                           ILLINOIS OFFICIAL REPORTS
                                        Appellate Court




  Selective Insurance Co. of South Carolina v. Cherrytree Cos., 2013 IL App (3d) 120959




Appellate Court            SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA,
Caption                    Plaintiff and Counterdefendant-Appellee, v. CHERRYTREE
                           COMPANIES, INC., d/b/a Macon General Contractors, Defendant and
                           Counterplaintiff-Appellant.



District & No.             Third District
                           Docket No. 3-12-0959


Filed                      November 4, 2013


Held                       In an action arising from a dispute as to whether plaintiff insurer had an
(Note: This syllabus       obligation to indemnify defendant insured under the policy defendant
constitutes no part of     purchased from plaintiff which provided commercial general liability
the opinion of the court   coverage and umbrella liability coverage with respect to the defective
but has been prepared      grain storage facilities defendant constructed, the trial court erred in
by the Reporter of         dismissing defendant’s counterclaims alleging that plaintiff breached its
Decisions for the          contractual duties and acted in bad faith by denying coverage on the
convenience of the         ground that no “suit” was filed, since the indemnification provision of the
reader.)
                           policy did not require the filing of a “suit” before defendant could seek
                           indemnification for the damages defendant agreed to pay the client for
                           whom the facilities were constructed.


Decision Under             Appeal from the Circuit Court of Bureau County, No. 11-MR-32; the
Review                     Hon. Marc P. Bernabei, Judge, presiding.



Judgment                   Reversed and remanded.
Counsel on                 Mark P. Standa (argued), of Mark P. Standa, P.C., of Lake Forest, for
Appeal                     appellant.

                           Brian A. O’Gallagher (argued) and Kristina M. Beck, both of Cremer,
                           Spina, Shaughnessy, Jansen & Siegert, LLC, of Chicago, for appellee.


Panel                      JUSTICE CARTER delivered the judgment of the court, with opinion.
                           Justice Holdridge concurred in the judgment and opinion.
                           Justice Schmidt specially concurred, with opinion.




                                             OPINION

¶1          The plaintiff and counterdefendant-appellee, Selective Insurance Company of South
        Carolina (Selective), filed a complaint for declaratory judgment against the defendant and
        counterplaintiff-appellant, Cherrytree Companies, Inc., d/b/a Macon General Contractors
        (Cherrytree), which requested the circuit court to rule on whether the insurance policy
        Cherrytree had with Selective provided coverage for problems Cherrytree had with a grain
        storage facility it had built for another company in Fairfield, Nebraska. Along with its
        answer, Cherrytree filed two counterclaims, alleging that Selective breached its contract with
        Cherrytree and that Selective acted in bad faith in denying coverage for the Fairfield incident
        and another incident with a grain storage facility in Chester, Nebraska. After a hearing, the
        circuit court dismissed Cherrytree’s counterclaims with prejudice on the pleadings. Later, the
        court denied Cherrytree’s motion to reconsider and granted Cherrytree’s motion for a finding
        pursuant to Illinois Supreme Court Rule 304(a) (eff. Feb. 26, 2010), thereby allowing
        Cherrytree to take this appeal. On appeal, Cherrytree argues that the court erred when it
        dismissed the counterclaims with prejudice. We reverse and remand for further proceedings.

¶2                                              FACTS
¶3          On September 14, 2011, Selective filed a complaint for declaratory judgment and other
        relief against Cherrytree, which Selective insured under a policy that contained commercial
        general liability (CGL) coverage and umbrella liability coverage. The complaint alleged that
        in March 2010, Cherrytree contracted with AGP Grain Marketing, LLC, to construct a grain
        storage facility in Fairfield, Nebraska. Cherrytree had completed 99% of the construction by
        October 26, 2010, when five to six trusses in the storage facility had sunk approximately one
        to two feet and the concrete walls in the center of the storage facility had bowed outward.
        Selective received notice of this problem on October 26, 2010, with a more detailed
        explanation given on November 4, 2010. Selective began investigating the incident in mid-


