In an unpublished opinion from the Illinois Appellate Court, Country Mutual Insurance Co. v. Badger Mutual Insurance Co., 2018 IL App (1st) 171774-U, the court held that because an insurer breached its duty to defend and failed to file a declaratory judgment action before the underlying lawsuit was resolved, it was estopped from denying coverage for the default judgment entered against its insured in the underlying lawsuit.
The underlying lawsuit concerned a claim that plaintiff’s property allegedly sustained damage when the insured performed work on the plaintiff’s residence. The complaint in the underlying lawsuit did not specifically identify when the property damage occurred. However, the complaint did state that the insurer’s investigator alerted it in 2010 that the property damage was due to the insured’s faulty work during the policy period. The insurer did not defend the insured during the action and a default judgment was entered against the insured.