Grinnell Mutual Reinsurance Company v. LaForge

NO. 4-06-0147 Filed: 12/15/06

IN THE APPELLATE COURT

OF ILLINOIS

FOURTH DISTRICT

GRINNELL MUTUAL REINSURANCE COMPANY, ) Appeal from
Plaintiff-Appellee, ) Circuit Court of
v. ) Logan County
GRANT LaFORGE, ) No. 03MR29
Defendant-Appellant. )
and )
COUNTRY COMPANIES MUTUAL INSURANCE & )
FINANCIAL SERVICES, as Subrogee of )
ALAN INVESTMENTS; ALAN INVESTMENTS; ) Honorable
and CROSS FARMS, INC., ) David L. Coogan,
Defendants. ) Judge Presiding.
_________________________________________________________________

PRESIDING JUSTICE STEIGMANN delivered the opinion of

the court:

In April 2003, defendant, Country Companies Mutual

Insurance & Financial Services (which was then plaintiff and

subrogee of defendants Alan Investments and Cross Farms, Inc.),

filed a complaint against defendant, Grant LaForge, seeking to
recoup $34,103.50 that Country Mutual paid to Alan Investments

and Cross Farms for the loss of several hundred pigs that died

while in LaForge's care. In May 2003, plaintiff, Grinnell Mutual

Reinsurance Company, filed a complaint for declaratory judgment,

seeking a determination as to whether it owed its insured,
LaForge, a defense in the underlying complaint. In January 2006,

the trial court granted summary judgment in Grinnell's favor.

LaForge appeals, arguing that the trial court erred by

granting summary judgment in Grinnell's favor because (1)

Grinnell was estopped from asserting any coverage defenses under
the policy issued to LaForge because it failed to timely file its

declaratory-judgment complaint, (2) Grinnell's declaratory-

judgment complaint improperly sought a determination of non-

liability for its past conduct, and (3) the "mend-the-hold"

doctrine barred Grinnell from asserting the "custom[-]farming"

exclusion set forth in the policy issued to LaForge. We disagree

and affirm.

I. BACKGROUND

The following facts were gleaned from Country Mutual's
underlying complaint, Grinnell's declaratory-judgment complaint,

attached documents and exhibits, and certain stipulations of the

parties.

Effective March 30, 2002, Grinnell issued a "farm[-]

guard" insurance policy to LaForge. The policy provided in

pertinent part, as follows:

"'We' will pay[,] subject to the liabil-

ity limits shown for LIABILITY TO PUBLIC

COVERAGE and the terms of the policy[,] all

sums arising out of any one loss which any

'insured person' becomes legally obligated to

pay as damages because of 'bodily injury' or

'property damage' covered by this policy.

If a claim is made or suit is brought

against any 'insured person' for liability

covered by this policy, 'we' will defend the

'insured person.' 'We' will use 'our' law-

yers and bear the expense.

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 HOWEVER, 'WE' WILL NOT DEFEND ANY SUIT

AFTER 'OUR' LIMIT OF LIABILITY FOR THIS COV-

ERAGE HAS BEEN PAID. 'WE' WILL DEFEND OR

SETTLE ONLY IF COVERAGE EXISTS UNDER THE

TERMS OF THIS POLICY." (Emphasis added.)

In August 2000, Gary Cross, owner of Alan Investments,

entered into an oral agreement with LaForge, under which LaForge

agreed to care for Cross's pigs at LaForge's farm for a fee. In

April 2002, Cross delivered several hundred of his pigs to
LaForge's farm, where LaForge was to feed and care for them.

On May 28, 2002, Ameren CIPS turned off the electricity

at LaForge's farm due to LaForge's alleged failure to pay his

power bill. As a result, approximately 700 of Cross's pigs died.

In a June 14, 2002, letter to Alan Investments,

Grinnell informed Cross that (1) it had received notice that

Cross had sustained a loss in May 2002, (2) it had completed its

investigation regarding his loss, and (3) LaForge's farm-guard

policy did not provide coverage for the loss.

