If a tree falls in the insurance policy, will it be covered?

Can a tree be cut by accident?

Well, unless you have super powers, you can’t accidentally cut down a tree: Cutting a tree takes considerable effort.

But you can accidentally cut down the wrong tree – a tree you weren’t supposed to cut – a tree you didn’t intend to cut.

This fine distinction is at the heart of Pekin Ins. Co. v. Miller, 2006 WL 2265604 (Ill.App. 1st Dist. 8/8/06).

Sarang Construction hired Miller Tree Service to cut down trees on lots 13, 14, and 15 of a subdivision in Hanover Park. Miller removed the trees from lots 10, 11, and 12 instead.

The owners of these lots took umbrage. They sued for trespass – an intentional tort – and for violation of the Wrongful Tree Cutting Act, 740 ILCS 185/0.01 et seq. Section 2 of the Act provides that, “Any party found to have intentionally cut or knowingly caused to be cut any timber or tree which he did not have the full legal right to cut or caused to be cut shall pay the owner of the timber or tree 3 times its stumpage value.” (740 ILCS 185/2.) Later amendments to the property owners’ complaint alleged “negligent trespass.”

Miller tendered the suit to Pekin for a defense. Pekin brought a declaratory action instead, contending that it did not owe a defense. First, it argued, the property owners’ suit did not allege an “occurrence.” That would keep the incident outside the insuring agreement of the Pekin policy. In addition, Pekin argued, even if the incident described in the property owners’ suit was an occurrence, two policy exclusions would defeat coverage. The trial court rejected these contentions and found that Pekin had a duty to defend; the Appellate Court, in a unanimous opinion by Justice Warren Wolfson, affirmed.

The Pekin policy provided coverage for “those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” Property damage would be covered only if the damage were caused by an “occurrence.” The policy, in turn, defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” (2006 WL 2265604 at *2.)

The word “accident” is typically not defined in insurance policies. This was apparently the case here. Quoting Monticello Insurance Co. v. Wil-Freds Construction, Inc., 277 Ill.App.3d 697, 703, 661 N.E.2d 451, 455 (2nd Dist. 1996), Justice Wolfson noted that, “Courts define an accident as ‘an unforeseen occurrence, usually of an untoward or disastrous character or an undesigned sudden or unexpected event of an inflictive or unfortunate character.’ ... ‘The natural and ordinary consequences of an act do not constitute an accident.’”

This is consistent with the definition of the word “accident” in other cases. In Travelers Ins. Co. v. P.C. Quote, Inc., 211 Ill.App.3d 719, 570 N.E.2d 614, 619 (1st Dist. 1991) the court stated:

An insurance policy’s use of the word “occurrence” instead of “accident” broadens coverage and eliminates the need to find an exact cause of damages so long as they are neither expected nor intended from the standpoint of the insured. Nevertheless, the occurrence must still be accidental. (Aetna Casualty and Surety Co. v. Freyer (1980), 89 Ill.App.3d 617, 619, 44 Ill.Dec. 791, 411 N.E.2d 1157.) An accident is defined as “an unforseen occurrence of untoward or disastrous character” or “an undesigned sudden or unexpected event.”

Miller surely intended to chop down trees but, just as surely, Miller did not intend to chop down trees on the wrong lots. That was not expected from the insured’s standpoint.

Pekin, relying on the formulation in Wil-Freds, contended that the trees were removed as the natural and ordinary consequence of chopping them down. Thus, there was no accident. But Justice Wolfson noted that, while “the construction defects alleged in the [Wil-Freds] complaint for breach of contract were the natural and ordinary consequences of improper construction techniques. . . the plaintiffs in the underlying complaint do not allege Miller used improper techniques in removing trees on their property. Rather, they allege he removed trees on the wrong property.” (2006 WL 2265604 at *2.)

The Pekin court looked instead to Lyons v. State Farm Fire & Casualty Co., 349 Ill.App.3d 404, 811 N.E.2d 451 (5th Dist. 2004), a case in which the insureds allegedly built levees that “protruded onto the plaintiffs’ property.” According to the Pekin court, the Lyons court concluded that “the focus of the inquiry in determining whether an occurrence is an accident is ‘whether the injury is expected or intended by the insured, not whether the acts were performed intentionally.’” ((2006 WL 2265604 at *2, quoting Lyons, 811 N.E.2d at 723.) Applying this approach, because “[t]here is no evidence Miller intended the harmful result – the clearing of trees on the wrong property,” the Pekin court concluded that the property owners’ complaint alleged an “occurrence.” (2006 WL 2265604 at *2.)

