Insurer Has No Duty to Defend When Insured Fails to Give Adequate Notice During Policy Period
An Illinois appellate court has held that an insurer had no duty to defend its insured in two underlying lawsuits because the insured failed to comply with the notice condition of the policy where it gave only cursory notice of potential claims the day before the policy expired. Ill. State Bar Ass’n Mut. Ins. Co. v. Beeler Law, P.C., 2015 WL 1407310 (Ill. App. Ct. Mar. 25, 2015). In so holding, the court concluded that adequate and timely notice was a “requirement” and “condition precedent” to insurance coverage, and “general notice” thus failed to trigger the insurer’s duty to defend.
The insured law firm purchased a legal malpractice insurance policy from the insurer that required the insured to give written notice of any claim “as soon as practicable” and within the policy period. The policy further required the notice to include specific information, including details about the alleged wrongful conduct and the circumstances giving rise to the claim. One day before the policy expired, the insured emailed the insurer to report three potential claims, identifying only the potential claimants by name and advising that more details would follow. The insured failed to provide any additional information until several months later, after the policy expired, when it was sued in the underlying litigation and it forwarded the complaints to the insurer. In response to the law firm’s request for a defense, the insurer brought the present coverage action, seeking a declaration that it did not have a duty to defend the insured in the underlying suits. On the parties’ cross-motions for summary judgment, the trial court granted the insurer’s motion, concluding that the insured failed to satisfy the policy’s notice requirements.
The Illinois appellate court affirmed the grant of summary judgment in favor of the insurer, holding that it was “undisputed that [the insured] failed to comply with the notice requirements.” According to the court, the insured’s purported notice by email during the policy period was “deficient” under the terms of the notice condition, and the insurer did not receive “actual notice” of the claims asserted against the law firm until the insured tendered the first underlying complaint to the insurer, after the policy period had expired.
The court also concluded that the notice condition was a “requirement” and a “condition precedent” to insurance coverage, rather than a “mere promise,” so the insured’s “general notice” of potential claims failed to trigger the insurer’s duty to defend under the terms of the policy’s insuring agreement. The court grounded its conclusion on the clear and unambiguous language of the notice condition. The court also noted that the policyholders were sophisticated “in commerce and insurance matters” and thus “should have had a clear understanding of their contractual obligations and reporting requirements under the Policy.” According to the court, it was also “clear” from the policy language that the notice condition “was intended to be a condition precedent, not a mere promise,” and “Illinois case law is clear that courts do enforce notice requirements.”
