Court Opinion

ID: 3177797
Source: CourtListenerOpinion
Date Created: 2016-02-17 15:22:21.733271+00
Date Added: 2024-06-11T14:06:54.032356
License: Public Domain

2016 IL App (1st) 142660

                                                                  FIRST DIVISION
                                                                  FEBRUARY 16, 2016

No. 1-14-2660

AMCO INSURANCE COMPANY,                                    )      Appeal from the
                                                           )      Circuit Court of
                      Plaintiff-Appellant,                 )      Cook County.
                                                           )
            v.                                             )      No. 11 CH 41151
                                                           )
ERIE INSURANCE EXCHANGE,                                   )      Honorable
                                                           )      Jean Prendergast Rooney,
                      Defendant-Appellee.                  )      Judge Presiding.

       JUSTICE CUNNINGHAM delivered the judgment of the court.
       Presiding Justice Liu and Justice Connors concurred in the judgment.

                                             OPINION

¶1     This appeal arises from the August 4, 2014 order entered by the circuit court of Cook

County, which granted summary judgment in favor of defendant Erie Insurance Exchange (Erie)

and denied a cross-motion for summary judgment filed by plaintiff AMCO Insurance Company

(AMCO), in a declaratory judgment action between the two insurers. On appeal, AMCO argues

that the circuit court erred in granting summary judgment in favor of Erie. For the following

reasons, we affirm the judgment of the circuit court of Cook County.

¶2                                      BACKGROUND

¶3     On March 15, 2007, Kevin Smith (Smith) filed a negligence action against Hartz

Construction Company (Hartz), KT Richards Construction Company (KT), and G&M Mason

Construction Company (G&M), for injuries Smith sustained when he fell while working at a

construction site at 19140 Crescent Drive in Mokena, Illinois (the underlying action). On April
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15, 2008, Smith filed a second amended complaint in the underlying action, naming only Hartz

and Cimarron Construction Company, Inc. (Cimarron) as defendants.

¶4     On June 27, 2008, Smith filed a third amended complaint in the underlying action against

Hartz, Cimarron, and named as a defendant for the first time, Van Der Laan Brothers, Inc.

(VDL). In the third amended complaint, Smith alleged that, on March 22, 2005, he was injured

as a result of negligent installation and placement of anchor bolts at the construction site. At the

time of his injuries, Smith was employed by Edward Allen Construction (Edward Allen), a

subcontractor working on the project at the construction site. Hartz was the general contractor in

the construction project, Cimarron was the carpentry subcontractor, and VDL was the concrete

subcontractor. The construction project consisted of building residential homes in a subdivision.

¶5     At the time of Smith's accident, several insurance policies were in effect. Hartz, as

general contractor, had a general liability policy issued by Cincinnati Insurance Company

(Cincinnati) (the Cincinnati policy). Cimarron had both a primary general liability policy and an

umbrella policy issued by AMCO (the AMCO policy). VDL had a general liability policy issued

by Erie (the Erie policy). Hartz was also insured as an additional insured under the AMCO

policy, and Hartz had a certificate of insurance indicating that it had coverage through VDL

under the Erie policy.

¶6     Under the Erie policy, an insured must give notice to Erie of a claim pursuant to the

following policy provision:

               "2. Duties in the Event of Occurrence, Offense, Claim or Suit

                         a. You must see to it that we are notified as soon as

               practicable of an 'occurrence' or an offense which may result in a

               claim. ***

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                      b. If a claim is made or 'suit' is brought against any insured,

              you must:

                              1) Immediately record the specifics of the claim or

              'suit' and the date received; and

                              2) Notify us as soon as practicable

                        You must see to it that we receive written notice of the

              claim or 'suit' as soon as practicable.

                      c. You and any other involved insured must:

                              1) Immediately send us copies of any demands,

              notices, summonses or legal papers received in connection with the

              claim or 'suit' ***."

The Erie policy also contained the following endorsement for additional insureds:

                      "A. Section II – Who is an Insured is amended to include

              as an insured any person or organization for whom you are

              performing operations and for whom a Certificate of Insurance

              with additional insured status has been issued. Such person or

              organization is an insured only with respect to liability arising out

              of your ongoing operations performed for that insured. A person's

              or organization's status as an insured under this endorsement ends

              when your operations for that insured are complete.

                      B. With respect to the insurance afforded to these

              additional insureds, the following additional exclusions apply:

                              2. Exclusions

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                           This insurance does not apply:

                                   a. 'Bodily injury'; 'property damage' or

            'personal and advertising injury' arising out of the rendering of, or

            the failure to render, any professional architectural, engineering or

            surveying services, including:

                                             (1) The preparing, approving, or

            failing to prepare or approve, maps, shop drawings, opinions,

            reports, surveys, field orders, change orders or drawings and

            specifications; and

                                             (2)       Supervisory,    inspection,

            architectural or engineering activities.