In a June 25, 2002, letter to LaForge, Grinnell in-

formed him that (1) it had been investigating the May 2002

incident; (2) it was unable to provide coverage under LaForge's

farm-guard policy because the policy "was not intended to cover

the animals in [LaForge's] care" that belonged to Cross; (3) by

advising LaForge of the reason for denying coverage, it did "not

intend to waive the right to rely on other reasons that may

become apparent at a later date"; and (4) if LaForge was sued as

a result of the loss, he should contact Grinnell immediately. In

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denying coverage, Grinnell cited the following policy exclusions:

"UNDER LIABILITY TO PUBLIC--COVERAGE A

* * *

5. 'We' do not cover 'property damage'

to property rented to, leased to, occupied

by, used by, or in the care, custody[,] or

control of any 'insured person' or any per-

sons living in the household of an 'insured

person.'
* * *

UNDER DAMAGE TO PROPERTY OF OTHERS--COVERAGE

A-1

1. 'We' will not pay for 'property

damage' to property owned by, leased to, or

rented to any 'insured person' or any resi-

dent of 'your' household."

Attached to that letter was a copy of the June 14, 2002, letter

from Grinnell to Alan Investments.

In a June 27, 2002, letter to LaForge, Cross Farms'

attorney informed him that (1) due to LaForge's "fault" in the

May 2002 incident, Cross Farms had suffered damages totaling

$35,878; and (2) LaForge needed to pay that amount within seven

days of receiving the letter.

In a July 9, 2002, letter to LaForge, Grinnell informed

him that (1) the letter provided "additional information and

clarification regarding coverage"; (2) LaForge's farm-guard

policy did not provide coverage for his custom-farming opera-

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tions; (3) as provided in paragraph 1 of exclusions "UNDER DAMAGE

TO PROPERTY OF OTHERS--COVERAGE A-1," the policy did not cover

property damage to "property owned by, leased to, or rented to

any 'insured person'"; (4) by advising LaForge of the reasons for

denying coverage, it did "not intend to waive the right to rely

on other reasons that may become apparent at a later date"; and

(5) if LaForge was sued as a result of the loss, he should

contact Grinnell immediately. (The letter also indicated that,

pursuant to the farm-guard policy, (1) "custom farming" means
"any activity arising out of or in connection with" the care or

raising of livestock, such as swine, "by any 'insured person' for

any other person or organization in accordance with a written or

oral agreement"; and (2) the policy did not cover property damage

arising out of custom-farming operations of any insured person if

the "'total gross receipts' from all 'custom farming' exceeds

$2,000[] in [12] months of the prior calendar year.")

In a July 12, 2002, letter to the Illinois Department

of Insurance, LaForge complained about Grinnell's denial of

coverage. In a July 30, 2002, letter to the Department, Grinnell

explained the results of its investigation and its reasons for

denying coverage, including the farm-guard policy's custom-

farming exclusion and paragraph 5 of exclusions "UNDER LIABILITY

TO PUBLIC--COVERAGE A." As to the custom-farming exclusion,

Grinnell noted that (1) since August 2000, LaForge had been

caring for pigs owned by Cross, earning approximately $3,000

every other month; (2) LaForge had failed to pay his power bill,

despite receiving a disconnection notice from Ameren CIPS (which

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he did not open); and (3) Ameren CIPS shut off LaForge's elec-

tricity, resulting in the death of approximately 700 pigs.

On September 17, 2002, an insurance analyst for the

Department sent a letter to LaForge, stating, in pertinent part,

that "[t]he contract of insurance requires an insurance company

to provide defense to the insured. I have directed a letter to

[Grinnell] to respond directly to you which would state their

defense of the claim representing the insured." That same date,

the Department's insurance analyst sent a letter to Grinnell,
which provided, in pertinent part, as follows:

"The Department has a question concerning

[Grinnell's] contract obligation to defend

the insured. The contract of insurance re-

quires the company to provide defense to the

named insured. Please direct a letter to the

insured indicating this contract responsibil-

ity and photocopy that letter to this Depart-

ment as soon as possible referring to file

number 02-8085."

