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                                     Appellate Court                         Date: 2017.05.25
                                                                             16:29:41 -05'00'




           Sentry Insurance v. Continental Casualty Co., 2017 IL App (1st) 161785



Appellate Court         SENTRY INSURANCE, a Mutual Company, Plaintiff and
Caption                 Counterdefendant, v. CONTINENTAL CASUALTY COMPANY;
                        NORTHWESTERN MEDICAL FACULTY FOUNDATION;
                        THEODORE FRANK; NICHOLAS HARRIS; JOE DOES 1-59;
                        JANE DOES 1-50; JOSEPH DOE; JAMES DOES 1-2; JANE DOE;
                        JAMES ANONYMOUS; JOHN ANONYMOUS; and JEFFREY
                        DOE, Defendants (Continental Casualty Company, Defendant and
                        Counterplaintiff-Appellant;  Northwestern    Medical  Faculty
                        Foundation, Defendant and Counterdefendant-Appellee).



District & No.          First District, Fifth Division
                        Docket No. 1-16-1785



Filed                   March 24, 2017



Decision Under          Appeal from the Circuit Court of Cook County, No. 14-CH-16745; the
Review                  Hon. Kathleen Pantle, Judge, presiding.



Judgment                Affirmed.



Counsel on              Karen W. Howard and Dawn Gonzalez, of Colliau, Carluccio, Keener,
Appeal                  Morrow, Peterson & Parsons, of Chicago, for appellant.

                        Jill B. Berkeley, Seth D. Lamden, and Andrew G. May, of Neal,
                        Gerber & Eisenberg LLP, of Chicago, for appellee.
     Panel                      PRESIDING JUSTICE GORDON delivered the judgment of the
                                court, with opinion.
                                Justices Hall and Lampkin concurred in the judgment and opinion.


                                                   OPINION

¶1         The instant interlocutory appeal concerns the trial court’s grant of a stay on the issue of
       whether Continental Casualty Company (Continental) owes a duty to indemnify Northwestern
       Medical Faculty Foundation (the Foundation) for any liability the Foundation incurs as a result
       of a number of lawsuits filed against it based on the failure of the Foundation’s cryogenic
       tanks, which had held semen and testicular tissue specimens that were rendered unusable.
       Continental argues that the trial court erred in granting the stay because interpreting the two
       applicable exclusions to insurance coverage would not have involved the determination of an
       ultimate fact in the underlying litigation. Alternatively, Continental argues that if the trial court
       stayed the analysis concerning the applicability of the policy’s exclusions, it should have also
       stayed the litigation concerning whether there was a duty to defend the Foundation under the
       policy. Continental also argues in the alternative that the trial court should have, at a minimum,
       determined coverage issues concerning two lawsuits that had already been settled. For the
       reasons that follow, we affirm.

¶2                                          BACKGROUND
¶3         On October 16, 2014, Sentry Insurance 1 (Sentry) filed a complaint for declaratory
       judgment against the Foundation and Continental, alleging that Sentry had issued a
       commercial general liability insurance policy to the Foundation and that the Foundation
       claimed that Sentry owed it a duty to defend and indemnify for approximately 65 lawsuits in
       which the Foundation had been named as a defendant (the underlying lawsuits) and which had
       been consolidated for pretrial activities. Continental was named in the complaint as the
       Foundation’s excess insurer. Sentry’s complaint alleged that its policy did not provide
       coverage for the claims alleged against the Foundation and sought a declaratory judgment that
       it owed no duty to defend or indemnify the Foundation and reimbursement of the amount spent
       thus far in defending the underlying lawsuits.
¶4         According to Sentry’s complaint, the Foundation owned and operated a cryopreservation
       and storage tank for semen and testicular tissue; certain Foundation patients, including the
       plaintiffs in the underlying lawsuits (the underlying plaintiffs), provided semen or testicular
       tissue to the Foundation for storage and safekeeping; and the Foundation received storage fees
       for the cryopreservation of the semen and testicular tissue from the underlying plaintiffs.
       Certain patients who had stored semen or testicular tissue with the Foundation between April
       and June 2012, including the underlying plaintiffs, alleged that their samples had thawed and
       were irreversibly damaged due to the failure of the Foundation’s cryopreservation tank. The
       underlying plaintiffs accordingly filed the underlying lawsuits against the Foundation and

             1
            Sentry is not a party to the instant appeal, as it has settled its disputes with the Foundation.
       However, its pleadings and the motions concerning Sentry are still set forth in our statement of facts, as
       they are interrelated with the claims made by Continental.

                                                       -2-
       Northwestern Memorial Hospital (the Hospital), seeking damages relating to the allegedly
       damaged semen and testicular tissue.
¶5         According to Sentry’s complaint, the Foundation admitted in the underlying lawsuits that it
       owned and operated the cryopreservation tank for semen and testicular tissue, that certain
       patients provided semen for storage and safekeeping with the Foundation, that the Foundation
       accepted the semen supplied by certain patients for safekeeping, and that the Foundation
       received storage fees for cryopreservation of the semen. Additionally, the Hospital denied in
       the underlying lawsuits that it owned, operated, managed, or controlled the cryopreservation
       tank for semen and testicular tissue; that certain patients provided semen for storage and
       safekeeping with the Hospital; that the Hospital accepted the semen supplied by certain
       patients for safekeeping; and that the Hospital received storage fees for cryopreservation of the
       semen.
¶6         Sentry’s complaint alleges that the Foundation tendered the underlying lawsuits to Sentry,
       seeking defense and indemnity pursuant to the Foundation’s insurance policy with Sentry, and
       that Sentry accepted the Foundation’s tender of the defense under a reservation of rights.
¶7         According to Sentry’s complaint, John Anonymous,2 one of the underlying plaintiffs, filed
       a motion for summary judgment against the Foundation, contending that the Foundation was
       liable to him under a bailment theory. Sentry alleged that in order to prevail on a bailment
       claim, it was necessary to establish (1) an express or implied agreement to create a bailment,
       (2) delivery of the property in good condition, (3) the bailee’s acceptance of the property, and
       (4) the bailee’s failure to return the property or the bailee’s redelivery of the property in a
       damaged condition. Sentry’s complaint alleged that on March 12, 2014, the trial court in the
       consolidated underlying lawsuits entered summary judgment in favor of John Anonymous
       “relative to elements (1), (3) and (4), thereby establishing that a bailment was created and that
       [the Foundation] had exclusive possession of the specimens.”
¶8         Sentry’s complaint set forth 15 “claims,” each serving as a basis for exclusion under its
       policy, and requested a declaration that Sentry had no obligation to defend or indemnify the
       Foundation against the claims asserted in the underlying lawsuits. Sentry also requested
       reimbursement of the funds it had expended in defending the Foundation in the underlying
       lawsuits.
¶9         The Sentry insurance policy, which was attached to Sentry’s complaint, contained two
       exclusions that are relevant to the instant appeal: a “care, custody, or control” exclusion and a
       “professional services” exclusion. The “care, custody, or control” exclusion provided that the
       insurance did not apply to property damage to “[p]ersonal property in the care, custody or
       control of the insured.” The “professional services” exclusion provided that “[t]his insurance
       does not apply to ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ due to
       the rendering of or failure to render any professional service.” The exclusion further defined
       “professional services” as “all professional liability relating to health care medical malpractice,
       druggist liability, to include accountants E & O as well as directors and officers liability.”
¶ 10       On November 20, 2014, Continental filed an answer and counterclaim. The counterclaim
       contained substantially identical factual allegations as Sentry’s complaint regarding the

          2
            According to Sentry’s complaint, with the exception of two named individuals, the rest of the
       underlying plaintiffs obtained judicial orders permitting them to proceed in the underlying lawsuits
       with their legal names kept under seal.