                                                 -2-
     November 2010 and issued a letter to Cherrytree in March 2011 that stated Selective did not
     believe the policy covered the problem with the storage facility. Selective stated that it was
     denying coverage because: (1) the problem with the storage facility did not constitute an
     “occurrence” under the policy; (2) the “your work” and “your product” exclusions precluded
     coverage; and (3) the problem with the storage facility did not constitute “property damage”
     under the policy.
¶4       Under the subject policy, the CGL coverage section stated, in relevant part:
             “We will pay those sums that the insured becomes legally obligated to pay as
         damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.
         We will have the right and duty to defend the insured against any ‘suit’ seeking those
         damages. However, we will have no duty to defend the insured against any ‘suit’ seeking
         damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply.
         We may, at our discretion, investigate any ‘occurrence’ and settle any claim or ‘suit’ that
         may result.”
¶5       The CGL coverage section defined “suit” as:
         “[A] civil proceeding in which damages because of ‘bodily injury’, ‘property damage’
         or ‘personal and advertising injury’ to which this insurance applies are alleged. ‘Suit’
         includes:
                 a. An arbitration proceeding in which such damages are claimed and to which the
             insured must submit or does submit with our consent; or
                 b. Any other alternative dispute resolution proceeding in which such damages are
             claimed and to which the insured submits with our consent.”
¶6       The umbrella liability coverage section of the policy stated, in relevant part:
             “We will pay on behalf of the insured the ‘ultimate net loss’ in excess of the ‘retained
         limit’ that the insured becomes legally obligated to pay as damages because of ‘bodily
         injury’, ‘property damage’ or ‘personal and advertising injury’ to which this insurance
         applies. We will have the right and duty to defend the insured against any ‘suit’ seeking
         those damages when the ‘underlying insurance’ does not provide coverage or the limits
         of ‘underlying insurance’ have been exhausted. When we have no duty to defend, we will
         have the right to defend, or to participate in the defense of, the insured against any other
         ‘suit’ seeking damages to which this insurance may apply. However, we will have no
         duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’,
         ‘property damage’ or ‘personal and advertising injury’ to which this insurance does not
         apply. At our discretion, we may investigate any ‘occurrence’ or offense that may involve
         this insurance and settle any resultant claim or ‘suit’, for which we have the duty to
         defend.”
¶7       The umbrella liability coverage section’s definition of “suit” was identical to the
     definition contained in the CGL coverage section, except that subsection “b.” read, “[a]ny
     other alternative dispute resolution proceeding in which such damages are claimed and to
     which the insured submits with our consent or the ‘underlying insurer’s’ consent.”
¶8       According to the complaint, in June 2011, counsel for Cherrytree sent a letter to Selective


                                               -3-
       in which counsel stated that Cherrytree had reached a settlement with AGP “in order to avoid
       costly litigation and bond claims.” In part, Cherrytree had agreed “to pay AGP for various
       property damage and consequential damages.” The complaint alleged that Cherrytree had
       requested Selective to indemnify it for amounts it paid or incurred as a result of the problem
       with the storage facility. Selective’s complaint sought rulings that: (1) the amounts for which
       Cherrytree sought indemnification were not covered under the CGL portion of the policy;
       and (2) the amounts for which Cherrytree sought indemnification were not covered under the
       umbrella liability portion of the policy. Alternatively, the complaint sought rulings that: (1)
       Selective had no duty to indemnify because Cherrytree did not establish that it was legally
       obligated to pay damages; (2) the policy did not cover voluntary payments; and (3)
       Cherrytree breached its contract with Selective by refusing to pay outstanding premiums on
       a different policy.
¶9          On October 17, 2011, Cherrytree filed its answer and counterclaims. In its statement of
       the case, Cherrytree listed three subcontractors it used to construct the storage facility and
       stated:
                “On October 26, 2010, the roof of the flat grain storage building owned by AGP in
            Fairfield, Nebraska collapsed, the walls continued to move outward near the center of the
            building and the hooped trusses had additional failures, resulting in a large volume of
            grain spewing out of the building side walls and damage to AGP property, including the
            grain stored at the facility, as well as the aeration, conveyor and electrical systems, all of
            which were purchased or obtained directly by AGP.”
       Cherrytree alleged that the damages were estimated to exceed $1.5 million.
¶ 10        Cherrytree also alleged that it participated in the construction of another grain storage
       facility in Chester, Nebraska, which also suffered a roof collapse. Cherrytree stated that it
       informed Selective of the problem with the Chester storage facility, but that Selective
       “refused to even acknowledge the claim and failed to reserve any rights on the Chester
       claim.”
¶ 11        The two counterclaims that Cherrytree set forth were for: (1) breach of contract; and (2)
       damages under section 155 of the Illinois Insurance Code (the Insurance Code) (215 ILCS
       5/155 (West 2010)). With regard to the first counterclaim, Cherrytree alleged that
       “SELECTIVE breached its obligations under the subject policy by its failure and refusal to
       provide coverage or indemnify CHERRYTREE for losses sustained as a result of the AGP
       claim and Chester claim, and failure to properly investigate or respond to those claims.” With
       regard to the second counterclaim, Cherrytree alleged that Selective acted in bad faith when
       it denied coverage for the problem with the Fairfield storage facility and when it ignored the
       claim Cherrytree made for the problem with the Chester storage facility.
¶ 12        On December 15, 2011, Selective filed several motions, including a motion to dismiss
       Cherrytree’s counterclaims. Selective argued, inter alia, that Cherrytree’s breach of contract
       counterclaim should be dismissed because: (1) the proper action to determine a coverage
       dispute is a declaratory judgment action, not a breach of contract action; (2) the policy
       required a “suit” to be filed before coverage would apply, and no “suit” had been filed
       against Cherrytree; and (3) regarding the problem with the Chester storage facility, Selective