On September 23, 2002, Grinnell sent a letter to LaForge, clari-

fying that his farm-guard policy provided no coverage for the May

2002 loss because the claim "arose out of custom feeding of

livestock." Grinnell also informed LaForge that if he was sued

as a result of the loss, he should contact Grinnell as soon as

possible and send Grinnell a copy of the lawsuit. Grinnell's

legal department would then review the lawsuit and determine if

it had an obligation to provide a defense.

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 On October 8, 2002, and October 21, 2002, LaForge sent

letters to Grinnell, claiming that Grinnell had a duty to defend

him and demanding coverage. In an October 28, 2002, letter to

LaForge, Grinnell informed him that as stated in its prior

correspondence and based on the information currently in its

file, the policy did not provide coverage for the May 2002 loss.

Grinnell again informed LaForge that if he was sued as a result

of the loss, he should contact Grinnell immediately because "the

allegations of the lawsuit may obligate us to provide you with a
defense or pay your lawyer to defend you even though the policy

does not provide any coverage."

On April 10, 2003, LaForge's counsel sent a letter to

Grinnell, enclosing an April 1, 2003, letter from Country Mutual

to LaForge, requesting a payment of $34,103.50 for the loss of

the pigs.

On April 14, 2003, Country Mutual filed its complaint

against LaForge, seeking to recoup $34,103.50 that it had paid to

Alan Investments and Cross Farms for the loss of Cross's pigs.

The complaint alleged, in part, that (1) LaForge and Alan Invest-

ments had entered into a verbal agreement, under which LaForge

agreed to care for Cross's pigs for a fee; (2) Ameren CIPS shut

off LaForge's electricity due to his failure to pay his power

bill; and (3) as a result of the power shutoff, Alan Investments

suffered property damage totaling $34,103.50. On April 17, 2003,

LaForge's counsel sent a letter to Grinnell, enclosing a copy of

the underlying complaint.

On May 12, 2003, Grinnell filed its declaratory-judg-

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ment complaint, seeking a determination as to whether it owed

LaForge a defense in the underlying action. Grinnell alleged, in

pertinent part, that LaForge's farm-guard policy did not cover

the May 2002 loss, citing the following policy exclusions: (1)

the custom-farming exclusion; and (2) paragraph 5 of exclusions

"UNDER LIABILITY TO PUBLIC--COVERAGE A," which states that the

policy did "not cover 'property damage' to property rented to,

leased to, occupied by, used by, or in the care, custody[,] OR

control of any 'insured person' or any persons living in the
household of an 'insured person.'"

In June 2003, LaForge filed an answer to Grinnell's

declaratory-judgment complaint and six affirmative defenses,

including the following: (1) the mend-the-hold doctrine barred

Grinnell from asserting the farm-guard policy's custom-farming

exclusion, and (2) under the doctrines of waiver and estoppel,

Grinnell was foreclosed from seeking an adjudication of its

obligations to LaForge because it failed to provide a defense

when a claim was first made against him. LaForge also filed two

counterclaims, seeking to recover for Grinnell's alleged breach

of contract and bad faith.

In early December 2003, LaForge filed a motion for a

default judgment. Five days later, Grinnell filed a motion

requesting leave to file an answer to LaForge's counterclaims and

affirmative defenses, which the trial court later granted.

Meanwhile, the underlying suit proceeded to trial. In

mid-December 2003, a jury returned a verdict against LaForge and

in favor of Country Mutual (damages totaling $26,603.50) and Alan

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Investments (damages totaling $3,750). The jury also returned a

verdict in favor of LaForge and against Cross on LaForge's

counterclaim seeking to recover for the cost of feed and disposal

of the dead pigs (damages totaling $5,059.20). LaForge appealed,

and this court affirmed the trial court's judgment. Country

Mutual Insurance Co. v. LaForge, No. 4-05-0235 (December 9, 2005)

(unpublished order under Supreme Court Rule 23).