                                   b. 'Bodily injury'; or 'property damage'

            occurring after:

                                             (1) All work, including materials,

            parts of equipment furnished in connection with such work, on the

            project (other than service, maintenance or repairs) to be

            performed by or on behalf of the additional insured(s) at the site of

            the covered operations has been completed; or

                                             (2) That portion of 'your work' out of

            which the injury or damage arises has been put to its intended use

            by any person or organization other than another contractor or

            subcontractor engaged in performing operations for a principal as a

            part of the same project.

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                         C. With respect to coverage provided by this endorsement,

               the following is added to Section IV – Commercial General

               Liability Conditions:

                                Certificates of Insurance

                                Coverage will only apply if the Certificate of

               Insurance has been issued prior to the loss."

The Erie policy also contains the following relevant language:

                         "Throughout this policy the words 'you' and 'your' refer to

               the Named Insured shown in the Declarations, and any other

               person or organization qualifying as a Named Insured under this

               policy.     The words 'we,' 'us' and 'our' refer to the company

               providing this insurance.

                         The word 'insured' means any person or organization

               qualifying as such under Section II – Who is An Insured."

¶7     On May 7 2008, prior to Smith's filing of the third amended complaint in the underlying

action, Hartz, as an additional insured under the AMCO policy, tendered its defense of the

underlying action to AMCO, which accepted under a reservation of rights.

¶8     On December 2, 2009, Hartz, as the holder of a certificate of insurance under the Erie

policy, tendered its defense of the underlying action to Erie in a letter to VDL's defense counsel.

In the letter, Hartz stated that it was an additional insured under the Erie policy; that it was then

currently being defended under a reservation of rights by Cimarron's insurer [AMCO]; and that

the purpose of the letter was to obtain the additional benefits of a defense and indemnity from

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Erie in addition to the defense and indemnity being provided by AMCO. Thereafter, Erie

accepted Hartz's defense tender subject to a reservation of rights.

¶9     On March 25, 2011, AMCO settled the underlying action with Smith for the total amount

of $1,450,000: $1 million on behalf of Hartz and $450,000 on behalf of Cimarron. Of the $1

million settlement amount paid on behalf of Hartz, AMCO allocated $550,000 to be paid under

AMCO's primary policy and $450,000 to be paid under the AMCO umbrella policy. The

settlement agreement also contained an assignment of rights by Hartz and Cimarron, by which

Hartz and Cimarron agreed that any rights, claims and causes of action they had to recover any

sums from Cincinnati and Erie in connection with the claims of the underlying action shall be

assigned and transferred to AMCO. Erie eventually settled the underlying action on behalf of

VDL for $5,000, but did not reimburse AMCO for any portion of the settlement amount that

AMCO had paid on behalf of Hartz.

¶ 10   On December 2, 2011, AMCO filed a complaint for declaratory judgment against Erie

and Cincinnati, seeking contribution for the $1 million settlement amount paid by AMCO on

behalf of Hartz in the underlying action. On May 16, 2012, AMCO filed an amended complaint

for declaratory judgment, seeking the same relief under the theories of equitable subrogation,

equitable contribution, and "other insurance" against Erie (counts I, III, and V) and Cincinnati

(counts II, IV, and VI). On August 24, 2012, the circuit court granted Cincinnati's motion to

dismiss with prejudice, finding that Hartz had made a "targeted tender" to AMCO and that the

Cincinnati policy was never triggered. On May 5, 2014, this court affirmed the circuit court's

dismissal of the counts against Cincinnati in the amended complaint for declaratory judgment.

See AMCO Insurance Co. v. Cincinnati Insurance Co., 2014 IL App (1st) 122856.

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¶ 11   In February 2014, AMCO and Erie filed cross-motions for summary judgment. In its

motion for summary judgment, AMCO argued that Hartz was an additional insured under the

Erie policy and, therefore, Erie is liable to AMCO for one-half of the settlement amount AMCO

paid on behalf of Hartz in the underlying action, as well as one-half of the defense costs it

incurred in defending Hartz against Smith in the underlying action. In its motion for summary

judgment, Erie argued that Hartz was not an additional insured under the Erie policy because

Hartz's notice to Erie of the underlying action was untimely as a matter of law and because

Hartz's liability did not "arise out of" VDL's work for Hartz. Erie also argued that because, at the

time of Smith's accident, VDL had already completed the work out of which Hartz's alleged

liability arose, Hartz was no longer an additional insured under the Erie policy.

¶ 12   On July 29, 2014, a hearing on the parties' cross-motions for summary judgment was

held. On August 4, 2014, the circuit court granted summary judgment in favor of Erie and

against AMCO, on the basis that Hartz's notice to Erie about the underlying action was untimely

as a matter of law.

¶ 13   On August 28, 2014, AMCO filed a timely notice of appeal. Accordingly, we have

jurisdiction over this appeal.

¶ 14                                       ANALYSIS

¶ 15   On appeal, we determine whether the circuit court erred in granting summary judgment in

favor of Erie and against AMCO, which we review de novo. See Collins v. St. Paul Mercury

Insurance Co., 381 Ill. App. 3d 41, 45 (2008).

