a defense for a wrongful eviction action. That ruling is hardly surprising, but the insurer’s attempt to deny coverage is what makes me want to get up on my soapbox.

How is there no coverage for a wrongful eviction when the policy provides coverage for wrongful eviction? Country Mutual argued that because the coverage fell under “Personal Injury” that the coverage only applied if his “person” was evicted, not merely for his property. Because the tenant was out of the country at the time of the eviction, Country Mutual claimed that the suit was not covered because the “person was not occupying” the space. Are you kidding me?

If that wasn’t bad enough, Country Mutual raised the breach-of-contract exclusion because the lease is a contract. It suggested that if its wrongful eviction coverage applied, it only applied to evictions where there are no leases. Country Mutual’s attorney suggested that its policy issued to a business, which is a landlord, is not buying eviction coverage. Thankfully, the appellate court rejected the argument finding that no “average, normal and reasonable” person would believe that a breach of contract exclusion applied to a wrongful eviction involving a lease agreement.

What is truly remarkable is that the court did not allow the insured’s Section 155 “vexatious and unreasonable” cause of action. Talk about giving the insurance company and its counsel the benefit of the doubt. The Doyles argued that they were entitled to damages under Section 155, [enhanced version available to subscribers], because they were forced to file a declaratory judgment to get coverage for an unambiguous term in the policy and there was never a bona fide basis to deny. The court allowed the “excuse” of relying on a prior case, Allstate Ins. Co. v. Amato, 372 Ill. App. 3d 139 (2007), [enhanced version available to subscribers], which looked at the issue of coverage for “wrongful detention,” not “wrongful eviction.”

The insured may have been liable for wrongful eviction, but they were robbed of the benefit of the insurance they purchased.

Read additional articles on legal developments that affect policyholders at the Policyholder Insurance Law Blog

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