ILLINOIS STATE BAR ASSOCIATION MUTUAL INSURANCE COMPANY, Plaintiff-Appellee,
LAW OFFICE OF TUZZOLINO AND TERPINAS, an Illinois Partnership, SAM TUZZOLINO, WILL TERPINAS, JR., and ANTONIO COLLETTA, Defendants-Appellants.
Appeal from the Circuit Court of Cook County No. 09 CH 11297 Honorable Rita M. Novak, Judge Presiding.
JUSTICE REYES delivered the judgment of the court, with opinion. Justice Hall and Justice Lampkin concurred in the judgment and opinion.
¶ 1 Defendants Will Terpinas, Jr. (Terpinas), and Antonio Colletta (Colletta) (collectively, defendants) appeal the trial court's entry of summary judgment in favor of the plaintiff, ISBA Mutual Insurance Company (plaintiff). After considering cross-motions for summary judgment, the trial court rescinded Terpinas' contract with plaintiff. Defendants argue the trial court improperly rescinded the contract because the innocent insured clause in the insurance policy and the common law innocent insured doctrine preserve Terpinas' coverage. For the following reasons, the judgment of the circuit court of Cook County is reversed.
¶ 2 BACKGROUND
¶ 3 I. Underlying Malpractice Litigation
¶ 4 Prior to this litigation, Terpinas and Sam Tuzzolino (Tuzzolino) operated, as partners, the Law Office of Tuzzolino & Terpinas (firm). Between the years of 2002 and 2008, Tuzzolino represented Colletta in several matters on behalf of the firm. In one of these matters, Colletta sought to recover over $1 million from his former partners in a business venture known as Baja Chicago, LLC. Colletta, however, believed Tuzzolino mishandled the Baja litigation and filed a malpractice suit against him. Tuzzolino responded by attempting to persuade Colletta to settle the malpractice suit. Tuzzolino suggested Colletta should drop his current lawsuit and file a separate malpractice claim against the attorney who handled Baja Chicago's bankruptcy. Colletta agreed, settling his pending litigation with Tuzzolino and hiring Tuzzolino to file the new bankruptcy malpractice suit. Tuzzolino, however, failed to file the complaint within the time required under the statute of repose and the case was consequently dismissed.
¶ 5 Over the next 18 months, Tuzzolino led Colletta to believe the bankruptcy malpractice litigation remained pending. Colletta, after checking the court file, learned the case had in fact been dismissed and confronted Tuzzolino with the discovery. In response, Tuzzolino offered Colletta $670, 000 to settle any ensuing claims Colletta might have against him.
¶ 6 II. The Insurance Policy
¶ 7 Following his settlement offer with Colletta, Tuzzolino attempted to renew the firm's current malpractice insurance policy; the firm had been insured by plaintiff since 2005. On April 29, 2008, Tuzzolino submitted a renewal quote and acceptance form to plaintiff on behalf of himself, Terpinas, and the firm. Question 4 on the renewal form asked, "[h]as any member of the firm become aware of a past or present circumstance(s) which may give rise to a claim that has not been reported?" Tuzzolino checked the box marked "no." He then signed the form under the following language:
"I/we affirm after an inquiry of all of the members of the applicant firm that all the information contained herein is true and complete to the best of my/our knowledge and that it shall be the basis of the policy of insurance and deemed incorporated therein upon acceptance of this application by issuance of a policy."
Terpinas did not sign the renewal form as he was not required to do so. Tuzzolino thereafter sent the form to plaintiff, which received it on May 2, 2008.
¶ 8 Of relevance to this appeal, the malpractice insurance policy contained an innocent insured clause and a severability clause. The innocent insured clause provided:
"Whenever coverage under this policy will be excluded or lost because of the insured's failure to provide timely notice, the company agrees that such insurance as would otherwise be afforded under this policy, should be applicable with respect to any insured who do not personally fail to give timely notice after having knowledge of the conduct that forms the basis of the claim. All insured covered by this provision must immediately comply with all policy provisions regarding reporting the claim upon learning of the unreported claim."
The severability clause provided:
"The APPLICATION, and any addendum or supplements and the Declarations, are the basis of the Policy. They are to be considered as incorporated in and constituting part of this Policy. The particulars and statements contained in the APPLICATION will be construed as a separate agreement with and binding on each INSURED. Nothing in this APPLICATION will be construed to increase the COMPANY'S Limit of Liability."
¶ 9 Over a month after the completion of the renewal form, Terpinas received a lien letter dated June 10, 2008 from an attorney hired to represent Tuzzolino in the impending malpractice claims against him. According to Terpinas, this was the first time he became aware of the claims against his partner. Terpinas contends, while he may have had general conversations with Tuzzolino about Colletta's cases, Tuzzolino never revealed to him anything about the Colletta malpractice ...