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02/02/98 KATHERINE RICE v. AAA AEROSTAR

KATHERINE RICE, PLAINTIFF-APPELLANT,
v.
AAA AEROSTAR, INC., D/B/A RALLY'S RESTAURANT, DEFENDANT, AND STATE FARM FIRE AND CASUALTY COMPANY, GARNISHEE-APPELLEE.



Appeal from Circuit Court of Sangamon County No. 94L337 Honorable Jeanne E. Scott, judge Presiding.

The opinion of the court was delivered by: Justice Cook delivered the opinion of the court:

This case presents the question whether an insurance company can avoid payment of a claim because it was not given notice that suit had been filed, although it was given notice of the occurrence. We reject plaintiff's argument that the insurer's awareness of the potential for lawsuit gave the insurer notice sufficient for it to locate and defend the suit. Nevertheless, we reverse the summary Judgement entered for the insurer, because the insurer's affidavit did not negate the possibility that the insurer had actual notice.

On July 7, 1992, plaintiff slipped and fell in a parking lot owned by defendant, AAA Aerostar, Inc., d/b/a Rally's Restaurant. At the time of the fall, plaintiff was 8½ months pregnant. Defendant's insurer, State Farm Fire and Casualty Company (State Farm), was notified of the incident. In August 1992, State Farm advised plaintiff that for a period of one year all reasonable medical expenses were covered under the medical payments provisions of defendant's insurance policy. In September 1992, plaintiff retained Florence L. Bain to prosecute a personal injury claim against defendant. State Farm investigated the claim and, during the interim, paid approximately $4,375 in medical expenses.

In March 1993, upon completing its investigation, State Farm denied liability on the part of defendant. In response to State Farm's denial, Bain wrote State Farm a letter outlining plaintiff's potential legal claim and offering settlement terms. In September 1993, State Farm took plaintiff's statement regarding the incident. State Farm again denied liability. In a status report dated December 1993, State Farm's claim representative, Pamela Woodson, noted that the only work remaining on the claim was defending a potential lawsuit. However, in January 1994, State Farm closed its file because plaintiff had not yet filed suit. The two-year statute of limitations would run July 7, 1994. See 735 ILCS 5/13-202 (West 1992).

In early 1994, State Farm was contacted by plaintiff's second attorney, Patricia Hayes. Hayes, via a representation letter, advised State Farm she was now representing plaintiff and had a lien on all money recovered by suit, settlement or otherwise. Once again, State Farm denied liability, and after numerous attempts to contact Hayes, State Farm again closed the file, in February 1994. In June 1994, Hayes, on plaintiff's behalf, filed a complaint against defendant for negligence. In December 1994, the trial court entered a default judgment against defendant. In September 1995, the court entered a final order awarding plaintiff $48,500 plus costs.

At some point prior to the entry of Judgement defendant filed bankruptcy, thereby preventing plaintiff from collecting from defendant on the judgment. In January 1996, plaintiff sought to garnish defendant's insurance fund. In February 1996, State Farm moved for summary Judgement pursuant to section 2-1005 of the Illinois Code of Civil Procedure (735 ILCS 5/2-1005 (West 1994)). State Farm argued its policy required written notice of all lawsuits filed against its insured. Because neither its insured nor plaintiff notified State Farm of the lawsuit, the policy was breached and plaintiff could not collect from the insurance fund. In April 1996, State Farm requested plaintiff admit she and her attorney failed to notify State Farm of the suit. The request to admit went unanswered.

In July 1996, Hayes withdrew from the case. Subsequently, another attorney appeared on behalf of plaintiff and later withdrew. In January 1997, plaintiff, via her fourth attorney, responded to State Farm's request and admitted she never contacted State Farm regarding the lawsuit; however, she was uncertain whether Hayes or Hayes' associates contacted State Farm. In conjunction with the admission, the court granted plaintiff leave to respond to State Farm's summary Judgement motion.

