In Country Mutual Ins. Co. v. Gary Gang Xu et al., 2024 IL App 2202287 (2024), the court considered whether allegations concerning sex trafficking against an insured—including one sounding in negligence—constituted an occurrence or otherwise fell within an intentional or expected acts exclusion. The insurer filed a declaratory judgment action stating it had no duty to defend or indemnify the insured under his homeowners or personal liability policy because the allegations were all related to intentional acts committed by the insured. An Illinois trial and appellate court both agreed with the insurer. 

The underlying complaint contained ten counts. The first nine counts clearly alleged the insured committed intentional acts that violated numerous state and federal laws, but the tenth count alleged negligent infliction of emotional distress. The insured filed a motion for judgment on the pleadings, arguing that he was entitled to coverage for the entire action because the final count was based on “negligent” conduct and, therefore, was not subject to the intentional acts exclusion that applied to the first nine counts. The insurer responded in a motion for summary judgment that the final count was based upon extremely outrageous and intentional conduct and thus did not constitute an occurrence and that it would otherwise be excluded as an intentional act. The trial court granted the insurer’s motion for summary judgment. 

The Illinois Court of Appeals then affirmed the trial court’s decision. It reasoned that “although [the negligent infliction of emotional distress count] is couched in terms associated with negligence, it is based on intentional conduct” and that “[t]he emotional distress arose out of intentional acts allegedly committed by [the insured].” Therefore, the Court stated that the count did not trigger coverage under the policy because it was not an “accident” or was otherwise excluded as an intentional act. Accordingly, the court held the insurer had no duty to defend or indemnify the insured in its underlying tort action. 

This case highlights the importance of carefully examining the language of insurance policies and the factual allegations of underlying complaints in insurance coverage disputes. Retaining experienced counsel to assist in analyzing and litigating coverage disputes can help an insurer avoid covering excluded claims.