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Country Mutual Insurance Co. v. Livorsi Marine11/30/2004
here the delay was relatively brief. Montgomery Ward & Co., Inc. v. Home Insurance Co., 324 Ill. App. 3d 441, 449, 753 N.E.2d 999 (2001); Fletcher v. Palos Community Consolidated School District No. 118, 164 Ill. App. 3d 921, 928, 518 N.E.2d 363 (1987).
But this is not a notice of occurrence case. It is a notice of lawsuit case. "A notice of suit requirement in a policy serves the purpose of enabling the insurer to conduct a timely and thorough investigation of the insured's claim *, as well as to locate and participate in the defense of the insured." Northbrook, 313 Ill. App. 3d at 465. Unreasonably late notice denies the insurer an opportunity to assess the loss and thereby protect its interests. Kerr, 283 Ill. App. 3d at 585.
Here, the appellants say the insurer's inability to prove prejudice, due to its conflict of interest, prohibits a denial of coverage. The insurer, in turn, contends that under the circumstances of this case a lack of prejudice is irrelevant.
Some Illinois decisions do say prejudice is required in all cases where the insurer claims late notice of a lawsuit. The first case to say it is Rice v. AAA Aerostar, Inc., 294 Ill. App. 3d 801, 690 N.E.2d 1067 (1998).
Rice is the standard-bearer for the must-prove-prejudice contenders. It also is the first Illinois decision to hold a different rule applies to notice of lawsuit cases.
In Rice, the defendant's insurer, State Farm, was notified that the plaintiff slipped and fell in a parking lot owned by defendant, but never received written notice of a personal injury lawsuit filed by plaintiff. Rice, 294 Ill. App. 3d at 803-04. A default judgment was entered against defendant, and plaintiff sought to garnish defendant's insurance fund. The trial court granted State Farm's motion for summary judgment.
On appeal, the court said State Farm may be liable for the judgment against defendant, despite the written notice requirement in the policy, if it had "actual notice" of the lawsuit. Rice, 294 Ill. App. 3d at 807. The court distinguished between notice of the occurrence and notice of the lawsuit, Rice, 294 Ill. App. 3d at 807, a distinction grounded more in ipse dixit than in stare decisis.
The court then said, " hen 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, citing Annotation, Modern Status of Rules Requiring Liability Insurer to Show Prejudice to Escape Liability Because of Insured's Failure or Delay in Giving Notice of Accident or Claim, or in Forwarding Suit Papers, 32 A.L.R. 4th 141, 145 (1984). No Illinois decision was cited in support of this "rule." No Illinois decision was cited to support the court's discernment of a different rule for notice of lawsuit cases. In fact, there is authority to the contrary. See Northbrook, 313 Ill. App. 3d at 465 ("A review of these cases reveals that, regardless of the type of notice involved, the courts generally apply the same legal principles in their analyses.") But see Montgomery Ward, 324 Ill. App. 3d at 449 (distinguishing between notice of lawsuit and notice of occurrence cases).
The Rice court did not decide whether State Farm was prejudiced by the lack of notice. In fact, prejudice played no role in the court's decision. The court held State Farm was not entitled to summary judgment because its affidavit failed to address whether it was aware of the lawsuit through other means, even though it did not receive formal notice from the plaintiff. The court reversed and remanded the case for State Farm to provide additional evid
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