Beyond a Reasonable Doubt is Key for Application to Criminal Acts Exclusion

A typical criminal act exclusion states that there is no coverage for bodily injury or property damage arising out of any criminal act. Typically the exclusion applies regardless of whether the insured is actually charged with or convicted of a crime. In Country Mutual Ins. Co. v. Dahms, 2016 IL App. (1st) 141392, 405 Ill.Dec. 311, 58 N.E.3d 118 (2016), the Illinois Court of Appeals held that the insurance company was required to defend its insured during the pendency of both a criminal proceeding and a tort action for bodily injury where the complaint in the tort action contained allegations of negligence as well as criminal activity. The Court found that the insurer was required to defend the insured because there was a potential for a non-criminal finding in the tort action.

However, while the tort case was still pending, a jury convicted the insured of aggravated battery. According to the Court, the conviction extinguished the insurance company’s duty to defend based upon the criminal act exclusion. The Court found that “[a]t that moment, [the insurance company] could not be accused of self-serving, unbridled discretion in determining that [the insured’s] conduct constituted a criminal act; [the insurance company] could point to a jury verdict based on the highest burden of proof known to our legal system. At that moment, the applicability of the criminal-acts exclusion became clear and free from doubt.” 58 N.E.3d at 132.

Of significance is the fact that at the time in the proceeding that the Court held the duty to defend was extinguished—at the time of the conviction—the criminal conviction was not final. In fact, the insured appealed the criminal conviction which was affirmed on April 23, 2015. A Petition for Review was then brought to the Illinois Supreme Court which was denied on September 30, 2015. On March 7, 2016, the United States Supreme Court denied the insured’s Petition for Certiorari. 58 N.E.3d at 123. Thus, the Court’s decision was not dependent upon the finality of the conviction, but on the strength of the factual determination indicating that a criminal act had occurred, i.e., a determination by a unanimous jury, beyond a reasonable doubt, that a crime had been committed. Notwithstanding the fact that the conviction was not final, the certainty of the jury’s determination, factually, provided sufficient clarity for the Court to conclude that the exclusion applied.

Remember, the typical exclusion does not require an actual conviction itself. The exclusion only requires that the bodily injury or property damage arise out of a criminal act. The exclusion defines a criminal act as meaning, “any act or omission which is criminal in nature or for which a penal statute or ordinance permits or requires any term of imprisonment or sentence or public service duties.” The typical exclusion applies irrespective of whether an insured is actually charged with or convicted of the crime. According to the Illinois Court, an insurance company is not entitled to make its own determination that the insured committed a policy defined criminal act but that a jury, after hearing all of the evidence and applying a rigorous standard of review (beyond a reasonable doubt), is sufficient.