Wausau Ins. Co. v. Valspar Corp.

• Decision Date: 16 August 1984
• Docket Number: No. 83 C 8736.,83 C 8736.
• Citation: 594 F. Supp. 269
• Parties: WAUSAU INSURANCE COMPANY, Plaintiff, v. The VALSPAR CORPORATION, a foreign corporation; Elizabeth Johnson Schoon; Rebecca Johnson Hampton; Royal Backes, as father and next friend of Michelle L. Backes, Kathy L. Backes and Curt A. Backes, all minors, Defendants.
• Court: U.S. District Court — Northern District of Illinois

594 F. Supp. 269

WAUSAU INSURANCE COMPANY, Plaintiff, v. The VALSPAR CORPORATION, a foreign corporation; Elizabeth Johnson Schoon; Rebecca Johnson Hampton; Royal Backes, as father and next friend of Michelle L. Backes, Kathy L. Backes and Curt A. Backes, all minors, Defendants.

No. 83 C 8736.

United States District Court, N.D. Illinois, E.D.

August 16, 1984.

Stephen E. Sward, Michael C. Borders, Rooks, Pitts, Fullagar & Poust, Chicago, Ill., for plaintiff.

Maynard I. Steinberg, Richard E. Mueller, Lord, Bissell & Brook, Chicago, Ill., for defendants.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge.

This action arose when plaintiff Wausau Insurance Company ("Wausau") was informed of three lawsuits filed against defendant Valspar Corporation ("Valspar") in Illinois state courts alleging injuries resulting from the contamination of well water with chemical wastes stored by Valspar on property adjacent to the state court plaintiffs' property. Wausau has filed a declaratory suit to determine its rights and liabilities under the policies issued to Valspar.¹ Presently before this Court are cross-motions for partial summary judgment on Counts I, II, IV, V and VII.² For reasons set forth below, Wausau's motion for summary judgment is granted, and Valspar's motion for summary judgment is denied.

On a motion for summary judgment, the moving party has the burden of showing "that there is no genuine issue as to any material fact ... entitling it to a judgment as a matter of law." Fed.R. Civ.P. 56(c). The evidence is viewed in a light most favorable to the party opposing the motion for summary judgment. If the moving party meets its initial burden, the opposing party must set forth specific facts showing that there is a genuine issue as to a material fact. If the opposing party fails to do so, summary judgment shall be entered against it. Egger v. Phillips, 710 F.2d 292 (7th Cir.1983). When confronted with cross-motions for summary judgment, we must rule on each party's motion on an individual basis, and both motions should be denied if material factual issues exist. 10A C. Wright & A. Miller, Federal Practice and Procedure § 2720 (2d ed. 1983). It is with these standards in mind that we consider the present matter.

Facts

Marvin Johnson ("Johnson") filed the first suit relating to Valspar's dumping activities in November of 1972. A jury verdict in favor of Valspar was returned on May 14, 1980. The Illinois Appellate Court affirmed the determination on February 16, 1982, that Valspar was not liable for the Johnsons' injuries, but reversed the dismissal of two of the plaintiffs in the original action. Johnson v. Tipton, 103 Ill. App.3d 291, 59 Ill.Dec. 179, 431 N.E.2d 464 (1982). The claims of the two plaintiffs which had been dismissed by the trial court were remanded to the trial court and are still pending. During the pendency of the Johnson appeal, Royal Backes filed suit against Valspar seeking compensatory damages for personal injuries resulting from Valspar's dumping activities and punitive damages for its reckless and wanton manner of storage. On February 10, 1983, Valspar, through its attorney, tendered to Wausau the defense of the remaining Johnson and Backes' claims.

Counts I and IV

In Counts I and IV of its complaint, Wausau contends that it did not receive reasonably timely notice of its potential liability from Valspar, a condition precedent to its duty to defend and indemnify and that, as a consequence, it is discharged from all liability under the terms of the policy.³ In response, Valspar contends that not only did Wausau receive timely notice, but adds that since the notice provisions are not conditions precedent according to the policy language, they are simply requirements of advisement. As such, they are designed to prevent a delay from prejudicing an insurer. Accordingly, to prevail on a motion for summary judgment, Wausau must show that Valspar's notice was untimely, and that Wausau was thereby prejudiced. Alternatively, Valspar argues that the determination of reasonable notice is inappropriate for summary judgment disposition since its resolution depends on the facts and circumstances of each case.

While the issue of reasonable notice is generally a factual inquiry, where there are no disputed material facts, the court may decide this issue as a matter of law. Furthermore, under Illinois law, while lack of prejudice to an insurer may be a factor when determining whether notice was reasonable, it does not constitute a defense. Casualty Indemnity Exchange v. Village of Crete, 731 F.2d 457, 458-459 (7th Cir.1984). Thus, to prevail on its motion for summary judgment as to Counts I and IV of its complaint, Wausau must show that the notice it received from Valspar was untimely as a matter of law.

It is undisputed by both parties that on February 10, 1983 Valspar, through its attorneys, sent a letter to Wausau explaining the favorable disposition of the original Johnson suit and the pendency of the remaining Johnson and Backes suits and tendering the continued defense of those claims to Wausau. This letter was the first direct communication between Valspar and Wausau concerning these law suits. Valspar does assert that it indirectly communicated this information when it sent the summons and complaint of the original Johnson suit to Alexander and Alexander, a firm of insurance brokers, on December 7, 1972, for ultimate transmittal to Wausau.

When determining the reasonableness of the notice given to an insurer, courts will allow the insured to rely upon actual notice received by the insurer, irrespective of the source. Illinois Valley Minerals Corp. v. Royal Globe Ins., 70 Ill.App.3d 296, 301, 26 Ill.Dec. 629, 633, 388 N.E.2d 253, 257 (1979). Consequently, if Wausau had received actual notice of its potential liability in 1972, it would be bound by its duty to defend and indemnify Valspar in subsequent litigation.⁴ However, the evidence does not support the conclusion that Wausau received actual notice in 1972. To the contrary, Wausau has filed affidavits with the Court detailing the investigation and search of its files in both Illinois and Minnesota which failed to reveal the receipts of any notice prior to February of 1983, more than ten years after the original Johnson suit was filed. It further asserts that Alexander and Alexander is not an agent of Wausau and that the firm has never been associated with Wausau. Having put forth this evidence, Wausau met its initial burden on a summary judgment motion and shifted to Valspar the burden of demonstrating the existence of a genuine factual issue for trial. Valspar did not dispute Wausau's evidence and thereby failed to sustain its burden.

Since the evidence does not show that Wausau had actual notice in 1972, we hold that the notice given by Valspar in February of 1983, ten years after the filing of the original Johnson suit and seventeen months after the filing of the Backes suit, was untimely as a matter of law, thereby discharging Wausau of any duty it had to defend and indemnify. Our decision is consistent with Casualty Indemnity Exchange v. Village of Crete, 731 F.2d 457 (7th Cir.1984), in which the Seventh Circuit affirmed the trial court's entry of summary judgment that held that the insured's five-month delay in forwarding suit papers and eighteen-month delay in giving its insurer notice of the occurrence were unreasonable as a matter of law.

Accordingly, Wausau's motion for summary judgment as to Counts I and IV is granted; Valspar's motion for summary judgment as to Counts I and IV is denied.

Counts II and...