In January 2005, LaForge filed a motion for summary

judgment, arguing that Grinnell's declaratory-judgment action

improperly sought a determination of nonliability for its past

conduct. In February 2005, Grinnell filed a summary-judgment

motion, arguing that it was entitled to judgment as a matter of

law based on the custom-farming and other policy exclusions, as

well as LaForge's admissions regarding his care and feeding of

Cross' pigs. The parties later filed briefs in the trial court

and submitted several exhibits, including the farm-guard policy,

copies of the correspondence between the parties and the Depart-

ment, and pleadings in the underlying lawsuit. In August 2005,

the court denied both parties' summary-judgment motions, upon

determining that genuine issues of material fact existed.

In September 2005, Grinnell filed a motion requesting a

bench trial. In December 2005, the parties agreed to file

stipulations to be considered during a stipulated bench trial.

In January 2006, the parties stipulated to the admission of

several exhibits, including the following: (1) a copy of

LaForge's farm-guard policy, (2) a copy of the April 2003 com-

plaint in the underlying action, (3) copies of the correspondence

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between the parties and the Department, (4) a transcript of the

December 2004 trial in the underlying action, and (5) the verdict

forms in the underlying action. The parties also stipulated to

the following: (1) in December 2004, the jury returned a

$30,353.50 judgment against LaForge in the underlying action; (2)

in December 2005, this court affirmed the trial court's judgment

in the underlying action (Country Mutual Insurance Co. v.

LaForge, No. 4-05-0235 (December 9, 2005) (unpublished order

under Supreme Court Rule 23)); (3) Grinnell and LaForge would

stand on the briefs they had previously submitted to the trial

court; (4) neither party forfeited any of their previously raised

objections; and (5) if LaForge were called as a witness, his

testimony would be consistent with his April 2005 declaration.

LaForge's April 2005 declaration indicated, in pertinent part, as

follows: (1) on May 28, 2002, LaForge was working in one of his

fields when Ameren CIPS shut off his electricity; (2) no one from

Ameren CIPS contacted him personally before doing so; (3) after

learning that his electricity had been shut off, LaForge rushed

to the hog-confinement building and discovered that a "substan-

tial number" of pigs had died; (4) he did not know that Ameren

CIPS was going to shut off his electricity; and (5) after the

incident, he notified Grinnell that Cross had indicated that he

was going to make a claim against LaForge.

Later in January 2006, the trial court sua sponte
granted summary judgment in Grinnell's favor, upon determining

that no genuine issue of material fact existed and Grinnell was

entitled to judgment as a matter of law.

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 This appeal followed.

II. ANALYSIS

A. Procedural Posture

Initially, we note that the procedural posture of this

case is unusual. Even though the trial court previously denied

the parties' summary-judgment motions and the parties (1) agreed

to a stipulated bench trial and (2) submitted stipulations, the

court then sua sponte granted summary judgment in Grinnell's

favor.

Because neither party challenges the trial court's

authority to proceed as it did, we will review the court's ruling

under the standard ordinarily applied to summary judgments--that

is, de novo. Peck v. Froehlich, 367 Ill. App. 3d 225, 227-28,

853 N.E.2d 927, 931 (2006). "Summary judgment is proper if, and

only if, the pleadings, depositions, admissions, affidavits and

other relevant matters on file show that there is no genuine

issue of material fact and that the movant is entitled to judg-

ment as a matter of law." State Farm Mutual Automobile Insurance
Co. v. Coe, 367 Ill. App. 3d 604, 607, 855 N.E.2d 173, 176

(2006).

B. The Timeliness of Grinnell's Declaratory-Judgment Complaint

1. The Duty To Timely File a Declaratory-Judgment Complaint
LaForge argues that Grinnell is estopped from asserting

any defenses under the farm-guard policy because it failed to

timely file its declaratory-judgment complaint. Grinnell re-

sponds that its declaratory-judgment complaint was timely because

it was filed within 25 days of Grinnell's receipt of the underly-

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ing complaint filed by Country Mutual. We agree with Grinnell.

Although neither party explicitly frames the argument

in this way, this case turns on our determination as to when

Grinnell's duty to defend was triggered. While LaForge contends

that Grinnell's June 2002 notice of Cross Farms' claim against

him triggered the duty to defend, Grinnell contends that its duty

to defend was triggered by the April 2003 filing of Country

Mutual's underlying complaint against LaForge.