                                                  -4-
       was still investigating the problem and had not decided whether coverage applied to that
       problem yet. In that argument section, Selective mentioned section 2-619.1 of the Code of
       Civil Procedure (735 ILCS 5/2-619.1 (West 2010)) but it did not specify whether the
       argument was being made pursuant to section 2-615 or to section 2-619 of the Code of Civil
       Procedure (735 ILCS 5/2-615, 2-619 (West 2010)). In a later pleading, Selective stated that
       the first of its three arguments on this issue was being brought pursuant to section 2-615 and
       the other two arguments were being brought pursuant to section 2-619.
¶ 13        Selective also argued that Cherrytree’s second counterclaim should be dismissed because
       Selective’s handling of the claim had not been vexatious and unreasonable. Specifically,
       Selective argued that: (1) a bona fide coverage dispute existed, thereby making a damage
       award under section 155 of the Insurance Code inappropriate; (2) generally, CGL policies
       do not provide coverage for defective workmanship; and (3) the policy required a “suit” to
       be filed before coverage would apply, and no “suit” had been filed against Cherrytree. In that
       argument section, Selective stated that it was making its argument pursuant to section 2-619
       of the Code of Civil Procedure.
¶ 14        On February 24, 2012, the circuit court held a hearing on Selective’s motion to dismiss
       Cherrytree’s counterclaims and on other motions filed by the parties. After hearing
       arguments, the circuit court issued an oral ruling. Initially, the court determined that
       Cherrytree’s counterclaims could be dismissed without prejudice for several reasons,
       although the court stated that it would also address Selective’s claim that the counterclaims
       should be dismissed because no underlying suit against Cherrytree had been filed regarding
       the problems with the Fairfield and the Chester storage facilities, as this reason could result
       in a dismissal with prejudice. The court thoroughly discussed relevant case law in issuing its
       decision, concluding that “there is no published Illinois reviewing court decision that was
       cited by the parties or revealed by the court’s own research that holds that there is a duty to
       indemnify absent a suit in a duty-to-defend policy.” The court placed repeated emphasis on
       the fact that the CGL policy at issue contained both duty to defend and duty to indemnify
       language and used this fact to analogize this case to certain cases and distinguish it from
       others. Specifically, the court ruled that it was persuaded by two cases, Lapham-Hickey Steel
       Corp. v. Protection Mutual Insurance Co., 166 Ill. 2d 520 (1995), and the First District’s
       decision in Zurich Insurance Co. v. Carus Corp., 293 Ill. App. 3d 906 (1997), which “both
       held a suit is necessary because of the duty-to-defend language before the duty to indemnify
       is triggered.” In so ruling, the court stated that it disagreed with two federal court cases, Sokol
       & Co. v. Atlantic Mutual Insurance Co., 430 F.3d 417 (7th Cir. 2005), and Keystone
       Consolidated Industries, Inc. v. Employers Insurance Co. of Wausau, 456 F.3d 758 (7th Cir.
       2006), in which the United States Seventh Circuit Court of Appeals interpreted Illinois state
       law as not requiring a “suit” to trigger an insurance company’s duty to indemnify. At the
       close of its discussion, the court ruled that because no suit had been filed, Cherrytree’s
       counterclaims were dismissed with prejudice.
¶ 15        On October 31, 2012, the circuit court denied Cherrytree’s motion to reconsider, granted
       Cherrytree’s motion for a Rule 304(a) finding, and stayed all other matters pending the
       outcome of Cherrytree’s appeal from the court’s dismissal order.