                                                    -3-
       allegations of the underlying lawsuits. Continental’s counterclaim also alleged that (1) the
       Foundation made a number of admissions in a third-party complaint that the Foundation had
       filed in the underlying lawsuits, including that the Foundation provided storage in a cryogenic
       tank located on the 20th floor of the Foundation for the semen and testicular tissue of the male
       underlying plaintiffs; (2) the Foundation was a faculty medical practice at the hospital; (3) the
       Foundation used an electronic controls system on the cryogenic tank that was designed to
       cause a page to be sent to a Foundation lab technician when an alarm was triggered by the
       control system; and (4) on the afternoon of April 23, 2012, a Foundation lab technician
       discovered that the cryogenic tank at the Foundation had failed to maintain a proper
       temperature.
¶ 11       In its counterclaim, Continental alleged that it issued to the Foundation a commercial
       umbrella policy and that in order for the Foundation to obtain coverage from Continental’s
       policy, “it must prove that it is entitled to coverage under the [Continental] Umbrella Policy
       insuring provision, including all of [Continental’s] terms, definitions and conditions,” which it
       could not do. First, Continental alleged that the Foundation could not establish that “bodily
       injury” or “property damage” occurred during the policy period, as required under the policy.
       Additionally, like Sentry’s policy, Continental’s policy included a “care, custody, or control”
       exclusion and a “professional services” exclusion. The “care, custody, or control” exclusion
       provided that the insurance coverage did not apply to property damage to “[p]ersonal property
       in the care, custody or control of the insured.” The “professional services” exclusion provided:
                    “This insurance does not apply to any liability arising out of any act or omission, or
                rendering of or failure to render professional services by you or any other person for
                whose acts you are legally responsible, and arising out of the performance of
                professional services for others in your capacity as a (an):
                    (Insert Profession of Service)
                    Professional Healthcare Services”
       Continental’s counterclaim alleged that, even if the Foundation could establish that it complied
       with all of the policy’s terms, conditions, and definitions, coverage in connection with the
       underlying lawsuits would still be excluded by the “care, custody, or control” or “professional
       services” exclusions. Accordingly, Continental sought a declaration that Continental owed no
       coverage to the Foundation.
¶ 12       On January 12, 2015, the Foundation filed a combined motion under section 2-619.1 of the
       Code of Civil Procedure (Code) (735 ILCS 5/2-619.1 (West 2014)) to dismiss Sentry’s
       complaint or, alternatively, to stay the complaint. On the same day, the Foundation also filed a
       section 2-619.1 motion to dismiss Continental’s counterclaim and expressly adopted its
       arguments in support of its motion to dismiss Sentry’s complaint into its motion to dismiss
       Continental’s counterclaim.
¶ 13       The Foundation argued that Sentry’s request for an adjudication of its duty to defend
       should be dismissed under section 2-619 of the Code (735 ILCS 5/2-619 (West 2014)) because
       the resolution of that issue required the adjudication of facts that overlapped with disputed
       liability issues in the underlying lawsuits. The Foundation argued that Sentry’s arguments
       concerning the care, custody, or control exclusion and the professional services exclusion were
       premature “because it is not clear and free from doubt from the face of the allegations in any of
       the underlying complaints that either of these policy exclusions precludes coverage and the
       Court cannot make coverage determinations based on disputed liability facts at issue in the

                                                    -4-
       pending Underlying Actions.” Sentry argued that determining whether the exclusions applied
       would require the trial court to determine “ultimate facts” in the underlying lawsuits, including
       whether the Foundation had exclusive possessory control over the semen samples at the time
       they were allegedly damaged and the responsibilities of the parties involved with the cryogenic
       process. Sentry similarly argued that the determination of whether the underlying lawsuits
       sought damaged for “bodily injury” or “property damage” would require an adjudication of
       disputed liability issues in the underlying lawsuits.
¶ 14       The Foundation also argued that Sentry’s request for an adjudication that it owed no duty to
       indemnify the Foundation should be dismissed under section 2-615 of the Code (735 ILCS
       5/2-615 (West 2014)) because the Foundation had not yet incurred any liability in the
       underlying lawsuits. With respect to Continental, the Foundation claimed that Continental was
       not presently defending the Foundation and so its “request for a declaration concerning its duty
       to defend is premature and should be dismissed for this reason alone.”
¶ 15       In the alternative, the Foundation argued that if dismissal was not the proper course, then
       the declaratory judgment claims should be stayed because “[a] stay would conserve judicial
       resources by reducing the discovery required in the coverage action, narrowing the scope of
       disputed issues, and otherwise avoiding the duplication of effort that is inherent when litigation
       proceeds on parallel tracks.”
¶ 16       In response, Continental argued that the issues in the declaratory judgment action would
       not require the trial court to determine ultimate facts in the underlying lawsuits because the
       court “will only need to apply undisputed facts to the pertinent policy language.” Continental
       further argued that since there was no potential for coverage, the issues concerning both the
       duty to defend and the duty to indemnify were ripe for adjudication. Continental also adopted
       Sentry’s response to the motion to dismiss, which claimed that the grant of summary judgment
       in John Anonymous’ favor against the Foundation established that the Foundation had
       exclusive possession of the specimens, as did the Foundation’s answers to the pleadings in the
       underlying lawsuits. Thus, determination of whether the care, custody, or control exception
       applied would not require adjudication of an ultimate fact. Sentry’s response further argued
       that the Foundation’s arguments concerning the litigation of the Foundation’s third-party
       claims were not applicable, as the Foundation’s third-party claims concerned the tank that
       allegedly failed and its component parts and did not concern possession of the specimens
       themselves.
¶ 17       In supplemental briefing, Continental also argued that two of the plaintiffs in the
       underlying lawsuits had voluntarily dismissed their complaints against the Foundation with
       prejudice. Continental thus argued that even if the coverage litigation was not appropriate for
       most of the cases, at the very least, coverage litigation should proceed with respect to the two
       cases the Foundation had resolved. Continental further requested that, if a stay was entered, the
       stay should only apply until each underlying lawsuit was resolved.
¶ 18       On May 19, 2016, the trial court granted in part and denied in part the Foundation’s
       motion. In its order, it discussed Sentry’s arguments and noted that “[t]he arguments raised by
       [Continental] in its counterclaim are substantially identical to those asserted by Sentry in its
       complaint.” First, the court found that “[a]t this point, the appropriate action is to stay the
       determination of the duty to indemnify until the duty to defend has been determined,” not to
       dismiss it, as dismissal would result in a waste of judicial resources. Next, the court found that
       the determination of whether the care, custody, or control exclusion applied would require the

                                                   -5-
       determination of an ultimate fact in the underlying litigation, since the court would need to
       make a determination as to whether the Foundation had exclusive control, and one of the
       ultimate facts in the underlying litigation was who had possession of the specimens. The court
       thus found that “a stay is appropriate.” The court rejected Sentry’s reliance on the partial
       summary judgment entered in the John Anonymous case, finding that the judge in that case had
       not made any factual findings as to whether the Foundation had exclusive care, custody, or
       control over the specimens at the time of the loss and that the issue in a bailment action was
       possession at the beginning of the bailment, not at the time of the loss. The court also rejected
       Sentry’s reliance on the Foundation’s discovery responses in the underlying lawsuits, noting
       that the Foundation had never conceded that it exercised exclusive possession of the specimens
       at the time of the tank’s failure.
¶ 19        The court also found that the professional services exclusions in the insurers’ policies were
       not ripe for adjudication. The court found that the language of the exclusion in the Continental
       policy differed from that in the Sentry policy but did not otherwise differentiate the two
       policies. In analyzing a professional services exclusion, the court found that the question was
       whether the activity “involves specialized knowledge, labor, or skill, and is predominantly
       mental or intellectual as opposed to physical or manual.” The court found that “[i]t is not
       apparent from the underlying complaints whether the maintenance of cryogenically preserved
       sperm requires ‘specialization or expertise’, or is merely incidental to any professional services
       [the Foundation] provides. The underlying complaints contain no description or detail as to
       how sperm samples are cryogenically preserved, much less whether cryogenic preservation of
       sperm is ‘predominantly mental or intellectual as opposed to physical or manual.’ ” The court
       found that, to make that determination, “the Court would have to look at extrinsic evidence
       (outside the pleadings) which the Court cannot do if it tends to determine an issue crucial to the
       determination of the underlying lawsuit.” The court additionally found that “in order to
       determine whether the professional services exclusion applied[,] the Court would have to find
       that the underlying complaints assert claims for ‘health care malpractice’.[3] A trial court
       presiding over an insurance coverage declaratory judgment action should not decide whether
       an underlying defendant committed malpractice when that decision would bind the parties in
       the underlying litigation.”
¶ 20        With respect to the issue of whether the underlying lawsuits sought damages for “bodily
       injury” or “property damage” under the policies such that there was a duty to defend, the court
       found that this issue was ripe for adjudication. The court found that, in determining whether
       there was a duty to defend, it could decide whether the allegations of the underlying complaints
       contained sufficient facts to show the potential for coverage and, accordingly, determined that
       it would “proceed with litigating the duty to defend analysis.”
¶ 21        Finally, the trial court found that it could not adjudicate coverage issues in the two
       underlying lawsuits that had settled, since a ruling concerning those cases could still have a
       collateral estoppel effect on the remaining underlying plaintiffs. The court further noted that
       the Foundation also had third-party complaints pending “which could be impacted by a ruling
       by this Court.”


