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02/06/87 Joseph Lockhart, v. Joseph Lockhart

February 6, 1987

APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIFTH DIVISION ILLINOIS INSURANCE GUARANTY FUND, PLAINTIFF-APPELLEE

v.

JOSEPH LOCKHART, DEFENDANT-APPELLANT NO 85-0541

THE SECURITY MUTUAL CASUALTY COMPANY WAS DECLARED INSOLVENT ON DECEMBER 3, 1982. THE ILLINOIS INSURANCE GUARANTY FUND , STATUTORILY CREATED (ILL. RE

v.

STAT 1985, CH. 73, PAR 1065.82) TO AVOID FINANCIAL LOSS TO CLAIMANTS OR POLICYHOLDERS OF INSOLVENT INSURANCE COMPANIES, TOOK OVER THE PROCESSING OF LOCKHART'S CLAIM.



504 N.E.2d 857, 152 Ill. App. 3d 603, 105 Ill. Dec. 572 1987.IL.142

Appeal from the Circuit Court of Cook County; the Hon. James C. Murray, Judge, presiding.

APPELLATE Judges:

JUSTICE PINCHAM delivered the opinion of the court. SULLIVAN, P.J., and LORENZ, J concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE PINCHAM

Plaintiff, Illinois Insurance Guaranty Fund filed a declaratory action against defendant, Joseph Lockhart, an insured motorist under a policy issued by Security Mutual Casualty Company, seeking a determination of liability coverage under the policy. The court held that Security Mutual Casualty was not liable under the policy because Lockhart failed to comply with certain notice requirements of the policy. The court granted IIGF's motion for summary judgment. Joseph Lockhart contends on appeal that (1) IIGF was not prejudiced by Lockhart's alleged breach of the notice provision in the insurance policy, and (2) IIGF should be estopped from contesting coverage even though he failed to give the notice required by the terms of the policy.

On November 30, 1979, Joseph Lockhart was involved in an intersection automobile accident with a car driven by Tony Biesada, an uninsured motorist. Lockhart notified Security Mutual Casualty of the accident shortly after the occurrence, and on November 11, 1980, Lockhart demanded arbitration pursuant to the provision of the policy. While Lockhart's arbitration demand was pending, Lockhart, on September 25, 1981, filed an action against Biesada, the uninsured motorist, and Illinois Bell. Lockhart's complaint alleged that Illinois Bell was partially responsible for the collision because an Illinois Bell truck parked in the intersection obstructed Lockhart's view of the intersection. Lockhart did not notify Security Mutual Casualty Company of his action against Illinois Bell and Biesada, the uninsured motorist, nor did he forward a copy of the complaint and summons to Security Mutual Casualty Company, as required by the terms of the policy.

On March 22, 1982, Illinois Bell, on its motion, was dismissed from the action on the grounds that the complaint did not state a cause of action against Illinois Bell.

While in the process of preparing for the arbitration hearing, IIGF discovered on November 11, 1983, in a meeting with the uninsured motorist, that Lockhart's lawsuit had been filed against Illinois Bell and the uninsured motorist.

On December 30, 1983, IIGF filed the instant action for declaratory judgment. IIGF's complaint alleged that Lockhart failed to comply with the conditions of the policy necessary to recover under the policy issued by Security Mutual Casualty Company, i.e., that Lockhart failed to notify and furnish Security Mutual Casualty Company with a copy of the summons and Lockhart's complaint against Illinois Bell and Biesada, as required by the notice provision in the policy. IIGF contended that this notice provision was designed to protect the Security Mutual Casualty Company's subrogation rights.

Lockhart filed an answer to the complaint for declaratory relief. IIGF responded with a motion for summary judgment in which it again alleged that Lockhart's failure to comply with the notice requirements of the policy precluded Lockhart from recovering under the policy.

Lockhart filed a cross-motion for summary judgment in which he contended that IIGF did not show that it had been prejudiced by Lockhart's failure to give notice of his action against Illinois Bell and the uninsured motorist, and therefore coverage could not be denied him for his failure to comply with the notice requirements of the policy. Lockhart further asserted that IIGF was estopped from denying coverage because it knew or should have known of Lockhart's suit against Illinois Bell and the uninsured motorist.

Summary judgment, which denied liability to Lockhart, was entered for IIGF from which Lockhart appeals.

Lockhart argues that IIGF must show that it was substantially prejudiced by Lockhart's failure to give notice of his suit against Illinois Bell and the uninsured motorist before coverage under the policy can be denied. He contends that not only must IIGF show that it was prejudiced by his lack of notice to IIGF but that IIGF must also allege such prejudice in its complaint. IIGF maintains that it is not required to show prejudice where an

While absence of actual prejudice to IIGF may be a factor to be considered in determining the propriety of notice and the insured's diligence, it is not conclusive that the insurer must show that it was prejudiced by a breach of the notice provision in the insurance policy before denying coverage. "Thus, where there is late notice, the issue is not whether the insured had been prejudiced, but rather whether reasonable notice has been given." Mitchell ...


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