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July 24, 1996


Appeal from the Circuit Court of Du Page County. No. 94--MR--0138. Honorable Bonnie M. Wheaton, Judge, Presiding.

Released for Publication August 26, 1996.

The Honorable Justice Hutchinson delivered the opinion of the court: McLAREN, P.j., and Geiger, J., concur.

The opinion of the court was delivered by: Hutchinson

JUSTICE HUTCHINSON delivered the opinion of the court:

Defendant, State Farm Mutual Automobile Insurance Company (State Farm), appeals the trial court's order granting summary judgment for plaintiff, Federated Mutual Insurance Company (Federated). State Farm contends that the trial court erred because active tender by an unschooled layperson is not necessary to trigger an insurer's duty to defend when the insurer has actual notice of the suit. We reverse and remand.

On December 31, 1991, Federated issued an insurance policy to Whitney Volkswagen, Inc. (Whitney), a car dealer. The policy covered a fleet of automobiles that Whitney allowed its service customers to use while their own vehicles were being repaired. On October 30, 1992, Scott Mulvanny, then a Whitney employee, borrowed an automobile owned by Whitney to use for the weekend. Whether Mulvanny had Whitney's permission to take the automobile remains an unresolved question of fact. Mulvanny drove his friends, Kathleen Gallagher, Steven Smith, Scott Dillingham, and Ray Szylko, to a Halloween party in the Lincoln Park area of Chicago. Following the party, Gallagher drove the group back to the suburbs. During the return drive, the automobile operated by Gallagher struck the back of a stopped vehicle. All the passengers of the vehicle driven by Gallagher suffered injuries as a result of the accident.

On November 15, 1993, Smith, Mulvanny, Dillingham, and Szylko filed suit against Gallagher (Steven Smith, Scott Mulvanny, Scott Dillingham and Raymond Szylko v. Kathleen Gallagher, No. 93--L--02284 (Cir. Ct. Du Page Co.)), alleging that she negligently operated the vehicle owned by Whitney. After being served with the summons and complaint on November 22, 1993, Gallagher contacted State Farm, her automobile liability carrier. On December 14, 1993, State Farm sent Federated a letter notifying it of the suit and stating that Federated was the primary liability carrier for Gallagher in the suit, while State Farm would provide excess coverage. In the letter, State Farm also asserted that it was tendering the defense of the suit to Federated. A copy of the summons and complaint served on Gallagher were evidently enclosed with the letter.

Federated filed a declaratory judgment action on March 3, 1994. In its complaint for declaratory relief, Federated alleged that Whitney did not give permission for Mulvanny to use the automobile involved in the accident and, therefore, that Gallagher was not an insured under the Federated policy. Thus, Federated contended that it had no duty to defend Gallagher for the claims made against her in cause No. 93--L--02284 or to indemnify her for any settlement or judgment against her. In addition, Federated asserted that it had no duty to defend Gallagher because she did not tender defense of the lawsuit to Federated.

Federated filed a motion for summary judgment on March 30, 1995. In the motion, Federated only alleged that it did not owe a duty to defend or indemnify Gallagher because she failed to tender her defense to Federated. In their answer to the complaint, Gallagher and State Farm admitted that she did not tender Federated her defense. In its reply brief on the motion for summary judgment, Federated admitted that it possessed knowledge of the underlying lawsuit. On June 19, 1995, the trial court granted Federated's motion for summary judgment and ruled that Federated had no duty to indemnify or defend Gallagher in cause No. 93--L--02284. This appeal ensued.

State Farm does not deny that Gallagher tendered the defense of the lawsuit to it and that she was insured under the State Farm policy. State Farm also acknowledged that Gallagher did not tender the defense of the lawsuit to Federated. Rather, State Farm argues on appeal that the trial court improperly granted summary judgment because Federated's receiving actual notice of the suit was sufficient to trigger Federated's duty to defend Gallagher.

Summary judgment is proper when the pleadings, depositions, and affidavits demonstrate that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2--1005(c) (West 1994). In adjudicating a summary judgment motion, a "court must construe the evidence strictly against the movant and liberally in favor of the nonmoving party." Guerino v. Depot Place Partnership, 273 Ill. App. 3d 27, 30, 209 Ill. Dec. 870, 652 N.E.2d 410 (1995). Summary judgment is a drastic means of resolving litigation and should be allowed only when the moving party's right to judgment is clear and free from doubt. Guerino, 273 Ill. App. 3d at 30. We conduct a de novo review of an order granting summary judgment. Espinoza v. Elgin, Joliet, & Eastern Ry. Co., 165 Ill. 2d 107, 113, 208 Ill. Dec. 662, 649 N.E.2d 1323 (1995).

In support of its argument that actual notice triggers an insurer's duty to defend, State Farm relies on Long v. Great Central Insurance Co., 190 Ill. App. 3d 159, 137 Ill. Dec. 794, 546 N.E.2d 739 (1989). In Long, the insured, Jess Long, was served with a complaint and summons in a dramshop action. Long delivered the complaint and summons to the agency from which he purchased the dramshop policy, instead of to his insurer, Great Central. No appearance was filed on behalf of Long, and a default judgment was entered against him. Long subsequently sued Great Central and the agency that sold him the policy. In count IV of his complaint, Long requested damages for failure to defend the suit because Great Central either was aware of the suit or possessed information that should have disclosed to it that the suit had been filed. The circuit court dismissed count IV of the complaint.

On appeal, Long asserted that Great Central's receiving actual notice of the suit was sufficient to create a duty to defend the lawsuit. In turn, Great Central argued that, in the absence of a tender of the defense of the claim, it had no duty to defend the action. In reversing the dismissal of count IV of Long's complaint, the court recognized that an insured's failure to forward process to his insurer does not preclude recovery on the policy when the insurer has actual notice of the lawsuit. Long, 190 Ill. App. 3d at 168. The court defined actual notice as notice sufficient to permit the insurer to locate and defend the suit. Long, 190 Ill. App. 3d at 168. The court then concluded that Long properly alleged facts providing a basis for holding that Great Central had actual notice of the suit. Long, 190 Ill. App. 3d at 168-69.

The court in Long distinguished the facts in its case from the situation in Hartford Accident & Indemnity Co. v. Gulf Insurance Co., 776 F.2d 1380 (7th Cir. 1985). Nevertheless, the court accepted the Hartford court's ruling as an accurate statement of Illinois law. See Long, 190 Ill. App. 3d at 169-70. Hartford involved the issue of whether the insured, a large municipality, had properly tendered the defense of a lawsuit to its insurer. The Hartford court concluded that the municipality had not properly tendered the defense ...

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