¶ 16   AMCO argues that Hartz's notice of the underlying action to Erie was reasonable and

timely under the circumstances and that Erie received actual notice of the underlying action

within a reasonable time. AMCO further argues that the Erie policy did not preclude coverage to

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Hartz, because VDL's operations at the construction site were ongoing and had not yet been

completed at the time of Smith's accident, and the underlying action arose out of VDL's work

performed for Hartz at the site. AMCO contends that Erie was liable to AMCO based on

equitable contribution and the "other insurance" clauses of their policies. AMCO requests that

this court reverse the circuit court's order and enter judgment in favor of AMCO by holding Erie

liable to AMCO for $500,000 plus one-half of the costs incurred by AMCO in defending Hartz

in the underlying action or, alternatively, reverse the circuit court's order and remand for further

proceedings.

¶ 17   Erie counters that the circuit court did not err in granting summary judgment in its favor,

where Hartz did not tender its defense to Erie under the Erie policy until nearly three years after

Smith filed the underlying action and the tender was thus untimely as a matter of law. Erie

argues that the "actual notice" rule had no relevance here, and that even if this court considered

AMCO's "actual notice" argument, a 16-month delay between the filing of Smith's original

complaint in the underlying action and the time Erie received "actual notice" of the action was

also unreasonable as a matter of law. Erie further argues that the Erie policy was not triggered to

provide any coverage to Hartz because Smith's injuries did not arise out of VDL's ongoing

operations at the construction site, but rather, at the time of Smith's accident, VDL had already

completed the work out of which Smith's injury allegedly arose. Erie further contends that

AMCO was not entitled to recover under the theory of equitable contribution because AMCO

and Erie insured against different risks, and that AMCO could not recover under the "other

insurance" clauses of the policies.

¶ 18   In this case, AMCO's amended declaratory judgment complaint sought contribution from

Erie for the $1 million settlement amount paid by AMCO in the underlying action, under the

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theories of equitable subrogation, 1 equitable contribution, and "other insurance" against Erie

(counts I, III and V). 2 In granting summary judgment in favor of Erie and against AMCO, the

circuit court found that Hartz's notice to Erie regarding the underlying action was untimely as a

matter of law. In light of the circuit court's ruling, it did not address the other arguments raised

by the parties.

¶ 19   Summary judgment is proper where "the pleadings, depositions, and admissions on file,

together with the affidavits, if any, show that there is no genuine issue as to any material fact and

that the moving party is entitled to judgment as a matter of law." 735 ILCS 5/2-1005(c) (West

2012). In considering a motion for summary judgment, the court must view the record in the

light most favorable to the nonmoving party. Pielet v. Pielet, 2012 IL 112064, ¶ 29. "The

purpose of summary judgment is not to try a question of fact, but to determine whether one

exists" that would preclude the entry of judgment as a matter of law.            Land v. Board of

Education of the City of Chicago, 202 Ill. 2d 414, 421 (2002). "Thus, although the nonmoving

party is not required to prove his case in response to a motion for summary judgment, he must

present a factual basis that would arguably entitle him to judgment." Id. at 432. When parties

file cross-motions for summary judgment, as was the case here, they agree that only a question of

law is involved and invite the court to decide the issues based on the record. See Pielet, 2012 IL
112064, ¶ 28. "However, the mere filing of cross-motions for summary judgment does not

establish that there is no issue of material fact, nor does it obligate a court to render summary

       1
          On appeal, AMCO has abandoned its theory of recovery under "equitable subrogation";
thus, those arguments are forfeited for appellate review. See Sekerez v. Rush University Medical
Center, 2011 IL App (1st) 090889, ¶ 81 (failure to raise arguments or cite legal authority is a
violation of Rule 341(h)(7) and results in forfeiture of the issue).
        2
          As noted, counts II, IV and VI were brought against Cincinnati, which were eventually
dismissed with prejudice on August 24, 2012.

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judgment." Id. A reviewing court may affirm a circuit court's grant of summary judgment on

any basis apparent in the record, regardless of whether the circuit court relied on that basis or

whether the court's reasoning was correct. Harlin v. Sears Roebuck & Co., 369 Ill. App. 3d 27,

31-32 (2006).

¶ 20   Resolution of the issue regarding timeliness of notice turns on the interpretation of the

Erie policy terms. The construction of an insurance policy is a question of law subject to de

novo review. American States Insurance Co. v. Koloms, 177 Ill. 2d 473, 479-80 (1997). In

construing the language of the policy, a court must ascertain and give effect to the intention of

the parties as expressed in their agreement. Id. at 479. In order to ascertain the meaning of the

policy's language and the parties' intent, the court must construe the policy as a whole and "take

into account the type of insurance purchased, the nature of the risks involved, and the overall

purpose of the contract." Id. If the words of a policy are clear and unambiguous, a court must

afford them their plain and ordinary meaning.          Outboard Marine Corp. v. Liberty Mutual

Insurance Co., 154 Ill. 2d 90, 108 (1992).          Conversely, if the language of the policy is

susceptible to more than one meaning, it is considered ambiguous and will be construed strictly

against the insurer and in favor of the insured. Koloms, 177 Ill. 2d at 479. However, a reviewing

court will not strain to find ambiguity where none exists. Travelers Insurance Co. v. Eljer

Manufacturing, Inc., 197 Ill. 2d 278, 293 (2001).

