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Country Mutual Insurance Co. v. Livorsi Marine11/30/2004
ence of lack of actual notice. Rice, 294 Ill. App. 3d at 808-09.
The A.L.R. 4th annotation does not distinguish between notice of occurrence and notice of lawsuit cases. Instead, it speaks of a "traditional proposition" that states a liability insurer "need not show that it was prejudiced by an insured's unreasonable and unexcused omission or delay in giving notice of an accident or in forwarding suit papers *" 32 A.L.R. 4th at 146. The 1984 annotation then refers to a "modern trend" that holds a liability insurer is required to show it was prejudiced by the insured's omission or delay "in giving notice of an accident or forwarding suit papers *" 32 A.L.R. 4th at 157.
We find no such "modern trend" in Illinois decisions. Rice was an actual notice case. No Illinois decision before or since Rice has barred an insurer which cannot prove prejudice from denying coverage to an insured who gave an unreasonably late notice of a lawsuit.
Close inspection reveals the cases often cited as furthering the Rice line of must-prove-prejudice in notice of lawsuit decisions do not actually rely on the Rice dictum for their holdings. Most recently, Zurich Insurance Co., No. 1-03-2617, at 5, embraced Rice's occurrence/lawsuit notice distinction and the "modern rule" that the insurer must show it was prejudiced by the omission or delay in a lawsuit notice in order to escape liability on its policy. But the holding in the case was that the insured gave timely notice to the insurer, which had actual notice of the lawsuit anyway.
In Household International, Inc., the outcome was decided under New York law, which provides prejudice to the insurer is a factor to be considered when deciding whether notice of a lawsuit was timely given. Household International, Inc., 321 Ill. App. 3d at 870-71.
The court discussed Rice's requirement of proof of prejudice in Illinois Founders Insurance Co. v. Barnett, 304 Ill. App. 3d 602, 611-12, 710 N.E.2d 28 (1999), found the insurer proved no prejudice, then held:
"Based on the totality of circumstances in this case, we conclude that the circuit court's decision that plaintiff [insurer] received actual notice of Barnett's lawsuit was not against the manifest weight of the evidence." Illinois Founders, 304 Ill. App. 3d at 612.
We do not see why the Illinois Founders and Rice courts would discuss and rely on the existence of actual notice for their decisions if failure to prove prejudice were fatal to the insurers' denial of coverage. Nor do we see a principled basis for distinguishing between notice of occurrence and notice of lawsuit. That is, if the insurance company suffers no prejudice due to an unreasonable notice, why does it matter whether the late notice related to an occurrence or a lawsuit? We have found no decision that offers a satisfactory reason for the distinction.
Two other cases said to be in the Rice camp should be mentioned. In Cincinnati Insurance Co. v. Baur's Opera House, Inc., 296 Ill. App. 3d 1011, 694 N.E.2d 593 (1998), the court first found the insurer had received adequate notice of a lawsuit, then went on to determine whether the insurer suffered prejudice--which it did, sending the case back to the trial court for consideration of the insurer's summary judgment motion. Vega v. Gore, 313 Ill. App. 3d 632, 730 N.E.2d 587 (2000), held the trial court erred as a matter of law in determining that the insurer had received actual notice sufficient to locate and defend against the lawsuit. Prejudice to the insurer was a factor that led to that conclusion.
Arrayed against the Rice dictum cases is a line of Illinois late notice of lawsuit decisions that treat prejudice
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