APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE ARTHUR DUNNE, JUDGE PRESIDING.
The Honorable Justice Wolfson delivered the opinion of the court: Campbell, P.j. and Buckley, J., concur.
The opinion of the court was delivered by: Wolfson
JUSTICE WOLFSON delivered the opinion of the court:
This case requires us to determine the event that triggered an errors and omissions insurance policy.
The controversy took root when a broker, Robert B. McManus, Inc. (McManus) obtained liability coverage for Art's Transportation, Inc., Windy City Coaches, and Art's Special Services, Inc. (Art's) with Savoy Reinsurance Company Limited (Savoy). The effective policy period was December 31, 1987, to December 31, 1988. Everyone agrees that Savoy was not licensed to do business in Illinois at the time the policy was obtained.
After the Savoy policy was issued, claims occurred. There were lawsuits. Savoy began defending those lawsuits. In May 1991, after more than two years of defending Art's, Savoy's lawyers withdrew from the claims and lawsuits because the insurance company was not paying legal fees. That required Art's to hire its own lawyer, and settle and litigate the pending claims and lawsuits at its own expense.
In June 1991 Art's made a claim against McManus under the broker's errors and omissions policy. The claim was based on a provision of the Illinois Insurance Code. That section, now 215 ILCS 5/121-4 (West 1992), concerns unauthorized insurance companies, and provides, in part:
"If any such unauthorized insurer fails to pay any claim or loss within the provisions of such an insurance contract, any person who assisted or in any manner aided directly or indirectly in the procurement of the insurance contract shall be liable to the insured for the full amount of the claim or loss as provided in the insurance contract."
Clearly, McManus would be liable to Art's for the claims or loss that would have been covered by the Savoy policy. That is not the issue before us. The issue is whether McManus' errors and omissions policy written by General Insurance Company of America (General) covers the claims or loss that would have been covered by the Savoy policy.
General's errors and omissions policy was effective from April 4, 1991, to April 4, 1992. It contained a Prior Acts Exclusion, set forth in an endorsement, which provided:
"It is hereby understood and agreed that coverage shall not apply to claims or suits arising as a result of acts, errors, or omissions which occurred prior to April 4, 1990."
The question, then, is: When did the "act, error, or omission" by McManus take place for the purpose of coverage?
If it took place just before December 31, 1987, when the Savoy policy went into effect, there would be no claim under the errors and omissions policy.
If it took place in May 1991, when Savoy's lawyer withdrew, leaving Art's high and dry, the June 1991 claim would trigger coverage. (General does not contend there was any defect in the way ...