                                                                                  FILED
                                                                                 May 22, 2018
                                     2018 IL App (4th) 170548                    Carla Bender
                                                                             4th District Appellate
                                           NO. 4-17-0548
                          Court, IL

                                  IN THE APPELLATE COURT


                                            OF ILLINOIS


                                        FOURTH DISTRICT


 ILLINOIS STATE BAR ASSOCIATION MUTUAL                        )   Appeal from the
 INSURANCE COMPANY,                                           )   Circuit Court of
                 Plaintiff-Appellant,                         )   Sangamon County
                 v.                                           )   No. 16MR843
 LEIGHTON LEGAL GROUP, LLC, an Illinois Lim­                  )
 ited Liability Company; G. TIMOTHY LEIGHTON;                 )
 CAROL M. McCLURE; and CYNTHIA S.                             )   Honorable
 McCLURE,                                                     )   Brian T. Otwell,
                 Defendants-Appellees.                        )   Judge Presiding.


               JUSTICE STEIGMANN delivered the judgment of the court, with opinion.
               Justices Holder White and DeArmond concurred in the judgment and opinion.

                                               OPINION

¶1             In August 2016, plaintiffs, Carol M. McClure and Cynthia S. McClure, filed a

complaint against G. Timothy Leighton and the Leighton Legal Group, LLC (collectively, the

insured); Daniel Sanchuk; DPS Consulting, LLC; and other nominal defendants in the Superior

Court for the District of Columbia. The insured was an attorney and cotrustee for a trust of which

plaintiffs were the remainder beneficiaries.

¶2             The complaint (1) sought a declaratory judgment as to the ownership of the trust

property, (2) sought restoration of trust property, (3) sought a constructive trust, (4) requested

termination of the trust, (5) alleged self-dealing by the insured, (6) alleged breach of good faith

and fair dealing, (7) alleged breach of trust for failure to administer the trust, (8) requested the

removal of the trustees, and (9) sought the appointment of a special fiduciary to perform an ac­
counting of trust property. Throughout the complaint, plaintiffs alleged willful conduct by the

insured.

¶3             In September 2016, the Illinois State Bar Association Mutual Insurance Company

(hereinafter, ISBA) filed a complaint for declaratory judgment, contending it had no duty to de­

fend the insured against the aforementioned complaint. ISBA asserted that the insured’s actions

constituted intentional conduct and was excluded from coverage.

¶4             In March 2017, the insured filed a motion for a judgment on the pleadings, argu­

ing that the underlying complaint’s allegations fall within, or potentially within, the policy’s

coverage. In May 2017, ISBA filed a motion for judgment on the pleadings, asserting again it did

not owe a duty to defend the insured because his actions as alleged in the underlying complaint

were intentional. In June 2017, the trial court concluded that ISBA had a duty to defend under

the terms of the policy.

¶5             ISBA appeals, arguing that the trial court erred by granting judgment in favor of

the insured because “the underlying [c]omplaint clearly alleged intentional conduct which is ex­

pressly excluded from coverage under the ISBA Mutual policy.” We conclude that the insured’s

conduct, as alleged in the underlying complaint, is excluded from coverage.

¶6                                      I. BACKGROUND

¶7                                 A. The Underlying Complaint

¶8                                 1. The Joseph McClure Trust

¶9             In August 2016, plaintiffs filed the underlying complaint against the insured in the

Superior Court for the District of Columbia. The underlying complaint stated that nearly 40 years

earlier, Joseph McClure and James Lundberg formed a variety of business entities to co-own real

property and conduct business. The complaint noted that Joseph and James acquired valuable



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real estate within the District of Columbia. In 1992, James died. On July 7, 1995, Joseph execut­

ed his last will and testament. On July 11, 1995, Joseph died.

¶ 10           Joseph’s will directed that after satisfying specific bequests, the remainder of his

property would be sold to establish an irrevocable trust (hereinafter, the Joseph McClure Trust).

The Joseph McClure Trust had specific provisions for nomination of trustees, designation of

beneficiaries, use of a qualified financial institution to comanage the trust, and instructions for

distribution of the trust corpus to the remainder beneficiaries. The will provided that Joseph’s

brother, Cecil McClure, would be the income beneficiary of the trust. Upon Cecil’s death, the

trust corpus was to be distributed to the Lundberg Family Education Fund and to Cecil’s chil­

dren. Plaintiffs are Cecil’s children.

