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Illinois Founders Insurance Co. v. Barnett

March 29, 1999


Appeal from the Circuit Court of Cook County Honorable Robert Boharic, Judge Presiding.

The opinion of the court was delivered by: Justice O'mara Frossard

JUSTICE O'MARA FROSSARD delivered the opinion of the court:

Plaintiff, Illinois Founders Insurance Company, appeals the circuit court's entry of judgment against it in a declaratory action to determine plaintiff's obligations under a general liability policy issued to Tony Savage, d/b/a Kathy's Liquors. Plaintiff claims that the circuit court improperly found that it received actual notice of a lawsuit filed by defendant Mamie Barnett against Tony Savage which triggered its duty to defend under the insurance policy. Plaintiff additionally claims that the circuit court erred in determining that the employee injury exclusion of the policy did not apply to Barnett.


The following facts were established at trial. Tony Savage, d/b/a as Kathy's Liquors, owned and operated Kathy's Liquors store. On February 8, 1991, Tony Savage (Savage) purchased a general liability insurance policy for the liquor store from plaintiff. The insurance policy was valid for one year. Prior to 1991, Savage and Mamie Barnett (Barnett) had been friends for 25 years. During this time period, Barnett and Savage participated in many social activities together and had an intimate relationship. Savage, on approximately six occasions, asked Barnett to watch or run the liquor store for him as a personal favor. When Barnett watched the store, she did not receive money compensation. Savage, however, on occasion gave Barnett groceries from the store for either watching the store or because of their friendship.

On December 1, 1991, Savage asked Barnett to watch the store for him because he had to run an errand. Barnett agreed and Savage provided her with keys to the store and cab fare. Barnett opened the store in the morning and assisted customers. On that same day, an intruder entered the store, attacked Barnett and injured her. Barnett received no compensation for her duties at the liquor store on the day she was attacked.

Eight days after Barnett was attacked, on December 9, 1991, Guild Insurance Agency, Inc. (Guild), the insurance broker that placed Savage with plaintiff, sent a loss notice to plaintiff informing it of the incident where Barnett was attacked and injured. The loss notice informed plaintiff of the date of the loss and specific facts of the loss. On December 13, 1991, plaintiff acknowledged that it received notice of the loss and subsequently contacted and forwarded claim forms to its insured, Savage. On December 21, 1991, immediately after her release from the hospital, Barnett called both Guild and plaintiff and discussed her claims with them. Plaintiff conceded it received prompt notice of the claim.

Plaintiff additionally retained the investigative firm of Wallrub, Copengiro & Associates, Inc. (Wallrub), to help with the Barnett claim. On March 4, 1992, three months after Barnett was attacked, Wallrub's investigators interviewed Barnett and Savage, obtained a written statement from them, took photographs of the store, collected other information and documents and provided this information and claim reports to plaintiff. Plaintiff's investigator also told Barnett that he worked for either plaintiff or Guild.

On October 28, 1993, Barnett filed a personal injury lawsuit against Savage, Kathy's Liquors, James Cole, and King Roofing and Construction for the injuries she sustained on December 1, 1991, at Savage's store. Barnett's attorney, on November 9, 1993, within two weeks of filing Barnett's civil case, wrote to both Guild and Wallrub informing them of Barnett's civil suit, enclosing copies of the filed complaint and asking them to forward all of this information to plaintiff. Plaintiff acknowledged receiving notice of suit from Guild on other matters in the past. On March 9, 1994, Savage was served with summons in the personal injury lawsuit and on April 26, 1994, the court entered a default order against Savage.

On May 30, 1996, Barnett's attorney sent by facsimile to plaintiff copies of the original complaint, Barnett's first amended complaint and the default order against Savage. Robert McKenna, plaintiff's vice-president of claims, testified that this was the first time that plaintiff received notice of Barnett's personal injury lawsuit against Savage. Plaintiff then retained counsel to defend Savage in the lawsuit. Savage's counsel moved to quash service of summons on Savage. The court denied that motion but vacated the default order against Savage and allowed him to answer or otherwise plead to Barnett's second amended complaint.

After testimony and arguments, the circuit court in this case found that plaintiff received notice of the lawsuit through Barnett's attorney's letters and copy of the filed complaint sent to Guild and Wallrub in compliance with the insurance policy. The circuit court further found that Barnett was not an employee of Savage at the time she was injured and thus was not excluded from coverage. Plaintiff appeals judgment on both counts of the declaratory action in favor of Barnett and against plaintiff.


Plaintiff first contends on appeal that because it did not receive notice of the Barnett lawsuit until May 30, 1996, it is relieved from any duty to defend and indemnify Savage. The insurance policy at issue states as follows:

"4. Insured's duties in the event of suit:


"(b) If a claim is made or a suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, ...

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