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11/22/95 EVERGREEN PARK SCHOOL DISTRICT NO. 124 v.

November 22, 1995

EVERGREEN PARK SCHOOL DISTRICT NO. 124, PLAINTIFF-APPELLANT,
v.
FEDERAL INSURANCE COMPANY, MISSION INSURANCE COMPANY, AND MISSION NATIONAL INSURANCE COMPANY, DEFENDANTS-APPELLEES. COMMUNITY CONSOLIDATED SCHOOL DISTRICT NO. 15, PLAINTIFF-APPELLANT, V. ATLANTIC MUTUAL INSURANCE COMPANY AND HARTFORD ACCIDENT AND INDEMNITY COMPANY, DEFENDANTS-APPELLEES. OAK PARK -- RIVER FOREST SCHOOL DISTRICT NO. 200, PLAINTIFF-APPELLANT, V. INSURANCE COMPANY OF NORTH AMERICA, ALLIED INSURANCE COMPANY, THE TRAVELERS INDEMNITY COMPANY OF ILLINOIS, AND PACIFIC EMPLOYERS INSURANCE COMPANY, DEFENDANTS-APPELLEES. THE HOME INSURANCE COMPANY OF ILLINOIS AND THE HOME INSURANCE COMPANY, A NEW HAMPSHIRE CORPORATION, PLAINTIFFS-APPELLEES AND COUNTERDEFENDANTS-APPELLEES, V. EVANSTON TOWNSHIP DISTRICT NO. 202, DEFENDANT-APPELLANT AND COUNTERPLAINTIFF-APPELLANT. THE CONTINENTAL INSURANCE COMPANIES AND NATIONAL BEN FRANKLIN INSURANCE COMPANY OF ILLINOIS, PLAINTIFFS-APPELLEES AND COUNTERDEFENDANTS-APPELLEES (GENERAL ACCIDENT INSURANCE COMPANY, COUNTERDEFENDANT-APPELLEE), V. NORTHWEST TOWNSHIP HIGH SCHOOL DISTRICT NO. 214, DEFENDANT-APPELLANT AND COUNTERPLAINTIFF-APPELLANT. NORTHFIELD TOWNSHIP HIGH SCHOOL DISTRICT NO. 225, PLAINTIFF-APPELLANT, V. INSURANCE COMPANY OF NORTH AMERICA, CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY (FORMERLY AETNA INSURANCE COMPANY), PACIFIC EMPLOYERS INSURANCE COMPANY, AND CENTENNIAL INSURANCE COMPANY, DEFENDANTS-APPELLEES. CONSOLIDATED HIGH SCHOOL DISTRICT NO. 230, PLAINTIFF-APPELLANT, V. INSURANCE COMPANY OF NORTH AMERICA, ALLIED INSURANCE COMPANY, INA INSURANCE COMPANY OF ILLINOIS, PACIFIC EMPLOYERS INSURANCE COMPANY, HARTFORD ACCIDENT AND INDEMNITY COMPANY, COUNTRY MUTUAL INSURANCE COMPANY, CONTINENTAL CASUALTY COMPANY, AND AMERICAN CASUALTY COMPANY OF READING, PA., DEFENDANTS-APPELLEES. AETNA CASUALTY AND SURETY COMPANY OF ILLINOIS AND PROVIDENCE WASHINGTON INSURANCE COMPANY (SUCCESSOR IN INTEREST TO MOTOR VEHICLE CASUALTY COMPANY), PLAINTIFFS-APPELLEES AND COUNTERDEFENDANTS-APPELLEES (AMERICAN MOTORISTS INSURANCE COMPANY, THE FIDELITY AND CASUALTY COMPANY OF NEW YORK, NATIONAL BEN FRANKLIN INSURANCE COMPANY OF ILLINOIS, AND ROYAL GLOBE INSURANCE COMPANY, COUNTERDEFENDANTS-APPELLEES), V. COMMUNITY CONSOLIDATED SCHOOL DISTRICT NO. 21, DEFENDANT-APPELLANT AND COUNTERPLAINTIFF-APPELLANT. COMMUNITY CONSOLIDATED SCHOOL DISTRICT NO. 15, PLAINTIFF-APPELLANT, V. ATLANTIC MUTUAL INSURANCE COMPANY AND HARTFORD ACCIDENT AND INDEMNITY COMPANY, DEFENDANTS-APPELLEES. THE CONTINENTAL INSURANCE COMPANIES AND NATIONAL BEN FRANKLIN INSURANCE COMPANY OF ILLINOIS, PLAINTIFFS-APPELLEES AND COUNTERDEFENDANTS-APPELLEES (GENERAL ACCIDENT INSURANCE COMPANY, COUNTERDEFENDANT-APPELLEE), V. NORTHWEST TOWNSHIP HIGH SCHOOL DISTRICT NO. 214, DEFENDANT-APPELLANT AND COUNTERPLAINTIFF-APPELLANT. CONSOLIDATED HIGH SCHOOL DISTRICT NO. 230, PLAINTIFF-APPELLANT, V. INSURANCE COMPANY OF NORTH AMERICA, ALLIED INSURANCE COMPANY, INA INSURANCE COMPANY OF ILLINOIS, PACIFIC EMPLOYERS INSURANCE COMPANY, HARTFORD ACCIDENT AND INDEMNITY COMPANY, COUNTRY MUTUAL INSURANCE COMPANY, CONTINENTAL CASUALTY COMPANY, AND AMERICAN CASUALTY COMPANY OF READING, PA., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County. Honorable Edward C. Hofert, Judge Presiding.

