Hinkhouse Williams Walsh

Circuit Court of Cook County Grants Insurer's Motion for Summary Judgment

AMCO Insurance Company (“AMCO”) filed an Amended Complaint in the Circuit Court of Cook County against Erie Insurance Exchange (“Erie”) and Cincinnati Insurance Company (“Cincinnati”) to recover a portion of the $1M indemnity payment that AMCO paid, on behalf of Hartz Construction Co. (“Hartz”), to settle an underlying bodily injury action styled Kevin Smith v. Cimarron Construction Co., 07 L 2729 (“Smith lawsuit”). 

AMCO insured Cimarron Construction Co. (“Cimarron”), the carpentry subcontractor on the construction project out of which the Smith lawsuit arose.  Cincinnati insured Hartz, the general contractor.  Erie insured Van Der Laan Brothers Concrete Construction Co., Inc. (“Van Der Laan”), the concrete subcontractor.  Hartz made a targeted tender of its defense to AMCO less than one month after Cimarron, AMCO’s Named Insured, was named as a defendant in the Smith lawsuit.  Hartz intended to put its policy with Cincinnati on stand-by.  Hartz did not tender its defense of the Smith lawsuit under the Erie policy until nearly three years after the complaint in the Smith lawsuit was filed.  However, Erie agreed to defend Hartz with AMCO under a reservation of rights. 

The Smith lawsuit settled and AMCO paid $1M on behalf of Hartz to settle the case.  Erie did not contribute anything toward the settlement on behalf of Hartz.  AMCO filed an action against Erie and Cincinnati to recover a portion of the settlement that AMCO paid on Hartz’s behalf.  AMCO’s Amended Complaint alleged theories of equitable contribution, equitable subrogation and “other insurance.”  The trial court granted Cincinnati’s Motion for Summary Judgment on the basis that Hartz’s “target tendered” to AMCO and Erie was valid and Cincinnati’s policy did not have to answer for the claim.

Erie filed a Motion for Summary Judgment contending that AMCO was only entitled to recover against Erie if the Erie policy provided coverage to Hartz.  Erie maintained that the policy did not provide any coverage to Hartz for the Smith lawsuit because Hartz’s notice to Erie, nearly three years after the Smith lawsuit was filed, was untimely as a matter of law.

The Smith lawsuit was filed in March 2007.  Hartz tendered the claim to Erie in December 2009.  AMCO contended that the notice was not late because Erie’s insured, Van Der Laan, was served in June 2008 and that Erie had actual notice by that time.  Under Cincinnati Cos. v. West American Insurance Co., 183 Ill. 2d 317 (1998), AMCO alleged, Erie’s policy was triggered in June 2008 for the benefit of both Van Der Laan and Hartz.  Erie countered that even if it had actual notice in June 2008, the notice was still fifteen months after the initial complaint was filed and late as a matter of law.  Erie also contended that the “actual notice” rule in Cincinnati did not apply because the facts of Cincinnati were distinguishable from the present case.

AMCO and Erie filed Cross-Motions for Summary Judgment.  The Circuit Court of Cook County granted Erie’s motion and denied AMCO’s motion.  The court stated that there was no dispute that Hartz knew of the case in March 2007.  Relying on the testimony of Hartz’s general counsel, who testified that she searched for and found a certificate of insurance indicating Hartz had coverage with Erie through Van Der Laan, the court stated that “[a] reasonable person, especially a company with corporate counsel, would read this complaint, compare it to the COI for Van Der Laan, and determine that the policy could provide coverage for Smith’s alleged injury. . . . AMCO has provided no reasonable justification for why Hartz failed to give Erie notice of its claim as an additional insured under the Van Der Laan policy. . . . This delay is unreasonable considering, as above, Hartz knew of the Van Der Laan policy at least as early as March 2007. . . . Therefore, Hartz’s 16-month delay of tender to Erie was unreasonable as a matter of law.”