¶ 11                         2. The Cecil Q. McClure Irrevocable Trust

¶ 12           The underlying complaint alleged that, in October 1998, Joseph’s estate closed

without a complete liquidation of his property. The complaint then alleged that the insured draft­

ed the Cecil O. McClure Irrevocable Trust (hereinafter, the Cecil McClure Trust). The complaint

further alleged that in December 1998, the insured attempted to unlawfully “decant” the Joseph

McClure Trust by transferring Joseph’s property to the Cecil McClure Trust. (Trust decanting

refers to the act of “pouring” the principal of an irrevocable trust into a new trust with different

terms. See Ferri v. Powell-Ferri, 72 N.E.3d 541, 546 (Mass. 2017); see also Natalie M. Kuehn

et al., Survey of Illinois Law: Trusts and Estates, 39 S. Ill. U. L.J. 647, 657-60 (2015).)

¶ 13           Similar to the Joseph McClure Trust, the Cecil McClure Trust made Cecil the in­

come beneficiary with the Lundberg Family Education Fund and Cecil’s children as the remain­

der beneficiaries. Nevertheless, the Cecil McClure Trust contained key differences such as (1)

including an in terrorem clause, (2) eliminating the requirement to use a qualified financial insti­



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tution as a cotrustee, (3) appointing the insured as a cotrustee, and (4) eliminating the require­

ment to sell Joseph’s property. (An in terrorem clause is a provision in a trust document or a will

that invalidates a gift to a beneficiary who unsuccessfully challenges the validity of the testamen­

tary document. See In re Estate of Lanterman, 122 Ill. App. 3d 982, 985, 462 N.E.2d 46, 47-48

(1984); see also Gerry W. Beyer et al., The Fine Art of Intimidating Disgruntled Beneficiaries

With In Terrorem Clauses, 51 SMU L. Rev. 225, 226-27 (1998).)

¶ 14                             3. The Allegations of Wrongdoing

¶ 15           In September 2010, Cecil McClure died. The underlying complaint alleged that

the insured told the plaintiffs that the remainder beneficiaries would receive quarterly income

distributions. Plaintiffs requested the trust corpus be liquidated and the proceeds distributed to

the remainder beneficiaries. The complaint asserted that the insured denied this request because

the real estate market was poor and because plaintiffs were not entitled to any distribution of

trust corpus. Instead, the insured continued to administer the Cecil McClure Trust and give quar­

terly income distributions.

¶ 16           The underlying complaint alleged that the insured created a self-compensation

scheme because the insured (1) included an in terrorem clause, (2) eliminated the requirement to

use a qualified financial institution as a cotrustee, and (3) appointed himself as a cotrustee. The

underlying complaint further asserted that the insured and others collected excessive fees while

managing the trust.

¶ 17           Throughout the underlying complaint, plaintiffs alleged willful conduct by the

insured. For example, count IV alleged that the insured “willfully refused to distribute the re­

maining trust assets.” (Emphasis added.) Count V alleged self-dealing by the insured, arguing

that he refused to liquidate the trust corpus “in order to perpetuate [his] self-compensation



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scheme.” (Emphasis added.) Count VI alleged that the insured willfully misinformed the plain­

tiffs in bad faith that they were not entitled to distribution of the trust corpus. Count VII alleged

breach of trust, asserting that the insured “committed breach of trust by willfully disregarding the

termination provision of the trust and refusing to distribute the trust assets.” (Emphasis added.)

Count VIII requested removal of the insured as trustee, arguing that he “willfully committed [a]

serious breach of trust in failing to fulfill [his] fiduciary duties.” (Emphasis added.)

¶ 18                      B. ISBA’s Complaint for Declaratory Judgment

¶ 19           In September 2016, ISBA filed a complaint for declaratory judgment against the

insured. ISBA conceded that the insured was covered under its professional liability insurance

policy but alleged it had no duty to defend him based upon the allegations of the underlying

complaint.

¶ 20                      1. The Provisions of the ISBA Insurance Policy

¶ 21           ISBA’s insurance policy provides coverage for damages and claim expenses aris­

ing out of a “wrongful act,” which the policy defines as “any actual or alleged negligent act, er­

ror, or omission in the rendering of or failure to render professional services.” The policy notes

that “professional services” includes working “as an administrator, *** trustee, or any other

similar fiduciary activity.” However, the policy explicitly excludes from coverage any claim

“arising out of any criminal, dishonest, fraudulent or intentional act or omission.”