           3
            Although the trial court did not make the distinction in its order, we note that this language is
       specific to the Sentry policy and does not appear in the Continental policy.

                                                     -6-
¶ 22       On June 8, 2016, Sentry filed a notice of appeal, and on June 17, 2016, Continental joined
       in Sentry’s notice of appeal and also filed its own notice of appeal. Sentry ultimately settled
       with the Foundation and asked this court to dismiss its appeal, which we did on October 25,
       2016, leaving only Continental’s appeal remaining.

¶ 23                                              ANALYSIS
¶ 24       On appeal, we are asked to consider whether the trial court properly entered a stay on
       Continental’s insurance coverage issues. While our appellate jurisdiction is normally limited
       to review of final judgments (see State Farm Mutual Automobile Insurance Co. v. Illinois
       Farmers Insurance Co., 226 Ill. 2d 395, 415 (2007)), we have jurisdiction in the instant
       interlocutory appeal pursuant to Illinois Supreme Court Rule 307(a)(1) (eff. Feb. 26, 2010),
       which allows for appeals from interlocutory orders “granting, modifying, refusing, dissolving,
       or refusing to dissolve or modify an injunction.” See, e.g., Blumenthal v. Brewer, 2016 IL
       118781, ¶ 39 (“Under established Illinois law, the denial of a stay of trial court proceedings is
       treated as a denial of a request for a preliminary injunction and is appealable as a matter of right
       under Illinois Supreme Court Rule 307(a)(1) (eff. Feb. 26, 2010).”); Marzouki v.
       Najar-Marzouki, 2014 IL App (1st) 132841, ¶ 8 (“This court has consistently held that a stay is
       injunctive in nature and a stay order is immediately appealable under Rule 307(a)(1).”);
       Cholipski v. Bovis Lend Lease, Inc., 2014 IL App (1st) 132842, ¶ 33 (noting that “the appellate
       court has repeatedly held that Rule 307 permits the interlocutory appeal of a stay of court
       proceedings”). We find that this appeal does not require us to consider the merits of the
       coverage issues, which will be ultimately decided by the trial court but requires us only to
       consider the question of when the coverage issues should be decided—now, or after the
       resolution of the underlying lawsuits.
¶ 25       The trial court in the instant case found that what it called the “duty to defend analysis,”
       namely, the question of whether the underlying lawsuits sought damages for “bodily injury” or
       “property damage” as defined by the insurance policies, was a question that it could determine
       prior to the resolution of the underlying lawsuits. However, it found that the applicability of the
       “care, custody, or control” and “professional services” exclusions would require the
       adjudication of ultimate facts in the underlying lawsuits and accordingly stayed consideration
       of those exclusions. On appeal, Continental argues that the trial court erred in staying the
       coverage litigation concerning the applicability of the two exclusions. In the alternative,
       Continental argues that if litigation concerning the exclusions was stayed, then litigation
       concerning the “duty to defend analysis” should likewise have been stayed. Also in the
       alternative, Continental argues that if a stay was proper, the stay should not apply to the two
       underlying cases that have been settled.

¶ 26                                     I. Standard of Review
¶ 27       As an initial matter, we must discuss the standard of review applicable to our analysis.
       Continental argues that we should review the propriety of the trial court’s stay de novo, while
       the Foundation argues that we should review it under an abuse of discretion standard. Our
       courts have consistently found that “[t]he decision to grant or deny a motion to stay will not be
       overturned unless the court abused its discretion.” Guarantee Trust Life Insurance Co. v.
       Platinum Supplemental Insurance, Inc., 2016 IL App (1st) 161612, ¶ 35; Cholipski, 2014 IL
       App (1st) 132842, ¶ 39. Continental recognizes that “Illinois courts have generally applied the

                                                    -7-
       abuse of discretion standard” in this type of situation. However, it argues that there is a “recent
       trend” for courts to apply a de novo standard in a Rule 307(a)(1) appeal if the question
       presented is purely legal, as it argues the instant case is. We agree with the Foundation that
       Continental overstates the importance of this purported “recent trend” which, in fact, is not a
       recent trend at all.
¶ 28        Over 20 years ago, our supreme court found that “in an interlocutory appeal, the scope of
       review is normally limited to an examination of whether or not the trial court abused its
       discretion in granting or refusing the requested interlocutory relief. [Citations.] However,
       where the question presented is one of law, a reviewing court determines it independently of
       the trial court’s judgment. [Citation.]” In re Lawrence M., 172 Ill. 2d 523, 526 (1996). While,
       as noted, Continental acknowledges that the propriety of an order granting or denying a stay is
       normally analyzed for an abuse of discretion, Continental argues that the cases applying an
       abuse of discretion standard for stay orders issued in insurance coverage declaratory judgment
       actions “have been called into question” by three cases: Coe v. BDO Seidman, L.L.P., 2015 IL
       App (1st) 142215, Fuqua v. SVOX AG, 2014 IL App (1st) 131429, and Bovay v. Sears,
       Roebuck & Co., 2013 IL App (1st) 120789. We do not find this argument persuasive.
¶ 29        First, as Continental acknowledges in its briefs on appeal, Fuqua applied an abuse of
       discretion standard of review, so it does not support Continental’s argument in favor of the
       application of a de novo standard of review. See Fuqua, 2014 IL App (1st) 131429, ¶ 15 (“this
       court applies the abuse of discretion standard of review in evaluating this appeal”).
       Additionally, as the Foundation points out, both Coe and Bovay involve motions to stay
       litigation and compel arbitration, which is not the issue in the instant case. While Continental
       argues that this distinction is irrelevant, we disagree.
¶ 30        “The circuit court may stay proceedings as part of its inherent authority to control the
       disposition of cases before it. [Citation.] The court may consider factors such as the orderly
       administration of justice and judicial economy in determining whether to stay proceedings.”
       Philips Electronics, N.V. v. New Hampshire Insurance Co., 295 Ill. App. 3d 895, 901-02
       (1998). For this reason, the trial court’s decision to grant a stay is reviewed under an abuse of
       discretion standard. Philips Electronics, 295 Ill. App. 3d at 902. However, in both Coe and
       Bovay, the motion to stay was filed in connection with arbitration proceedings. See Coe, 2015
       IL App (1st) 142215, ¶ 10 (the motion at issue was “a motion to stay the action in favor of
       arbitration”); Bovay, 2013 IL App (1st) 120789, ¶ 12 (the motion at issue was “a motion to
       compel arbitration and stay the proceedings”). Both motions expressly stated that the stay was
       sought pursuant to section 3 of the Federal Arbitration Act, which provides that, “[i]f any suit
       or proceeding [is] brought in any of the courts of the United States upon any issue referable to
       arbitration under an agreement in writing for such arbitration, the court in which such suit is
       pending *** shall on application of one of the parties stay the trial of the action until such
       arbitration has been had in accordance with the terms of the agreement.” 9 U.S.C. § 3 (1994);
       see Coe, 2015 IL App (1st) 142215, ¶ 10; Bovay, 2013 IL App (1st) 120789, ¶ 12. Thus, in
       these cases, the issue was whether the matter should be arbitrated, not whether the matter
       should be stayed, because if the matter was to be arbitrated, it was required to be stayed under
       the Federal Arbitration Act pending that arbitration. This distinguishes these cases from the
       usual type of case in which a stay is a matter of the trial court’s discretion in controlling its
       docket and in no way “call[s] into question” the general rule that stays are reviewed for an
       abuse of discretion.


