Triggering Coverage
Pekin Insurance Company (Pekin) issued a commercial general liability (CGL) policy covering Xactdose, Inc., a packager and distributor of single-dose units of liquid medication. While serving as directors of Xactdose, three directors (Defendants) allegedly formed and operated another company, Precision Dose, Inc., which engaged in the same type of business. The policy was amended to name Precision Dose as an insured. Minority shareholders of Xactdose filed an amended complaint against Defendants, derivatively on behalf of Xactdose, for breach of fiduciary duty.
Defendants tendered plaintiffs’ suit to Pekin for defense and indemnity. Pekin denied that the policy covered any of the claims and filed a declaratory judgment action seeking that it had no duty to defend. Pekin and Defendants filed cross-motions for summary judgment, and Pekin additionally moved to strike the affidavit of Koopman, the former president of Xactdose and current president of Precision Dose. Pekin argued that because the affidavit was not submitted until Defendants filed their motion for summary judgment and the affidavit contained facts of which Pekin was unaware when coverage was denied, the facts were not relevant to whether the denial of coverage was proper. The trial court struck the affidavit and granted Pekin’s motion for summary judgment. Defendants appealed the granting of both motions.
The court held that the trial court did not err in striking the affidavit because, by delaying the disclosure of additional facts bearing on Pekin’s duty to defend, defendants left Pekin without knowledge of true but unpleaded facts that, when taken together with the allegations in the complaint, indicated the claims were potentially covered by the policy. Because Pekin lacked knowledge of those facts at the time the complaint was filed, the affidavit did not need to be considered in the motion for summary judgment. The court noted that although a court is allowed to look outside the eight corners of the insurance policy and complaint, it is not required to. The court added that defendants breached the notice provision by failing to timely present Pekin with the facts set forth in Koopman’s affidavit.
The court also affirmed the trial court’s ruling that there was no duty to defend because the complaint did not contain allegations which triggered coverage. The allegation that “Precision Dose began assuming operations of the Xactdose packaging factory” did not allege an advertising injury because the statement encompassed only the manufacture of goods. It did not allege a personal injury because “assuming operations” did not in any way encompass wrongful eviction, wrongful entry into, or invasion of plaintiffs’ right of private occupancy.
Pekins Ins. Co. v. Precision Dose, Inc., 2012 WL 907074, —N.E.2d —- (Ill.App. 2 Dist., 2012), No. 2-11-0195.