                                                  -5-
¶ 16                                         ANALYSIS
¶ 17       On appeal, Cherrytree argues that the circuit court erred when it dismissed its
       counterclaims with prejudice. Specifically, Cherrytree asserts that the subject policy did not
       require a “suit” to trigger coverage and that relevant case law supports such a conclusion.
¶ 18       A motion to dismiss brought pursuant to section 2-619 of the Code of Civil Procedure
       (735 ILCS 5/2-619 (West 2012)) admits the legal sufficiency of the complaint it attacks and
       asserts a defense that allegedly defeats the complaint’s allegations. Patrick Engineering, Inc.
       v. City of Naperville, 2012 IL 113148, ¶ 31. “When ruling on such motions, a court must
       accept as true all well-pleaded facts, as well as any reasonable inferences that may arise from
       them [citation], but a court cannot accept as true mere conclusions unsupported by specific
       facts.” Id. We review a section 2-619 dismissal under the de novo standard. Id.
¶ 19       The interpretation of an insurance policy’s provisions presents a question of law.
       Travelers Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill. 2d 278, 292 (2001). When we
       construe policy provisions, our goal is to ascertain the intent of the parties to the policy and
       give effect to that intent. Id. To do so, we must view the policy as a whole and “ ‘take into
       account the type of insurance purchased, the nature of the risks involved, and the overall
       purpose of the contract.’ ” Id. (quoting American States Insurance Co. v. Koloms, 177 Ill. 2d
       473, 479 (1997)).
¶ 20       The narrow question before this court is whether the policy in this case required the filing
       of a “suit” before Cherrytree could seek indemnification for the damages it agreed to pay to
       AGP. In the CGL coverage section, the policy stated, in relevant part:
                “We will pay those sums that the insured becomes legally obligated to pay as
           damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.
           We will have the right and duty to defend the insured against any ‘suit’ seeking those
           damages. However, we will have no duty to defend the insured against any ‘suit’ seeking
           damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply.
           We may, at our discretion, investigate any ‘occurrence’ and settle any claim or ‘suit’ that
           may result.”
       Similarly, in the umbrella liability section, the policy stated, in relevant part:
                “We will pay on behalf of the insured the ‘ultimate net loss’ in excess of the ‘retained
           limit’ that the insured becomes legally obligated to pay as damages because of ‘bodily
           injury’, ‘property damage’ or ‘personal and advertising injury’ to which this insurance
           applies. We will have the right and duty to defend the insured against any ‘suit’ seeking
           those damages when the ‘underlying insurance’ does not provide coverage or the limits
           of ‘underlying insurance’ have been exhausted. When we have no duty to defend, we will
           have the right to defend, or to participate in the defense of, the insured against any other
           ‘suit’ seeking damages to which this insurance may apply. However, we will have no
           duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’,
           ‘property damage’ or ‘personal and advertising injury’ to which this insurance does not
           apply. At our discretion, we may investigate any ‘occurrence’ or offense that may involve
           this insurance and settle any resultant claim or ‘suit’, for which we have the duty to
           defend.”

