Appeal from the Circuit Court of Cook County. The Honorable Albert Green, Judge Presiding.
As Modified on Denial of Rehearing March 31, 1995.
The Honorable Justice Egan delivered the opinion of the court: McNAMARA, P.j., and Rakowski, J., concur.
The opinion of the court was delivered by: Egan
MODIFIED OPINION ON DENIAL OF REHEARING
The Honorable Justice EGAN delivered the opinion of the court:
This is an appeal by the insurer defendants from summary judgment granted in favor of the plaintiff insured, Martin J. Waitzman.
The plaintiff was both a licensed attorney and a certified public accountant. He practiced both accounting and law. He was a member of the law firm of Kovitz, Shifrin & Waitzman ("KS&W"). On October 10, 1989, the defendants issued the plaintiff an accountants' professional liability policy ("the policy"), which provided insurance against negligent acts, errors or omissions in rendering professional accounting services. The policy stated:
"THIS IS A CLAIMS MADE POLICY. EXCEPT TO SUCH EXTENT AS MAY OTHERWISE BE PROVIDED HEREIN, THE COVERAGE OF THIS POLICY IS LIMITED TO LIABILITY FOR ONLY THOSE CLAIMS THAT ARE FIRST MADE AGAINST THE INSURED AND REPORTED TO THE COMPANY WHILE THE POLICY IS IN FORCE. ***
THIS POLICY EXCLUDES PRIOR ACTS, UNLESS SHOWN TO BE COVERED ON THE DECLARATIONS AND/OR CERTIFICATE OF INSURANCE. IT PROVIDES NO COVERAGE OR DEFENSE FOR ACTS, ERRORS OR OMISSIONS WHICH OCCUR PRIOR TO THE EFFECTIVE DATE OF THE FIRST POLICY ISSUED OR IF EARLIER, THE RETROACTIVE DATE SHOWN ON THE CERTIFICATE OF INSURANCE ISSUED TO THE SPECIFIC ADDITIONAL INSURED."
Regarding retroactive coverage, the policy provided that "RETRO ACTIVE [sic] COVERAGE IS HERE BY [sic] GRANTED BACK TO THE FIRST DATE THAT CONTINUOUS CLAIMS MADE COVERAGE HAS BEEN CARRIED WITH MINIMUM LIMITS OF $250,000." The policy was effective for the period of February 1, 1990, to February 1, 1993. The plaintiff had another policy which provided coverage above this minimum dollar limit for the period of February 1, 1989, to February 1, 1990.
In 1985 or 1986, Capital Metals, a steel processing company, engaged the plaintiff as its accountant. Dydio, the soleshareholder and president of Capital Metals, also hired the plaintiff to perform personal accounting services for him. In 1986, KS&W and Waitzman also began to perform legal work for Capital Metals and Dydio.
On September 25, 1990, Capital Metals and Dydio asserted accounting and legal malpractice claims against the plaintiff and KS&W. On October 18, 1990, the attorneys retained by the Home Insurance Company ("Home"), the legal malpractice insurer for KS&W, wrote a letter notifying the defendants of the claims against the plaintiff and KS&W.
In a November 2, 1990, letter to the plaintiff, the defendants requested proof of continuous claims-made coverage back to the date on which he first began performing accounting services for Capital Metals and Dydio. The defendants repeated this request in a March 21, 1991, letter and in a May 10, 1991, letter. In the May letter, the defendants also told the plaintiff that, if he could not show continuous claims-made coverage back to 1985, he would have no coverage under the policy. On May 31, 1991, the plaintiff provided the defendants with copies of accountants' professional liability policies for the following periods: March 5, 1984 to March 5, 1985; April 22, 1985, to April 22, 1986; and February 1, 1989, to February 1, 1990. On June 6, 1991, the defendants wrote the plaintiff that the 1984 and 1985 policies did not list him as an insured and that they would deny coverage if the defendant did not provide proof of continuous coverage back to 1985.
On August 13, 1991, Capital Metals and Dydio filed a complaint against the plaintiff and his law firm alleging that the plaintiff performed accounting services for them between 1986 and the spring of 1990. The complaint alleged negligence in connection with those accounting services:
"20. Waitzman and/or KS&W prepared the year-end financial statements for Capital Metals for 1986, 1987 and 1988, as well as various monthly or quarterly statements. Waitzman and/or KS&W were also engaged to conduct a year-end audit for Capital Metals for 1989. While they completed this audit in May 1990, they refused to release the Audit Report and financials unless Dydio guaranteed payment of all their bills to Capital Metals.
28. Under an Audit Report, dated March 7, 1989, Waitzman issued the year-end financial statements for December 31, 1988 ['the 1988 Audit']. This Audit Report purported to be conducted 'in ...