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Appellate Court Rules Insurer Must Provide Independent Counsel to Co-Insured Stepson
Insurance Law Update
In Country Mut. Ins. Co. v. Olsak, ___ N.E. 2d ___, 2009 WL 1361596 (Ill. App. Ct. May 13, 2009), the Appellate Court of Illinois, First District, reversed a summary judgment in favor of an insurer and remanded for a determination of whether a co-insured, Thomas Olsak, was entitled to independent counsel and, if so, whether the insured was prejudiced by the insurer’s failure to retain independent counsel.
Olsak was a 17-year old Fremd High School hockey player. Olsak’s stepfather, Edward Pudlo, was a Fremd High School Hockey Club Board member. The underlying complaint, brought by Olsak’s coach, alleged that Olsak struck the coach in the temple, causing serious head injuries. The coach alleged assault and battery against Olsak, negligence against the Fremd High School Hockey Club and the board members, and negligent parental supervision against Pudlo.
Country Mutual had issued a homeowner’s policy and an umbrella policy to Pudlo. Olsak was an insured under the terms of the policies. In 2000, Country Mutual denied coverage for Olsak on the bases that there was no “occurrence” and that the intentional acts exclusion applied, but retained counsel to defend Pudlo. Thereafter, Olsak retained his own counsel and filed an answer denying the underlying complaint’s allegations and affirmative defenses alleging that the coach instigated the altercation and provoked him.
In 2005, Country Mutual filed a declaratory judgment action, and the trial court granted Country Mutual’s motion for summary judgment, declaring that County Mutual had no duty to defend or indemnify Olsak.
On appeal, the court determined that the allegations of the underlying complaint revealed a potential of coverage for Olsak because the allegations did not demonstrate that Olsak deliberately intended to injure the coach, and Olsak, a minor, may have lacked the mental capacity to form the intention to harm or the expectation of injury. The court further found that the interests of Pudlo and Olsak were diametrically opposed. It was in Pudlo’s best interest to argue that Olsak acted with the intent to deliberately injure the coach, while it was in Olsak’s best interest to argue that he did not act intentionally, that he was provoked or acted in self-defense, and that he did not receive adequate discipline or management from Pudlo or the other board members. Thus, Country Mutual was presented with a conflict.
As such, the court remanded the case to the trial court to make the final determination of whether a conflict of interest existed and, if so, to determine if Olsak was prejudiced by Country Mutual’s failure to retain independent counsel to represent him.
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