¶ 22                         2. ISBA’s Claim and the Insured’s Answer

¶ 23           ISBA alleged it had no duty to defend because the insured’s actions were dishon­

est, intentional, and fraudulent and therefore excluded from coverage. In November 2016, the

insured filed an answer to ISBA’s complaint, contending that ISBA had a duty to defend.

¶ 24                      C. The Motions for Judgment on the Pleadings



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¶ 25           In March 2017, the insured filed a motion for a judgment on the pleadings, noting

that an insurer has a duty to defend against an underlying complaint if the “allegations fall with­

in, or potentially within, the policy’s coverage.” (Emphasis in original.) The insured conceded

that this dispute “could be the result of intentional conduct.” However, the insured contended

that “to the extent that the allegations have any merit, they are much more likely to be the result

of mere negligence.” Thus, the insured contended ISBA had a duty to defend. In May 2017,

ISBA filed a cross-motion for judgment on the pleadings, contending that the insured’s actions

as alleged in the underlying complaint constituted intentional conduct that was excluded from

coverage.

¶ 26                               D. The Trial Court’s Ruling

¶ 27           In June 2017, the trial court concluded that “read as a whole, the complaint herein

in certain counts sounds in negligence such that [ISBA] has a duty to defend.” The court there­

fore granted the insured’s motion for judgment on the pleadings, denied ISBA’s cross-motion,

and entered judgment in favor of the insured.

¶ 28           This appeal followed.

¶ 29                                      II. ANALYSIS

¶ 30           ISBA appeals, asserting that the trial court erred in granting judgment in favor of

the insured because “the underlying [c]omplaint clearly alleged intentional conduct which is ex­

pressly excluded from coverage under the ISBA Mutual policy.” We conclude that the insured’s

conduct, as alleged in the underlying complaint, is excluded from coverage.

¶ 31                                   A. The Applicable Law

¶ 32                               1. Judgment on the Pleadings

¶ 33           Any party may move for judgment on the pleadings pursuant to section 2-615(e)



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of the Code of Civil Procedure. 735 ILCS 5/2-615(e) (West 2016). Judgment on the pleadings is

proper when the pleadings disclose no genuine issue of material fact and the moving party is en­

titled to judgment as a matter of law. Allstate Property & Casualty Insurance Co. v. Trujillo,

2014 IL App (1st) 123419, ¶ 15, 7 N.E.3d 110. In ruling on a motion for judgment on the plead­

ings, the trial court can only consider the facts apparent from the face of the pleadings, attach­

ments to the pleadings, judicial admissions in the record, and matters subject to judicial notice.

Fagel v. Department of Transportation, 2013 IL App (1st) 121841, ¶ 26, 991 N.E.2d 365; 735

ILCS 5/2-606 (West 2016).

¶ 34                               2. An Insurer’s Duty to Defend

¶ 35            In a declaratory judgment action in which the issue is whether the insurer has a

duty to defend, courts first look to the allegations in the underlying complaint and compare those

allegations to the relevant provisions of the insurance contract. Pekin Insurance Co. v. Precision

Dose, Inc., 2012 IL App (2d) 110195, ¶ 30, 968 N.E.2d 664. If the facts alleged in the underlying

complaint fall within, or potentially within, the policy’s coverage, the insurer has a duty to de­

fend. Pekin Insurance Co. v. Wilson, 237 Ill. 2d 446, 455, 930 N.E.2d 1011, 1017 (2010). The

insurer may refuse to defend only if it is clear from the face of the underlying complaint that the

allegations fail to state facts that bring the cause within, or potentially within, coverage. Illinois

State Bar Ass’n Mutual Insurance Co. v. Cavenagh, 2012 IL App (1st) 111810, ¶ 14, 983 N.E.2d

468.