                                                    -8-
¶ 31       Furthermore, we find unpersuasive Continental’s claims that the instant case involves no
       factual issues and requires only “a purely legal analysis” of the applicable law. As noted, and
       as will be further discussed below, the trial court’s decision in the instant case turned on its
       determination that the issues present in the coverage litigation would overlap with “ultimate
       facts” at issue in the underlying lawsuits, therefore making a stay appropriate. The trial court
       expressly rejected Continental’s arguments that the Foundation had already conceded the
       relevant facts in its pleadings and answers to discovery in the underlying cases. Continental
       uses those same arguments now to support its contention that there are no factual issues at play
       and that the coverage litigation involves only legal issues. Continental’s argument is thus
       putting the cart before the horse because only if we agree with its arguments concerning the
       Foundation’s purported admissions could we find that there were no factual issues in dispute.
¶ 32       In the case at bar, therefore, we find that the appropriate standard of review is abuse of
       discretion, not de novo. “The standard of ‘abuse of discretion’ is the most deferential standard
       of review recognized by the law; a decision will be deemed an abuse of discretion only if the
       decision is ‘unreasonable and arbitrary or where no reasonable person would take the view
       adopted by the circuit court.’ ” Pekin Insurance Co. v. St. Paul Lutheran Church, 2016 IL App
       (4th) 150966, ¶ 69 (quoting Gulino v. Zurawski, 2015 IL App (1st) 131587, ¶ 64).

¶ 33                                      II. Stay of Exclusions
¶ 34      Continental’s primary argument on appeal is that the trial court erred in staying the
       consideration of whether its “care, custody, or control” and “professional services” exclusions
       apply to preclude coverage under the Continental insurance policy.

¶ 35                                A. Duties to Defend and Indemnify
¶ 36        We begin our analysis by setting forth the applicable law concerning an insurer’s duties to
       defend and indemnify an insured. In Illinois, the duties to defend and to indemnify are not
       coextensive, with the obligation to defend being broader than the obligation to pay.
       International Minerals & Chemical Corp. v. Liberty Mutual Insurance Co., 168 Ill. App. 3d
       361, 366 (1988). In determining whether an insurer has a duty to defend its insured, a court
       looks to the allegations in the underlying complaint and compares them to the relevant
       provisions of the insurance policy. Outboard Marine Corp. v. Liberty Mutual Insurance Co.,
       154 Ill. 2d 90, 107-08 (1992). “If the facts alleged in the underlying complaint fall within, or
       potentially within, the policy’s coverage, the insurer’s duty to defend arises.” Outboard
       Marine, 154 Ill. 2d at 108. However, if it is clear from the face of the complaint that the
       allegations fail to state facts that bring the case within, or potentially within, the policy’s
       coverage, an insurer may properly refuse to defend. United States Fidelity & Guaranty Co. v.
       Wilkin Insulation Co., 144 Ill. 2d 64, 73 (1991) (quoting State Farm Fire & Casualty Co. v.
       Hatherley, 250 Ill. App. 3d 333, 336 (1993)).
¶ 37        Additionally, “a circuit court may, under certain circumstances, look beyond the
       underlying complaint in order to determine an insurer’s duty to defend.” Pekin Insurance Co.
       v. Wilson, 237 Ill. 2d 446, 459 (2010). “ ‘It is certainly true that the duty to defend flows in the
       first instance from the allegations in the underlying complaint; this is the concern at the initial
       stage of the proceedings when an insurance company encounters the primary decision of
       whether to defend its insured. However, if an insurer opts to file a declaratory proceeding, we
       believe that it may properly challenge the existence of such a duty by offering evidence to

                                                    -9-
       prove that the insured’s actions fell within the limitations of one of the policy’s exclusions.
       [Citations.] The only time such evidence should not be permitted is when it tends to determine
       an issue crucial to the determination of the underlying lawsuit [citations] ***.’ ” Wilson, 237
       Ill. 2d at 461 (quoting Fidelity & Casualty Co. of New York v. Envirodyne Engineers, Inc., 122
       Ill. App. 3d 301, 304-05 (1983)). Thus, if there is no concern that a crucial issue will be
       determined, the trial court may consider evidence that would otherwise be appropriate at that
       stage of the proceedings. See Wilson, 237 Ill. 2d at 462 (noting that Envirodyne Engineers
       involved evidence available in summary judgment proceedings, while Wilson involved
       evidence available in a grant of judgment on the pleadings).
¶ 38        “[W]here an exclusionary clause is relied upon to deny coverage, its applicability must be
       clear and free from doubt because any doubts as to coverage will be resolved in favor of the
       insured.” International Minerals & Chemical Corp., 168 Ill. App. 3d at 367; see also Wilson,
       237 Ill. 2d at 456 (“ ‘provisions that limit or exclude coverage will be interpreted liberally in
       favor of the insured and against the insurer’ ” (quoting American States Insurance Co. v.
       Koloms, 177 Ill. 2d 473, 479 (1997))). “[W]here the language of an insurance policy is clear
       and unambiguous, it will be applied as written.” Hatherley, 250 Ill. App. 3d at 337. The
       construction of an insurance policy presents a question of law that is reviewed de novo.
       Outboard Marine, 154 Ill. 2d at 108. De novo consideration means we perform the same
       analysis that a trial judge would perform. Erie Insurance Exchange v. Compeve Corp., 2015 IL
       App (1st) 142508, ¶ 14.
¶ 39        An insurer’s duty to indemnify is narrower than its duty to defend its insured. Outboard
       Marine, 154 Ill. 2d at 127. “[T]he question of whether the insurer has a duty to indemnify the
       insured for a particular liability is only ripe for [adjudication] if the insured has already
       incurred liability *** against it.” Outboard Marine, 154 Ill. 2d at 127. “If so, the duty to
       indemnify arises if the insured’s activity and the resulting loss or damage actually fall within
       the *** policy’s coverage.” (Emphasis in original.) Outboard Marine, 154 Ill. 2d at 128.
       However, if a court determines that the insurer has no duty to defend, “it may simultaneously
       determine that the insurer has no duty to indemnify.” Abrams v. State Farm Fire & Casualty
       Co., 306 Ill. App. 3d 545, 549 (1999). “In cases *** where no duty to defend exists and the
       facts alleged do not even fall potentially within the insurance coverage, such facts alleged
       could obviously never actually fall within the scope of coverage. Under no scenario could a
       duty to indemnify arise. Clearly, where there is no duty to defend, there will be no duty to
       indemnify ***.” (Emphases in original.) Crum & Forster Managers Corp. v. Resolution Trust
       Corp., 156 Ill. 2d 384, 398 (1993). In the case at bar, although only the duty to indemnify is at
       issue with respect to Continental’s policy, Continental claims that the issue is ripe for
       adjudication because there was no duty to defend.

¶ 40                                         B. Peppers Doctrine
¶ 41       In the case at bar, the trial court determined that it was premature to consider whether the
       “care, custody, or control” and “professional services” exclusions applied to deny coverage to
       the Foundation and instead decided to stay the coverage litigation on this question. The court’s
       decision to stay the determination of these coverage issues was based on its application of the
       “Peppers doctrine,” which was set forth by our supreme court in Maryland Casualty Co. v.
       Peppers, 64 Ill. 2d 187 (1976).


