Indemnification for Insurance Company Denied in Claim Based on Unpled Facts

Scot Vandenberg and his wife maintained that their allegations in an unfiled tort complaint triggered insurance coverage for an accident that injured Scot, paralyzing him during a party he attended on a 75-foot yacht.

Scot was severely injured when he fell off a bench at the edge of a top deck of the yacht to a lower deck. The original complaint he filed against the companies that owned and maintained the yacht (along with several corporate officers) alleged that the defendants were negligent because there was no railing on the upper level of the yacht.

Two of the defendants sued in this case were insured by Maryland Casualty under a policy that excluded coverage for bodily injury claims involving the ownership, maintenance or use of a watercraft.

Maryland Casualty sued for declaratory judgment, claiming that its policy of insurance did not apply. The defendants in that case included the Vandenbergs.

The Vandenbergs requested an extension of time to respond to Maryland Casualty’s complaint. The Vandenbergs submitted a motion that included, as an exhibit, an amended complaint that they say they intended to file in the Circuit Court of Cook County as part of the negligence case. According to the proposed pleading, the tort defendants were also negligent because the bench was allegedly wobbly.

The Vandenbergs never filed the amended complaint because they settled the negligence claim, and a federal judge in related admiralty proceedings enjoined them from pursuing the state court case.

In settling with the Vandenbergs for an undisclosed sum, the defendants also handed over their rights under their insurance policies.

With respect to the declaratory judgment action Maryland Casualty brought, the trial judge granted its motion for summary judgment. The case was appealed to the Illinois Appellate Court, which affirmed the trial judge’s decision concluding that “the self-serving allegations in an unfiled amended complaint cannot be presumed true and are not the type of facts intended to be covered by the true but unpleaded facts doctrine.”

The defendants contended that Maryland Casualty’s duty to indemnify rises from the “true, but unpleaded facts” contained in the allegations in the unfiled amended complaint. The defendants argued that their allegations that the insureds negligently used an “unstable bench” sufficiently state the basis for liability that was independent form the ownership, maintenance or use of the yacht. That was the language that excluded coverage. The Vandenbergs then proposed that the bench was an independent proximate cause of Scot’s injuries to which the watercraft exclusion did not apply and that therefore the commercial general liability policy covered the personal injury claims.

Under certain circumstances in determining whether there is a duty to defend or indemnify a court may look to true but unpleaded facts”, of which the insurer has knowledge that potentially brings the underlying claims within policy coverage.

The Illinois Appellate Court for the 2nd District considered the true but unpleaded facts doctrine in the case of Schreiber v. Utica Mutual Insurance Co., 323 Ill.App.3d 243 (2001).

In the Schreiber case, it was claimed that the insurer was required to defend its insured when it was aware of true but unpleaded facts that indicated a claim was potentially covered. Schreiber attached to its motion an affidavit from Schreiber’s president and a copy of a letter he sent to Utica informing Utica of the facts leading up to the underlying action against Schreiber. The circuit court granted Schreiber’s’ motion for summary judgment and found that Utica’s duty to defend “had been invoked by true but unpleaded facts known to Utica,” that being in the form of a letter from Schreiber’s president who sent a letter to Utica informing it of the facts leading up to the underlying actions.

In this case, the Vandenbergs never referred to the bench as “wobbly” or “unstable” in the underlying complaint. The allegations that refer to the bench focused on the bench being placed too close to the edge of the unrailed deck, and allegations specifically relating to maintenance of the yacht.

The mere mention of the bench existed or even tipping is not enough to show that the Vandenbergs alleged that the bench was included as a cause of Scot’s injury. Because the amended complaint was never filed, even though it alleged a new claim based on the insured’s negligent use of an “unstable bench,” true but unpleaded facts typically do not include those facts where the insurer has no way of knowing whether the facts are true unless it conducts an independent investigation. In conclusion, the Illinois Appellate Court stated that the self-serving allegations in an unfiled amended complaint cannot be presumed true and are not the type of facts intended to be covered by the true but unpleaded facts doctrine. The defendants, the Vandenbergs, did not cite any law and the court’s research had not revealed an instance in any jurisdiction where a court considered the allegations in an unfiled complaint as true but unpleaded facts. As a result, because the Vandenbergs’ underlying complaint alleged only claims that were directly related to the maintenance of the yacht, the watercraft exclusion applied and thus the appeals panel affirmed the decision of the trial judge.

Maryland Casualty v. Dough Management, 2015 IL App (1st) 141520 (June 30, 2015).

Kreisman Law Offices has been handling catastrophic injury cases, construction site injury cases, and watercraft injury cases for individuals and families who have been harmed, injured or died as a result of the carelessness or negligence of another for more than 38 years in and around Chicago, Cook County and its surrounding areas, including Evergreen Park, Calumet City, Calumet Park, Alsip, Harvey, Crete, Oak Forest, LaGrange, Villa Park, Itasca, Des Plaines, Bridgeview, Broadview, Brookfield, Buffalo Grove, Burr Ridge, Chicago Ridge, Maywood, LaGrange Park, Palatine, Chicago (Printer’s Row, Chinatown, Museum Campus, Loyola Park, Little Italy, Armor Square, Lincoln Park, Archer Heights, Bronzeville, Beverly, Belmont Gardens, Craigin, Forest Glen, Edison Park, Edgewater, Hyde Park, Koreatown), Round Lake Beach and St. Charles, Ill.

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