Country Mutual Ins. Co. v. Livorsi Marine, No. 99807.

CourtIllinois Supreme Court
Writing for the CourtGarman
Citation305 Ill.Dec. 533,222 Ill.2d 303,856 N.E.2d 338
Decision Date18 May 2006
Docket NumberNo. 99807.
PartiesCOUNTRY MUTUAL INSURANCE COMPANY, Appellee, v. LIVORSI MARINE, INC., et al., Appellants.
856 N.E.2d 338
222 Ill.2d 303
305 Ill.Dec. 533
COUNTRY MUTUAL INSURANCE COMPANY, Appellee,
v.
LIVORSI MARINE, INC., et al., Appellants.
No. 99807.
Supreme Court of Illinois.
May 18, 2006.
Rehearing Denied September 25, 2006.

[856 N.E.2d 339]

Kevin M. Flowers and Mark H. Izraelewicz, of Marshall, Gerstein & Borun, L.L.P., Chicago, for appellant Livorsi Marine, Inc.

Stephen G. Kehoe, Chicago, for appellant Gaffrig Performance Industries, Inc.

Keith G. Carlson, Chicago, for appellee.

John S. Vishneski III and Stanley C. Nardoni, of Mayer, Brown, Rowe & Maw, L.L.P., Chicago, for amicus curiae Illinois Tool Works Inc.

John D. Shugrue, Thomas A. Marrinson, Daniel J. Struck and Laura M. Geiger, of Morgan, Lewis & Bockius L.L.P., Chicago, for amici curiae Illinois Manufacturers' Association et al.

Paul Walker-Bright, James M. Davis, Evan T. Knott, of Anderson Kill & Olick (Illinois), P.C., Chicago, and Amy R. Bach, San Francisco, California, for amicus curiae United Policyholders.

R. Mark Mifflin, David O. Edwards and Kristina E. Mony, of Giffin, Winning, Cohen & Bodewes, P.C., Chicago, Springfield, for amicus curiae Illinois Insurance Association et al.

Justice GARMAN delivered the judgment of the court, with opinion:


The circuit court of Cook County granted a declaratory judgment to Country Mutual Insurance Company, determining that it had no duty to defend or indemnify the defendant policyholders in this case. The appellate court affirmed this decision. 358 Ill.App.3d 880, 295 Ill.Dec. 665, 833 N.E.2d 871. We granted defendants' petition for leave to appeal (177 Ill.2d R. 315), and now affirm.

Background

Defendants Gaffrig Performance Industries, Inc., and Livorsi Marine, Inc., each carry commercial general liability insurance policies with Country Mutual Insurance Company. In December 1999, Livorsi brought a lawsuit against Gaffrig in the United States District Court for the Northern District of Illinois. The suit alleged various trademark violations related to the use of the "Gaffrig Precision Instruments" name. In response, Gaffrig filed a lawsuit with similar allegations against Livorsi. The suits, which sought both damages and injunctive relief, were consolidated. Gaffrig Performance Industries, Inc. v. Livorsi Marine, Inc., Nos. 99 C 7778, 99

856 N.E.2d 340

C 7822 cons., 2003 WL 23144859 (N.D.Ill. December 22, 2003).

The language of both Gaffrig's and Livorsi's insurance policies gives Country Mutual the duty to defend and indemnify its insureds in any lawsuit seeking damages based on an advertising injury:

"We will pay those sums that the insured becomes legally obligated to pay as damages because of `personal injury' or `advertising injury' to which this coverage part applies. We will have the right and duty to defend any `suit' seeking those damages. We may at our discretion investigate any `occurrence' or offense and settle any claim or `suit' that may result."

As a condition of coverage, the policies require Gaffrig and Livorsi to notify Country Mutual of any lawsuit:

"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."

Although Gaffrig and Livorsi filed their lawsuits on December 1, 1999, neither party informed Country Mutual of the consolidated suit until August 2001.

Country Mutual then filed a complaint for declaratory judgment in the circuit court of Cook County. The insurer sought a judgment that it had no obligation to defend or indemnify either Livorsi or Gaffrig in connection with the trademark lawsuit. Country Mutual argued that the claims raised in the lawsuit did not fit the policy's definition of "advertising injury" and that both Livorsi and Gaffrig breached the notice condition of their policies by failing to inform Country Mutual of the lawsuits for more than 20 months.

Testimony during a brief trial centered on telephone conversations between Michael Livorsi, the owner of Livorsi Marine, Inc., and Gary Miller, the Country Mutual agent for both Gaffrig and Livorsi. These conversations concerned the possibility of a lawsuit between Gaffrig and Livorsi and occurred prior to the filing of the trademark suit. As the parties stipulated, Country Mutual did not receive actual notice of the lawsuit until August 2001, more than 20 months after Gaffrig and Livorsi filed suit.

