Court Opinion

ID: 9523325
Source: CourtListenerOpinion
Date Created: 2023-08-07 02:39:12.751796+00
Date Added: 2024-06-11T13:04:53.629320
License: Public Domain

McCORMICK, P. J., dissenting: I must respectfully dissent to the holding of the majority opinion. The only question involved in the case is whether or not the plaintiff, Apex Mutual Insurance Company, notified the defendant Christners in ample time of its reservation of rights under the policy. There is no question, where the coverage is in doubt because of a breach of condition or an essential fact tending to place the claim outside the coverage of the policy, that if the insurance company defends it must notify the insured of its intention to stand on its rights. In the majority opinion it is pointed out that the assumption of the insured’s defense constitutes a waiver by the insurer of all questions of policy coverage. The opinion states: “If, therefore, in spite of its doubts as to coverage, the insurer elects to take over the insured’s defense, it will afterwards be estopped from denying its own liability under the policy.” If the coverage is in doubt in the opinion of the insurance company, it may refuse to enter the case at all. The court points out in the opinion that if the insurance company refuses to enter the litigation the insurer cannot subsequently be estopped from setting up in its own defense any matter not decided in the original action. However, such abstention presents a hazard since the insurer will be “collaterally estopped” in the subsequent suit as to issues decided in the prior action. The majority opinion states: “The reservation of rights is a means by which, prior to determination of the liability of the insured, the insurer seeks to suspend the operation of the estoppel doctrines through a non-waiver agreement. When coverage is in doubt, the insurer will offer to defend the insured under such an agreement, reserving to the insurer all of its policy defenses in case the insured is found liable.” [Emphasis supplied.] In Gallaway v. Schied, 73 Ill App2d 116, 219 NE2d 718, the court said at page 126: “It has long been settled that an insurer will not be estopped from setting up the defense of noncooperation by participating in the defense of the action against the insured, if, at the same time, it gives notice to the insured that it does not waive the benefit of such defense. [Citing cases.] ” In Illinois it is not necessary that a formal agreement be entered into, and the giving of notice to the insured is sufficient. Where the insured desires to have an adjudication of its liabilities under the policy he can, of course, proceed by way of a declaratory judgment action. However, it would seem that if he starts the declaratory judgment action after the suit is pending and the attorneys hired by the insurance company have entered their appearance for the insured, the better practice would be to file notice reserving rights. The majority opinion states: “The right of the insured to obtain a judicial declaration on the issue of policy coverage prior to adjudication of the personal injury claim has been favored by the weight of Illinois authority. [Citing numerous cases.] ” That statement is entirely in accord with this dissent. The opinion states: “An insurer will not be estopped from asserting a breach of the cooperation clause by its insured if it repudiates liability within a reasonable time after becoming aware of the insured’s failure to cooperate. Krutsinger v. Illinois Cas. Co., 10 Ill2d 518, 526, 139 NE2d 767; . . . Allstate Ins. Co. v. Keller, 17 Ill App2d 44, 50, 149 NE2d 482, ...” In Krutsinger the court said at page 526: “When an insurer wishes to assert its nonliabilityunder the policy, it must notify the insured without delay. The reason is that ‘[t]he claim might be of such a character as that the amount of damages recovered in a lawsuit by the injured party would exceed the indemnity and subject the insured to considerable loss and damage, and therefore the insured should have a right to know with reasonable promptness the attitude of the indemnity company, so that he might be in a position to take such action as would not only protect the indemnity company, but save himself from loss and damages.’ ” The court found that the defendant insurance company knew from the very inception — about the last of June 1953 — that it was not accepting responsibility for the defense of the action. It did nothing until March 1954, when it filed, in another county, an action for a declaratory judgment of nonliability. The court said at page 527: “By its failure to repudiate the answer of July 3, 1953, or to seek leave to amend it if it was unsatisfactory, and by its failure to do anything further until many months later, we think that defendant effectively waived any rights it might have had to claim a breach of the policy conditions it relies on.” Allstate Ins. Co. v. Keller, 17 Ill App2d 44, 149 NE2d 482, was an appeal for declaratory judgment entered in favor of the insurance company, exempting it from any obligation to pay any judgment against the holder of an automobile liability insurance policy, in an action for personal injuries. The court said at page 50: “We must now consider whether plaintiff waived the breach by defendant of the co-operation clause. The law is generally well settled that the failure of an insurer promptly to elect to disclaim liability, upon discovering facts indicating a breach of the co-operation clause by the insured, constitutes a waiver by the insurer of any rights which might otherwise accrue to it as a result of the breach.” In its opinion in Allstate the court quoted from Krutsinger. In the Allstate case a year and a half elapsed from the time the insurance company had acquired knowledge of the breach on the part of its insured before it took any action. In the instant case, the personal injury action against the insured was filed on November 21, 1962. The insurance company assigned the defense of that case to Gillin and Owens, who filed an answer, and served and answered interrogatories. On September 17, 1963, Helen Christner informed the attorney for the plaintiff that she had made false statements and had told untruths in her deposition. On the same day counsel for the plaintiff informed Gillin and Owens that Helen Christner had given the statement. There is no indication in the record that Gillin and Owens asked for a copy, but on October 3 they obtained a copy by court order. It would seem that if they had asked counsel for the statement it would have been given to them. Two weeks later Gillin and Owens took a discovery deposition of Officer Marks, part of which (as stated in the majority opinion) dealt with Helen Christner’s connection with the police as a crossing guard, the circumstances of her meeting with Marks in the restaurant, and the events surrounding her giving the statement to Rosenblum. It is difficult to conclude that in taking this deposition Gillin and Owens were representing the Christners and not representing the insurance company. On December 11, 1963, the insurance company filed an action for declaratory judgment, and the defendants were served on December 15, 1963. Treating the filing of the action as a formal disclaimer, it was nevertheless too late, and it would appear that in this case, as in Allstate, it was the duty of plaintiff’s attorneys, on learning of the possible conflict of interests between plaintiff and defendants, to immediately notify defendants of this fact. The judgment of the Circuit Court should be reversed.