The U.S. District Court for the Southern District of Illinois applied the “eight-corners” rule to determine that insurer had no duty to defend or indemnify insured in Elmore v. Grinnell Mutual Reinsurance Company et al. (S.D.Ill. July 27, 2015).
The plaintiff filed a declaratory judgment action against Grinnell Mutual Reinsurance, alleging that Grinnell had a duty to defend and indemnify the plaintiff under the terms of his Farm-Guard policy for damages arising out of a motor vehicle accident on a public highway in Illinois. The plaintiff further alleged that Grinnell breached its duty to defend and indemnify by denying coverage, and was therefore estopped from raising policy defenses.
Grinnell denied coverage under the motor vehicle exclusion language contained in the farm policy, due to the fact that the plaintiff was operating a 1994 Jeep Wrangler, which was licensed and registered for use on public roads, at the time of the accident.
The plaintiff alleged that since he was driving his 1994 Jeep Wrangler to pick up a grain wagon when he was involved in a motor vehicle collision, the Jeep qualified as a “farm implement” under the policy, and thus, fell under an exception to the motor vehicle exclusion.
Grinnell filed a motion for summary judgment arguing that the plain language of the insurance contract excludes coverage because the Jeep is a “motor vehicle” and could not be considered a “farm implement” under any interpretation of the policy. Grinnell further argued that even if the Jeep Wrangler could be considered a “farm implement” under the policy language – defining a farm implement as a “recreational vehicle” when being used as in a farming activity at the time of the occurrence – this exception would not apply, since the policy language defined “farming activity” as the ownership, maintenance, or use of any of the insureds premises for production of crops, or the raising, or care of any livestock or poultry. Grinnell argued that there was no evidence that the use of the Jeep on public roads involved the ownership, maintenance of use, or insured premises. In addition, Grinnell argued that the clear policy language excludes coverage for recreational vehicles unless they are being operated on the insured premises.
The standard for granting summary judgment in Illinois is very high. The reviewing court must look at the evidence presented in the light most favorable to the nonmoving party. Despite that high burden, the U.S. District Court for Southern Illinois granted Grinnell’s motion for summary judgment, finding that there was no evidence that the plaintiff was maintaining or using an “insured premises” at the time of the accident, and as such, the Jeep Wrangler did not fall under the policy’s “farm implement” definition. Further, the court found that Grinnell did not breach its duty to defend under Illinois Law, because such a duty did not exist under the “eight-corners” rule, in which the court compares the four corners of the complaint with the four corners of the insurance policy to determine whether the facts alleged in the complaint fall within, or potentially within, the policy’s coverage.
This ruling is a clear reminder that under Illinois law, if the facts of a complaint potentially fall within the scope of the policy coverage, insurers must either defend under a reservation of rights, or seek declaratory judgment that there is no coverage, even when the allegations are groundless. In this case, the clear and unambiguous language of the Grinnell policy, when compared to the facts alleged in the plaintiff’s complaint, inferred no duty on Grinnell.