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Equity General Insurance Co. v. Patis

OPINION FILED NOVEMBER 10, 1983.

EQUITY GENERAL INSURANCE COMPANY, PLAINTIFF-APPELLEE,

v.

ROBERT PATIS, D/B/A ROBERT PATIS GENERAL INSURANCE AGENCY, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County; the Hon. Arthur L. Dunne, Judge, presiding.

JUSTICE LINN DELIVERED THE OPINION OF THE COURT:

Defendant, Robert Patis, appeals from the trial court's order granting the motion for summary judgment brought by plaintiff, Equity General Insurance Company (Equity). Equity, defendant's professional liability insurer, sought a declaration of no coverage under an errors and omissions policy on a malpractice claim filed against Patis, its insured. The trial court found that Patis failed to satisfy a condition precedent to coverage and that no genuine issue of material fact existed.

Defendant's sole contention on appeal is that the trial court granted summary judgment based on speculation outside the record. We disagree and affirm the decision of the trial court.

FACTS

Robert Patis, an experienced insurance agent, was insured for malpractice under an errors and omissions policy with Equity, his professional liability insurer. In December 1979, Robert and Margaret Fanella requested Patis to secure fire insurance coverage for a building they owned and managed. Existing coverage on the building was due to expire on January 31, 1980. Patis was able to place half of the $130,000 requested coverage with West Bend Mutual Insurance Company (West Bend). On January 28, 1980, Patis sent an order to Insurance Central, Ltd., seeking to obtain the remaining $65,000 coverage. The coverage was never obtained.

On February 19, 1980, Patis received a telephone call from Insurance Central informing him that an insurance inspector had gone to the Fanella property pursuant to preparation for issuing a policy and found a smoldering pile of debris. The Fanella's building was totally destroyed by fire on February 18, 1980. The only insurance in effect on the date of the fire was the $65,000 half coverage under the West Bend policy and a contents policy written by Home Insurance. Upon learning of the fire, Patis did not notify either the Fanellas or Equity of the $65,000 undercoverage.

The day after the fire, the Fanellas hired a public adjuster to investigate their claim for fire loss. The adjuster assisted West Bend and Home Insurance in the investigation and adjustment of the claim. Equity did not take part in the investigation and adjustment by the other insurance companies because Patis persisted in his failure to notify Equity of either the fire or the potential malpractice claim by the Fanellas.

During the investigation of the fire loss by West Bend and Home Insurance, the Fanellas retained counsel. Upon request of the Fanellas' attorney, Patis turned over his entire file to the attorney. At the time he so cooperated with Fanella's attorney, Patis had neither notified Equity of the claim nor requested Equity's consent to such cooperation or to any waiver of its right to counsel.

On April 14, 1980, Equity, still unadvised of the Fanellas' claim, cancelled Patis' malpractice insurance due to an excessive number of negligence claims that had been brought against him. On June 30, 1980, the Fanellas filed suit against Patis for professional malpractice. On July 10, 1980, nearly five months after the Fanellas property had burned to the ground, Patis notified Equity of the Fanellas' claim and tendered to it his defense under the malpractice policy. Equity accepted the tender under a reservation of rights.

Equity inquired of Patis as to when the Fanellas first made a claim against him, a fact Patis had omitted from his preliminary loss report. Patis' response was "the date of the suit," an ambiguous reference either to the date of filing, June 30, 1980, or to the date of service of process, July 8, 1980, both of which had occurred after the cancellation of Patis' malpractice insurance. Because the errors and omissions policy covered only those claims made during the policy period, Equity denied coverage.

Upon learning of Equity's basis for denial, Patis wrote Equity in an attempt to resolve favorably the earlier ambiguity as to the date of the claim. In his letter, Patis stated that he knew of the possible claim by the Fanellas on the date of the fire. This information did not alter Equity's position. Equity informed Patis that his unreasonable and inexcusable failure to give notice of the claim until many months after he knew of it violated a condition precedent to coverage. Patis failed to undertake his own defense in the suit brought by the Fanellas, and Equity filed suit seeking a declaration of no coverage under Patis' now-expired errors and omissions policy. A motion for summary judgment followed.

In its summary judgment motion, Equity argued that it was an undisputed fact that the policy required Patis to give notice "as soon as practicable" as a condition precedent to coverage. Equity maintained that Patis' delay of nearly five months in giving notice could not reasonably be construed as "as soon as practicable." Patis, on the other hand, contended that the reasonableness of notice and the extent to which Equity was prejudiced by his delay were disputed issues of material fact and that, consequently, the entry of summary judgment in favor of Equity was legally improper.

On October 13, 1982, the trial court granted Equity's motion for summary judgment, finding that Patis failed to give notice "as soon as practicable" as required under the errors and omissions policy. The court held that the notice provision was clear and unambiguous and that satisfaction of the requirement was a condition precedent to coverage. The court found that Patis was experienced "in the ways of insurance" and noted that he offered no justification for his unreasonable delay in notifying Equity.

Turning to the effect of Patis' delay in giving notice, the trial court concluded that Equity was "severely and substantially prejudiced" by its inability to participate in the investigation and adjustment of the Fanellas' fire loss claim. The court further agreed with Patis' own deposition testimony in which he admitted he had been negligent. Finding that there was no genuine issue of material fact and that Equity was ...


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