¶ 48 "Illinois public policy dictates that insurance is ‘not necessarily a private matter between an insurer and its insured,’ and as such, an injured party's rights against the liability insurer vests at the moment of the accident giving rise to the underlying claim." State Farm Fire & Casualty Co. v. Perez , 387 Ill. App. 3d 549, 552, 326 Ill.Dec. 580, 899 N.E.2d 1231 (2008) (quoting Skidmore v. Throgmorton , 323 Ill. App. 3d 417, 422, 256 Ill.Dec. 247, 751 N.E.2d 637 (2001) ); Reagor v. Travelers Insurance Co. , 92 Ill. App. 3d 99, 102, 47 Ill.Dec. 507, 415 N.E.2d 512 (1980) ("liability insurance is no longer considered merely a private matter between an insured and an insurer"). The injured party's vested rights cannot be "defeated by the joint efforts of the insured and the insurer."
(Internal quotation marks omitted.) Northbrook Property & Casualty Co. v. Transportation Joint Agreement, 194 Ill.2d 96, 98–99, 251 Ill.Dec. 659, 741 N.E.2d 253 (2000); see also Maxum Indemnity Co. v. Gillette, 405 Ill.App.3d 881, 887, 346 Ill.Dec. 78, 940 N.E.2d 78 (2010); State Farm Fire & Casualty Co. v. Perez, 387 Ill.App.3d 549, 556–57, 326 Ill.Dec. 580, 899 N.E.2d 1231 (2008). ¶ 19 In Northbrook, several students were injured and killed when a train collided with a school bus operated by the local school districts.
Although it briefly considered allegations in third-party complaints in the underlying action, it intimated that it need not have done so. 381 Ill. App. 3d at 107, 885 N.E. 2d at 394 ("Even if we were to consider the allegations made in those complaints . . ."). Finally, there is State Farm Fire and Cas. Co. v. Perez, 387 Ill. App. 3d 549, 553, 899 N.E. 2d 1231, 1235 (1st Dist. 2008). There, as in the other two cases, the insurer filed a declaratory judgment action and sought judgment on the pleadings.
The applicability of the exclusion must be clear and free from doubt. Id.; see also State Farm Fire & Casualty Co. v. Perez, 387 Ill. App. 3d 549, 553 (2008) (courts narrowly read any policy provision that purports to exclude or limit coverage, and apply them only where the terms are "clear, definite, and specific") (internal quotation marks omitted.) Conditions, exclusions, or exceptions to coverage in an insurance police are to be strictly construed against the insurer.
Under Illinois law, courts liberally construe both the terms of an insurance policy and the allegations in the underlying complaint in favor of the insured. State Farm Fire & Cas. Co. v. Perez, 387 Ill.App.3d 549, 326 Ill.Dec. 580, 899 N.E.2d 1231, 1235 (2008) (“[A]ny doubts and ambiguities are resolved against the insurer.”). An insurer's duty to defend is broad; it exists when a complaint alleges facts that are “potentially within” the scope of the insurance policy's coverage. Menard, 372 Ill.Dec. 801, 992 N.E.2d at 648.
" Santa's Best Craft, LLC v. St. Paul Fire and Marine Ins. Co., 611 F.3d 339, 346 (7th Cir. 2010) (quotations omitted); Crum and Forster Managers Corp. v. Resolution Trust Corp., 156 Ill.2d 384, 189 Ill.Dec. 756, 620 N.E.2d 1073, 1079 (1993). "Both the policy terms and the allegations in the underlying complaint are liberally construed in favor of the insured, and any doubts and ambiguities are resolved against the insurer." State Farm Fire and Casualty Co. v. Perez, 387 Ill.App.3d 549, 326 Ill.Dec. 580, 899 N.E.2d 1231, 1235 (2008), citing Pekin Ins. Co. v. Beu, 376 Ill.App.3d 294, 315. Ill.Dec. 167, 876 N.E.2d 167, 170 (2007). However, the general rules that favor the insured must "yield to the paramount rule of reasonable construction which guides all contract interpretations."