In February 1997, State Farm took Hayes' deposition. In her deposition, Hayes admitted she never advised State Farm of the lawsuit filed against defendant and she was unsure whether anyone in her office contacted State Farm. Additionally, her records did not indicate whether State Farm was ever notified of the lawsuit. State Farm offered plaintiff's admissions and Hayes' deposition as evidence supporting its summary Judgement motion. State Farm also submitted interrogatories answered by Michael Beaman, a State Farm claim supervisor, and an affidavit, signed by Beaman, outlining State Farm's knowledge of the lawsuit. The affidavit stated State Farm "was not informed by laintiff, laintiff's attorney, any representative of laintiff or any entity that had been served with summons" for the lawsuit. In a similar fashion, Beaman's affidavit also denied State Farm was informed of the motion for default judgment, the hearing on the motion for default judgment, the motion to set damages, or the hearing to set damages. Beaman's interrogatories denied State Farm received a copy of plaintiff's complaint against defendant.

In response to State Farm's motion, plaintiff argued State Farm had actual notice of the lawsuit via settlement negotiations conducted prior to suit being filed. Plaintiff relied on written statements made by Woodson, the claim representative, as evidence that State Farm had knowledge of the lawsuit. Woodson's reports stated plaintiff was threatening to file suit and a lawsuit was possible; therefore, plaintiff argued State Farm was aware of the potential for a lawsuit and should have checked with plaintiff, defendant, or the clerk of the court to determine whether the suit had been filed. In May 1997, the court granted State Farm's motion for summary judgment. Plaintiff appeals.

In ruling upon a summary Judgement motion, the evidence is reviewed de novo and construed in the light most favorable to the nonmovant. See Walker v. Rogers, 272 Ill. App. 3d 86, 89, 650 N.E.2d 272, 274 (1995), citing Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511, 518, 622 N.E.2d 788, 792 (1993). Summary Judgement is properly entered when the pleadings, depositions, admissions, and affidavits fail to establish a genuine issue of material fact, thereby entitling the movant to Judgement as a matter of law. 735 ILCS 5/2-1005(c) (West 1994). The movant may be granted summary Judgement in two instances: (1) when the movant affirmatively disproves the nonmovant's case by introducing evidence that, if uncontroverted, would entitle the movant to judgment as a matter of law (see Putrill v. Hess, 111 Ill. 2d 229, 24041, 489 N.E.2d 867, 871 (1986)), or (2) when the movant can establish the non-movant lacks sufficient evidence to prove an essential element of the cause of action (see Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 273, 106 S. Ct. 2548, 2552 (1986); Kimbrough v. Jewel Cos., 92 Ill. App. 3d 813, 817, 416 N.E.2d 328, 331 (1981)). See also 4 R. Michael, Illinois Practice §40.3, at 271-72 (1989) (Civil Procedure Before Trial).

In this case, State Farm, via its motion for summary judgment, attempts to affirmatively disprove plaintiff's case by establishing it never received notice of the lawsuit against its insured. As the movant, State Farm bears the burden of persuasion and the initial burden of production. See Carruthers v. B.C. Christopher & Co., 57 Ill. 2d 376, 380, 313 N.E.2d 457, 459 (1974). Only if State Farm satisfies its initial burden of production does the burden shift to plaintiff to present some factual basis that would arguably entitle her to a favorable judgment. See Carruthers, 57 Ill. 2d at 380, 313 N.E.2d at 459; Bank of Waukegan v. Epilepsy Foundation of America, 163 Ill. App. 3d 901, 906, 516 N.E.2d 1337, 1340 (1987). Plaintiff is generally not required to file counteraffidavits or depositions in response to State Farm's summary Judgement motion, but well-pleaded facts set forth in State Farm's affidavit must then be accepted as true. See Carruthers, 57 Ill. 2d at 381, 313 N.E.2d at 460; Lappin v. Costello, 232 Ill. App. 3d 1033, 1040, 598 N.E.2d 311, 316 (1992).

Defendant's insurance policy requires that State Farm receive written notice of any legal actions brought against it. The policy states the following:

"3. Duties in the vent of ccurrence, laim or uit.

a. You must see to it that we are notified promptly of an occurrence that ...


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