Focus of Insurance Policy that has a Criminal Act Exclusion is on Whether the Consequences of Insured’s Criminal Act are Reasonably Expected
In Allstate Indemnity Co. v. Hieber, Osvaldo Salazar (“Osvaldo”) shot and killed Holly Hieber (“Hieber”) on July 10, 2011, while handling a handgun that he had purchased on the street to show his friends. The State charged Osvaldo with four crimes, including involuntary manslaughter. Hieber’s estate filed a complaint against the Salazars, alleging that Osvaldo negligently handled the gun and that Osvaldo’s parents negligently stored the gun and allowed Osvaldo access to it. Allstate Indemnity Company (“Allstate”) issued a homeowners policy to the Salazars effective March of 2011. In that policy, Allstate agreed, in relevant part, to “pay damages which an insured person becomes legally obligated to pay because of bodily injury arising from an occurrence.” The policy defines an “occurrence” as “an accident” resulting in bodily injury. The policy also included an exception to coverage when bodily injury is reasonably expected to result from the intentional or criminal acts or omissions of any insured person. The Salazars tendered the Hiebers’ claim to Allstate. Allstate filed a declaratory judgment action against Hieber’s estate and the Salazars, seeking a declaration that it was not obligated to defend or indemnify the Salazars in the underlying action. The trial court granted summary judgment to Allstate, finding that the exclusion in Allstate’s policy for bodily injury reasonably expected to result from the insured’s criminal acts applied. Therefore, Allstate was not obligated to defend or indemnify the Salazars in the underlying suit. Hieber’s estate appealed.
Allstate contended that Osvaldo’s criminal conviction collaterally estopped Hieber’s estate from contending that Hieber’s death was not the reasonably expected result of Osvaldo’s criminal act. Allstate further contended that there was no duty to indemnify Hieber’s estate because Osvaldo’s conduct fell within the criminal exception of the policy coverage. Hieber’s estate argued Salazar did not have the requisite state of mind listed as an exclusion in Allstate’s policy and as a result should be indemnified.
The court reviewed whether the state of mind necessary to Osvaldo’s criminal conviction presented the same issue implicated by Allstate’s policy exclusion. The court affirmed the trial court’s decision granting Allstate’s motion for summary judgment. The court stated that there was no genuine issue of material fact regarding whether Hieber’s death was reasonably expected as a result of Osvaldo’s criminal acts. Thus, holding that Osvaldo’s conduct fell within the exceptions of the policy and Allstate had no duty to indemnify Hieber’s estate.
Illinois Insurance Law: Where an insurance policy has a criminal act exclusion, the focus is on whether the consequences of the insured’s criminal act are reasonably expected. An analysis of this exclusion has nothing to do with the insured’s subjective beliefs and draws no distinction between the insured’s “knowing” or “reckless” criminal acts. Rather, these exclusions should be analyzed with an objective standard as to whether the bodily injury was to be reasonably expected as a result of the insured’s conduct.
Allstate Indemnity Co. v. Hieber, 2014 IL App (1st) 132557.
