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American Home v. City of Granite City





APPEAL from the Circuit Court of Madison County; the Hon. EDWARD FERGUSON, Judge, presiding.


Rehearing denied May 29, 1978.

Plaintiff American Home Assurance Company (AHA) brought an action for a declaratory judgment in order to establish its rights and obligations under a professional liability insurance policy issued to the City of Granite City. Plaintiff alleged that the City had forfeited its rights under the policy with respect to a shooting incident which occurred on May 22, 1973 as a result of the City's failure to comply with the policy provisions requiring notice as soon as practicable of an incident likely to give rise to a claim under the policy. Plaintiff appeals from a judgment of the trial court finding that Granite City complied with the notice provisions of the policy and declaring that plaintiff owes a duty under the policy to Granite City to defend and indemnify the City according to the terms of the policy for losses sustained in litigation arising out of the shooting incident of May 22, 1973.

Granite City obtained the AHA professional liability policy through a local insurance agent. All Granite City's business with respect to the policy was conducted with the agent. The City never dealt directly with AHA.

The policy was in full force and effect on May 22, 1973, when Mike Collins, age 16, was mortally wounded by three Granite City police officers acting in the course of their regular duties. The AHA policy contained the following provision regarding the insured's obligation to provide the company with timely notice of potential claims under the policy:

"In the event of an incident likely to give rise to a claim hereunder written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof and the names and addresses of the injured and of available witnesses shall be given by or for the insured to the company or any of its authorized agents as soon as practicable."

On July 11, 1973, the City of Granite City received written notice from an attorney of an intention to file suit over the shooting incident on behalf of Vonda Collins, Michael Collins' mother and administratrix of his estate. The City claimed that it notified the agent of Vonda Collins' intention to sue on September 21, 1973, when a meeting was held concerning Granite City's professional liability insurance between the agent, the assistant city attorney, the chief of police and a city councilman. On May 17, 1974, Vonda Collins filed suit against Granite City and the three officers involved in the shooting incident. Granite City mailed the summons and complaint to the agent who forwarded the information to the AHA claims representative in Springfield, Illinois.

At the end of all of the evidence, the trial court ruled as a matter of law that Henderson was AHA's agent for the purpose of receiving notice of policy claims. The court submitted three special interrogatories to the jury on the issue of whether notice had been given as soon as practicable. The jury found (1) that Henderson had received notice of the incident at the September 21, 1973, meeting and (2) that this notice was as soon as practicable. The third interrogatory is not material to the issues in this appeal.

The critical question presented in this case is whether requirement of giving the notice under the policy was satisfied. The identical provision in this policy has been interpreted to require notification to the company within a reasonable time considering all of the facts and circumstances of a particular case. (Barrington Consolidated High School v. American Insurance, 58 Ill.2d 278, 319 N.E.2d 25.) In Barrington the Supreme Court said at pages 281-82:

"Provisions in policies stating when the insurer must be notified of a covered occurrence have generally been interpreted to require notification of the company within a reasonable time, considering all the facts and circumstances of the particular case. Decisions illustrating this general holding include Walsh v. State Farm Mutual Automobile Insurance Co., 91 Ill. App.2d 156; Hoffman & Klemperer Co. v. Ocean Accident & Guaranty Corp. (7th Cir. 1961), 292 F.2d 324; see also 18 A.L.R. 2d 443, 448 (1951).

Couch's comment on the term used in the policy here for the time of reporting, `As soon as is practicable' is: `"As soon as practicable" in a policy covering liability for personal injury and property damage means within a reasonable time, and what is a reasonable time depends upon the facts and circumstances of the case.' 13 Couch on Insurance 2d sec. 49:328 (1965); see also 2 Long, The Law of Liability Insurance sec. 13.09 (1974)."

The court said at page 281:

"A provision in an insurance liability policy requiring an insured to give the insurer notice of an accident is a reasonable policy requirement, one which affords the insurer an opportunity to make a timely and thorough investigation and to gather and preserve possible evidence. McFadyen v. North River Insurance Co., 62 Ill. App.2d 164."

In Kenworthy v. Bituminous Casualty Corp., 28 Ill. App.3d 546, 328 N.E.2d 588, the court held that notice has been uniformly interpreted to mean a reasonable time and this was a question of fact for the jury. The court went on to say at page 549:

"However, there is another factor present in this case. A jury could have decided that the company suffered no prejudice because of the delayed notice. Prejudice is one of the factors which determines what is a reasonable time in which to give notice. (Haskell v. Siegmund, 28 Ill. App.2d 1, 170 N.E.2d 393; Simmon v. Iowa Mutual Casualty Co., 3 Ill.2d 318, 121 N.E.2d 509.) The purpose of notice is to enable the insured to make a prompt and thorough investigation. Here many months had already elapsed since the accident and, in any case, the insured was successful in denying his liability.

In Higgins v. Midland Casualty Co., notice on an accident insurance policy was not given until more than a year after the accident. The insurance policy stated that notice must be given `as soon as possible.' In that case, the court stated that the question of reasonableness of notice was for the jury and it was error for the court to direct a verdict.

We hold that it was proper for the trial judge to submit the question of reasonableness to the jury. Reasonable men could draw contrary inferences from the facts presented. Whether timely notice had been given was therefore a question of fact."

• 1, 2 A provision in a liability insurance policy requiring notice is a reasonable and valid stipulation. Its purpose is to give the insurer an opportunity to make a timely and adequate investigation of all the circumstances. No general rule can be promulgated as to what constitutes a reasonable time within which to give notice since this question depends upon the facts and circumstances of each particular case. One of the factors to be considered include the length of time in giving the notice, i.e., was the delay unreasonable, and was the insurer prejudiced by reason of the delay.

Plaintiff's evidence consisted of testimony from the chief of police of Granite City, called pursuant to section 60 of the Civil Practice Act, James Henderson, the agent who sold the policy in question to the City and Robert A. Orndorff, claims supervisor for an insurance association which included the plaintiff as one of its members.

Chief Veizer testified that he knew the policy in question was in force on May 22, 1973, when Michael Collins, aged 16, was shot and killed by a Granite City police officer. He was promptly notified of the incident. He remembered receiving a letter on July 11, 1973, wherein a law firm indicated an intent to sue the City because of the incident. He immediately notified the city clerk and city attorney.

The agent testified that he was an insurance broker and real estate broker. He solicited and sold the policy in question to the City. He was acting as a broker when he sold the policy and when he did this he was acting for the City. He was then asked if he had given a written statement on the Collins matter and he said "yes." He was then shown the statement and the following ensued:

"Q. Mr. Henderson, what was the first notice that you had that a shooting incident involving Michael Collins that occurred on May 22, 1973 — what is ...

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