Request for Money Damages Not Required to Trigger Duty to Defend re: Insurance Litigation
Applying Illinois law, the court in Country Mutual Insurance Co. v. Bible Pork, Inc., 2015 IL App (5th) 140211, held that an express request in an underlying complaint for damages because of property damage or bodily injury is not necessary to trigger the duty to defend. Rather, a request for “other relief” is broad enough to create the potential that the insured could be held liable for damages, thereby triggering the duty to defend.
In Bible Pork, the underlying plaintiffs brought a lawsuit against the insured seeking a declaratory judgment holding that the insured’s hog factory facility constituted a public and private nuisance because the factory was a source of “disagreeable noises, odors, dust particles, surface water contamination, and loss of property values.” In addition to seeking declaratory relief, the underlying complaint also sought “such other relief as deemed appropriate.” The complaint did not include a specific demand for money damages. The insured’s CGL insurer and umbrella insurer both denied coverage for that reason, among others.
In the coverage litigation that followed, the insurers argued that even if the complaint alleged property damage or bodily injury caused by an occurrence--and the court found that it did--they nevertheless had no duty to defend because the underlying complaint did not include a demand for money damages in addition to its request for declaratory relief. Accordingly, they argued, the complaint did not satisfy the "for damages" and "seeking damages" requirements in their respective policies.
The court in the coverage action rejected this argument, holding that the insurers had a duty to defend because the request for “‘other relief’ in the underlying lawsuit establishes it as a suit for ‘damages’ and one ‘seeking damages’ which are to be covered under the language of the policies . . . .” In so ruling, the court observed that a request for “other relief” permitted the underlying court to award money damages in addition to equitable relief. The court also observed that under Illinois law, the term “damages,” as used in a CGL policy, encompasses both equitable relief and monetary damages. As the court explained, the term “damages” includes “money one must expend to remedy an injury for which he or she is responsible, whether such expenditure is compelled by a court of law by way of compensatory damages or by a court of equity by way of compliance with a mandatory injunction.”
Other courts similarly have rejected the argument that a specific request in an underlying complaint for damages because of property damage or bodily injury is required to trigger the duty to defend. See, e.g., Travelers Ins. Co. v. Penda Corp., 974 F.2d 823 (7th Cir. 1992). In Penda, the insured sold polystyrene sheets to the underlying plaintiff, which used the sheets to manufacture sample books. After the sheets yellowed, the underlying plaintiff sued the insured for breach of contract and breach of warranty, alleging that the sheets were “unusable and unacceptable” and that the plaintiff’s customer had refused to pay for sample books made with the sheets unless it received replacement books. The underlying complaint sought damages for lost profits and reputational harm; it did not seek damages for property damage to the sample books or other property.
In refusing to defend, the insurer argued that the underlying complaint did not allege covered property damage because “nowhere does the complaint explicitly attempt to recover for damage to property or persons . . . .” The Penda court disagreed, finding instead that the insurer breached its duty to defend “because it cannot be said” that the allegations in the underlying complaint did not “potentially fall within coverage.” Rather than require “explicit” or “specific” allegations of “property damage” to trigger the duty to defend, the court found a duty to defend simply because the “allegations can be read as stating a claim to recover damage that occurred to the . . . sample books, which [the underlying plaintiff] was required to replace.” Similarly, the court found potential “loss of use” property damage because “even if the failure of the sheets did not cause physical injury to or destruction of the lithographing, varnish, material, and books, it appears that [the underlying plaintiff and its customer] ‘lost the use’ of these components when [the insured’s] sheets became unusable and had to be replaced.”