Exclusion of Injuries To Resident is Effective

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Defendant, Cynthia Donnelly, sued her landlords after she injured herself when an allegedly defective stair collapsed under her at the rental property. 

In Farmers Insurance Exchange v. Vidyasagar Cheekati, et. al. 2022 IL App (4th) 210023, Nos. 4-21-0023, 4-21-0024, Court of Appeals of Illinois, Fourth District (February 7, 2022) the Illinois Court of Appeal resolved the disputes that arose when Farmers refused to defend or indemnify the Insureds in Donnelly’s lawsuit and sought declaratory judgment, stating it rightly disclaimed coverage and, therefore, need not defend the Insureds.

BACKGROUND

Farmers disclaimed coverage for Donnelly’s injuries. Citing the resident and business exclusions in the homeowners policy, Farmers found the policy excluded coverage because “[a]t the time of her alleged injury, Ms. Donnelly was a tenant in your home.”

ANALYSIS  An Insurer’s Duty to Defend its Insured

An insurer has a duty to defend its insured if the facts alleged in the underlying complaint fall within, or potentially within, the policy’s coverage.

The Insureds’ homeowners policy contained a “Liability Exclusions” to “Any insured or other residents of the residence premises. We do not cover bodily injury or personal injury to: (a) any insured; or (b) any resident of the residence premises, whether resident in the dwelling or a separate structure.”

Donnelly was a resident of the residence premises when she allegedly sustained injuries from a defective stair in the home. Consequently, the court of appeal concluded that it was “clear and free from doubt” that the resident exclusion applied to preclude coverag

ZALMA OPINION

The Illinois Court of Appeal found, as it was required to do by law and precedent, that an insurance policy is a contract that must be interpreted as a whole. Multiple, creative arguments to find coverage failed. Insurance was not the only remedy available to Ms. Donnelly. She can still proceed against the landlords and collect any judgment she may receive from the landlord’s assets, like the house she rented.

© 2022 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

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