West Am. Ins. Co. v. Yorkville Nat'l Bank

• Decision Date: 23 September 2010
• Docket Number: No. 108285.,108285.
• Citation: 238 Ill.2d 177,345 Ill.Dec. 445,939 N.E.2d 288
• Parties: WEST AMERICAN INSURANCE COMPANY, Appellee,v.YORKVILLE NATIONAL BANK et al., Appellants.
• Court: Illinois Supreme Court

238 Ill.2d 177

939 N.E.2d 288

345 Ill.Dec. 445

WEST AMERICAN INSURANCE COMPANY, Appellee,

v.YORKVILLE NATIONAL BANK et al., Appellants.

No. 108285.

Supreme Court of Illinois.

Sept. 23, 2010.

W. Scott Porterfield, Roger H. Stetson, Elias C. Selinger, of Barack Farrazzano Kirschbaum & Nagelberg LLP, of Chicago, for appellants.Robert Marc Chemers, Christopher C. Cassidy, of Pretzel & Stouffer, Chrtd., of Chicago, for appellee.Regina A. Ripley, of Clausen Miller, PC, of Chicago, Laura A. Foggan, Benjamin J. Theisman, of Wiley Rein, LLP, of Washington, DC, for amicus curiae Complex Ins. Claims Lit. Ass'n

[345 Ill.Dec. 447 , 238 Ill.2d 180] OPINION

Justice BURKE delivered the judgment of the court, with opinion.

The issue in this case is whether the insured violated its liability insurance policy by failing to give timely written notice to the insurer as specified in the policy, thereby relieving the insurer of its duties to defend and indemnify. The appellate court held that the insured breached the policy's notice provision and was therefore not entitled to coverage. 388 Ill.App.3d 769, 327 Ill.Dec. 889, 902 N.E.2d 1275. For the following reasons, we reverse the appellate court.

BACKGROUND

On September 24, 2001, Sheryl Kuzma filed a defamation lawsuit in the circuit

[345 Ill.Dec. 448 , 939 N.E.2d 291]

court of Will County against Yorkville National Bank (Yorkville) and its vice president, Bernard Wiegmann. Kuzma alleged that Wiegmann uttered certain false statements in his official capacity which damaged her professional reputation. At the time of the alleged defamation in November 2000, Yorkville was covered by a commercial general liability policy and commercial umbrella policy (collectively, the Policy) issued by West American Insurance Company (West American) for the period of September 17, 2000, to September 17, 2001. West American is owned by the Ohio Casualty Insurance Company (Ohio Casualty). The Policy lists the Zeiter–Dickson Insurance Agency (Zeiter–Dickson) as the agent. Zeiter–Dickson, at all relevant times, was an approved insurance agent of Ohio Casualty and West American.

On March 9, 2004, West American filed a declaratory judgment action denying coverage under the Policy based on late notice. Yorkville did not submit written notice of a claim for coverage until January 19, 2004, approximately 27 months after the defamation lawsuit was filed. The Policy's notice provision states:

“SECTION IV—COMMERCIAL GENERAL LIABILITY CONDITIONS

* * *

2. Duties in the Event of Occurrence, Offense, Claim or Suit.

* * *

b. 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.

c. You and any other involved insured must

(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or ‘suit’ * * *.”

In its answer, Yorkville alleged that West American received oral notice of the Kuzma suit on several occasions prior to receiving written notice on January 19, 2004. Yorkville contended that the oral notices to West American constituted “actual notice” triggering West American's duty to provide coverage.

At a bench trial, James Liggett, Yorkville's president, testified that in late 2001 or early 2002, he met with Richard Dickson, the Zeiter–Dickson insurance agent who had placed the Policy with Yorkville. Dickson was an agent for Zeiter–Dickson until 2003. Liggett told Dickson that Yorkville was “involved in a defamation lawsuit in Ottawa,” that it was a “he said/she said sort of thing,” and that it was not covered by the bank's director and officer insurance policy. According to Liggett, he asked Dickson if the Zeiter–Dickson Policy would cover the suit. Dickson replied, “Probably not. Most all of those policies are written the same anyway.” Dickson did not testify at trial.

Liggett testified that he met with Joel Ottosen, another West American agent, sometime during the same time period. Liggett stated he told Ottosen that Yorkville was involved in a defamation liability case and asked if the Policy would cover it. According to Liggett, Ottosen gave “basically the same response” as Dickson, stating that the Policy probably would not cover the lawsuit. In his testimony, Ottosen denied having any conversation with Liggett about the defamation lawsuit before

[345 Ill.Dec. 449 , 939 N.E.2d 292]

January 16, 2004. Ottosen testified that he first learned of the lawsuit on January 15, 2004, when Wiegmann contacted him to find out whether his homeowner's policy covered the suit.

