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Vol. 5, Iss. 12
December 7, 2016

Skolnik v. Allied Property and Casualty Ins. Co., 45 N.E.3d 1161 (App. Ct. Ill. 2015)

Court Provides Roadmap For Policyholders To Navigate Around Numerous Exclusions


Skolnik v. Allied Property and Casualty Ins. Co. was decided a few days before Christmas in 2015. If the Illinois Appeals Court opinion had been issued just a few weeks earlier -- before the 2015 Top Ten Coverage Cases article had been finished -- I would have given it serious consideration for the list. Therein lies an inherent flaw in publishing a year-end review before year-end – cases that are decided in the last few weeks of the year are not available for consideration. I have often thought about including them in the next year’s edition if warranted. But I have always resisted the temptation on grounds of purity.

For the first time I have made an exception and include a late-2015 case on the 2016 list. The case is potentially too significant not to do so. And, since the Illinois Supreme Court denied review of Skolnik in 2016, it kinda, sorta, is a 2016 case (not really, but you know what I’m saying).

There are a host of exclusions that preclude coverage for injury arising out of some specified conduct on the part of an insured: assault and battery, furnishing alcohol, criminal acts, etc. These exclusions are often interpreted broadly on account of being expressed in “arising out of” language. Skolnik demonstrates that a plaintiff may be able to trigger a defense obligation, in a case that would otherwise be subject to a broad “specified conduct exclusion,” by simply alleging (provable or not) that, after the insured committed the excluded conduct, it failed to summon help for the victim. And such failure was also a cause of the plaintiff’s injuries.

Given the frequency in which underlying litigation is possibly subject to a “specified conduct” exclusion, the significant exposure for an insurer that can attach to providing a defense and the ease in which a plaintiff’s lawyer can apply the lesson of the case, I selected it for inclusion.

Haley Johnson died of methadone intoxication in the bedroom of Joshua Skolnik, who lived with his parents. The night before, Johnson and Skolniok, and others, had been out drinking. Skolnik had a prescription for methadone. I’ll let the court take over the facts from here. Be sure you are sitting down. “After Johnson had another drink that Skolnik provided, she told him that she thought ‘something’ had been put into it, and needed assistance to walk. Skolnik took Johnson to his parents’ home where they had sex in his bedroom. Skolnik had abused drugs in the past and used methadone; Skolnik’s parents knew of his drug history and of the methadone in the house. Skolnik’s parents heard voices in his bedroom at 4 a.m. Around 9 a.m., Skolnik’s mother checked on Skolnik and he told her that Johnson passed out in the bedroom. Between 11:30 a.m. and 1 p.m., two of Johnson’s friends came to the Skolniks’ home to check on her but Skolnik did not let them see her, telling them that Johnson was passed out naked in his bedroom.

At 3:30 p.m., Skolnik told his parents Johnson was unconscious. Three hours later, his parents left for dinner and another six-and-a-half hours later, Skolnik pulled Johnson off his bed and called his parents who had not yet returned. He told them Johnson felt cold to the touch. The Skolniks instructed their son to dress Johnson and call 911. At 10:11 p.m., Skolnik called 911. When the police arrived at 10:14 p.m., Johnson was not breathing. She was pronounced dead at the Skolniks’ home at 11:31 p.m.”

Johnson’s father sued Joshua Skolnik and his parents for wrongful death, false imprisonment and a host of other causes of action. Coverage was sought under homeowner’s and personal and umbrella policies issued by Allied Property and Casualty. The policies contained an exclusion for bodily injury “arising out of the use” of controlled substances, with an exception for “the legitimate use of prescription drugs by a person following the orders of a licensed physician.”

The applicability of this exclusion, for purposes of a duty to defend, was the crux of the case before the Illinois Court of Appeals. Allied argued that the complaint alleged that Johnson’s death resulted from controlled substances. This is not an unreasonable argument, especially when you consider that the term “arising out of,” as contained in an exclusion, is usually interpreted broadly. The trial court concluded that the exclusion applied to relieve Allied from a duty to defend.

But as the appeals court saw it, there was more to it. In addition to allegations that Skolnik caused Johnson’s death, the complaint also alleged that “Skolnik and his parents negligently, carelessly, and improperly failed to request emergency medical assistance for Johnson within a reasonable period of time after knowing she was physically incapacitated or unconscious or both; and knowing or discovering she ingested or unknowingly consumed methadone or other illegal substances in the Skolnik home. Further, count I alleges that Skolnik and his parents refused to allow Johnson’s two friends to check on, talk to, see, or render aid to Johnson upon their request; and that they ‘took affirmative actions to Johnson’s detriment and acted in concert’ after discovering she was ‘dead, unconscious, and/or unresponsive in their home.’”

The court used these allegations to conclude that, at least for purposes of the duty to defend, the controlled substances exclusion did not apply: “Here, despite the autopsy notation regarding cause of death [methadone intoxication], a genuine issue of material fact exists as to whether Johnson’s death was caused solely by her methadone ingestion. The four corners of the complaint contain details that, if true, describe a lengthy and protracted period of time during which Skolnik could have sought assistance. The unknown is whether Johnson would have died if he had allowed Johnson’s friends to see her, or called 911, or truthfully informed his parents earlier about Johnson’s condition. Other potential causes include a genetic predisposition and a prior history of drug abuse.”

Thus, the court held that Allied had a duty to defend. But whether Allied would have a duty to indemnify was still an open issue. It was tied to a determination whether, in fact, there was “an independent basis for liability in that Skolnik could have saved Johnson but he did not summon help?”

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