                                                 -6-
¶ 21       In analyzing this language, the circuit court in this case discussed several cases at length.
       The first of these cases was Lapham-Hickey. The circuit court found that the supreme court’s
       decision in Lapham-Hickey provided guidance for the resolution of the issue in this case.
¶ 22       In Lapham-Hickey, the insured filed a declaratory judgment action seeking to recover
       defense costs it incurred from an investigation it conducted into environmental
       contamination on its property. Lapham-Hickey, 166 Ill. 2d at 522. The insured conducted the
       investigation voluntarily after consulting with the Minnesota Pollution Control Agency. Id.
       at 524-25. The insured’s all-risks policy covered, in relevant part, the following property on
       any location covered by the policy:
                “ ‘[P]ersonal property of others in the custody of the Insured to the extent of the
           Insured’s legal liability for physical loss or damage of the type insured against by this
           Policy. [The insurer] further agrees to defend any suit against the Insured alleging
           liability for such damage, destruction or loss and seeking damages on account thereof,
           even if such suit is groundless, false or fraudulent; but this company may without
           prejudice, make such an investigation, negotiation and settlement of any claim or suit as
           the Company deems expedient.’ ” Id. at 528.
       “Suit” was not defined in the policy, so the supreme court gave the term its plain and
       ordinary meaning as an action involving court proceedings. Id. at 532. Because no “suit” had
       been filed against the insured, the supreme court held that the insurance company had no
       duty to defend. Id. The supreme court further concluded that the insured could not recover
       the costs it incurred from the investigation of its property. Id. at 533.
¶ 23       The circuit court in this case placed great emphasis on the Lapham-Hickey decision due
       to the supreme court’s statement that “[the insurer] can avoid its duty to defend and to
       reimburse [the insured] for the defense costs if the language of the policy unambiguously
       shows that [the insurer] did not contract to defend the actions [the insured] undertook in
       response to letters and a proposed consent decree issued from the [Environmental Protection
       Agency] and the [Minnesota Pollution Control Agency].” (Emphasis added.) Id. at 529. Even
       though it was only the duty to indemnify that was at issue in Lapham-Hickey, it appears to
       this court that the first sentence of the above-quoted policy provision would not cover the
       type of reimbursement the insured was seeking in Lapham-Hickey anyway, as that sentence
       referred to the “personal property of others” and not to damage to the insured’s property
       caused by a third party (id. at 528). In addition, the type of policy in Lapham-Hickey and its
       specific language were very different from the CGL policy and its specific language at issue
       in this case. For these reasons, we find that Lapham-Hickey does not provide guidance for
       the resolution of the issue in this case.
¶ 24       The circuit court in this case also placed great emphasis on the First District’s decision
       in Carus in arriving at its decision to dismiss Cherrytree’s counterclaims with prejudice. In
       Carus, the insurer filed a declaratory judgment action seeking a ruling that it had no duty to
       defend or indemnify for expenses the insured incurred while investigating potential pollution
       remediation. Carus, 293 Ill. App. 3d at 908. The insured participated in a program that
       required it “to conduct a remedial investigation and feasibility study” to determine what
       further action would be necessary for the site to come into compliance with pollution control


                                                 -7-
       laws. Id. The policy at issue contained the following relevant language:
            “ ‘The [insurer] will pay on behalf of the insured all sums which the insured shall
            become legally obligated to pay as damages because of:
                Coverage A. bodily injury
                Coverage B. property damage to which this insurance applies, caused by an
            occurrence, and the [insurer] shall have the right and duty to defend any suits against the
            insured seeking damages ***.’ ” Id. at 907.
       The insurer claimed that because no “suit” had been filed, it had no duty to defend or
       indemnify the insured. Id. at 908. Although it recognized that the issue presented by the case
       pertained to the insurer’s duty to indemnify, the First District proceeded to discuss the duty
       to defend, which was absent because no “suit” had been filed. Id. at 908-09. Then, the First
       District concluded that the insurer also had no duty to indemnify the insured. Id. at 909-10.
       In support of this conclusion, the First District cited to Crum & Forster Managers Corp. v.
       Resolution Trust Corp., 156 Ill. 2d 384 (1993), for a general proposition that “ ‘where there
       is no duty to defend, there will be no duty to indemnify.’ ” Carus, 293 Ill. App. 3d at 909
       (citing Crum, 156 Ill. 2d at 398).1
¶ 25        We determine upon our review of the Carus and Crum decisions that neither justifies a
       dismissal with prejudice of Cherrytree’s counterclaims. First, our examination of Crum
       shows that Carus’s reliance on that decision was misplaced. In Crum, the insurers filed a
       declaratory judgment action claiming that they had no duty to defend or indemnify the
       insureds in an underlying action that had been filed against the insureds. Crum, 156 Ill. 2d
       at 387. The supreme court held that the insurers had no duty to defend the insureds in the
       underlying suit because the facts alleged in the underlying suit’s complaint “do not fall
       potentially within the coverage afforded by the policies.” Id. at 395. The supreme court also
       held that the insurers had no duty to indemnify the insureds for any liability that might arise
       from the underlying suit. Id. at 398. However, it is important to note the context in which the
       supreme court’s holding on the duty to indemnify arose:
            “In cases such as the instant case 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 and we find that the plaintiff-insurers have no duty to defend or indemnify
            the insureds in this case.” (Emphases in original.) Id.
       From this context, it is clear that Crum does not stand for a general proposition that when an
       insurer has no duty to defend, then it will not have a duty to indemnify. Rather, Crum’s
       holding was fact-specific–the insurers had no duty to indemnify the insureds for any liability
       they might incur from an underlying action when: (1) the policy contained both duty-to-
       defend and duty-to-indemnify provisions; and (2) the facts alleged in the underlying action’s