The Honorable Justice Rakowski delivered the opinion of the court: McNAMARA, P.j., and Egan, J., concur.

The opinion of the court was delivered by: Rakowski

The Honorable Justice RAKOWSKI delivered the opinion of the court:

This consolidated action concerns the right of appellants (school districts) to receive insurance coverage from their property insurers for asbestos-related property damage. The circuit court granted summary judgment and dismissal of the school districts' claims, holding the claims were time barred by the insurance policies' notice and suit limitation terms. We affirm.

From at least 1962 through 1991, the school districts owned and operated public school buildings and facilities containing asbestos materials. Most of the school districts have begun removal and abatement of the asbestos-containing materials, estimated to cost over $70 million. The property insurers of the school districts issued "all-risks" policies covering expenses incurred in the removal of asbestos-related debris. The policies contained notice and suit limitation terms which required the school districts to serve timely notice of a claim and to file suit challenging denial of benefits within one or two years, depending on the policy at issue. It is undisputed that the school districts failed to make timely notices and filings under the terms of the policies. As a result, the insurers denied their claims.

The school districts, and in some cases the insurers, filed complaints in the circuit court of Cook County for declaratory judgment of coverage or noncoverage. The insurers filed motions to dismiss the complaints (735 ILCS 5/2-619 (West 1992)) and for summary judgment (735 ILCS 5/2-1005 (West 1992)), citing the school districts' failure to comply with notice and suit limitation provisions of the policies. The school districts argued that as public entities allegedly enforcing public rights the terms were inapplicable to them under the doctrine of nullum tempus occurrit regi (nullum tempus). The circuit court granted the insurers' motions, holding nullum tempus did not apply to contractual terms contained in insurance policies.

Alternatively, in opposition to some insurers' motions, the school districts argued that certain policies did not contain suit limitations. The school districts contended that forms used in such policies expressly canceled and replaced the limitation terms contained elsewhere in the policies. The circuit court disagreed, finding in favor of the insurers.

The school districts first argue that they were excused from compliance with notice and suit limitations contained in the insurance contracts under the doctrine of nullum tempus. The doctrine, which is translated as "time does not run against the King," developed at common law to protect the King from the running of time as to the bringing of actions. ( People v. Asbestospray Corp. (1993), 247 Ill. App. 3d 258, 260, 616 N.E.2d 652, 186 Ill. Dec. 462.) Despite the abolition of sovereign immunity, the Illinois Supreme Court has held that the doctrine remains viable. ( City of Shelbyville v. Shelbyville Restorium, Inc. (1983), 96 Ill. 2d 457, 460-61, 451 N.E.2d 874, 71 Ill. Dec. 720.) Its survival is supported by the policy of protecting the public from injury and loss due to the negligence of public officers in failing to timely bring actions which belong to the public. Asbestospray Corp., 247 Ill. App. 3d at 260; City of Shelbyville, 96 Ill. 2d at 460-61.

