Court of Appeals of Illinois, First District, Second Division
from the Circuit Court of Cook County, No. 13-CH-24611; the
Hon. Rita M. Novak, Judge, presiding.
Sudekum, Cassidy & Shulruff, Chtrd., of Chicago
(Frederick J. Sudekum III and Florence M. Schumacher, of
counsel), for appellant.
SmithAmundsen LLC, of Chicago (Michael Resis, Timothy J.
Fagan, and Britta A. Sahlstrom, of counsel), for appellee.
JUSTICE NEVILLE delivered the judgment of the court, with
opinion. Justices Pierce and Mason concurred in the judgment
1 This case involves an insurer's duty to defend or
indemnify an insurance agent for negligent placement of
insurance coverage that allegedly caused another insurer to
incur damages. In July 2012, TimCal, Inc., an insurance agent
affiliated with Geico Direct Representatives, received from
Fidelity National Property & Casualty Insurance Company a
letter, charging TimCal with breach of its duties as an
insurance agent and informing TimCal that Fidelity would seek
to recover damages. TimCal did not inform its professional
liability insurer, James River Insurance Company (James
River), about the claim until April 2013. James River filed a
complaint against TimCal and Fidelity, seeking a judgment
declaring that it had no duty to defend or indemnify TimCal
because TimCal failed to provide timely notice of
Fidelity's claim to James River. The circuit court
granted James River's motion for summary judgment.
2 In this appeal, Fidelity argues that the court should not
have granted James River's motion for summary judgment
because (1) TimCal might have timely told an insurance agent
about Fidelity's claim, (2) the July 2012 letter Fidelity
sent to TimCal might not count as a claim, and (3) the
professional liability insurance policy might allow the April
2013 notice as timely due to the renewal of the policy. We
find no ambiguity in the pertinent policy terms, and the
circuit court correctly applied the policy to the facts in
this case. We affirm the circuit court's judgment in
favor of James River.
4 In 2011, James River issued a professional liability
insurance policy to Geico Direct Representatives. Under the
policy, James River promised to provide coverage when an
insurance agent affiliated with Geico Direct made an error in
selling an insurance policy, and the error harmed either the
insurance purchaser or the insurance seller. Geico renewed
the James River policy in 2012. In December 2011, TimCal
arranged the sale to Dwayne Swimley of homeowner's
insurance from Fidelity. On April 5, 2012, a fire severely
damaged Swimley's home. Fidelity paid Swimley's
5 Fidelity sent to TimCal a letter dated July 9, 2012,
"The Swimley residence was constructed *** as a single
family residence and was subsequently remodeled so that the
second floor contained a separate apartment, complete with
kitchen. *** At the time he applied for insurance through
TimCal, Swimley had 4 tenants or roomers residing at the
insured premises. ***
TimCal violated the terms of the 'Independent Producer
Agreement' between GEICO Insurance Agency, Inc. and us
*** by submitting an application containing inaccurate
information for a risk that did not qualify for insurance
coverage with us. Specifically, Question 26 of the
application states, 'Are there any roommates or
bo[a]rders in the home and/or is the home used as a rooming
or boarding house?' [TimCal's employee] McGreevy
answered this question, 'No.' Similarly, Questions 6
and 7 relate to whether the Dwelling was originally
constructed as a Single Family residence but later converted
to a Multi-Family structure and whether any unit in the
structure is occupied by more than one family. McGreevy
answered 'No' [to] both of these questions.
*** TimCal did not properly employ the *** website *** which
was designed to ensure that the proper information was
collected for the application. *** [The method] that McGreevy
utilized does not address the subjects covered by questions
26, 6 and 7, which likely resulted in McGreevy providing
inaccurate information on those subjects.
Had we known that the residence actually contained two
separate living units and four tenants, we would not have
extended coverage for the residence. As a result of
McGreevy's violation of the Independent Producer
Agreement *** we have been damaged in the amount it will be
required to pay Swimley for his claim for damages to the
residence, which is presently reserved at $576, 500.00.
This letter is intended to place you on notice that we will
seek to recover these damages from you. In the event that you
have errors and omissions insurance coverage which
potentially covers this loss, we suggest that you forward a
copy of this letter to you insurer."
6 On April 3, 2013, an employee of TimCal sent an email to a
claims manager who worked for James River. The TimCal
employee said, "my company has our E & O through
you. I have a few questions ***. I was given your contact
information from my insurance broker. This is a claims
7 Fidelity sent to James River a letter dated April 23, 2013,
repeating the statements from its letter to TimCal from July
2012 concerning the inaccurate information TimCal sent to
Fidelity. Fidelity changed the ending of the letter to say,
"we have been damaged in the amount it will be required
to pay Swimley for his claim for damages to the residence,
which is presently $497, 086.52 ACV.
This letter is intended to place you on notice that we are
seeking to recover these damages from TimCal Inc. under your
errors and omissions insurance coverage."
8 In October 2013, James River filed a complaint against
TimCal and Fidelity, asking the court to enter a judgment
declaring that James River had no duty to defend or indemnify
TimCal in the anticipated lawsuit from Fidelity, due to lack
of timely notice. Fidelity filed the expected complaint
against TimCal on April 2, 2014. Fidelity sought to ...