                                                  - 10 -
¶ 42        In the declaratory judgment action at issue in Peppers, the trial court was asked to
       determine whether an insurer owed a duty to defend its insured in a personal injury action that
       alleged intentional, negligent, and willful and wanton conduct; the insurance policy at issue
       specifically excluded coverage for intentionally inflicted injuries. Peppers, 64 Ill. 2d at 190,
       193. After a bench trial, the trial court found that the insured’s actions were intentional, and
       therefore, there was no coverage under the policy. Peppers, 64 Ill. 2d at 191. Our supreme
       court, however, found that “[b]y virtue of the interrelation of the various issues involved in the
       litigation between [the underlying plaintiff] and [the insured] and between [the insured] and
       [the insurer] we must conclude that this finding by the trial court constituted an abuse of the
       discretion vested in it” under the Civil Practice Act (Ill. Rev. Stat. 1975, ch. 110, ¶ 57.1).
       Peppers, 64 Ill. 2d at 196. The supreme court found that under the principle of collateral
       estoppel, the finding in the declaratory judgment action that the injury was intentionally
       inflicted “could possibly establish the allegations of the assault count in the complaint and
       might preclude [the underlying plaintiff’s] right to recover under the other theories alleged.”
       Peppers, 64 Ill. 2d at 197. The supreme court cited with approval an appellate court case
       finding that such a judgment under similar circumstances was premature and found that “[t]he
       finding of the trial court in our case that the injury was intentional was not proper in this
       declaratory judgment action. This issue was one of the ultimate facts upon which recovery is
       predicated in the *** personal injury action against [the insured], which had been filed
       considerably before the declaratory judgment action had been instituted.” Peppers, 64 Ill. 2d at
       197. This ruling has come to be known as the “Peppers doctrine.” TIG Insurance Co. v. Canel,
       389 Ill. App. 3d 366, 373 (2009).
¶ 43        “Under the Peppers doctrine, ‘it is generally inappropriate for a court considering a
       declaratory judgment action to decide issues of ultimate fact that could bind the parties to the
       underlying litigation.’ ” Landmark American Insurance Co. v. NIP Group, Inc., 2011 IL App
       (1st) 101155, ¶ 59 (quoting Allstate Insurance Co. v. Kovar, 363 Ill. App. 3d 493, 501 (2006)).
       “This proscription specifically precludes determination of any ultimate facts upon which
       liability or recovery might be predicated in the underlying case.” NIP Group, 2011 IL App
       (1st) 101155, ¶ 59. Thus, it is an abuse of discretion for a trial court in a declaratory judgment
       action to make such a determination. Peppers, 64 Ill. 2d at 196; Empire Fire & Marine
       Insurance Co. v. Clarendon Insurance Co., 267 Ill. App. 3d 1022, 1027 (1994).
¶ 44        Our supreme court in Peppers did not define the term “ultimate fact” and has subsequently
       used other terms to stand for the same proposition. In Thornton v. Paul, our supreme court,
       relying on Peppers, found that “it would not be appropriate, under the facts of this case, for the
       insurer to seek a declaratory judgment that the insured’s conduct constituted a battery and was
       thus beyond the coverage of the insurance policy. In such a proceeding, an issue crucial to the
       insured’s liability in the personal injury action and also one on which punitive damages could
       ultimately be assessed would be determined in a purely ancillary proceeding with the plaintiff
       and defendant in the personal injury action both aligned on the same side as defendants in the
       declaratory judgment action.” (Emphasis added.) Thornton v. Paul, 74 Ill. 2d 132, 159 (1978),
       overruled in part on other grounds by American Family Mutual Insurance Co. v. Savickas, 193
       Ill. 2d 378 (2000). In Savickas, the supreme court reaffirmed the “rule” relied on by the
       Thornton court “that it is inappropriate to resolve a declaratory judgment action in such a
       manner as would bind the parties in the underlying litigation on any issues therein.”
       (Emphasis added.) Savickas, 193 Ill. 2d at 387. Thus, in applying the Peppers doctrine, courts


                                                   - 11 -
       have had to determine whether the facts to be decided in the declaratory judgment action would
       be considered “ultimate facts” such that the coverage litigation was premature.
¶ 45        For instance, in Envirodyne Engineers, the appellate court began its analysis by attempting
       to define “ultimate fact.” The court noted:
                     “Both Peppers and Thornton are instructive as to what matters cannot be
                determined in a declaratory judgment proceeding prior to the completion of the
                underlying action. Peppers states that an ultimate fact upon which recovery is
                predicated in the underlying case may not be addressed. The court’s language suggests
                that an ultimate fact is one which would estop the plaintiff in the underlying case from
                pursuing one of his theories of recovery. Thornton implies that an ultimate fact is one in
                which ‘an issue crucial to the insured’s liability’ in the underlying case is determined.
                Apparently only then would the inequities surface in regard to alignment of the parties
                and the order and burden of proof, because those matters necessarily arise in any
                declaratory judgment proceeding brought before completion of the underlying lawsuit.
                Thus, in examining the facts in the instant case, we must decide whether the plaintiff in
                the underlying lawsuit would be estopped from raising a theory of recovery or if the
                trial court decided an issue crucial to the insured’s liability in the underlying case.”
                Envirodyne Engineers, 122 Ill. App. 3d at 307.
       Applying this standard, the Envirodyne Engineers court noted that the sole issue determined by
       the trial court in the declaratory judgment proceeding was the nature of the services provided
       by the insured at a construction site, namely, that the insured was acting as a consulting
       engineer. Envirodyne Engineers, 122 Ill. App. 3d at 307. The court found that this
       determination in no way “estops the underlying plaintiff from raising a theory of recovery or
       decides any issue crucial to the underlying litigation.” Envirodyne Engineers, 122 Ill. App. 3d
       at 308. The court noted that the allegations in the underlying complaint were for violations of
       the Structural Work Act and for negligence and found that “[a] finding that [the insured]
       performed as a consulting engineer in no way diminishes either theory of recovery advanced
       by the underlying plaintiff.” Envirodyne Engineers, 122 Ill. App. 3d at 308. The court further
       found that the fact that the insured was acting as a consulting engineer was not an issue crucial
       to its liability in the underlying case because “the ultimate, or crucial, queries in this case
       revolve around whether [the insured] ‘willfully’ violated the Structural Work Act or whether
       [the insured] acted negligently. None of these questions hinges upon whether [the insured] did
       or did not serve in the capacity of consulting engineer for the construction project.” Envirodyne
       Engineers, 122 Ill. App. 3d at 308. Accordingly, the court found that the nature of the insured’s
       services was not an issue of ultimate fact. Envirodyne Engineers, 122 Ill. App. 3d at 308.
¶ 46        In the case at bar, the trial court determined that a finding concerning the applicability of
       the “care, custody, or control” and “professional services” exclusions would require it to
       determine ultimate facts in the underlying lawsuits. We consider each exclusion in turn,
       bearing in mind that, “[i]n determining whether to stay proceedings, the circuit court has
       discretion to consider factors such as the ‘orderly administration of justice and judicial
       economy,’ as well as its inherent authority to control the disposition of the cases before it.” TIG
       Insurance Co. v. Canel, 389 Ill. App. 3d 366, 375 (2009) (quoting Estate of Bass v. Katten, 375
       Ill. App. 3d 62, 68 (2007)).




                                                   - 12 -
¶ 47                               C. Care, Custody, or Control Exclusion
¶ 48        Continental’s insurance policy contained a “care, custody, or control” exclusion that
       provided that the insurance did not apply to property damage to “[p]ersonal property in the
       care, custody or control of the insured.” “For this common exclusion, Illinois courts ‘employ a
       two-part test. If the property damaged is within the possessory control of the insured at the time
       of the loss and is a necessary element of the work performed, the property is considered to be in
       the care, custody, or control of the insured.’ ” Liberty Mutual Insurance Co. v. Zurich
       Insurance Co., 402 Ill. App. 3d 37, 40 (2010) (quoting Caisson Corp. v. Home Indemnity
       Corp., 151 Ill. App. 3d 130, 133 (1986)). “With respect to whether an insured [has] possessory
       control of the property at the time of the loss, it has been noted that, ‘[w]hile the control
       exercised by the insured must be exclusive, it need not be continuous, and if the insured has
       possessory control at the time the property is damaged, the exclusion clause will apply.’ ”
       Bolanowski v. McKinney, 220 Ill. App. 3d 910, 914 (1991) (quoting Country Mutual Insurance
       Co. v. Waldman Mercantile Co., 103 Ill. App. 3d 39, 42 (1981)); Essex Insurance Co. v.
       Wright, 371 Ill. App. 3d 437, 441 (2007); Caisson Corp., 151 Ill. App. 3d at 133. Thus, in order
       for the trial court in the declaratory judgment action to determine that the “care, custody, or
       control” exclusion applied in the instant case, it would need to determine that the Foundation
       exercised exclusive control over the specimens at the time they were damaged.
¶ 49        Continental argues that this determination would not require the resolution of an ultimate
       fact in the underlying lawsuits. First, Continental argues that exclusive possessory control of
       the specimens at the time they were damaged is not necessary for either a bailment or
       negligence claim. While Continental correctly states that, in theory, neither a cause of action
       for bailment nor a cause of action for negligence requires exclusive possession at the time of
       the damage, Continental fails to consider the actual factual allegations in the underlying
       lawsuits.
¶ 50        The underlying lawsuits name both the Foundation and the Hospital as defendants and
       allege causes of action for bailment and negligence against both. With respect to the
       negligence claim against the Hospital, the underlying complaints allege4 that, at the time the
       cryogenic tanks failed, the Hospital “had the duty to exercise ordinary care in the storage and
       preservation of the semen/testicular specimens” of the underlying plaintiffs and was negligent
       in, inter alia, “[f]ail[ing] to adequately maintain the semen/testicular tissue specimens in its
       possession”; “[f]ail[ing] to adequately store the semen/testicular tissue specimens in its
       possession”; and “[f]ail[ing] to adequately preserve the semen/testicular tissue specimens in its
       possession.” Thus, the allegations of the underlying complaints expressly allege that the
       Hospital exercised possessory control over the specimens at the time they were damaged.
       Similarly, with respect to the bailment claim against the Hospital, the underlying complaints
       allege that the semen or testicular tissue specimens of the underlying plaintiffs “were damaged
       without [the underlying plaintiffs’] knowledge or consent while under the care of” the
       Hospital. Thus, the bailment claims allege that the specimens were under the Hospital’s care at
       the time they were damaged.
¶ 51        As we have previously noted, in order for the trial court in the declaratory judgment action
       to determine that the “care, custody, or control” exclusion applied in the instant case, it would