In Illinois, a liability insurer in doubt over whether
it has a duty to defend its insured "'cannot simply stand on the

sidelines and wait until the tort action is completed before

contesting the question of coverage.'" Central Mutual Insurance

Co. v. Kammerling, 212 Ill. App. 3d 744, 749, 571 N.E.2d 806, 810

(1991), quoting Reis v. Aetna Casualty & Surety Co., 69 Ill. App.

3d 777, 782-83, 387 N.E.2d 700, 704 (1978). Instead, the insurer

must defend its insured under a reservation of rights or seek a

declaratory judgment that no coverage exists under its policy.

State Farm Fire & Casualty Co. v. Martin, 186 Ill. 2d 367, 371,

710 N.E.2d 1228, 1230-31 (1999).

"When an insurer fails to seek a declar-

atory judgment as to its obligations and

rights in a timely manner or defend under a

reservation of rights, it has breached its

duty to defend. [Citation.] The most impor-

tant factor in determining whether an insurer

has breached its duty to defend is not the

raw chronological delay in an insurer's fil-

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 ing a declaratory[-]judgment action, but

whether the insurer waited until trial or

settlement was imminent." Aetna Casualty &

Surety Co. v. O'Rourke Bros., Inc., 333 Ill.

App. 3d 871, 880, 776 N.E.2d 588, 596 (2002).

Although LaForge cites several cases addressing an

insurer's duty to timely file a declaratory-judgment action, he

cites no case law (and we have found none) in which the insurer's

duty to take such action was triggered prior to the initiation of

a lawsuit. See Martin, 186 Ill. 2d at 369, 710 N.E.2d at 1230

(holding that when a lawsuit has been filed against an insured,

the insurer has a duty to either (1) seek, though not necessarily

secure, a declaratory judgment or (2) proceed under a reservation

of rights); Insurance Co. of the State of Pennsylvania v. Protec-

tive Insurance Co., 227 Ill. App. 3d 360, 367-68, 592 N.E.2d 117,

122 (1992) (concluding that the insurer's September 1988

declaratory-judgment action was not timely when the underlying

complaint was filed in May 1986); Employers Insurance of Wausau
v. Ehlco Liquidating Trust, 186 Ill. 2d 127, 139-42, 708 N.E.2d

1122, 1129-31 (1999) (reaffirming that a "suit" exists when a

complaint is filed in a court of law and concluding that a suit

had been filed triggering the insurer's duty to defend); Aetna
Casualty, 333 Ill. App. 3d at 880-81, 776 N.E.2d at 596-97

(holding that the insurer breached its duty to defend when it

filed its declaratory-judgment complaint 11 months after learning

of the complaints being filed against its insured); Cincinnati

Cos. v. West American Insurance Co., 183 Ill. 2d 317, 329-30, 701

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N.E.2d 499, 505 (1998) (holding that (1) the insurer's duty to

defend is triggered by "actual notice of the underlying suit" and

(2) such notice includes knowledge that a cause of action has

been filed and the complaint falls within or potentially within

the scope of the policy coverage); West American Insurance Co. v.

J.R. Construction Co., 334 Ill. App. 3d 75, 85, 777 N.E.2d 610,

619 (2002) ("'two requirements must be satisfied before an

insurer's duty to defend arises: (1) the action must be brought

against an insured, and (2) the allegations of the complaint must

disclose the potential of policy coverage. [Citation.]'"),

quoting Federal Insurance Co. v. Economy Fire & Casualty Co., 189

Ill. App. 3d 732, 735, 545 N.E.2d 541[, 544] (1989).

2. The Terms "Claim" and "Suit" as Used in the Farm-Guard Policy

Although LaForge does not direct our attention to the

language of the farm-guard policy, his estoppel argument can only

succeed if the terms of the farm-guard policy itself impose a

duty on Grinnell to file a declaratory-judgment action prior to a

lawsuit being filed.

