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08/02/88 St. Paul Insurance Company v. Alberto S. Armas

August 2, 1988





527 N.E.2d 921, 173 Ill. App. 3d 669, 123 Ill. Dec. 283 1988.IL.1190

Appeal from the Circuit Court of Cook County; the Hon. George M. Marovich, Judge, presiding.


PRESIDING JUSTICE HARTMAN delivered the opinion of the court. BILANDIC and SCARIANO, JJ., concur.


Defendant Alberto S. Armas, M.D., appeals from a circuit court order: (1) granting plaintiff St. Paul Insurance Company of Illinois' motion for summary judgment; (2) denying Armas' motion for summary judgment; and (3) granting plaintiff's motion to strike Armas' affidavit filed in support of his motion for summary judgment. The issues presented are whether the circuit court ruled erroneously on the parties' cross-motions for summary judgment and the circuit court erred in granting plaintiff's motion to strike Armas' affidavit.

On January 15, 1985, plaintiff issued to Armas a physician's professional liability "claims made" policy, No. 512 TF 1470. The policy period ended January 15, 1986, with a retroactive date of January 15, 1983. The "claims made" policy promised Armas coverage and legal defense for any claims generated by professional services performed, or which should have been performed, between January 15, 1983, and January 15, 1986, provided Armas reported the claim to the insurer as required by the policy.

On August 7, 1985, Thomas and Ernestine Freeman, individually and as the parents of Ryan Thomas Freeman (collectively, Freeman), filed a complaint in Cook County circuit court against Armas and others, alleging, inter alia, Armas' negligence in the diagnosis and treatment of Ernestine and Ryan Freeman in 1984, causing "permanent and debilitating" injury to Ryan Freeman. Service of the Freeman complaint on Armas was not effected until March 31, 1986, and Armas denied knowledge of the lawsuit until service upon him.

Meanwhile, in August or September 1985, Armas decided to terminate his policy with plaintiff and notified by undated letter the James H. Cunningham Insurance Agency, Inc. (Cunningham), through whom Armas purchased the policy, of his intent. Armas received three letters from Cunningham, dated September 18, October 2, and October 23, 1985, in which Cunningham advised Armas of his policy's impending termination and provided the release form by which he could effect cancellation. Each letter, moreover, reminded Armas that he could, within 30 days of the policy's cancellation, extend the period in which to report claims to plaintiff by purchasing insurance coverage in the form of a reporting endorsement. Armas did not purchase the endorsement.

On October 6, 1985, Armas executed plaintiff's form designated "Cancellation Request/Policy Release," which indicated that his professional liability policy would be cancelled as of October 1, 1985.

After being served with the Freemans' lawsuit summons, Armas wrote to the Cunningham agency on April 16, 1986, informing it of the Freeman litigation and enclosing the summons and complaint served on March 31, 1986. The letter continued, "It is my understanding that this complaint was filed during the period of coverage when I was covered by a policy of professional liability insurance through [plaintiff]."

Plaintiff acknowledged receipt of Armas' letter to Cunningham in its written reply of May 22, 1986, but stated it would not extend coverage to or provide a defense for the claim because Armas reported it after the policy's termination date of October 1, 1985.

Plaintiff filed a complaint on June 2, 1986, against Armas and the Freemans, requesting the circuit court to determine and adjudicate the rights and liabilities of the parties with respect to the policy and enter a declaratory judgment in favor of plaintiff, seeking a finding that: (1) Armas did not procure and/or request the reporting endorsement in writing within 30 days after the policy termination date of October 1, 1985; (2) Armas did not report his claim within the period of the policy agreement; (3) plaintiff is not obligated to defend Armas or pay any judgment or settlement entered against him; and (4) plaintiff has no obligation to the Freemans.

Armas answered the complaint on September 2, 1986, admitting the terms of the policy as explained in the preceding paragraphs, but denying that he made the claim 6 1/2 months following the policy's termination date and his policy was cancelled by execution of the release form.

On April 8, 1987, plaintiff filed a motion for summary judgment, supported by affidavits and a memorandum of law, asserting that: Armas neither ordered nor applied for a reporting endorsement prior to April 1, 1986; on or after April 1, 1986, Cunningham first received notice from Armas of the Freeman litigation and the alleged acts of negligence raised by the Freeman complaint; plaintiff knew nothing of the Freeman complaint before April 16, 1986; plaintiff has no duty to defend nor does the policy provide coverage when a claim is not reported within the time frame specified by the policy; and the court should thus rule in plaintiff's favor as a matter of law.

Armas moved on July 20, 1987, for summary judgment, submitting to the court a memorandum of law and his affidavit. Plaintiff filed a reply in support of its motion on August 10, ...

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