The defamation lawsuit was discussed at three meetings of the Yorkville board of directors in 2002. Dickson was in attendance at the meetings because he was a member of the board. According to the minutes, at the September meeting, Liggett reported to the board that “Attorney Cheryl Kuzman” was suing Yorkville and Wiegmann for allegedly derogatory comments made by Wiegmann. At the November meeting, Liggett reported that expenses were high at the Ottawa bank branch as a result of legal fees related to the Kuzma litigation. Finally, at the December meeting, the board reviewed and approved the minutes from the November meeting.

In January 2004, Yorkville was advised by an unrelated insurance company that the Policy “should cover” the defamation lawsuit. Liggett informed Ottosen of the lawsuit, who submitted the requisite claim forms and copy of the complaint to West American on January 19, 2004. The parties stipulated that on January 22, 2004, Carolyn Maher, a litigation specialist for West American, informed counsel for Yorkville that “there was insurance coverage for most of the allegations in the Kuzma complaint.”

The trial on the Kuzma suit was set for March 15, 2004. On March 5, 2004, West American decided to deny coverage under the Policy based on late notice. Yorkville later settled the case with Kuzma on July 28, 2004, for $1.75 million. West American did not participate in any trial proceedings or settlement negotiations.

The circuit court found for Yorkville and against West American in the declaratory judgment action and awarded stipulated damages in the amount of $1,982,778.78. The court found that the conversation between Liggett and Dickson took place as described by Liggett and was “unrefuted.” The court found that Liggett and Ottosen had a “passing conversation” in the bank, but the court made no finding as to the content of that conversation. Based on the conversation between Liggett and Dickson and the reports of the board meetings, the trial court found that West American received actual notice of the lawsuit in 2001 or 2002. The court further found that the written notice in 2004 was given within a reasonable time because Yorkville was told in 2001 or 2002 that the lawsuit was not covered.

The appellate court affirmed in part, reversed in part, and remanded. ¹ 388 Ill.App.3d 769, 327 Ill.Dec. 889, 902 N.E.2d 1275. Citing to Country Mutual Insurance Co. v. Livorsi Marine, Inc., 222 Ill.2d 303, 305 Ill.Dec. 533, 856 N.E.2d 338 (2006), the appellate court held that Yorkville breached the Policy's notice clause as a matter of law by waiting until 27 months after the lawsuit was filed to submit a written claim for coverage and a copy of the complaint. The court found the late notice was unreasonable in light of the fact that discovery had closed and the case was scheduled to proceed to trial in eight weeks. The court held that actual notice had “no bearing” on the issue of whether Yorkville breached the written-notice provision. To hold that actual notice

[345 Ill.Dec. 450 , 939 N.E.2d 293]

“trumps” the plain language of the policy, the court found, would “render the policy's written notice provision meaningless.” 388 Ill.App.3d at 777, 327 Ill.Dec. 889, 902 N.E.2d 1275. Justice Schmidt specially concurred, noting that there was no reason not to enforce the contract language, which had been approved by the Department of Insurance. Justice Lytton concurred in part and dissented in part, contending that West American had a duty to defend and indemnify Yorkville pursuant to Cincinnati Cos. v. West American Insurance Co., 183 Ill.2d 317, 233 Ill.Dec. 649, 701 N.E.2d 499 (1998), since it had received actual notice of the suit. 388 Ill.App.3d at 783–84, 327 Ill.Dec. 889, 902 N.E.2d 1275 (Lytton, J., concurring in part and dissenting in part). We granted Yorkville's petition for leave to appeal to this court. 210 Ill.2d R. 315. We granted leave to the Complex Insurance Claims Litigation Association to file a brief on behalf of West American as amicus curiae.

ANALYSIS

In construing an insurance policy, we must ascertain and give effect to the intentions of the parties, as expressed in the policy language. Country Mutual Insurance Co. v. Livorsi Marine, Inc., 222 Ill.2d 303, 311, 305 Ill.Dec. 533, 856 N.E.2d 338 (2006). The policy must be construed as a whole, giving effect to every provision. Country Mutual, 222 Ill.2d at 311, 305 Ill.Dec. 533, 856 N.E.2d 338. Unambiguous words in the policy are to be given their plain, ordinary, and popular meaning. Country Mutual, 222 Ill.2d at 311, 305 Ill.Dec. 533, 856 N.E.2d 338. Where the policy language is ambiguous, courts are to construe the policy liberally in favor of coverage. Country Mutual, 222 Ill.2d at 311, 305 Ill.Dec. 533, 856 N.E.2d 338.

Insurance policy notice provisions impose valid prerequisites to insurance coverage. Country Mutual, 222 Ill.2d at 311, 305 Ill.Dec. 533, 856 N.E.2d 338. The policy language in the notice provision at issue states that an insured must “see to it that we receive written notice of the claim or ‘suit’ as soon as practicable.” A policy provision requiring notice “as soon as practicable” means notice must be given “within a reasonable time.” Country...