¶ 21   In order to trigger the Erie policy at bar, Hartz, as a putative additional insured, had a

duty to timely notify Erie of the underlying action. A notice provision in an insurance policy is a

"condition precedent" to the triggering of the insurer's contractual duties. Northern Insurance

Company of New York v. City of Chicago, 325 Ill. App. 3d 1086, 1091 (2001). When the insured

fails to comply with the provision to give notice, "the insurer may be relieved from its duty to

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defend and indemnify the insured under the policy." Id. The purpose of a notice requirement in

an insurance policy is to enable the insurer to conduct a timely and thorough investigation of the

insured's claim. Kerr v. Illinois Central R.R. Co., 283 Ill. App. 3d 574, 585 (1996). Whether

notice has been given within a reasonable time depends on the facts and circumstances of each

case. Country Mutual Insurance Co. v. Livorsi Marine, Inc., 222 Ill. 2d 303, 311-12 (2006).

However, where, as here, the facts are undisputed, the reasonableness of notice to an insurer by

its insured is a question of law. Kerr, 283 Ill. App. 3d at 583.

¶ 22   Under the Erie policy, an insured must give notice to Erie of a claim pursuant to the

following policy provision:

                "2. Duties in the Event of Occurrence, Offense, Claim or Suit

                       a. You must see to it that we are notified as soon as

               practicable of an 'occurrence' or an offense which may result in a

               claim. ***

                       c. You and any other involved insured must:

                               1) Immediately send us copies of any demands,

               notices, summonses or legal papers received in connection with the

               claim or 'suit' ***." (Emphasis added.).

A policy condition requiring notice "as soon as practicable" has been interpreted by our supreme

court to mean "within a reasonable time." Barrington Consolidated High School v. American

Insurance Co., 58 Ill. 2d 278, 282 (1974). Illinois courts consider several factors to determine

whether an insured's delay in notifying the insurer is reasonable: (1) the specific language of the

policy's notice provision; (2) the degree of the insured's sophistication in commerce and

insurance matters; (3) the insured's awareness of a lawsuit that may trigger insurance coverage;

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(4) the insured's diligence in ascertaining whether policy coverage is available; and (5) prejudice

to the insurer.   Livorsi Marine, Inc., 222 Ill. 2d at 313; Northbrook Property & Casualty

Insurance Co. v. Applied Systems, Inc., 313 Ill. App. 3d 457, 466 (2000).

¶ 23   In the case at bar, it is undisputed that on March 15, 2007, Smith filed his original

complaint in the underlying action naming general contractor Hartz as a defendant. It is also

undisputed that on June 27, 2008, Smith filed a third amended complaint in the underlying action

against Hartz, Cimarron (carpentry subcontractor), and also named VDL (concrete

subcontractor) as a defendant for the first time. The parties also do not dispute that Hartz

tendered a formal notice of the underlying action to Erie for coverage on December 2, 2009,

almost three years after the initial filing of Smith's underlying action against Hartz.

¶ 24   We find that the first factor under the reasonableness analysis weighs in favor of Erie.

The notice requirement in the Erie policy clearly and expressly states that notice of a lawsuit

must be given "as soon as practicable" and that copies of any demands, notices, summonses or

legal papers relating to a claim or lawsuit must be "immediately" sent to Erie. Section II of the

Erie policy states that an "insured" includes any person or organization for whom VDL was

performing operations and for whom a certificate of insurance had been issued. As a holder of a

certificate of insurance under the Erie policy and for which VDL, as the concrete subcontractor,

performed work at the construction site, Hartz was considered an additional insured whose

compliance with the notice provision was required under the Erie policy. AMCO does not

challenge Hartz's requirement to comply with the notice provision of the Erie policy, but argues

that its notice was timely and reasonable under the circumstances. Here, although Hartz was

named as a defendant in Smith's original complaint filed on March 15, 2007, Hartz did not tender

the underlying lawsuit to Erie until almost three years later on December 2, 2009. This delay of

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almost three years, could not realistically be deemed an "immediate" submission of the

complaint to Erie. Thus, the notice provision in the Erie policy was violated as a result of Hartz's

failure to immediately send Erie copies of any demands, notices, summonses or legal papers it

received in connection with the underlying action. Further, Hartz's delay in tendering its defense

of the underlying action to Erie on December 2, 2009, was untimely as a matter of law. See

Livorsi Marine, Inc., 222 Ill. 2d 303 (upholding summary judgment ruling in favor of insurer

where insured delayed for 21 months before giving notice of the underlying lawsuit); Northbrook

Property & Casualty Insurance Co., 313 Ill. App. 3d 457 (affirming summary judgment in favor

of insurer where insured's 17-month delay in notifying insurer of lawsuit was unreasonable, thus

absolving insurer of any obligation to provide defense costs or indemnification under policies).

We note that although Erie undoubtedly knew about the underlying action in July 2008 after it

received a copy of Smith's third amended complaint naming its primary insured, VDL as a

defendant, that fact did not negate Hartz's duty to notify Erie of the lawsuit "as soon as

practicable" and did not change the fact that another 17 months transpired before Hartz finally

and formally tendered its defense of the underlying lawsuit to Erie in December 2009.

