Immediate Notice Requirement Defeats Claim
IHC Construction Companies, LLC ("IHC") and MA Rebar Services, Inc. ("MA
Rebar"), appealed a final summary judgment entered in favor of
Westfield Insurance Company ("Westfield") in Westfield's declaratory
judgment action against IHC, MA Rebar, and Wayne McClure. In
Westfield Insurance Company v. MA Rebar Services, Inc., IHC Construction
Companies, LLC, and Wayne Kelly McClure, No. 1-23-0161, 2023 IL App
(1st) 230161-U, Court of Appeals of Illinois, First District, Fourth
Division (July 27, 2023) the Court of Appeals resolved the dispute.
FACTS
In 2016 IHC was the general contractor for a municipal construction
project ("the Project") and that IHC had hired MA Rebar as a
subcontractor on the Project. As a condition of its subcontract, MA
Rebar was required to obtain liability insurance. In accordance with the
subcontract, MA Rebar obtained the required insurance from Westfield
and provided IHC with a certificate of insurance confirming such
compliance.
Wayne McClure filed a complaint against IHC alleging that he was injured
as a result of IHC's negligence while working on the Project as an
employee of MA Rebar. IHC promptly notified its insurance carrier,
Hartford Insurance Company, of the suit, but it did not provide any
notice to Westfield at that time. In July 2018, IHC filed a motion to
dismiss McClure's complaint. After the circuit court denied the motion
in October 2018, IHC filed a third-party complaint against MA Rebar
seeking indemnification and contribution.
Approximately three months later MA Rebar notified Westfield of IHC's
third-party complaint against it. Westfield then sued for declaratory
judgment seeking declarations (1) that it has no duty to defend and
indemnify MA Rebar and (2) that it owed no coverage obligation to IHC
due to the six-month delay between the time that IHC learned of the
McClure lawsuit and the time that Westfield received notice of the suit.
The circuit court issued a final order granting Westfield's motion for
summary judgment and denying IHC and MA Rebar's cross-motion.
The circuit court below determined that IHC's notice to Westfield was
untimely because IHC had not provided a justifiable excuse for its
three- to six-month delay in notifying Westfield of McClure's claim.
IHC failed to provide Westfield with notice of the suit for six months
after it received service of the complaint. IHC's only justification for
the delay in providing notice is that it was attempting to negate the
need for insurance coverage by seeking dismissal of the case, but that
does not justify the delay.
Westfield was entitled to be informed of the suit "immediately,"
precisely to allow it to participate in defense actions like motions to
dismiss. IHC denied Westfield that contractual right by withholding
notice while pursuing the motion to dismiss.
The court concluded that the Insured failed to comply with the terms of
an insurance policy notice provision requiring "immediate" notice of any
claims when the insurer did not receive notice of a lawsuit against the
insured until six months after service of the complaint on the insured.
ZALMA OPINION
The insured tried to reduce its premium, by moving to dismiss without
reporting a claim, found itself to be its own worst enemy. Its scheme to
save future premium increases resulted only to eliminate its insurance
for McClure's claimed injury and lost over $10 million in available
coverage and the unlimited defense costs. Ignorance can be cured but
stupid attempts to save insurance premiums is not curable.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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