               1
                The First District also ruled that there was no duty to indemnify because the costs
       associated with conducting the voluntary investigation of the property were not costs that the insured
       became “ ‘legally obligated to pay.’ ” Carus, 293 Ill. App. 3d at 910.

                                                    -8-
       complaint did not even potentially trigger the insurers’ duty to defend as defined by the
       policy. Id. at 398. Accordingly, we determine that the Carus court misstated and
       misconstrued the law when it cited Crum for that general proposition.
¶ 26       Second, this court has previously stated its belief that Carus was incorrectly decided. In
       Central Illinois Light Co. v. Home Insurance Co. (CILCO I), 342 Ill. App. 3d 940, 958
       (2003), we expressed our disagreement with the Carus court’s statement that case law had
       “established as a rule that an insurer’s duty to defend and indemnify is triggered by a suit
       against the insured, and in the absence of a lawsuit, no such duty exists.” Id. While it is true
       that the policies in CILCO I were indemnity-only policies (id. at 949), our statement in
       CILCO I is directly relevant to the disposition of the issue presented by this case.
¶ 27       Third, two decisions of the United States Seventh Circuit Court of Appeals that
       interpreted Illinois insurance law had pointed out the aforementioned flaw in the Carus
       decision. In both Sokol and Keystone, the Seventh Circuit discussed the contextual nature of
       the Crum holding and noted that Carus was an anomaly because no other Illinois cases relied
       on Crum for a general proposition that if the insurer has no duty to defend, then it has no duty
       to indemnify. Sokol, 430 F.3d at 421 n.1; Keystone, 456 F.3d at 762 n.2.
¶ 28       In fact, the Sokol and Keystone decisions are particularly instructive on the issue
       presented by this case. In Sokol, one company had supplied peanut butter packets to another
       company for inclusion in the latter company’s cookie mix. Sokol, 430 F.3d at 419. The latter
       company discovered that the peanut butter had gone bad, replaced the peanut butter at its
       own expense, then sought reimbursement from the former company for the replacement
       costs. Id. The former company then filed a claim with its CGL insurer. Id. After the insurer
       denied coverage, the former company paid the latter company’s claim and then sought
       indemnification from the insurer. Id. The insurer once again denied coverage. Id. The
       relevant policy language stated:
           “ ‘We will pay those sums that the insured becomes legally obligated to pay as damages
           because of “bodily injury” or “property damage” to which this insurance applies. We will
           have the right and duty to defend the insured against any “suit” seeking those damages.
           However, we will have no duty to defend the insured against any “suit” seeking damages
           for “bodily injury” or “property damage” to which this insurance does not apply.’ ” Id.
           at 420.
¶ 29       The federal district court granted summary judgment for the insurer, citing Crum for the
       same general proposition for which Carus cited Crum. Id. at 419. The Seventh Circuit held
       that the district court improperly relied on Crum because Crum did not stand for a general
       proposition that when there is no duty to defend, there will be no duty to indemnify. Id. at
       421. The Seventh Circuit emphasized that the case before it was an indemnification action,
       not a duty-to-defend action, and that “the coverage grant pertaining to indemnification does
       not contain the same limiting language requiring the existence of a ‘suit.’ ” Id. Further, it
       stated that “[t]he two duties of the insurer–defense and indemnification–are distinct; while
       the duty to indemnify may sometimes nest inside the duty to defend, that will not always be
       the case.” Id. For these reasons, the Seventh Circuit ruled that the insurer’s duty to indemnify
       was not limited to “suits.” Id. at 422. While the Seventh Circuit ultimately affirmed the