In pretrial and posttrial briefing, Gaffrig and Livorsi argued that Country Mutual was not prejudiced by the companies' delay in notifying their insurer of the lawsuit. The companies argued that because Country Mutual insured both parties, it had a conflict that would have prevented the insurer from investigating the claim or defending either party in the lawsuit over the Gaffrig Precision Instruments trademark. Gaffrig and Livorsi therefore argued that the insurer would have had to pay for independent counsel for both parties regardless of when it received notice, and so the timing of the notice did not prejudice the insurer. Thus, the delay in notice should not relieve Country Mutual of its duty to defend. The companies found support for this argument in a line of cases beginning with Rice v. AAA Aerostar, Inc., 294 Ill.App.3d 801, 229 Ill.Dec. 20, 690 N.E.2d 1067 (1998). The opinion in Rice stated that, "When notice of the lawsuit is the issue, the rule is that the insurer is required to show that it was prejudiced by the insured's omission or delay in order to escape liability on its policy." Rice, 294 Ill.App.3d at 807-08, 229 Ill.Dec. 20, 690 N.E.2d 1067.

Country Mutual argued that the proper inquiry was not whether the insurer was

856 N.E.2d 341

prejudiced, but whether the insureds had given Country Mutual reasonable notice of the lawsuit. Under other appellate cases, prejudice to the insurer is one of several factors in assessing the reasonableness of notice. See, e.g., Northbrook Property & Casualty Insurance Co. v. Applied Systems, Inc., 313 Ill.App.3d 457, 466, 246 Ill.Dec. 264, 729 N.E.2d 915 (2000). Country Mutual argued that such a lengthy delay, without an excuse from Gaffrig and Livorsi, was unreasonable as a matter of law. Thus, this breach of the policies' notice conditions should relieve Country Mutual of its obligation to defend and indemnify the companies in their lawsuit.

The circuit court found that the claims in the federal lawsuit potentially fell within the insurance policy language covering advertising injuries, triggering Country Mutual's duty to defend. That conclusion is not at issue in this appeal. The court also determined that Gaffrig and Livorsi failed to give Country Mutual the notice to which it was entitled. It addressed Gaffrig and Livorsi's prejudice argument in the following manner:

"In determining an insurer's liability under the circumstances presented here, there is a case to be made for considering whether late notice actually prejudiced the insurer. However, any such possible argument tends to lose its force where there is no reasonable justification or excuse offered for not having given timely notice * * *. In the present case, there has been literally no evidence of any justification or excuse offered by either of the defendants for a delay of more than 21 months in the giving of notice to Country Mutual. Under the circumstances, unless the court adopts the position that an unambiguous term of a contract may not be enforced unless the aggrieved party demonstrates some direct harm, there can be only one consequence flowing from the facts of this case."

Accordingly, the circuit court entered judgment in favor of Country Mutual. Gaffrig and Livorsi appealed this decision. Prior to the appellate court's consideration of the case, the underlying trademark suit was resolved. The federal court granted Gaffrig's request for an injunction against Livorsi's use of the disputed trademarks. Gaffrig Performance Industries, Inc. v. Livorsi Marine, Inc., Nos. 99 C 7778, 99 C 7822 cons., 2003 WL 23144859 (N.D.Ill. December 22, 2003). The court did not award monetary damages to either party. In the absence of damages, Country Mutual's duty to indemnify is no longer an issue in this case. The appellate court therefore addressed only the insurer's duty to defend. 358 Ill.App.3d 880, 295 Ill.Dec. 665, 833 N.E.2d 871.

The appellate court premised its decision on two concessions it concluded could be found in the parties' briefs. 358 Ill. App.3d at 883, 295 Ill.Dec. 665, 833 N.E.2d 871. It determined that Gaffrig and Livorsi conceded that the notice they gave Country Mutual was unreasonably and inexcusably late. 358 Ill.App.3d at 883, 295 Ill.Dec. 665, 833 N.E.2d 871. The court also determined that Country Mutual conceded that, because of the conflict of interest, it could not prove it was prejudiced by the late notice. 358 Ill.App.3d at 883, 295 Ill.Dec. 665, 833 N.E.2d 871. Thus, it framed the issue in the following terms: "Given the circumstances presented to us, did Country Mutual have to prove prejudice?" 358 Ill.App.3d at 883, 295 Ill. Dec. 665, 833 N.E.2d 871.

The court noted the distinction between notifying an insurer of an occurrence and notifying an insurer of a lawsuit. 358 Ill. App.3d at 885, 295 Ill.Dec. 665, 833 N.E.2d 871. It determined that when notice of an occurrence is the issue, courts consider

856 N.E.2d 342

prejudice to the insurer as one of several factors in the evaluation of whether the insurer received reasonable notice. 358 Ill.App.3d at 884, 295 Ill.Dec. 665, 833 N.E.2d 871. Additionally, some appellate decisions consider prejudice to the insurer only when the insured has a good excuse for the late notice of occurrence or where the delay in notice was relatively brief. 358 Ill.App.3d at 885, 295 Ill.Dec. 665, 833 N.E.2d 871. However, when notice of suit is the issue, some appellate decisions...

