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Ina Insurance Co. v. City of Chicago





APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR L. DUNNE, Judge, presiding.


Defendant, City of Chicago, appeals from an order granting plaintiff's motion for summary judgment. The court found that the City had failed to give timely notice of injury as required by an insurance policy taken out by Rock Road Construction Company in favor of the City. As a result the court held that the insurer, INA Insurance Company of Illinois, had no duty to indemnify the City against loss.

The material facts are not in dispute. In 1971 the City contracted with Rock Road for the construction of a deep tunnel project within the City. As part of its contractual obligation, Rock Road, through its insurance agent, Arthur J. Gallagher & Company, obtained a liability policy issued by INA insuring the City against claims for injuries arising out of the construction project. The policy was originally effective through November 9, 1972, but since the project was not completed on that day, it was extended by Rock Road to cover the period through August 1, 1974. The City was not notified of the extension by Rock Road or Gallagher.

On June 7, 1973, Juan Colon, a Rock Road employee, was injured while working the deep tunnel project. On July 12, 1973, Lewis Paige, another Rock Road employee, also was injured on the project. On July 16 Rock Road filed reports concerning both accidents with Gallagher who notified Rock Road's workmen's compensation insurance carrier.

In June 1974, Colon and Paige filed their respective suits against the City to recover damages for their injuries. Both plaintiffs alleged that they had given the City the statutorily required notice within six months after the occurrences. According to City records, the insurance coverage provided by Rock Road had expired prior to the accident. On October 8, 1974, inquiry was made of Gallagher as to whether there had been an extension of the policy issued to Rock Road by INA. The City was informed on October 15 that there had been an extension by endorsement to August 1, 1974. On December 6, 1974, the City transmitted copies of the two complaints with a formal tender of defense to Gallagher. This tender was acknowledged by INA on December 27 and thereafter INA retained counsel to defend the City under a reservation of rights.

On April 9, 1975, INA filed an action seeking a declaration of rights under the insurance policy. INA requested a ruling that the City had breached a condition precedent to the contract of insurance by failing to give INA notice of the occurrences as required by the policy. The notice provisions of the policy provide:


(a) In the event of an occurrence, 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.

(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."

In addition paragraph 5 of the policy states:

"No action shall lie against the Company unless, as a condition precedent thereto, there shall have been full compliance with all the terms of this policy * * *."

On February 7, 1977, the trial court entered summary judgment in favor of INA.

The City contends that the trial court erred in awarding summary judgment to INA. The City maintains that since it was not apprised of the extension of the policy, it had no reason to believe insurance coverage was available at the time of the 1973 accidents. Therefore, the City urges there was no reason to notify INA of the accidents until after October 15, 1974, when the City learned of the extension. The City contends that any delay in giving notice was excusable since it was unaware of the policy's existence until October 1974.

INA counters that the delay was solely attributable to the City's lack of diligence in ascertaining whether there had been an extension of the policy obtained by Rock Road. Since Rock Road was required to obtain insurance in favor of the City as part of its contractual obligation, INA argues that the City could not reasonably believe that Rock Road would allow the policy to expire before the completion of the project. INA emphasizes that the City could have learned of the extension long before October 15, 1974, simply by asking Rock Road or Gallagher. INA also contends that the City's delay of almost two months in giving notice to INA after it had learned of the existence of the policy ...

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