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HOME INS. CO. v. ADCO OIL CO.

June 5, 1997

THE HOME INSURANCE COMPANY OF ILLINOIS, Plaintiff,
v.
ADCO OIL COMPANY, a corporation, Defendants.



The opinion of the court was delivered by: GETTLEMAN

 Plaintiff, The Home Insurance Company of Illinois ("Home"), has filed a complaint *fn1" for declaratory judgment against defendant, Adco Oil Company ("Adco"), alleging that it is not liable to indemnify defendant for defendant's claim against plaintiff's insured, Michael J. Rovell ("Rovell"). Plaintiff requests this court to enter judgment declaring that: (1) Rovell breached the Notice of Claims provision of his insurance policy with plaintiff; (2) plaintiff has no duty or obligation to defend Rovell against Adco; and (3) plaintiff be awarded its just and reasonable costs for prosecuting this suit.

 Both parties have filed motions for summary judgment pursuant to Fed. R. Civ. P. 56. For the reasons set forth below, this court grants defendant's and denies plaintiff's motion for summary judgment.

 FACTS2

 Plaintiff issued its insurance policy No. CPL-C106252 to Rovell, a lawyer, as the insured party. The policy was effective from April 1, 1994, to April 1, 1995. The policy sets for the scope of coverage, in pertinent part, as follows:

 I. Professional Liability and Claims-Made Clause :

 
To pay on behalf of the insured all sums in excess of the deductible amount stated in the Declarations which the Insured shall become legally obligated to pay as damages as a result of CLAIMS FIRST MADE AGAINST THE INSURED DURING THE POLICY PERIOD AND REPORTED TO THE COMPANY DURING THE POLICY PERIOD caused by any act, error, or omission for which the Insured is legally responsible, and arising out of the rendering or failure to render personal services for others in the Insured's capacity as a lawyer or notary public. [emphasis in original].
 
"Policy Period," whenever used in this policy, means the period from the inception date of this policy to the policy expiration date as set forth in the Declarations or its earlier termination date, if any.

 Section "F" of the Policy reads in pertinent part:

 
I. Notice of Claims : As a condition precedent to the right to the protection afforded by this insurance, the Insured shall, as soon as practicable, give to the Company written notice of any claim made against the Insured.
 
In the event suit is brought against the Insured, the Insured shall immediately forward to the Company every demand notice, summons, or other process received directly or by the Insured's representatives.

 On October 21, 1994, defendant filed an action against Rovell in the United States District Court for the Western District of Oklahoma (the "Adco malpractice action"), alleging a number of serious charges of malpractice in connection with major litigation in which Rovell represented defendant in Oklahoma. According to the malpractice complaint, Rovell intentionally and negligently breached his duties to defendant, causing millions of dollars in damages. Apparently, the Adco malpractice action is still pending.

 The first notice plaintiff had of the Adco malpractice action was a June 9, 1995, letter from defendant to plaintiff stating that defendant had filed a suit against Rovell. According to defendant, Rovell has admitted in his bankruptcy proceeding (described below) that he intentionally did not notify plaintiff of the malpractice suit because he regarded defendant's claims as frivolous, he believed that filing a claim would negatively impact his future insurance premiums, and he would have to pay the $ 10,000 deductible. In addition, defendant contends that Rovell deliberately concealed his malpractice policy with plaintiff -- in violation of a local rule of the Oklahoma district court -- until after ...


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