Timely Notice on Insurance Policy Is Equally Important for Additional Insureds

July 20, 2017

It’s well known by many insurance policyholders that the named insured on a policy must give timely notice of an insured loss to an insurance company or risk having the claim denied. However, the Illinois Appellate Court recently held that a policy’s additional named insured must also give timely notice to the insurer of both the occurrence and a resulting lawsuit under the same standards that apply to the original named insured. The failure to do so can result in the loss of coverage.

The case is AMCO Ins. Co. v. Erie Ins. Exch., 2016 IL App (1st) 142660.  In this case, Hartz Construction Co. (“Hartz”) was sued by an injured worker in a worksite negligence action on March 15, 2007. Although Hartz had its own general liability insurance policy, Hartz was also an additional named insured on a policy with Erie Insurance Exchange (“Erie”) that required the insured to give notice of a claim “as soon as practicable.”

On December 2, 2009, nearly three years after the initial suit had been filed against Hartz, Hartz tendered a claim for coverage of the pending lawsuit to Erie. Shortly afterward, Hartz’s primary insurer settled the suit in full and pursued Erie in a separate lawsuit for what the insurer claimed to be its fair share of the settlement sums for its mutual insured primary, Hartz. The circuit court ruled in favor of Erie and against Hartz’s primary insurer and found that Hartz’s notice to Erie was untimely as a matter of law, therefore there was no coverage to be provided, by Erie.

On review, the Illinois Appellate Court observed that notice provisions in insurance policies are conditions precedent to triggering coverage, meaning that, absent timely notice, an insurer’s coverage obligations cannot be triggered. The Court further found that an additional insured on has the same duty to timely notify the insurer of the underlying action.

In considering whether notice was proper, the Court listed a number of factors to consider in determining the adequacy of notice, including:

  • The notice language in the insured’s policy;
  • Sophistication of the parties, the more sophisticated a party is in insurance matters, the greater the importance of prompt notice;
  • The insured’s awareness of a lawsuit that may trigger insurance coverage;
  • The insured’s diligence in ascertaining policy coverage; and
  • Prejudice to the insurer of late notice.

 

The Court found that all five of these factors weighed in favor of Erie in this case, despite the fact that Erie was the insurer for a different party to the original action as early as 2008, thus there was no dispute that Erie had actual knowledge of the original lawsuit. As such, the Illinois Appellate Court agreed that there was no duty to provide coverage for what likely would have been a covered loss of the additional named insured, Hartz.

The key takeaway from this case is that timely notice, and compliance with an insurance policy’s other requirements of the insureds, are critically important to maintaining coverage. Further, an insured needs to seek coverage under and comply with the terms of each and every policy which might provide coverage.  The experienced professionals at Rock Fusco & Connelly, LLC, can provide the strategic considerations and assistance necessary to pursue your future insurance claims.

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