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119 practice notes
  • Pekin Ins. Co. v. Precision Dose, Inc., No. 2–11–0195.
    • United States
    • United States Appellate Court of Illinois
    • May 31, 2012
    ...or incur any expense, other than for first aid, without our consent.” ¶ 53 In Country Mutual Insurance Co. v. Livorsi Marine, Inc., 222 Ill.2d 303, 305 Ill.Dec. 533, 856 N.E.2d 338 (2006), the supreme court reaffirmed that [360 Ill.Dec. 186] [968 N.E.2d 679]an insured's breach of a policy's......
  • First Chi. Ins. Co. v. Molda, No. 1–14–0548.
    • United States
    • United States Appellate Court of Illinois
    • June 26, 2015
    ...in an insurance contract is a “valid prerequisite[ ]” to coverage under the policy. Country Mutual Insurance Co. v. Livorsi Marine, Inc., 222 Ill.2d 303, 311, 305 Ill.Dec. 533, 856 N.E.2d 338 (2006) ; Berglind v. Paintball Business Ass'n, 402 Ill.App.3d 76, 85, 341 Ill.Dec. 522, 930 N.E.2d ......
  • Paj, Inc. v. Hanover Ins. Co., No. 05-0849.
    • United States
    • Supreme Court of Texas
    • January 11, 2008
    ...traditional rule and concluding that (1) notice requirements are conditions precedent, see Greycoat, 657 A.2d at 768; Livorsi Marine, 305 Ill.Dec. 533, 856 N.E.2d at 343; Las Vegas Star Taxi, 714 P.2d at 562; Argo, 794 N.Y.S.2d 704, 827 N.E.2d at 764; Goodyear Tire & Rubber Co. v. Aetna Cas......
  • Fairmount Park, Inc. v. Travelers Indem. Co., No. 12–CV–827–WDS
    • United States
    • United States District Courts. 7th Circuit. Southern District of Illinois
    • September 30, 2013
    ...one factor to consider in deciding whether an insured's delay in notice was reasonable. Country Mut. Ins. Co. v. Livorsi Marine, Inc., 222 Ill.2d 303, 305 Ill.Dec. 533, 856 N.E.2d 338, 346 (2006); Simmon v. Iowa Mut. Cas. Co., 3 Ill.2d 318, 121 N.E.2d 509 (1954). If prejudice is only a fact......
  • Request a trial to view additional results
119 cases
  • Pekin Ins. Co. v. Precision Dose, Inc., No. 2–11–0195.
    • United States
    • United States Appellate Court of Illinois
    • May 31, 2012
    ...or incur any expense, other than for first aid, without our consent.” ¶ 53 In Country Mutual Insurance Co. v. Livorsi Marine, Inc., 222 Ill.2d 303, 305 Ill.Dec. 533, 856 N.E.2d 338 (2006), the supreme court reaffirmed that [360 Ill.Dec. 186] [968 N.E.2d 679]an insured's breach of a policy's......
  • First Chi. Ins. Co. v. Molda, No. 1–14–0548.
    • United States
    • United States Appellate Court of Illinois
    • June 26, 2015
    ...in an insurance contract is a “valid prerequisite[ ]” to coverage under the policy. Country Mutual Insurance Co. v. Livorsi Marine, Inc., 222 Ill.2d 303, 311, 305 Ill.Dec. 533, 856 N.E.2d 338 (2006) ; Berglind v. Paintball Business Ass'n, 402 Ill.App.3d 76, 85, 341 Ill.Dec. 522, 930 N.E.2d ......
  • Paj, Inc. v. Hanover Ins. Co., No. 05-0849.
    • United States
    • Supreme Court of Texas
    • January 11, 2008
    ...traditional rule and concluding that (1) notice requirements are conditions precedent, see Greycoat, 657 A.2d at 768; Livorsi Marine, 305 Ill.Dec. 533, 856 N.E.2d at 343; Las Vegas Star Taxi, 714 P.2d at 562; Argo, 794 N.Y.S.2d 704, 827 N.E.2d at 764; Goodyear Tire & Rubber Co. v. Aetna Cas......
  • Fairmount Park, Inc. v. Travelers Indem. Co., No. 12–CV–827–WDS
    • United States
    • United States District Courts. 7th Circuit. Southern District of Illinois
    • September 30, 2013
    ...one factor to consider in deciding whether an insured's delay in notice was reasonable. Country Mut. Ins. Co. v. Livorsi Marine, Inc., 222 Ill.2d 303, 305 Ill.Dec. 533, 856 N.E.2d 338, 346 (2006); Simmon v. Iowa Mut. Cas. Co., 3 Ill.2d 318, 121 N.E.2d 509 (1954). If prejudice is only a fact......
  • Request a trial to view additional results

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