          4
            The underlying complaints, all of which were attached to Continental’s counterclaim, are
       substantively identical.

                                                   - 13 -
       need to determine that the Foundation exercised exclusive control over the specimens at the
       time they were damaged. However, this would contradict the allegations in the underlying
       complaint that allege that the Hospital exercised control over the specimens at that same time
       and would effectively preclude the underlying plaintiffs from proving their claims against the
       Hospital. This is exactly the type of factual determination that the Peppers doctrine prohibits.
¶ 52       We are not persuaded by Continental’s arguments that the Foundation has already admitted
       that it retained exclusive control in its pleadings and answers to discovery such that the trial
       court’s determination in the instant case would have no effect on the underlying lawsuits.
       Continental’s arguments are based on the answer filed by the Foundation and the Hospital to
       the John Anonymous complaint, as well as the third-party complaint jointly filed by the
       Foundation and the Hospital. With respect to the answer filed in the John Anonymous
       complaint, that complaint did not state its allegations against the Foundation and the Hospital
       in separate paragraphs but discussed them together; for instance, paragraph 2 of the complaint
       alleged that “[i]n 2008, [the Hospital] and [the Foundation] owned, operated, managed, and
       controlled a cryopreservation storage tank for semen/testicular tissue located at their outpatient
       urology facility in the Galter Pavilion of [the Hospital].” The answer to that allegation, filed
       jointly by the Foundation and the Hospital, was: “[The Foundation] admits that it owned and
       operated a cryopreservation storage tank for semen/testicular tissue and denies the remaining
       allegations of paragraph 2. Further answering, defendant [the Hospital] denies owning,
       operating, managing, or controlling the cryopreservation storage tank for semen/testicular
       tissue located at [the Foundation]’s urology facility in the Galter Pavilion.” Continental reads
       this answer, along with the Foundation’s other answers, as the Foundation “fully conceding”
       that the Foundation had exclusive possessory control over the specimens at the time they were
       damaged. Continental’s argument rests on the assumption that a denial in an answer operates
       as a concession that the corollary of that allegation is true; that is, under Continental’s view, the
       Foundation’s denial in the above-quoted answer operates as a concession that the Hospital did
       not own, operate, manage, or control the cryopreservation storage tank.
¶ 53       However, that is the opposite of the way in which answers to complaints operate. An
       answer is required to contain an explicit admission or denial of each allegation of the pleading
       to which it relates. 735 ILCS 5/2-610(a) (West 2014). “Every allegation *** not explicitly
       denied is admitted ***.” 735 ILCS 5/2-610(b) (West 2014). In the case at bar, then, using the
       above-quoted answer as an example, the Foundation admitted only that it owned and operated
       a cryopreservation storage tank for semen/testicular tissue because it denied the remaining
       allegations of the paragraph, which related to the Hospital. Continental’s position would
       require the court to interpret the Foundation’s denial as a concession that the Hospital did not
       own, operate, manage, or control the cryopreservation storage tank, in effect conceding that the
       Foundation exercised exclusive possession over the tank. Continental provides no authority for
       this novel way of interpreting the Code of Civil Procedure, and we do not find its attempt to
       fashion an admission out of a denial to be persuasive. The Foundation’s answers at most admit
       that it had control over the specimens and do not speak to whether that control was exclusive.
¶ 54       Similarly, the third-party complaint is silent as to exclusive control. Continental points to
       paragraph 13 of the third-party complaint, which alleges that “[a]t all relevant times, [the
       Foundation] provided storage for plaintiffs’ semen and/or testicular tissue in a cryogenic
       freezer designed and manufactured by Horizon, Harsco and Taylor-Wharton. The freezer was
       located on the 20th Floor of [the Foundation].” Again, this allegation at most demonstrates that


                                                    - 14 -
       the Foundation had control over the specimens, but says nothing about whether that control
       was exclusive. Thus, we do not find that the Foundation has conceded its exclusive possession
       of the specimens such that the trial court’s decision in the instant insurance coverage litigation
       would not run afoul of the Peppers doctrine should it also make such a determination.
¶ 55       We are similarly unpersuaded by Continental’s argument that the trial court’s entry of
       partial summary judgment in the John Anonymous case necessarily resolved the issue of
       exclusive possession. The trial court in that case entered summary judgment on John
       Anonymous’ bailment count “on elements 1, 3 & 4.” The first element referred to by the trial
       court is “an express or implied agreement to establish a bailment.” Longo Realty v. Menard,
       Inc., 2016 IL App (1st) 151231, ¶ 21. Continental argues that the Foundation did not dispute
       that it entered into a bailment and, thus, conceded that it had exclusive possession. However, as
       the trial court pointed out, a bailment is created at the time of the delivery of the property, while
       the “care, custody, or control” exclusion concerns possession of the property at the time of the
       loss. See Wausau Insurance Co. v. All Chicagoland Moving & Storage Co., 333 Ill. App. 3d
       1116, 1121 (2002) (“A bailment is the delivery of property for some purpose upon a contract,
       express or implied, that after the purpose has been fulfilled, the property shall be redelivered to
       the bailor, or otherwise dealt with according to his directions, or kept until he reclaims it.”
       (Internal quotation marks omitted.)); Bolanowski, 220 Ill. App. 3d at 914 (“if the insured has
       possessory control at the time the property is damaged, the exclusion clause will apply”
       (internal quotation marks omitted)). Thus, a finding that a bailment was created is not relevant
       to the issue of whether the Foundation exercised exclusive control over the specimens at the
       time the tank failed.
¶ 56       As a final matter concerning the “care, custody, or control” exclusion, Continental appears
       to believe it is “irrelevant” whether potential claims remain against the Hospital. However, by
       making this argument, Continental appears to miss the point of the Peppers doctrine. As our
       supreme court noted in that case, under the principle of collateral estoppel, the finding in the
       declaratory judgment action that the injury was intentionally inflicted “could possibly establish
       the allegations of the assault count in the complaint and might preclude [the underlying
       plaintiff’s] right to recover under the other theories alleged.” Peppers, 64 Ill. 2d at 197. The
       supreme court thus found that such a determination was an abuse of the trial court’s discretion.
       Peppers, 64 Ill. 2d at 196. Similarly, here, a finding that the Foundation had exclusive
       possessory control over the specimens at the time of the damage could preclude the underlying
       plaintiffs’ right to recover under the bailment and negligence theories they alleged in their
       complaints against the Hospital. Contrary to Continental’s contention, this is the heart of the
       problem and is not “irrelevant.” We thus cannot find that the trial court abused its discretion in
       deciding to stay the litigation concerning the “care, custody, or control” exclusion.