Therefore, based on the clear language of the notice provision, we find that the first factor

weighs in favor of Erie.

¶ 25   With respect to the second factor, we find that it also weighs in favor of Erie. Viewing

the record in a light most favorable to AMCO, we find that Hartz was not unsophisticated in

commerce and insurance matters. The record shows that Hartz was a general contractor of the

construction project at issue in the underlying action. Hartz's general counsel, Elaine Pochiro

(Pochiro), stated in her deposition testimony that on previous occasions, she had personally made

about six claims to Hartz's insurers for defense under those policies. Pochiro testified in her

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deposition that she understood the importance of timely notifying Hartz's insurer of any lawsuits

naming Hartz as a defendant because "there's a time on these policies within which you must

make a report or an incident report or a claim. It's part of the contract between the insurance

company and the insured." Pochiro had also advised Hartz's president, Donald Hartz (President

Hartz), that claims should be made within certain specified periods to meet Hartz's obligations to

comply with the notice terms of the insurance policy. In his deposition testimony, President

Hartz acknowledged that Hartz should contact its insurer once any claims are made against it. In

fact, the record shows that Hartz, as an additional insured, had tendered notice to other

insurers—West Bend Mutual Insurance Company (West Bend), Country Mutual Insurance

Company (Country Mutual) and AMCO—within one month after their respective primary

insureds 3 were named as defendants in the underlying action. Therefore, we conclude that Hartz

possessed a high degree of sophistication in matters of commerce and insurance. Therefore, this

factor weighs in favor of Erie.

¶ 26   Likewise, we find that the third factor under the reasonableness analysis—regarding the

insured's awareness of a lawsuit that may trigger insurance coverage—weighs in favor of Erie,

where there is no dispute that Hartz knew of Smith's underlying action in March 2007.

¶ 27   With respect to the fourth factor regarding the insured's diligence in ascertaining whether

policy coverage is available, we find that it weighs in favor of Erie. The record shows that Hartz

required its subcontractor, VDL, to execute an insurance contract obligating VDL to name Hartz

as an additional insured on VDL's insurance policy with Erie. The insurance contract was

       3
          West Bend was the primary insurer for G&M and Country Mutual was the primary
insurer for KT. KT and G&M were named as defendants along with Hartz in Smith's original
March 15, 2007 complaint. As noted, AMCO was the primary insurer for Cimarron, which was
named as a defendant along with Hartz in the April 15, 2008 second amended complaint. Hartz
was the additional insured on each of the West Bend, Country Mutual and AMCO policies.

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executed before the start of the construction project at issue in the underlying action. According

to the deposition testimony of Hartz's chief financial officer, Michael Gembara (CFO Gembara),

Hartz required subcontractors to provide Hartz with a certificate of insurance naming Hartz as an

additional insured before commencing work for Hartz. He noted that subcontractors who fail to

comply with this requirement would not be allowed to begin the construction work. According

to Pochiro, when Hartz originally received the underlying Smith complaint in 2007, Hartz

searched its files for any certificates of insurance "that would have been in effect at [the] time" of

Smith's accident. She admitted that Hartz had a certificate of insurance on file for VDL at the

time Smith filed his original underlying complaint in March 2007. Further, the record shows that

in August 2008, two months after Smith filed the third amended complaint naming VDL as a

defendant, Pochiro conducted a search in Hartz's files for an insurance contract with VDL "that

would give [Hartz] another source of insurance representation." The original March 15, 2007

complaint in the underlying action alleged that the defendants "[f]ailed to properly place and/or

install [] anchor bolts in a safe, suitable and proper manner so as to give proper and adequate

protection"; "[k]new or should have know[n] of the presence of the anchor bolts and that they

constituted a tripping hazard to the plaintiff" and "created a hazard by having the anchor bolts

installed in an unsafe manner." The record shows that VDL was the concrete subcontractor hired

by Hartz pursuant to a purchase order to complete work with respect to foundations, basement

floors, garage floors and stoops for the construction project. VDL also installed the anchor bolts,

which helped secure the house or deck to the foundation, pursuant to Hartz's blueprints. Thus,

although VDL was not named as a defendant in Smith's original March 2007 complaint, Hartz

reasonably could have compared the allegations in the original complaint to the certificate of

insurance for VDL, and ascertained that policy coverage under the Erie policy was available.

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Contrary to AMCO's arguments, VDL's presence at the construction site at the time of the

accident did not matter. Hartz knew that VDL installed the anchor bolts referenced in Smith's

complaint and knew that it had a certificate of insurance for coverage through VDL under the

Erie policy. Yet, Hartz did not tender its defense of the underlying action to Erie until almost

three years after the March 2007 underlying complaint was filed by Smith. Even after VDL was

named as a defendant in Smith's June 27, 2008 third amended complaint, Hartz still waited

another 18 months before giving notice and tendering its defense to Erie.

