Five Yards for Encroachment: Prematurity Doctrines Found to Preclude Insurer’s Use of Extrinsic Evidence to Evade Coverage

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In Pekin Insurance Co. v. St. Paul Lutheran Church, 2016 IL App (4th) 150966, the Illinois Appellate Court refused, based on the Prematurity Doctrine, to consider extrinsic evidence in an insurer’s declaratory judgment action in connection with an underlying wrongful death suit.

As background, Hope Farney, as administrator of the estate of Kitty Mullins, sued St. Paul Lutheran Church (Church) for wrongful death. She alleged that a Church employee, Matthew Geerdes, used his personal vehicle for Church business and negligently crashed into a vehicle driven by Mullins, resulting in her death. Farney alleged that at the time of the incident, Geerdes was negligently distracted while driving by a Church employee’s phone call to Geerdes. The Church tendered its defense to its liability insurer, Pekin Insurance Company, which agreed to defend under a reservation of rights. Notably, Pekin’s policy covered bodily injury caused by use of a non-Church owned auto used for Church business. Pekin then tendered the defense to Country Mutual Insurance Company, Geerdes’ automobile insurer, which accepted coverage without reservation. Importantly, the Pekin policy’s “other insurance” provision contained an excess provision.

Pekin subsequently initiated a declaratory judgment action, contending it had no duty to defend the Church since Geerdes was not using his vehicle in connection with Church business, as he was on his way to another job and because there was other insurance covering the same loss. The Church and Farney filed respective motions to dismiss. The Church contended that the allegations in the underlying complaint brought Farney’s claims within the scope of the Church’s coverage policy with Pekin. The Church further contended that there was no actual controversy between Pekin and the Church. Farney contended that because the Church supervised and controlled Geerdes at the time of the incident, and because Geerdes was acting in the interest of the Church, the Pekin policy applied. Farney also contended that the “other insurance” provision did not relieve Pekin from its duty to defend the Church, as the wrongful death complaint remained within the four corners of the Pekin policy, and the “other insurance” provision did not affect coverage. Pekin responded that the court should look beyond the four corners of the underlying complaint and consider Geerdes’ deposition testimony that, at the time of the incident, he was not using his automobile for Church business. The trial court ultimately granted the defendants’ motions to dismiss. Thereafter, Pekin moved for permission to file a second amended complaint for declaratory judgment (which included Geerdes’ testimony that he was driving to his other job at the time of the incident) and to stay the declaratory judgment until resolution of the underlying action. The trial court denied Pekin’s motion with prejudice.

The Appellate Court affirmed. It first found that by considering whether Geerdes was using his automobile for Church business that might collaterally estop Farney from pursuing a vicarious liability theory against the Church. The Appellate Court further reasoned that under the circumstances, a stay of proceedings was inappropriate. The Appellate Court also determined that the “other insurance” question was moot because there was no “actual controversy” to resolve.

This decision further solidifies well-settled Illinois precedent that extrinsic evidence will not be admitted in a declaratory action if it will decide an ultimate issue in the underlying lawsuit.