¶ 57                                D. Professional Services Exclusion
¶ 58        Continental also argues that the trial court could have determined the applicability of its
       “professional services” exclusion without determining any ultimate facts in the underlying
       litigation. The “professional services” exclusion contained in the policy provided:
                    “This insurance does not apply to any liability arising out of any act or omission, or
                rendering of or failure to render professional services by you or any other person for
                whose acts you are legally responsible, and arising out of the performance of
                professional services for others in your capacity as a (an):

                                                    - 15 -
                    (Insert Profession of Service)
                    Professional Healthcare Services”
¶ 59       In construing “professional services” exclusions, “courts have adopted an expansive
       definition of the term ‘professional service.’ The term is not limited to services performed by
       persons who must be licensed by a governmental authority in order to practice their
       professions. Rather, it refers to any business activity conducted by the insured which involves
       specialized knowledge, labor, or skill, and is predominantly mental or intellectual as opposed
       to physical or manual in nature.” State Street Bank & Trust Co. of Quincy, Illinois v. INA
       Insurance Co. of Illinois, 207 Ill. App. 3d 961, 967 (1991); see also Pekin Insurance Co. v. L.J.
       Shaw & Co., 291 Ill. App. 3d 888 (1997).
¶ 60       In the case at bar, the trial court found that “[i]t is not apparent from the underlying
       complaints whether the maintenance of cryogenically preserved sperm requires ‘specialization
       or expertise’, or is merely incidental to any professional services [the Foundation] provides.
       The underlying complaints contain no description or detail as to how sperm samples are
       cryogenically preserved, much less whether cryogenic preservation of sperm is
       ‘predominantly mental or intellectual as opposed to physical or manual.’ ” The court found
       that, to make that determination, “the Court would have to look at extrinsic evidence (outside
       the pleadings) which the Court cannot do if it tends to determine an issue crucial to the
       determination of the underlying lawsuit.”
¶ 61       Continental argues that “[a]ll of the alleged actions or omissions of [the Foundation] in the
       Cryogenic Tank Claims relate to [the Foundation]’s means and methods for preserving its
       patients’ semen/testicular tissue specimens through a cryopreservation system within a
       cryogenic tank. [Citation.] Such cryogenic related activities clearly require specialized
       knowledge, labor or skill and are predominantly mental or intellectual.” Thus, it argues that the
       allegations of the underlying complaints are sufficient to determine whether the Foundation’s
       actions constitute “professional services” under the policy and that such a determination does
       not involve the resolution of any ultimate facts.
¶ 62       By contrast, the Foundation argues that the underlying complaints do not contain any detail
       as to how frozen sperm samples are maintained or what specialized knowledge or skill is
       required in maintaining them. Thus, the Foundation argues that the complaints alone are
       insufficient to answer this question. Furthermore, the Foundation argues that “the question of
       what [the Foundation] did—or did not do—as part of its cryopreservation program is what the
       Underlying Actions are all about. The claims against [the Foundation] turn on whether [the
       Foundation] was negligent in its efforts to maintain, store and preserve the samples, and what
       actions it took to monitor the tank or to safeguard the plaintiffs’ samples. The evidence bearing
       on these critical issues is the same type of evidence that would inform whether the professional
       services exclusion applies.” (Emphasis in original.)
¶ 63       Continental is correct that courts in other cases have considered the nature of an insured’s
       work without running afoul of the Peppers doctrine. See, e.g., Bonnie Owen Realty, Inc. v.
       Cincinnati Insurance Co., 283 Ill. App. 3d 812, 817 (1996) (finding that the trial court properly
       determined that “[n]one of the allegations of negligence involve any specialized knowledge,
       labor, or skill, nor do they involve conduct which is predominantly mental or intellectual as
       opposed to physical of manual in nature”); Envirodyne Engineers, 122 Ill. App. 3d at 307-08
       (noting that “[t]he sole issue determined by the trial court in the declaratory proceeding was the
       nature of the services performed by [the insured] at the job site,” which did not estop the

                                                   - 16 -
       underlying plaintiff from raising a theory of recovery or decide any issue crucial to the
       underlying litigation). However, the fact that other courts chose to decide the issue does not
       mean that the trial court in the instant action was required to do the same.
¶ 64        In the case at bar, the trial court found that it could not determine whether the Foundation’s
       conduct constituted professional services by looking at the underlying complaints, and to make
       that determination, “the Court would have to look at extrinsic evidence (outside the pleadings)
       which the Court cannot do if it tends to determine an issue crucial to the determination of the
       underlying lawsuit.” This latter statement by the trial court implies that it believed that
       determining the nature of the Foundation’s conduct would require it to determine an issue
       crucial to the underlying lawsuits.
¶ 65        As noted, “[t]he decision to grant or deny a motion to stay will not be overturned unless the
       court abused its discretion.” Guarantee Trust Life Insurance, 2016 IL App (1st) 161612, ¶ 35;
       Cholipski, 2014 IL App (1st) 132842, ¶ 39. Furthermore, “[i]n determining whether to stay
       proceedings, the circuit court has discretion to consider factors such as the ‘orderly
       administration of justice and judicial economy,’ as well as its inherent authority to control the
       disposition of the cases before it.” Canel, 389 Ill. App. 3d at 375 (quoting Estate of Bass, 375
       Ill. App. 3d at 68).
¶ 66        In the case at bar, we cannot find that the trial court abused its discretion in taking the more
       cautious approach and choosing not to decide an issue that it believed had the potential to
       affect the underlying lawsuits. Certainly, as the Foundation points out, the nature of the
       Foundation’s conduct could touch on its liability for negligence and the liability of the
       third-party defendants. While Continental argues that the trial court did not need to determine
       whether the Foundation acted appropriately but only needed to determine whether the
       Foundation’s conduct involved “specialized knowledge,” we cannot find that the trial court’s
       decision to stay that determination was so “ ‘unreasonable and arbitrary’ ” (St. Paul Lutheran
       Church, 2016 IL App (4th) 150966, ¶ 69 (quoting Gulino, 2015 IL App (1st) 131587, ¶ 64))
       such that it constituted an abuse of discretion.
¶ 67        As a final matter on this issue, Continental argues that even if the allegations of the
       underlying complaints were insufficient to resolve this issue, the trial court could examine
       extrinsic evidence to determine the nature of the Foundation’s activities. It claims that “[a]s in
       Envirodyne, evaluating extrinsic facts beyond the allegations in the complaints, as to the
       specifics of how [the Foundation] cryogenically preserved its patients’ tissue in the cryogenic
       tank, will provide additional information to confirm that [the Foundation]’s actions involved
       special knowledge and training to support the application of the professional services
       exclusion.” While we have already determined that the trial court appropriately stayed the
       consideration of this issue, we must caution that Continental takes an overly expansive view of
       what extrinsic evidence may be considered by the trial court.
¶ 68        As we have discussed earlier, “a circuit court may, under certain circumstances, look
       beyond the underlying complaint in order to determine an insurer’s duty to defend” (Wilson,
       237 Ill. 2d at 459), and an insurer may offer extrinsic evidence to prove that an exclusion
       applies unless “ ‘it tends to determine an issue crucial to the determination of the underlying
       lawsuit’ ” (Wilson, 237 Ill. 2d at 461 (quoting Envirodyne Engineers, 122 Ill. App. 3d at
       304-05)). However, even if there is no concern that a crucial issue will be determined, the trial
       court may only consider evidence that would otherwise be appropriate at that stage of the
       proceedings. See Wilson, 237 Ill. 2d at 462 (noting that Envirodyne Engineers involved

                                                    - 17 -
       evidence available in summary judgment proceedings, while Wilson involved evidence
       available in a grant of judgment on the pleadings). The Wilson court specifically cautioned that
       Envirodyne Engineers, which is cited by Continental in support of this argument, involved a
       summary judgment proceeding, which explained why that court was permitted to consider the
       evidence it did. See Wilson, 237 Ill. 2d at 462. By contrast, in Wilson, which was decided on
       the pleadings, our supreme court noted that it was limited by examining the pleadings alone.
       Wilson, 237 Ill. 2d at 462. Thus, Envirodyne Engineers does not stand for the proposition that
       all extrinsic evidence may be considered but only that the court in the declaratory judgment
       action may consider extrinsic evidence that would otherwise be appropriate at that stage of the
       proceedings and that does not determine a crucial issue in the underlying litigation.