The pertinent language of the farm-guard policy pro-

vides as follows: "If a claim is made or suit is brought against

any 'insured person' for liability covered by this policy, 'we'

will defend the 'insured person'".

In Country Mutual Insurance Co. v. Livorsi Marine,
Inc., 222 Ill. 2d 303, 311, ___ N.E.2d ___, ___ (2006), our

supreme court discussed the interpretation of an insurance policy

as follows:

"When construing the language of an

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 insurance policy, a court is to ascertain and

give effect to the intentions of the parties

as expressed by the words of the policy.

[Citation.] An insurance policy must be

construed as a whole, giving effect to every

provision. [Citation.] If the words used in

the policy are unambiguous, they are given

their plain, ordinary, and popular meaning.

[Citation.] Although insurance policies are
construed liberally in favor of coverage,

this rule of construction comes into play

only when the policy language is ambiguous."

Giving the language in the farm-guard policy its plain

and ordinary meaning, we conclude that a claim and a suit are not

equivalent. If those terms have identical meanings, the clause

is redundant and thus offends the well-settled principle of

contract construction that the provisions of a contract shall not

be interpreted in a way that renders other provisions meaning-

less. Atwood v. St. Paul Fire & Marine Insurance Co., 363 Ill.

App. 3d 861, 864, 845 N.E.2d 68, 71 (2006). In addition, in

ordinary usage, a "claim" can be considered a demand for some

asserted right. See Merriam-Webster's Collegiate Dictionary 210

(10th ed. 2000) (defining "claim" as "a demand for something due

or believed to be due"). On the other hand, a "suit" refers to a

proceeding in a court of law that requires the filing of a

complaint. Employers Insurance of Wasau, 186 Ill. 2d at 140, 708
N.E.2d at 1130; see also Katz Drug Co. v. Commercial Standard

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Insurance Co., 647 S.W.2d 831, 835 (Mo. App. 1983) (concluding

that the words "claim" and "suit" in an insurance policy were not

equivalent).

3. Grinnell's Duty Under the Farm-Guard Policy

Although the farm-guard policy imposes a duty to

"defend" when either "a claim is made" or a "suit is brought," we

hold that the assertion of a claim and the filing of a lawsuit do

not trigger precisely the same duty. As the previous discussion

shows, Illinois case law speaks only to the duty to defend that

arises when a lawsuit has been filed, and we have found no case

in which the insurer's duty to file a declaratory-judgment

complaint was triggered prior to the initiation of a lawsuit. We

acknowledge that when, as in this case, the language of the

insurance policy clearly imposes a duty upon notice of a claim

having been made, the insurer is obligated to take some action.

However, whatever the parameters of that duty might be, it does

not extend to the obligation to file a declaratory-judgment

action. Instead, the insurer's duty to file a declaratory-

judgment action (or, alternatively, to defend its insured under a

reservation of rights) does not arise until a complaint has been

filed against the insured.

Accordingly, we hold that Grinnell did not have a duty

to file its declaratory-judgment action until after Country

Mutual's lawsuit was filed. A mere 25 days after Country Mutual

filed its underlying complaint, Grinnell did just that. We thus

further conclude that Grinnell's declaratory-judgment complaint

was not untimely filed so as to estop Grinnell from raising

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policy defenses.

LaForge also argues that Grinnell's declaratory-judg-

ment complaint improperly sought a determination of nonliability

for its past conduct. In light of our conclusion that Grinnell's

declaratory-judgment complaint was timely filed, we need not

address this argument.

C. The Mend-the-Hold Doctrine

LaForge next argues that the mend-the-hold doctrine

barred Grinnell from asserting that the May 2002 loss was not
covered under the farm-guard policy's custom-farming exclusion.

Specifically, he contends that because Grinnell did not assert

the custom-farming exclusion in its initial correspondence (the

June 14, 2002, letter to Alan Investments), it was barred from

later asserting that exclusion. We disagree.