                                                 -9-
       district court’s grant of summary judgment on grounds that are not at issue in this appeal (id.
       at 422-23), its ruling on whether a “suit” was required to trigger the duty to indemnify is
       directly on point to the issue presented by this case.
¶ 30       Like in the policy at issue in Sokol, the word “suit” does not appear in the first sentences
       of either the CGL or the umbrella liability sections of the policy in this case, which are the
       sentences that refer to Selective’s duty to indemnify. Rather, “suit” appears in the second
       sentences of these sections, which are the sentences that refer to Selective’s duty to defend.
       As the Seventh Circuit stated in Sokol under very similar circumstances, “[t]he present
       dispute, however, is not about the insurer’s duty to defend. This is a claim for
       indemnification coverage, and the coverage grant pertaining to indemnification does not
       contain the same limiting language requiring the existence of a ‘suit.’ ” Id. at 421. Without
       that limiting language, we hold that the indemnification provision in the policy in this case
       did not require the filing of a “suit” before Cherrytree could seek indemnification for the
       damages it agreed to pay to AGP. See id. at 422.
¶ 31       The Seventh Circuit’s decision in Keystone provides further support for our holding.
       Similar to what they said in Sokol, the Seventh Circuit in Keystone noted the proper context
       of the Crum decision and also cited to our supreme court’s decision in Central Illinois Light
       Co. v. Home Insurance Co. (CILCO II), 213 Ill. 2d 141, 155-62 (2004), for its discussion of
       indemnity-only policies that did not include any “suit” language, including its conclusion that
       “the policy language, standing alone, does not require the insured to have been served as the
       defendant or respondent in an adversarial proceeding before the duty to indemnify arises” (id.
       at 156). Keystone, 456 F.3d at 762. The Seventh Circuit concluded, “it appears fairly well
       settled that under Illinois law, an insurance policy may entitle the insured to indemnification
       for claims that do not arise from the resolution of a lawsuit, so long as those claims satisfy
       any requirements set forth in the relevant provisions of the policy.” Id. at 761-62. We are in
       accord with the Seventh Circuit’s assessment of Illinois law in this area, including the
       context in which it cited the CILCO II decision.
¶ 32       For the foregoing reasons, we hold that the circuit court erred when it dismissed
       Cherrytree’s counterclaims with prejudice. We emphasize that our ruling in this case is a
       narrow ruling and is not to be construed as determinative of any other aspect of the case,
       including whether the counterclaims could be dismissed with or without prejudice on other
       grounds, whether the policy does in fact provide coverage for any part of the settlement
       Cherrytree negotiated with AGP, whether any exclusions would apply, and any other
       unresolved issues such as the open motion for summary judgment filed by Selective.

¶ 33                                    CONCLUSION
¶ 34      For the foregoing reasons, we reverse the judgment of the circuit court of Bureau County
       and remand the cause for further proceedings.

¶ 35      Reversed and remanded.



                                                -10-
¶ 36       JUSTICE SCHMIDT, specially concurring.
¶ 37       I concur with the majority, but write separately to point out that I believe the dispositive
       factor is Cherrytree alleges that it settled with AGP only after Selective denied coverage. Had
       Cherrytree settled with AGP in the absence of a denial of coverage by Selective, we would
       have an entirely different animal. I want to make plain that this case should not be construed
       by anyone as standing for the proposition that an insured under a liability policy can go out
       and settle with some tort claimant without prior knowledge and consent of the insurer, and
       then demand indemnity from the insurer. That proposition would create a moral hazard too
       attractive for many con artists to ignore. It is also prohibited by policy conditions. This
       policy, like virtually every liability policy issued in this state, provides:
                “Section IV–Conditions:
                                                   ***
                    4. No insureds will, except at the insured’s own cost, voluntarily make a payment,
                assume any obligation, or incur any expense other than for first aid, without our
                consent.”
¶ 38       However, where as here, the insurer denies coverage, the insured is entitled to do what
       he or she can to cut his or her losses, and need not wait until suit is filed to once again make
       demand on the insurer. That condition (IV(4)) is not at issue in this case. The supreme
       court’s pronouncement in Crum & Forster was never intended to suggest that a liability
       insurer’s duties arise only after suit is filed against its insured.




                                                -11-