¶ 69                                         III. Duty to Defend
¶ 70       Continental next argues that, if the trial court properly stayed litigation of whether the
       exclusions applied, it should have also stayed litigation on whether the underlying lawsuits
       alleged “bodily injury” or “property damage” such that there was a duty to defend under the
       language of its policy.5 In the case at bar, with respect to the issue of whether the underlying
       lawsuits sought damages for “bodily injury” or “property damage” under the policies such that
       there was a duty to defend, the court found that this issue was ripe for adjudication. The court
       found that, in determining whether there was a duty to defend, it could decide whether the
       allegations of the underlying complaints contained sufficient facts to show the potential for
       coverage and, accordingly, determined that it would “proceed with litigating the duty to defend
       analysis.” We cannot find that the trial court abused its discretion by proceeding to consider
       whether the allegations of the underlying complaints fall potentially within the policies’
       coverage such that there was a duty to defend.
¶ 71       As we have noted, in determining whether an insurer has a duty to defend its insured, a
       court looks to the allegations in the underlying complaint and compares them to the relevant
       provisions of the insurance policy. Outboard Marine, 154 Ill. 2d at 107-08. “If the facts alleged
       in the underlying complaint fall within, or potentially within, the policy’s coverage, the
       insurer’s duty to defend arises.” Outboard Marine, 154 Ill. 2d at 108. However, if it is clear
       from the face of the complaint that the allegations fail to state facts that bring the case within,
       or potentially within, the policy’s coverage, an insurer may properly refuse to defend. Wilkin
       Insulation, 144 Ill. 2d at 73 (citing Hatherley, 250 Ill. App. 3d at 336).
¶ 72       “The insurer bears the burden of establishing that it has no duty to defend.” Skolnik v.
       Allied Property & Casualty Insurance Co., 2015 IL App (1st) 142438, ¶ 26. “This burden
       includes affirmatively demonstrating the applicability of an exclusion.” Skolnik, 2015 IL App
       (1st) 142438, ¶ 26. “[W]here an exclusionary clause is relied upon to deny coverage, its
       applicability must be clear and free from doubt because any doubts as to coverage will be
       resolved in favor of the insured.” International Minerals & Chemical Corp., 168 Ill. App. 3d at
       367; see also Wilson, 237 Ill. 2d at 456 (“ ‘provisions that limit or exclude coverage will be


           5
            We note that only Sentry’s complaint alleges a duty to defend. However, Continental’s arguments
       are based on the theory that if there is no duty to defend, there can be no duty to indemnify. As both
       policies contain identical language concerning “bodily injury” and “property damage,” the duty to
       defend arguments would equally apply to both insurers.

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       interpreted liberally in favor of the insured and against the insurer’ ” (quoting Koloms, 177 Ill.
       2d at 479)).
¶ 73       In the case at bar, as we have discussed above, the trial court properly concluded that there
       is no way to determine whether the Continental policy’s exclusions apply without determining
       ultimate facts in the underlying lawsuits, thereby running afoul of the Peppers doctrine. Thus,
       at this stage of the proceedings, Continental is unable to “affirmatively demonstrat[e] the
       applicability of an exclusion” (Skolnik, 2015 IL App (1st) 142438, ¶ 26) and therefore cannot
       rely on the exclusions to establish that it has no duty to defend the Foundation because the
       applicability of the exclusions is not “clear and free from doubt,” and we must resolve any
       doubts as to coverage in favor of the foundation. International Minerals & Chemical Corp.,
       168 Ill. App. 3d at 367.
¶ 74       However, in considering the rest of the policy, which provides coverage for “bodily injury”
       and “property damage,” the trial court is required to consider whether “the facts alleged in the
       underlying complaint fall within, or potentially within, the policy’s coverage.” Outboard
       Marine, 154 Ill. 2d at 108. This is something the trial court can do without deciding any
       ultimate facts in the underlying litigation. Accordingly, the trial court did not abuse its
       discretion in finding that it did not need to stay consideration of the duty to defend and may
       properly proceed to consider whether the allegations of the underlying complaints show the
       potential for coverage.
¶ 75       We emphasize that the duty to indemnify arises only “if the insured’s activity and the
       resulting loss or damage actually fall within the *** policy’s coverage.” (Emphasis in
       original.) Outboard Marine, 154 Ill. 2d at 128. Thus, once the underlying facts required for
       consideration of the applicability of the exclusions are decided, the trial court will be able to
       determine whether the foundation’s activity actually fell within the policy’s coverage such that
       there is a duty to indemnify. However, for purposes of a duty to defend, since Continental is
       unable to “affirmatively demonstrat[e] the applicability of an exclusion” (Skolnik, 2015 IL
       App (1st) 142438, ¶ 26) at this point, the trial court could properly proceed to consider the rest
       of the policy’s language to determine if a duty to defend arose.

¶ 76                                        IV. Settled Lawsuits
¶ 77        Finally, Continental argues that if the matter was properly stayed, then the stay should not
       extend to those underlying lawsuits that have already been resolved. Continental points to two
       lawsuits that have been settled and argues that the coverage litigation should proceed with
       respect to these suits. We do not find this argument persuasive.
¶ 78        The basis for Continental’s argument on appeal is the citation of a number of other cases in
       which coverage litigation for certain lawsuits has proceeded while other lawsuits remain
       pending. However, in at least one of the cases it cites, there was no dispute between the parties
       as to whether litigation on some claims could proceed while others remained pending, as there
       is in the instant case. See, e.g., United States Gypsum Co. v. Admiral Insurance Co., 268 Ill.
       App. 3d 598, 607 (1994) (“By agreement among the parties, this coverage trial was limited to
       eight specific underlying cases” that had been resolved, while approximately 200 remained
       pending.). In some of the other cases, the courts were considering section 2-619(a)(3) of the
       Code, which involves duplicative litigation and is not at issue here. See Zurich Insurance Co.
       v. Baxter International, Inc., 173 Ill. 2d 235, 243 (1996); John Crane Inc. v. Admiral Insurance
       Co., 391 Ill. App. 3d 693, 698 (2009).

                                                   - 19 -
¶ 79        Additionally, the mere fact that other courts have chosen to proceed in this manner does not
       mean that proceeding to consider coverage issues in the settled lawsuits here is required. As
       noted, “[t]he decision to grant or deny a motion to stay will not be overturned unless the court
       abused its discretion.” Guarantee Trust Life Insurance, 2016 IL App (1st) 161612, ¶ 35;
       Cholipski, 2014 IL App (1st) 132842, ¶ 39. “The circuit court may stay proceedings as part of
       its inherent authority to control the disposition of cases before it. [Citation.] The court may
       consider factors such as the orderly administration of justice and judicial economy in
       determining whether to stay proceedings.” Philips Electronics, 295 Ill. App. 3d at 901-02.
¶ 80        In the case at bar, the court found that it could not adjudicate coverage issues in the two
       underlying lawsuits that had settled, since a ruling concerning those cases could still have a
       collateral estoppel effect on the remaining underlying plaintiffs. The court further noted that
       the Foundation also had third-party complaints pending “which could be impacted by a ruling
       by this Court.” We cannot find that the trial court’s decision to take the more cautious route and
       wait until the resolution of all of the underlying lawsuits constituted an abuse of discretion.
¶ 81        Continental argues that staying the coverage litigation for the settled cases would unduly
       prejudice the insurer by delaying resolution of the litigation. However, proceeding with the
       litigation would prejudice the underlying plaintiffs and the Foundation by impacting their
       ability to litigate the underlying lawsuits and the third-party complaint. We thus cannot find
       that the trial court’s decision in the instant case to favor the interests of the underlying litigants
       constituted an abuse of discretion merely because it would delay resolution of Continental’s
       claims.

¶ 82                                           CONCLUSION
¶ 83        For the reasons set forth above, the trial court did not abuse its discretion in staying
       consideration of coverage issues where its factual determinations in the coverage litigation
       could have an effect on the ultimate facts at issue in the underlying lawsuits. The trial court
       also did not abuse its discretion in proceeding to consider whether the allegations of the
       underlying complaints set forth facts that arguably fell within the policies’ coverage such that
       it gave rise to a duty to defend. Finally, the trial court did not abuse its discretion in declining to
       adjudicate coverage issues on the two underlying lawsuits that had settled.

¶ 84       Affirmed.




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