In Gibson v. Brown, 214 Ill. 330, 341, 73 N.E. 578, 582

(1905), our supreme court first discussed the mend-the-hold

doctrine, as follows:

"'Where a party gives a reason for his con-

duct and decision touching anything involved

in a controversy, he cannot, after litigation

has begun, change his ground and put his

conduct upon another and a different consid-

eration. He is not permitted thus to amend

his hold. He is estopped from doing it by a

settled principle of law.' Ohio and Missis-
sippi Railway Co. v. McCarthy, 96 U.S. 258[,

267-68, 24 L. Ed. 693, 696 (1877)]."

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See also Schuyler County v. Missouri Bridge & Iron Co., 256 Ill.

348, 353, 100 N.E. 239, 240 (1912) (citing Gibson); Harbor

Insurance Co. v. Continental Bank Corp., 922 F.2d 357, 363 (7th

Cir. 1990) (in which the Seventh Circuit noted that the mend-the-

hold doctrine precludes a "party who hokes up a phony defense to

the performance of his contractual duties" from trying "on

another defense for size" after the first defense fails).

In Liberty Mutual Insurance Co. v. American Home

Assurance Co., No. 1-05-2441, slip op. at 18 (November 2, 2006),

___ Ill. App. 3d ___, ___, ___ N.E.2d ___, ___, the First Dis-

trict recently discussed the mend-the-hold doctrine and noted

that "[i]n the insurance context, courts have precluded insurers

from denying a claim on one basis and then changing the basis for

denial during litigation." (Emphasis added.) We agree with

Liberty Mutual that in the insurance context, the mend-the-hold

doctrine precludes insurers from denying a claim for one reason

and then changing the reason for its denial in the midst of

litigation.

In this case, Grinnell sent a June 14, 2002, letter to

Alan Investments, informing Cross that LaForge's farm-guard

policy did not provide coverage for the May 2002 loss. On June

25, 2002, Grinnell sent its initial letter to LaForge, informing

him that it was unable to provide coverage because the farm-guard

policy "was not intended to cover the animals in [LaForge's]

care" that belonged to Cross. Although Grinnell did not assert

the custom-farming exclusion, it explicitly reserved its right to

assert additional bases for denying coverage. In a July 9, 2002,

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letter to LaForge, Grinnell first asserted the custom-farming

exclusion. Clearly, Grinnell's assertion of this additional

basis for denying coverage occurred long before Grinnell filed

its May 12, 2003, declaratory-judgment complaint. We thus

conclude that the mend-the-hold doctrine did not apply under the

circumstances of this case.

Even if we were to accept LaForge's assertion that the

mend-the-hold doctrine applies when an insurer changes the reason

for denying coverage before litigation is initiated, the doctrine
nonetheless does not apply in the absence of detriment to the

party seeking its application, unfair surprise, or arbitrariness.

See Trossman v. Philipsborn, No. 1-04-0588, slip op. at 35-36

(August 21, 2006), ___ Ill. App. 3d ___, ___, ___ N.E.2d ___, ___

(noting that courts have refused to apply the mend-the-hold

doctrine out of equitable considerations; concluding that the

counter-plaintiffs could not prevail under the doctrine because

they failed to show detriment, unfair surprise, or arbitrari-

ness); Liberty Mutual, No. 1-05-2441, slip op. at 20, ___ Ill.

App. 3d at ___, ___ N.E.2d at ___ (discussing Trossman and noting
that the First District had "refused to apply the doctrine in the

absence of unfair surprise or arbitrariness").

In this case, LaForge did not show (nor does he argue

on appeal) that Grinnell's assertion of the custom-farming

exclusion in its July 9, 2002, letter to him was arbitrary,

unfairly surprised him, or was detrimental to him. Indeed,

LaForge could not establish unfair surprise or detriment, given

that Grinnell asserted the custom-farming exclusion (1) within 1

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1/2 months after the May 28, 2002, incident and (2) 9 months

before Country Mutual filed the underlying complaint against

LaForge. Thus, the mend-the-hold doctrine did not apply in this

case.

III. CONCLUSION

For the reasons stated, we affirm the trial court's

judgment.

Affirmed.

MYERSCOUGH and COOK, JJ., concur.

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