The vitality of nullum tempus was reaffirmed recently in Board of Education of City of Chicago v. A, C & S, Inc. (1989), 131 Ill. 2d 428, 546 N.E.2d 580, 137 Ill. Dec. 635, where 34 school districts, including the appellants herein, sued defendants, who were involved in the manufacturing and distribution of asbestos-containing materials in their public buildings. Defendants argued that the doctrine of nullum tempus did not apply to the school districts; thus, the suits were barred by the statute of limitations. The Illinois Supreme Court rejected defendants' argument, holding that the statute of limitations which applies to tort actions is inapplicable to the school districts. The court reasoned that the school districts' interests were sufficiently "public" to warrant immunity for the negligence of officers and agents who failed to timely assert causes of action which belong to the public. A, C & S, Inc., 131 Ill. 2d at 472.

The school districts in the case sub judice urge the court to extend the doctrine of nullum tempus to limitation terms contained in insurance policies. The school districts argue that if the court enforces notice and suit limitation terms as provided by the contracts, the public would be harmed by the forfeiture of substantial insurance coverage. They contend there is no clear, principled distinction between statutes of limitations and limitation terms in insurance contracts for purposes of this doctrine.

There is a distinction, however, in that statutes of limitations are creations of the legislature, whereas limitation periods contained in insurance policies are contractual in nature and privately imposed by the parties. A contract is a contract and a governmental entity must abide by its contractual obligations the same as an individual. ( Wall v. Chicago Park District (1941), 378 Ill. 81, 93, 37 N.E.2d 752.) Absent an unusual and exceptional reason, a governmental entity may not avoid its contractual obligations, including those with insurance companies. Bond County Community School District No. 2 v. Indiana Insurance Co. (1995), 269 Ill. App. 3d 488, 492, 647 N.E.2d 293, 207 Ill. Dec. 331 (hereinafter Bond County).

Bond County is a recent, significant Illinois case to consider the applicability of nullum tempus to contractual terms contained in insurance policies. In Bond County, the Fifth District Appellate Court affirmed the dismissal of plaintiff's complaint, finding there was no justification for applying nullum tempus to contractual obligations of a school district in order to relieve it of notice and suit limitations under an insurance policy. The court held that historically the doctrine of nullum tempus has only been used to avoid statutes of limitations; it has never been applied to contractual limitation provisions. Bond County, 269 Ill. App. 3d at 495; see also Pikeland Community Unit School District No. 124 v. Indiana Insurance Co. (1995), 269 Ill. App. 3d 976, 977, 647 N.E.2d 301, 207 Ill. Dec. 339 (Fourth District Appellate Court expressly adopted the analysis and conclusions of Bond County and affirmed dismissal of school district's complaint, holding the doctrine of nullum tempus did not apply to contractual limitations in insurance policies).

Even before the abolition of sovereign immunity, the Illinois Supreme Court recognized a distinction between statutory and contractual limitations in Board of Supervisors v. City of Lincoln (1876), 81 Ill. 156. The court held: "Our understanding of the law [of nullum tempus] is, that, as respects all public rights, or as respects property held for public use, upon trusts, municipal corporations are not within the operation of the Statute of Limitations, but in regard to contracts or mere private rights, the rule is different, and such corporations, like private citizens, may plead or have pleaded against them the Statute of Limitations." (Emphasis added.) City of Lincoln, 81 Ill. at 158.

Accordingly, we conclude that application of the doctrine of nullum tempus to avoid notice and suit limitations in insurance policies would be an extension of the supreme court's decision in A, C & S, Inc. and in direct opposition to the holding in City of Lincoln. We further believe that to apply the doctrine would create an anomaly in the law that "a contract is a contract" and governmental entities are bound by contractual obligations the same as individuals. ( Wall, 378 Ill. at 93; Bond County, 269 Ill. App. 3d at 498.) Should the legislature or the Illinois Supreme Court see fit, it may very well create an exception to general contract principles and apply nullum tempus to insurance policy ...


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