Appeal from the Circuit Court of Bond County. No. 93-L-9. Honorable John DeLaurenti, Judge, presiding.
The Honorable Justice Lewis delivered the opinion of the court: Maag, P.j., and Welch, J., concur.
The opinion of the court was delivered by: Lewis
JUSTICE LEWIS delivered the opinion of the court:
Plaintiff, Bond County Community School District No. 2 (school district), sued defendants, Indiana Insurance Company (Indiana Insurance) and Country Mutual Insurance Company (Country Mutual), who had issued "all-risks" property insurance to the school district for all of its school buildings, for asbestos-related property damage to the school district's buildings. Plaintiff sought a declaration of coverage and a monetary award in the amount of its loss. The trial court granted defendants' motions to dismiss (735 ILCS 5/2-619(a)(5) (West 1992)) on the grounds of untimely notice and suit initiation under the terms of the policies.
Two issues are presented by this appeal: (1) whether the school district is immune from the notice-and-suit-limitation provision in the insurance contracts with defendants; and (2) whether Country Mutual's policy for the period of 1977-1980 lacks an effective suit-limitation term, in light of an endorsement that "cancels and replaces" the portion of the policy that contained those terms. We answer both questions in the negative and affirm the trial court's grant of the defendants' motions to dismiss.
On June 22, 1993, the school district filed a complaint against both defendants for a declaratory judgment as to the notice requirements and suit limitation of the policies and for breach of the insurance contracts. The complaint alleged that "from at least 1971 through the present, Bond County's public school buildings and facilities have contained substantial amounts of asbestos-containing materials," and that the school district had begun a costly and time-consuming removal-and-abatement program, the cost of which was estimated at over $4 million.
The school district alleged that Indiana Insurance issued an "all-risks" policy covering the school district's property, effective 1980 to 1983, that the school district filed its initial claim against Indiana Insurance for asbestos-related coverage on December 27, 1990, and that Indiana Insurance denied the claim on April 1, 1993. As to Country Mutual, the school district alleged that it issued "all-risks" insurance coverage in three separate policies covering periods from 1977 to 1980 and 1983 to 1989. The school district filed its initial claim against Country Mutual on December 27, 1990, and Country Mutual denied the claim on May 26, 1993. The school district alleged, as to both defendants, that it had "satisfied all conditions precedent to recovery under Illinois law" and that both defendants had wrongfully denied the school district's claims for its losses.
The school district attached the letters from defendants denying the claims. The letter from Indiana Insurance stated as follows:
"The facts as developed during the claim analysis show that the asbestos was installed long before the policy issuance. Asbestos consultants were first retained in 1979, and samples were taken and analyzed the same year. Removal of asbestos began in 1984. * * * The District has failed to comply with policy requirements in case of loss. Finally, the time allowed by the policy in which to file suit regarding the claim expired long ago."
Country Mutual denied the claim on the same basis, failure to comply with the policy requirements of notice and suit initiation, among other alleged grounds for denial.
Country Mutual filed a motion to dismiss, pursuant to section 2-619 of the Civil Practice Law (735 ILCS 5/2-619 (West 1992)), alleging that the policies under which Country Mutual was sued contained provisions "requiring any suit under the policy to be brought within one year after the loss occurs," and that it is "undisputed that the alleged loss in this case occurred more than one year prior to the time this suit was filed." Indiana Insurance filed a motion to dismiss the complaint, also pursuant to section 2-619, alleging that the complaint was insufficient at law to state a cause of action against Indiana Insurance because the school district had not given Indiana Insurance immediate written notice of the loss, had not submitted a sworn proof of loss within 60 days after the loss, and had not filed the lawsuit against Indiana Insurance within one year of the loss, all as required by the policy. The school district responded to both motions to dismiss by arguing that "it is immune to the suit and notice provisions upon which defendants rely," based upon the common law doctrine of nullum tempus occurit regi (time does not run against the King).
At the hearing on the motions to dismiss, both defendants argued that the doctrine of governmental immunity, or nullum tempus, applied only to statutes of limitations, not to suit-limitation provisions in the insurance policies issued by defendants, that the school district was bound by the unambiguous provisions of each policy requiring any suit on the policy to be filed within one year after the loss, and that because the school district had not complied with those provisions, the school district's complaint should be dismissed. Indiana Insurance also argued as additional grounds for dismissal that the school district had failed to comply with the notice and proof-of-loss provisions of its policy. Plaintiff argued in response that it does not matter whether the one-year suit limitation is a statute of limitations or a provision of the contract, pursuant to the Illinois Supreme Court's reasoning in Board of Education v. A, C & S, Inc. (1989), 131 Ill. 2d 428, 546 N.E.2d 580, 137 Ill. Dec. 635, because the public interest in the removal of asbestos-containing materials (ACMs) is so great that nullum tempus applies either way.
The trial court granted the motions to dismiss, finding that there was no dispute that "property damage by presence of asbestos first occurred in 1971," that the school district did not submit its notice of loss to defendants until 1990, and that the lawsuit was not filed until June 22, 1993. The court stated that its initial concern was "for the broad public interest of the health and welfare of school children." The court determined that the unusual nature of the claimed loss and the public interest involved justified a strict construction of the policies against the insurers, but that the pleadings on file "indicate that the discovery of loss by the school district occurred at the very latest in the mid-1980's." (Emphasis in original.) The court found it clear that plaintiff did not comply with the 60-day notice requirement or the one-year suit-initiation period of any of the policies.
The trial court found that the case law in Illinois was clear: "A contract is a contract, an agreement is an agreement, whether made by individuals, corporations or public officials; and the parties should therefore be bound. To find otherwise would create absolute uncertainty in all commercial contract transactions with public bodies leading to unpredictable mischief and costs.
Additionally, the burden of insurance rates and expense falls both on the individual insureds [sic] and the taxpayers buying insurance for public bodies. Therefore, there should be some stability in the belief that the language means what it says in all ...