¶ 28   AMCO argues that Hartz's delay in notifying Erie of the underlying action was excusable

because there was confusion as to whom Smith's employer, Edward Allen, worked for and how

they were involved in the construction project. AMCO points to Pochiro's deposition testimony,

in which she stated that Edward Allen was not a subcontractor of Hartz's; that it took some time

for Hartz to sort out which insurance company to tender the complaint to in light of the

confusion about Edward Allen's involvement in the construction project; and that the confusion

was not resolved until "certain facts came out" in the discovery process which were not known at

the time the underlying action was filed—including that Edward Allen was brought onto the site

by one of Hartz's subcontractors. However, we find that whether Hartz knew which of its

subcontractors was responsible for bringing Edward Allen onto the jobsite had no bearing on the

fact that the allegations regarding anchor bolts in the underlying complaint should have alerted

Hartz to the issue of VDL's work, and had no relevance as to whether Hartz knew it had

coverage through VDL under the Erie policy and to its duty to timely notify Erie of the

underlying action.   Indeed, when asked to explain how the knowledge of Edward Allen's

involvement in the construction project affected Hartz's decision to delay tender to Erie, Pochiro

could only theorize that "the only explanation" she could think of was that knowing which

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subcontractor brought Edward Allen onto the jobsite went directly to the question of whose

insurance contract would cover the claim. However, this does not explain why even after VDL

was named a defendant in Smith's June 2008 third amended complaint, which again alleged the

failure to properly install the anchor bolts and Hartz presumably knew the Erie policy was

triggered, yet still waited another 18 months before tendering its defense of the underlying action

to Erie. Further, Pochiro's conjecture as to the reason behind Hartz's delayed tender to Erie was

inconsistent with the fact that, despite not knowing at that time which of its subcontractors

brought Edward Allen onto the construction project, Hartz tendered its defense of the underlying

action to AMCO as an additional insured under the AMCO policy within a month after AMCO's

insured, Cimarron, was named for the first time as a defendant in the second amended complaint.

Therefore, we find that the fourth factor in the reasonableness analysis weighs against AMCO.

¶ 29   With respect to the fifth factor—prejudice to the insurer—we find that it weighs in favor

of Erie. As our supreme court held, prejudice is but one factor in the reasonableness analysis;

however, even if there is a lack of prejudice to the insurer, the insured must still give reasonable

notice according to the terms of the insurance policy. Livorsi Marine, Inc., 222 Ill. 2d at 313,

316-17, citing Simmon v. Iowa Mutual Casualty Co., 3 Ill. 2d 318 (1954). AMCO argues that

Erie suffered no prejudice as a result of Hartz's delay in giving notice to Erie, by pointing out

that "anything of substance," such as the depositions of Smith, James Venhuizen (president of

Cimarron) and Jerald Van Der Laan (president of VDL) in the underlying action, did not take

place until after Erie first became involved in the underlying action as a result of its named

insured, VDL, being named as a defendant in the June 27, 2008 third amended complaint. We

reject this contention. Although Erie first became involved in the underlying action when its

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defense counsel filed an appearance on behalf of VDL in July 2008 4 and Erie eventually settled

the underlying action on behalf of VDL, the above-mentioned depositions were all taken before

Hartz tendered a defense of its claim to Erie in December 2009. By the time Hartz requested a

defense from Erie, discovery was nearly complete and almost three years had passed since Hartz

was initially named as a defendant in the underlying action, and Erie did not have the

opportunity to investigate or to develop a defense on behalf of Hartz. See Kerr, 283 Ill. App. 3d
574, 585 (1996) (the purpose of a notice requirement in an insurance policy is to enable the

insurer to conduct a timely and thorough investigation of the insured's claim). As discussed,

even after Erie became involved in defending VDL in the underlying action, Hartz did not notify

Erie of its desire for a defense by Erie until about another 17 months had transpired. Therefore,

we find that the fifth factor in the reasonableness analysis weighs in favor of Erie. Accordingly,

in examining the five factors, we find that Hartz's delay in notifying Erie of the underlying action

by tendering its defense to Erie almost three years after Smith filed the underlying action against

Hartz and 18 months after VDL was named as a defendant, was unreasonable. See Kerr, 283 Ill.

App. 3d at 585 ("[c]ompliance with the notice provision is a condition precedent to coverage and

if breached, the insurer will not be liable under the policy, even if there was no showing in fact

of prejudice"); Livorsi Marine, Inc., 358 Ill. App. 3d at 884 (notice provisions in insurance

contracts are valid prerequisites to coverage and not mere technical requirements which the

insured is free to overlook or ignore with impunity).

¶ 30   Nonetheless, AMCO asserts that Hartz provided reasonable and timely notice of the

underlying action to Erie, by arguing that Hartz complied with the notice requirement under the

       4
         The factual background in AMCO's brief states, and Erie does not dispute, that Erie's
counsel filed an appearance on behalf of VDL in the underlying action on July 30, 2008.