¶ 36                      3. Exclusionary Clauses for Intentional Conduct

¶ 37            If an insurer relies on an exclusionary clause to deny coverage, it must be clear

and free from doubt that the exclusionary clause applies. American Zurich Insurance Co. v. Wil­

cox & Christopoulos, L.L.C., 2013 IL App (1st) 120402, ¶ 34, 984 N.E.2d 86; Atlantic Mutual



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Insurance Co. v. American Academy of Orthopaedic Surgeons, 315 Ill. App. 3d 552, 560, 734

N.E.2d 50, 56 (2000). The construction afforded to intentional act exclusions is to deny coverage

when the insured has (1) intended to act and (2) specifically intended to harm a third party. State

Farm Fire & Casualty Co. v. Leverton, 314 Ill. App. 3d 1080, 1085, 732 N.E.2d 1094, 1098

(2000). The burden is on the insurer to prove that an exclusionary clause applies. Country Mutu­

al Insurance Co. v. Bible Pork, Inc., 2015 IL App (5th) 140211, ¶ 38, 42 N.E.3d 958.

¶ 38           An exclusionary clause for intentional conduct will not apply when a claim arises,

or could potentially arise, from a negligent act or omission. Lincoln Logan Mutual Insurance Co.

v. Fornshell, 309 Ill. App. 3d 479, 484, 722 N.E.2d 239, 242 (1999). However, phrases in the

underlying complaint such as mislead, conceal, scheme, deceive, intentionally, or willfully are

the “ ‘paradigm of intentional conduct and the antithesis of negligent actions.’ ” Steadfast Insur­

ance Co. v. Caremark Rx, Inc., 359 Ill. App. 3d 749, 760, 835 N.E.2d 890, 899 (2005) (quoting

Connecticut Indemnity Co. v. DER Travel Service, Inc., 328 F.3d 347, 351 (7th Cir. 2003)).

¶ 39                 4. Construction of the Policy and the Standard of Review

¶ 40           The primary objective when construing the language of an insurance policy is to

ascertain and enforce the intentions of the parties as expressed in their agreement. Pekin Insur­

ance Co., 2012 IL App (2d) 110195, ¶ 31. Terms that are clear and unambiguous will be given

their plain and ordinary meaning. Id. Ambiguous provisions that limit or exclude coverage will

be interpreted liberally in favor of the insured. Id. If the terms of an insurance policy are suscep­

tible to more than one reasonable meaning, a court should strictly construe those terms against

the insurer and in favor of the insured. Id. Courts will construe the policy as a whole and consid­

er the type of insurance purchased, the nature of the risks involved, and the overall purpose of

the contract. Wilson, 237 Ill. 2d at 456. The construction of an insurance policy is a question of



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law reviewed de novo. Cavenagh, 2012 IL App (1st) 111810, ¶ 12. Likewise, a trial court’s

granting of a motion for judgment on the pleadings is reviewed de novo. Trujillo, 2014 IL App

(1st) 123419, ¶ 16.

¶ 41                                         B. This Case

¶ 42           On appeal, ISBA argues that the underlying complaint clearly alleged intentional

conduct that is excluded from its policy. The insured counters that “to the extent that the allega­

tions *** have any merit[,] they are just as likely, if not more likely, to be the result of profes­

sional negligence.” Thus, the insured contends that as long as plaintiff’s complaint could be

based in negligence, ISBA has a duty to defend because the allegations could potentially fall

within coverage. We conclude that the insured’s conduct, as alleged in the underlying complaint,

is excluded from coverage. See American Zurich Insurance, 2013 IL App (1st) 120402, ¶ 34.

¶ 43                                   1. Intentional Conduct

¶ 44           The underlying complaint alleged that the insured “willfully refused” to distribute

the trust corpus “in order to perpetuate their self-compensation scheme.” (Emphasis added.) The

complaint further alleged that the insured “[w]ilfully” misinformed the plaintiffs that they were

not entitled to the trust corpus upon the death of Cecil McClure. (Emphasis added.) Likewise, the

complaint alleged that the insured “willfully” committed a serious breach of trust by failing to

fulfill his fiduciary duty. (Emphasis added.) The complaint also included allegations of bad faith.

¶ 45           Phrases in the underlying complaint such as mislead, conceal, scheme, deceive,

intentionally, or willfully are the “paradigm of intentional conduct and the antithesis of negligent

actions.” (Internal quotation marks omitted.) Caremark Rx, Inc., 359 Ill. App. 3d at 760. Accord­

ingly, the allegations in the underlying complaint could not be the result of mere professional

negligence. Rather, these allegations denote intentional conduct, which is excluded from cover­



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age. See id.