Significantly, the Pekin court found it “immaterial that the underlying complaint alleges intentional torts.” (2006 WL 2265604 at *6.) The words used to describe the conduct giving rise to the claim are not controlling; the conduct described is what counts.

That brings us to the exclusions on which Pekin also relied.

Section 2j(5) of the Pekin policy excluded coverage for property damage to “[t]hat particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations.” (2006 WL 2265604 at *3.)

Section 2j(6) excluded coverage for property damage to “[t]hat particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.” (2006 WL 2265604 at *3.)

“Your work” was defined in the policy as:

a. Work or operations performed by you or on your behalf; and
b. Materials, parts or equipment furnished in connection with such work or operations.

(2006 WL 2265604 at *3.)

The Pekin court found no Illinois case which provided any guidance in this case. Instead, the court looked to a case from Minnesota, Thommes v. Milwaukee Insurance Co., 641 N.W.2d 877 (2002).

The Pekin court read Thommes as distinguishing two different types of risk “undertaken by an insured contractor.” One is a ‘business risk’ – a risk that the insured “may be liable as a matter of contract law to make good on products or work which is defective or otherwise unsuitable” – as in a guarantee or warranty. CGL policies do not guarantee the quality of the work performed by their insureds. Instead, CGL policies “are intended to insure against the second type of risk – ‘the risk that [the contractor’s] work or product will cause bodily injury or property damage to other property,’ which may give rise to tort liability to third parties.” (2006 WL 2265604 at *5.)

The Minnesota court found both exclusions ambiguous – and therefore construed them against the insurer. The Pekin court agreed. With regard to exclusion 2j(5), there was a question as to whether the phrase “that particular part of real property” refers to the land – or the trees. (2006 WL 2265604 at *5.)

“In addition,” the Pekin court continued, “section 2j(5) is ambiguous because it is not clear whether the exclusion refers to any property or only to property that the insured is contractually obligated to perform operations on. Given the purpose of CGL policies, one could reasonably interpret exclusion 2j(5) to apply only to property the insured is contractually obligated to work on” – the lots on which the trees were left standing. (2006 WL 2265604 at *6.)

As for exclusion 2j(6), the Pekin court likewise found “two reasonable interpretations of the provision. The phrase ‘incorrectly performed’ could refer to the manner in which the trees were removed. Here, there was nothing incorrect about the manner in which Miller removed the trees. It also could refer to the location from which they were removed, which would be applicable in this case. It is not clear whether the exclusion applies to the unusual situation in this case because the underlying complaint does not allege Miller's tree-removal procedures were incorrect, only that trees were removed from the wrong lots. We also believe the phrase ‘your work’ as applied to 2j(6) is ambiguous. Nowhere in the exclusion or in the definition of ‘your work’ does the policy indicate whether ‘your work’ is confined to the actual location [where] Miller was hired to perform his tree-cutting work.” (2006 WL 2265604 at *6.)

The Pekin court concluded that section “2j(6) does not define the phrase ‘any property.’ If it means the land Miller cut trees on it might reasonably be argued the exclusion does not apply because it is not the land that must be ‘restored, repaired or replaced;’ it is the trees. If ‘any property’ refers to the trees that were cut, the exclusion makes no sense in this case because Miller's ‘work’ was not ‘incorrectly performed’ on the trees. We find exclusion 2j(6) is ambiguous and construe it against the insurer. It does not apply in this case.” (2006 WL 2265604 at *6.)

Wrongful tree cutting cases are not a major burden on the courts of Cook County. But Pekin has a general lesson, as well as the specific ones we’ve just gone through: When in doubt, if you’re sued, tender the complaint to your carrier. Even though the complaint does not plead “negligence” – even though the suit pleads only intentional torts – tender. The insurer has an obligation to carefully evaluate its obligations whenever a suit is tendered for a defense.