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Erie policy because Erie received actual notice of the underlying action. AMCO argues that Erie

received actual notice of the underlying action by July 30, 2008 when counsel for Erie filed an

appearance on behalf of VDL, which was only fourteen months 5 since Hartz "indisputably was

aware of the Smith lawsuit."      AMCO argues that once Erie received actual notice of the

underlying action in July 2008, Erie was "on notice" that Hartz's liability potentially arose out of

VDL's work and that the lawsuit potentially fell within the scope of coverage under the Erie

policy. Relying primarily on The Cincinnati Cos. v. West American Insurance Co., 183 Ill. 2d
317 (1998), AMCO argues that Hartz was not required to make a formal tender of defense to

Erie; rather, once Erie received actual notice of the underlying action in July 2008, Erie had the

duty to inquire whether Hartz desired its assistance. AMCO further argues that the circuit court

erred in finding Cincinnati Cos. inapplicable, and that Pochiro's deposition testimony did not

support the court's conclusion that Hartz should have tendered the claim to Erie immediately

when Smith filed the original underlying complaint in March 2007.

¶ 31   We find Cincinnati Cos. to be inapposite to the case at bar. In Cincinnati Cos., a

construction accident resulted in a lawsuit for personal injuries against several subcontractors,

including Baird, which was defended under a policy issued by Cincinnati Companies. A second

subcontractor, B&D, was defended by West American Insurance Company. Unbeknownst to

Baird, it was an additional insured under B&D's West American policy; therefore, it had no

reason to tender a defense to West American. However, on the eve of trial, B&D disclosed that

Baird was an additional insured on the West American policy. Baird then tendered its defense to

       5
         AMCO arrives at 14 months by calculating the time between May 24, 2007, when Hartz
filed an appearance in the underlying action, and July 30, 2008, when Erie's defense counsel
filed an appearance on behalf of VDL. However, there is a 16-month gap when calculating the
time between March 2007, when the original underlying action was filed naming Hartz as a
defendant, and July 2008, when Erie's counsel filed an appearance on behalf of VDL.

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West American, which rejected Baird's tender. Cincinnati Cos., 183 Ill. 2d at 319-21. Our

supreme court held that the insurer could not decline coverage on the basis that there had not

been an official tender of defense by the newly discovered insured when it already had "actual

notice" of the action because it had been actively defending the identical lawsuit for another

insured, B&D. Id. at 329-30. Defining "actual notice" as "notice sufficient to permit the insurer

to locate the suit and defend it," our supreme court concluded that the insurer actually knew of

the lawsuit at issue for three years, as it had been defending B&D throughout the pendency of

that action. Id. at 330. Accordingly our supreme court held that an exception to the tender

requirement exists—and the insurer's duty to defend was therefore triggered—where it was

unmistakable that the insurer was already aware of the lawsuit. In arriving at this holding, our

supreme court explicitly stated that because neither party invoked the specific terms of the

policy, "policy defenses have not been a factor in our decision." Id. at 323 n.1.

¶ 32   We find AMCO's reliance on Cincinnati Cos. to be misplaced, as it is neither factually

nor legally on point with the case at bar. Cincinnati Cos. concerned the issue of what is

necessary to trigger an insurer's duty to defend, which our supreme court held that the duty arises

with actual notice of a claim against an insured, except where the insured has knowingly forgone

the insurer's assistance. Id. at 328. AMCO does not claim either in the circuit court or on appeal

that Erie breached its duty to defend to Hartz. Here, unlike Cincinnati Cos. in which the insurer

rejected the insured's tender, it is undisputed that Erie accepted Hartz's defense tender subject to

a reservation of rights as it was required to do. See American National Fire Insurance Co. v.

National Union Fire Insurance Co. of Pittsburgh, P.A., 343 Ill. App. 3d 93, 101 (2003) (it is well

settled that when an underlying complaint presents an issue of potential insurance coverage and

the insurer believes that the policy does not cover the claim, the insurer may not refuse to defend

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the insured but must either defend the suit under a reservation of rights or seek a declaration of

no coverage). The crux of the case at hand concerns the issue of indemnification. AMCO, as the

settling insurer, seeks indemnification contribution from Erie, the nonsettling insurer, for half of

the $1 million settlement amount that AMCO paid on behalf of Hartz in the underlying action. 6

Further, unlike in Cincinnati Cos. where notice provisions were not at issue and policy defenses

were not raised by the parties to that action, Erie is vigorously raising policy defenses, arguing

that the language of the policy controls, and relying upon long-settled precedent that an insured's

compliance with the notice provisions is a prerequisite to insurance coverage. See Northbrook

Property & Casualty Insurance Co., 313 Ill. App. 3d at 464 (the insurance contract controls the

insured's duties); West American Insurance Co. v. Yorkville National Bank, 238 Ill. 2d 177, 210

(2010) (Freeman, J., dissenting). Moreover, the Cincinnati Cos. court did not determine if notice

was unreasonable as a matter of law whereas, here, the relevant inquiry is whether Hartz's

delayed notice to Erie was unreasonable and whether it complied with the notice requirement

under the plain terms of the Erie policy. AMCO's arguments in favor of applying the actual

notice rule in Cincinnati Cos. seem to suggest that the duty to defend and the duty to indemnify

are the same. However, an insurer's duty to defend its insured is much broader than its duty to

indemnify. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 125 (1992).