¶ 46                                  2. Intentional Misconduct

¶ 47           As mentioned earlier, ISBA’s insurance policy provides coverage for damages

and claim expenses arising from “any actual or alleged negligent act, error, or omission in the

rendering of or failure to render professional services.” The policy explicitly excludes from cov­

erage any claim “arising out of any criminal, dishonest, fraudulent or intentional act or omis­

sion.” This court has previously discussed intentional act exclusions, as follows:

                       “The construction generally afforded to intentional act exclusions is to de­

               ny coverage where the insured has (1) intended to act and (2) specifically intend­

               ed to harm a third party. This construction is the most logical interpretation and

               best represents the parties’ intentions.” Leverton, 314 Ill. App. 3d at 1085.

¶ 48           The First District has explained that “[t]he word ‘intent’ for purposes of exclu­

sionary clauses in insurance policies denotes that the actor desires to cause the consequences of

his action or believes that the consequences are substantially certain to result from it.” Aetna

Casualty & Surety Co. v. Freyer, 89 Ill. App. 3d 617, 620, 411 N.E.2d 1157, 1159 (1980).

This court has likewise concluded that “intentional act or omission” means (1) the insured in­

tended to cause the consequence of his act or omission or (2) believed that the consequence of

his act or omission was substantially certain to result. See Leverton, 314 Ill. App. 3d at 1086; see

also Freyer, 89 Ill. App. 3d at 620. Essentially, exclusionary clauses for intentional conduct ap­

ply to intentional misconduct. See Freyer, 89 Ill. App. 3d at 620. However, an exclusionary

clause for intentional conduct does not apply merely because an insured intended to act.

Leverton, 314 Ill. App. 3d at 1086.

¶ 49           Construing “intentional act or omission” to mean “intentional misconduct” is also



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supported by the doctrine of noscitur a sociis. See People v. Qualls, 365 Ill. App. 3d 1015, 1020,

851 N.E.2d 767, 771 (2006). This doctrine holds that a court may determine the meaning of a

word by examining the meaning and context of the surrounding words. Warren v. Lemay, 144 Ill.

App. 3d 107, 113, 494 N.E.2d 206, 209 (1986); see Stephen J. Safranek, Scalia’s Lament, 8 Tex.

Rev. L. & Pol. 315, 340-42 (2004). In this case, the policy states that it does not apply to a claim

“arising out of any criminal, dishonest, fraudulent or intentional act or omission” committed by

the insured. Thus, the phrase “intentional act or omission” is within the broader context of an ex­

clusionary clause seeking to deny coverage for criminal and dishonest acts.

¶ 50            Finally, the policy sought to provide coverage for negligent errors that arise dur­

ing the practice of law while denying coverage for criminal, dishonest, and fraudulent conduct.

As such, construing “intentional act or omission” to mean “intentional misconduct” is consistent

with the type of insurance purchased, the nature of the risks involved, and the overall purpose of

the contract. Wilson, 237 Ill. 2d at 456.

¶ 51            In this case, the underlying complaint alleged that the insured unlawfully and

without authority decanted the Joseph McClure Trust by transferring trust property to the newly

created Cecil McClure Trust. Though mostly identical, the Cecil McClure Trust had materially

different terms such as (1) an in terrorem clause, (2) no requirement to use a qualified financial

institution as cotrustee, and (3) including the insured as a cotrustee. Plaintiffs alleged that the in­

sured intentionally made these changes to establish a self-compensation scheme. These allega­

tions clearly allege intentional misconduct, which is excluded from coverage. Further, this alle­

gation of intentional misconduct could not be the result of mere negligence.

¶ 52            Accordingly, we conclude that the insured’s conduct, as alleged in the underlying

complaint, is excluded from coverage. See American Zurich Insurance, 2013 IL App (1st)



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120402, ¶ 34; see also Illinois State Bar Ass’n Mutual Insurance Co. v. Mondo, 392 Ill. App. 3d

1032, 1039, 911 N.E.2d 1144, 1151 (2009). Therefore, ISBA had no duty to defend the insured

in the underlying action.

¶ 53                                  III. CONCLUSION

¶ 54           For the reasons stated, we reverse the trial court’s judgment and enter judgment

in favor of ISBA on its motion for judgment on the pleadings.

¶ 55           Reversed; judgment entered for ISBA.




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