United States District Court, Northern District of Illinois
October 15, 1974
WESTERN CHAIN COMPANY, PLAINTIFF,
AMERICAN MUTUAL LIABILITY INSURANCE COMPANY, DEFENDANT.
The opinion of the court was delivered by: Bauer, District Judge.
MEMORANDUM OPINION AND ORDER
This cause comes before the Court on cross motions for
summary judgment pursuant to Rule 56 of the Federal Rules of
Civil Procedure. Both parties have submitted extensive
memoranda, exhibits, and affidavits which the Court has
This is a suit by the plaintiff Western Chain Company
(hereinafter "Western Chain") against its insurance carrier,
American Mutual Liability Insurance Company (hereinafter
"American Insurance") arising out of a default judgment entered
against Western Chain in the amount of $204,160.00. This
judgment was entered in Simpson County, Mississippi.
The issue in this case is the interpretation of the condition
in the insurance policy which states as follows:
"4. Insured's Duties in the Event of Occurrence,
Claim or Suit.
(b) If claim is made or suit is brought
against the insured, the insured shall
immediately forward to the company every
demand, notice, summons or other process
received by him or his representative."
There is no real dispute as to the facts presented in this
litigation. Chronologically they are as follows:
— March 10, 1971 American Insurance issued
its General Liability Insurance Policy No.
BLPC 768586 to Western Chain with an
expiration date of March 10, 1972.
— April 27, 1971 a chain allegedly
manufactured by Western Chain was
purchased in Magee, Mississippi from a
Dabbs & Company.
— May 5, 1971 a Billy Brownlee allegedly was
using Western's chain when the chain
allegedly broke causing injuries and death
to Billy Brownlee on that date.
— January 9, 1973 suit was filed by the
widow Nell Brownlee and the
minor children against Western Chain and
summons issued by the Clerk of the Circuit
Court of Simpson County.
— January 11, 1973 service of summons was
made upon the Honorable Heber Ladner
pursuant to the Mississippi "Long Arm
Statute", Section 1437, Mississippi Code
of 1942 as amended.
— January 15, 1973 Summons and Notice was
received by Western Chain at its offices
at 1807 Belmont Avenue, Chicago, Illinois
by "Registered Mail — Deliver to agent or
officer of addressee only — Return Receipt
Requested — Registered No. 218-046
Postmaster: Please advise if Addressee
refuses to accept delivery", all being
pursuant to the provisions of the
Mississippi "Long Arm Statute" and signed
for by one John R. Miller an employee or
agent of Western.
— January 15, 1973, Summons, Notice and
Process given to Arthur W. Hill,
President, General Manager and principal
stockholder of Western Chain who put the
process in "a pile of stuff on my desk
. . .".
— March 20, 1973 the Summons and Notice are
still on Mr. Hill's desk and default
judgment is entered against Western in the
sum of $204,160.00.
June 25, 1973 the first Notice to American
Insurance of the lawsuit or the default
No one seriously disputes the fact that the summons was lying
on the desk of the president of Western Chain. No inferences
exist that American Insurance had actual notice of the suit nor
does Western Chain contend that American Insurance did have
notice. Western Chain argues that it was not required to give
notice of the suit as a condition precedent to the rendering of
a defense by American Insurance. In support of their position
they point out the following: The summons they received from
Mississippi Secretary of State did not contain a complaint and
thus was indistinguishable from the many other legal notices
received by Western; Western's president, Arthur W. Hill was
distracted from his duties as president by the death of his
wife and his own personal health problems; Western Chain's
delay in notifying the insurance company should be excused due
to non-culpable negligence.
Unfortunately this Court is bound to honor the terms of the
contract to which the parties freely entered. Although Western
Chain has demonstrated its good faith there is no doubt that it
was negligent in failing to deliver the notice of the suit to
American Insurance. Thus, if the Court were to excuse Western
Chain from the conditions precedent of the contract would be to
impose liability upon American Insurance without an opportunity
The case law in Illinois is clear and unambiguous that
conditions in insurance contracts will be enforced. Johnson v.
Banner Mutual Insurance Company, 40 Ill.App.2d 417,
189 N.E.2d 780 (1963); Chambers v. Prudence Mutual Insurance Company,
23 Ill. App.2d 508, 163 N.E.2d 553 (1959); International Harvester
v. Continental Casualty, 33 Ill.App.2d 467, 179 N.E.2d 833
(1962). In Johnson, supra, the Illinois Appellate Court stated
in upholding the insurer that:
"It is accepted in Illinois that an insured's
failure to forward to his insurer process received
by him does not preclude recovery on the policy
when the insurer has, in fact, `actual notice' of
suit. However, those cases so holding indicate
that `actual notice' must be notice sufficient to
permit the insurer to locate the suit and defend
it. [Citing cases] We find no element of waiver or
estoppel in this case. We conclude, therefore,
that the instant statement of plaintiffs'
attorney, accepted by the court, was insufficient
to constitute `actual notice' to Banner, so as to
permit Banner to locate the suit and defend it."
While there are slight differences between the two principal
text writers as to whether the condition relating to delivery
of summons to the insurer is on the same level as the condition
relating to notice of occurrence, with Appleman Insurance Law
and Practice, Section 4740, holding the duty, "would seem to
fall midway between the giving of notice and the duty to
cooperate;" both are in full agreement as stated in Couch on
Insurance 2d, Section 51:117:
"While in some cases involving earlier types of
policies the question arose whether the insured
was under an obligation under the cooperation
clause of a liability policy, to forward suit
papers to the insurer, liability policies
ordinarily contain an express provision requiring
the insured, if a suit is brought against him,
immediately to forward to the insurer every
notice, summons, or other process received by him
or his representative, and it is well settled that
the forwarding of papers provision is reasonable,
valid, and enforceable.
The Court is in full accord with the proposition that an
insurer should not easily be relieved of its duty to defend.
Nevertheless it should be pointed out that the named insured
and the plaintiff in this action is a corporation and appears
to be a long established manufacturing corporation and not a
legally unsophisticated individual. International Harvester v.
Continental Casualty, supra.
A review of the cases cited by Western Chain discloses that
none of them really deal with the specific legal question
presented to this court. The present case is not one of a
wrongful disclaimer by an insurer or an erroneous
interpretation of an exclusion, such as presented in a number
of cases cited by Western Chain. In all of those cases the
insured did deliver the process to the insurer and then the
insurer subsequently wrongfully disclaimed. In none of the
cases does it appear that the condition of delivery of process
to the insurer was breached and the effect of that breach was
not the point of the particular authority.
Western Chain devotes a great deal of its argument to the
position that American Insurance has not only a duty to
indemnify but also a duty to defend the insured. Thus they
argue that American Insurance should now defend Western Chain
in the appellate proceedings in the Mississippi Courts. But
since a vital condition of the insurance contract was breached
the insurance company is under no duty to defend. If however
the appellate court in Mississippi decides that a trial de novo
is required because of the failure to provide adequate notice
to the defendant then American Insurance would have a duty to
defend. The rationale of course is that if a new trial was
granted and American Insurance was given notice they would not
be prejudiced by providing a defense. But as the situation
stands at present American is unable to present a defense on
behalf of the insured. If they had entered the case on behalf
of Western Chain after the return of the $204,160 judgment they
might have subjected themselves to liability for the judgment
under waiver and estoppel principles. However if the case is
re-opened American Insurance would not be prejudiced in any way
by the failure to give the original notice and would have a
full opportunity to defend the insured.
Accordingly, defendant's motion for summary judgment is
hereby granted. Plaintiff's cross motion for summary judgment
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