Appeal from the Circuit Court of Madison County; the Hon.
Horace L. Calvo, Judge, presiding.
PRESIDING JUSTICE HARRISON DELIVERED THE OPINION OF THE COURT:
Rehearing denied September 7, 1983.
Defendant, Interstate Fire & Casualty Company (Interstate), appeals from a grant of summary judgment in favor of plaintiffs, The Sisters of Divine Providence, d/b/a St. Elizabeth Medical Center (St. Elizabeth's). The question presented for review is whether St. Elizabeth's complied with a condition precedent contained in its excess malpractice insurance policy which required it to notify Interstate of an underlying lawsuit as soon as practicable, or within a reasonable time. For the following reasons, we reverse the decision of the trial court and enter summary judgment in favor of Interstate.
During the period from January 31, 1975, to January 31, 1976, St. Elizabeth's was insured under a policy of insurance with Interstate, policy No. 155-U-021569. The policy provided coverage for malpractice in the amount of $5,000,000 per occurrence as excess coverage over $200,000. The hospital was self-insured for the first $100,000 and insured by INA for the second $100,000.
On April 7, 1977, a lawsuit by Charles Thomas White, a minor, was instituted by his parents against St. Elizabeth's and the attending physician. The two-count complaint alleged that on November 22, 1975, the hospital was negligent in its treatment of the child and that, as a result of the negligence, the child suffered severe and irreversible brain damage. The complaint sought damages in excess of $15,000 for each count.
The summons and complaint were served upon the hospital and its administrators. The assistant administrator sent the papers to the hospital's own defense counsel. Copies were also sent to the secondary carrier, INA. Discovery was initiated soon thereafter, and depositions were taken as early as August 10, 1977. However, notice of the lawsuit and the possibility of a claim was not conveyed to Interstate until April 25, 1980, by a letter from the hospital's insurance broker. The case went to trial on May 27, 1980, and was settled the next day. The settlement agreement included a payment by St. Elizabeth's of $250,000 over and above its self-insured limits and a payment by Interstate of $350,000. It was stipulated between the hospital and Interstate at the time of the settlement that these payments would in no way affect the rights of the hospital and Interstate between themselves.
St. Elizabeth's thereafter filed suit against Interstate for the $250,000 it paid in excess of the self-insured amount. Interstate counterclaimed for the $350,000 it contributed. Both parties filed motions for summary judgment. The circuit court of Madison County held in favor of the hospital and entered the summary judgment from which this appeal arose.
Interstate's position on appeal is that the hospital as a matter of law, did not give the required notice of the claim by Charles White as soon as practicable, or within a reasonable time. The notice provision in the excess policy between Interstate and St. Elizabeth's reads as follows:
"F. Notice of occurrence:
Whenever the insured has information from which the insured may reasonably conclude that an occurrence covered hereunder involves injuries or damages which, in the event that the insured would be held liable, is likely to involve this policy, notice shall be given by or on behalf of the insured to the company as soon as practicable, provided, however, that failure to give notice of any occurrence which at the time of its happening did not appear to involve this policy but which, at a later date, would appear to give rise to claims hereunder, shall not prejudice such claims."
Our review of the law indicates only one reported case in Illinois which involves an excess insurance policy. (Brownlee v. Western Chain Co. (1979), 74 Ill. App.3d 804, 393 N.E.2d 515.) There, the court construed language in a notice clause which is identical to the language in the policy between Interstate and St. Elizabeth's. The court declared that the notice clause imposed upon the insured the duty to notify the carrier once the insured possessed "actual knowledge" from which it could reasonably conclude that an accident would give rise to a claim under the excess policy. (Brownlee v. Western Chain Co. (1979), 74 Ill. App.3d 804, 811-12.) Because the insured in that case, Western Chain Company, had no actual knowledge of the amount of the claim, the court reversed summary judgment which had been entered in favor of the insurer.
In the present set of circumstances, however, it is apparent that St. Elizabeth's had actual knowledge that the White claim could exceed $200,000. Exhibits attached to the motions for summary judgment show this communication from the hospital counsel to the hospital, dated June 2, 1977:
"As you can see, it appears that Charles White did contract meningitis and has suffered severe brain damage as a result."
And, following depositions taken on August 10, 1977, the hospital's attorney wrote on August 12 that "It should be noted that this case is extremely dangerous considering the injuries." The injuries were described by the child's father ...