In doing so, "[b]oth the policy terms and the allegations in the underlying complaint are liberally construed in favor of the insured, and any doubts and ambiguities are resolved against the insurer." State Farm Fire & Cas. Co. v. Perez, 387 Ill.App.3d 549, 553, 899 N.E.2d 1231, 1235 (2008); see also Amerisure Mut. Ins. Co. v. Microplastics, Inc., 622 F.3d 806, 810 (7th Cir. 2010).
Any claim made in the underlying lawsuits that are not "wholly independent" of intoxication, however, fall within the liquor liability exclusion. State Farm Fire & Cas. Co. v. Perez, 387 Ill. App. 3d 549, 556-57, 899 N.E.2d 1231, 1238 (2008) (insurance policy excluded injuries arising from use of car; court determined that claims related to negligently modified seats and seat belts were excluded because the injury arose from use of car); see Certain Underwriters at Lloyd's of London v. Kutchens Enters., Inc., No. 4:08-CV-143-A, 2008 WL 5381244, at *5 (N.D. Tex. Dec. 22, 2008) (negligent supervision and failure to monitor claims were excluded by liquor liability exclusion because factually the injuries suffered by plaintiff arose out of serving alcoholic beverages). A claim based on a "rephrasing" of the fact that injuries arose from intoxication will not avoid the exclusion.
Phusion maintains that because "alcohol intoxication" is not the sole proximate cause of the injuries in the underlying lawsuits, Selective has a duty to defend it against these claims. In support of its argument, Phusion relies on United States Fidelity & Guaranty Co. v. State Farm Mutual Automobile Insurance Co., 152 Ill. App. 3d 46 (1987) (USF&G), Northbrook Property & Casualty Co. v. Transportation Joint Agreement, 194 Ill. 2d 96, 97 (2000) (Northbrook), and State Farm Fire & Casualty Co. v. Perez, 387 Ill. App. 3d 549 (2008). ¶ 49 In response, Selective denies that there is such a "sole and proximate cause rule" and points out that Phusion does not dispute that the individuals in the underlying lawsuits were intoxicated and that their intoxication proximately caused the bodily injuries and deaths alleged. ¶ 50 Phusion derives its "sole and proximate cause rule" from this court's analysis in USF&G, which we note did not consider whether the insurer had a duty to defend. In that case, the reviewing court considered whether the insurer met its burden at trial of proving that the injuries at issue were caused solely by a proximate cause excluded under its insurance policy.
Plaintiff also cites to other Illinois cases that are equally unpersuasive. See American Service Ins Co v City of Chicago, 404 Ill App 3d 769; 935 NE2d 715 (2010) (holding that insurer has standing to file declaratory judgment action against insured and injured party); State Farm Fire & Cas Co v Perez, 387 Ill App 3d 549; 899 NE2d 1231 (2008) (holding, in insurer-brought declaratory action contesting duty to defend, that policy exclusion barred coverage); Skidmore v Throgmorton, 323 Ill App 3d 417; 751 NE2d 637 (2001) (on which Judge Gleicher's concurrence also heavily relies for its characterization of prior Illinois case law) (agreement between insured and insurer limiting amount of coverage does not divest injured person of right to seek post-judgment resolution of policy ambiguities as to coverage); Society of Mount Carmel v National Ben Franklin Ins Co of Illinois, 268 Ill App 3d 655; 643 NE2d 1280 (1994) (holding that injured person was necessary party to declaratory judgment action brought by insured against insurer refusing to defend); Pratt v Protective Ins Co, 250 Ill App 3d 612; 621 NE2d 187 (1993) (injured person had standing to bring declaratory judgment action, where insurer had withdrawn defense, insurer had dismissed its own declaratory judgment action, a default judgment had entered a