Appeal from the Circuit Court of Cook County No. 04 CH 4889 Honorable Martin S. Agran, Judge Presiding.
The opinion of the court was delivered by: Justice Cahill
JUSTICE CAHILL delivered the judgment of the court, with opinion. Presiding Justice Garcia and Justice Robert E. Gordon concurred in the judgment and opinion.
The core issue in this case is whether section 6-7.1 of the Corporate Fiduciary Act (Act) (205 ILCS 620/6-7.1 (West 2006)) tolls the contractual termination provision of a financial institution crime bond insurance policy (Bond) when the insured, Independent Trust Corporation (Intrust), notified the insurer, Kansas Bankers Surety Company (KBS), of a claim or right of action before a receiver was appointed to liquidate the insured. We believe the Act tolls the termination provision of the Bond. We reverse the trial court's order granting KBS's cross-motion for summary judgment and remand for further proceedings.
This case has a complicated litigation history, and various matters related to the dissolution and liquidation of Intrust have previously been before this court. See In re Possession & Control of the Commissioner of Banks & Real Estate of Independent Trust Corp., 327 Ill. App. 3d 441, 764 N.E.2d 66 (2001) (Possession of Intrust); Independent Trust Corp. v. Hurwick, 351 Ill. App. 3d 941, 814 N.E.2d 895 (2004). We revisit the facts here to the extent necessary to understand the issues raised on appeal.
Intrust was an Illinois corporate fiduciary organized under the Act and regulated by the Illinois Commissioner of Banks and Real Estate (the CBRE). Possession of Intrust, 327 Ill. App. 3d at 449. Intrust served as a custodian for various investment trust assets customers placed in its custody, such as individual retirement accounts, qualified benefit plans and personal trusts. Possession of Intrust, 327 Ill. App. 3d at 449-50.
On December 20, 1999, Intrust and KBS executed the Bond in question. Under the Bond, KBS agreed to indemnify Intrust for various losses resulting from criminal activity, including losses incurred from fraudulent acts committed by employees, forgeries and securities. These insuring agreements were subject to two relevant conditions and limitations of the Bond: (1) a termination provision and (2) a notice/proof of loss provision.
The termination provision provides that the Bond terminates "immediately upon the taking over of the Insured by a receiver or other liquidator or by State or Federal officials." The provision also terminates KBS's liability for a loss discovered after the appointment of a receiver:
"Termination of the bond as to any Insured terminates liability for any loss sustained by such Insured which is discovered after the effective date of such termination.
After termination or cancellation, no State or Federal official, agency, receiver, or liquidator, acting in the capacity of supervisor, liquidator, receiver, regulator, corporate, or any other capacity shall have or exercise any right to make any claim against the Underwriter, unless a Proof of Loss, duly sworn to, with full particulars and complete documentation has been received by the Underwriter prior to the termination or cancellation of this bond."
The notice/proof of loss provision of the Bond reads:
"(a) At the earliest practicable moment, not to exceed 30 days, after discovery of loss, the Insured shall give the Underwriter notice thereof.
(b) Within 6 months after such discovery, the Insured shall furnish to the Underwriter proof of loss, duly sworn to, with full particulars."
The Bond was effective from December 20, 1999, to December 20, 2000, and provided insurance coverage in the amount of $10 million. The Bond covered losses discovered during the policy period, ...