Thus, we find that the actual notice rule in Cincinnati Cos. does not apply in the case at bar.

       6
          AMCO's May 16, 2012 amended complaint for declaratory judgment against Erie
specifically alleged that Erie breached its duty to indemnify Hartz against the underlying action,
and made no mention of the duty to defend. See Pagano v. Occidental Chemical Corp., 257 Ill.
App. 3d 905, 911 (1994) ("[a] plaintiff fixes the issues in controversy and the theories upon
which recovery is sought by the allegations in his complaint. *** In ruling on a motion for
summary judgment, the court looks to the pleadings to determine the issues in controversy").

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¶ 33   Even if the actual notice rule applied, we find that the 16-month 7 delay was unreasonable

as a matter of law, where there was no justification for this delay and where, as discussed, Hartz

tendered notice to other insurers (West Bend, Country Mutual and AMCO) within one month

after their respective primary insureds were named as defendants in the underlying action. But

compare Employers Reinsurance Corp. v. E. Miller Insurance Agency, Inc., 332 Ill. App. 3d 326

(2002) (insurer's duty to defend triggered where it received actual notice of the underlying

lawsuit within a reasonable time—two months—after the insured was served with the complaint

and summons); Illinois Founders Inc. Co. v. Barnett, 304 Ill. App. 3d 602 (1999) (insurer's duty

to defend triggered where it received actual notice of the underlying lawsuit within eight days

after the occurrence). Thus, we find that AMCO's argument on this basis must fail.

¶ 34   We note that, in arguing that Hartz's late notice to Erie was unreasonable, Erie asserts that

the doctrine of judicial estoppel applied to bar AMCO from now taking the position that Hartz's

notice under the Erie policy was timely. Erie specifically points out that AMCO, in response to

Cincinnati's motion to dismiss 8 in the instant declaratory judgment action, had argued that

Hartz's "target tender" to AMCO was invalid because it was untimely. Erie argues that because

the timeframe within which Hartz tendered its defense to AMCO was much shorter than the

timeframe within which Hartz tendered its defense to Erie, AMCO "cannot now take the

diametrically opposite position that Hartz's notice under the Erie policy was timely." We reject

this argument. The doctrine of judicial estoppel "promotes the truth and protects the integrity of

       7
          Calculated from March 2007 when Smith filed his original complaint against Hartz, to
July 2008, when Erie received actual notice of the lawsuit and its counsel filed an appearance on
behalf of VDL.
        8
          As noted, AMCO brought the instant declaratory judgment action against both Erie and
Hartz's general liability insurer, Cincinnati. The circuit court granted Cincinnati's motion to
dismiss, which this court affirmed. See AMCO Insurance Co., 2014 IL App (1st) 122856.

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the court system by preventing litigants from deliberately shifting positions to suit the exigencies

of the moment." (Internal quotation marks omitted.) United Automobile Insurance Co. v.

Buckley, 2011 IL App (1st) 103666, ¶ 35. The elements of judicial estoppels are: (1) the two

positions must be taken by the same party; (2) the positions must be taken in judicial

proceedings; (3) the positions must be given under oath; (4) the party must have successfully

maintained the first position and received some benefit; and (5) the two positions must be totally

inconsistent. Id. Judicial estoppel applies to statements of fact and not to legal opinions or

conclusions. Id. We find that judicial estoppel did not apply to the case at bar. First, AMCO's

positions regarding timeliness pertained to legal conclusions, not statements of fact. Second,

Erie has not made, nor can it make, any arguments regarding how AMCO had successfully

maintained its first position, where the circuit court dismissed AMCO's claim and this court

affirmed the dismissal, let alone argue that AMCO derived some benefit from that position.

¶ 35   Therefore, because Hartz's untimely notice barred coverage under the Erie policy, AMCO

was not entitled to seek contribution from Erie for the $1 million that AMCO paid in settling the

underlying action against Hartz. Moreover, although AMCO argues in a single sentence that

Erie also owes half of all "unreimbursed costs" incurred by AMCO in defending Hartz in the

underlying action, AMCO does not cite to legal authority or to any part of the record in support

of this claim. 9 Thus, AMCO has forfeited this issue for review on appeal. See Sekerez, 2011 IL

App (1st) 090889, ¶¶ 80-82 (failure to cite legal authority in violation of Rule 341(h)(7) results

in forfeiture of the issue); Ill. S. Ct. R. 341(h)(7) (eff. July 1, 2008) (arguments shall contain

citation of the authorities and citation of the record). Accordingly, we find that the circuit court

       9
          In AMCO's reply brief in support of its own motion for summary judgment before the
circuit court, AMCO asserted that it "is prepared to prove up, in the appropriate post-judgment
proceeding, its defense costs incurred after Erie receive actual notice in July, 2008 ***."

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did not err in granting summary judgment in favor of Erie and against AMCO. In light of our

holding, we need not address the parties' remaining arguments on appeal.

¶ 36   For the foregoing reasons, we affirm the judgment of the circuit court of Cook County.

¶ 37   Affirmed.

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