Fact Issue: Is Notice To Broker Notice To Insurer?
May 04, 2011
The 1st District Appellate Court recently held that fact issues existed with respect to a broker's authority to receive notice of a claim on behalf of an insurer, and that additional fact issues existed concerning whether the insurer received timely notice of the underlying accident or lawsuit. Summary judgment for the insurer, therefore, was not appropriate, even though it did not receive actual notice of the accident for 2½ years and did not receive notice of the lawsuit until seven months after filing. First Chicago Insurance Co. v. Molda, No. 1-10-1138, 2011 WL 1205480 (1st Dist. March 29, 2011).
The insurer, First Chicago, was represented by James P. Newman & Associates LLC of Chicago. Beverly & Pause of Chicago represented an additional insured under the policy, Michael Molda.
Background
Molda was an employee of Metrolift. He was involved in an automobile accident while on the job in August 2005. First Chicago provided automobile liability coverage for Metrolift. Metrolift corporate officers became aware of the accident within two days and one of them, Harrison, contacted Metrolift's broker, Associated, to discuss the accident.
According to Harrison, he agreed with the Associated representative during the conversation that they would "wait and see" how the accident evolved, including whether Metrolift would be named a defendant in any lawsuit and whether Molda's personal insurance might provide coverage. Associated's representative, however, disagreed that there was any agreement reached not to report the accident to First Chicago.
On the other hand, the Associated representative testified that Metrolift provided no details of the accident, as it had with other accidents in the past, and that no one from Metrolift told Associated to turn in the claim to First Chicago.
In August 2007, the other person involved in the accident with Molda, Nola Wilson, filed suit against Molda. About five months later, in January 2008, Molda's attorney contacted Metrolift. Metrolift reported the lawsuit to Associated and Associated notified First Chicago. First Chicago claimed not to receive notice until the latter part of March 2008.[*]
In April 2008, the underlying claimant, Wilson, filed an amended complaint adding Metrolift as a defendant. In the same month, First Chicago brought this declaratory action claiming late notice of the accident and of the lawsuit. Molda filed a counterclaim for coverage. The trial court entered summary judgment for First Chicago and Molda and Wilson took this appeal.
Agency Fact Issues
In an opinion by Justice Robert E. Gordon, the 1st District reversed. He noted the appellants' two arguments, namely, that Associated was First Chicago's agent for notice purposes and that the notice provided by Molda to Metrolift, which prompted the actual notice to First Chicago, was timely because Molda was not earlier aware of the First Chicago coverage.
With respect to the first issue, Gordon observed that the First Chicago policy required that "you," meaning Metrolift, provide the "authorized agent" for First Chicago "prompt notice" of the accident. The policy did not define "authorized agent." The issue thus became whether Associated, Metrolift's broker, was an "authorized agent" of First Chicago for notice purposes.
According to Gordon, evidence existed of record suggesting that Associated could have had apparent authority to act on First Chicago's behalf in accepting notice from Metrolift. Gordon relied primarily on evidence indicating a pattern of conduct on prior claims between First Chicago and Associated in which Associated would accept notice of a claim and submit the information to First Chicago. Gordon thought this evidence sufficient to give rise to a fact issue concerning apparent authority.
He noted that Metrolift did, on occasion, deal with First Chicago directly, but that most of its communications came through Associated. He also relied on the fact that the First Chicago policy listed the name and contact information for Associated, but contained no other contact information, including no listing of an "authorized representative" for First Chicago.
First Chicago argued that notice was not sufficient because Metrolift and Associated agreed that notice would not be provided to First Chicago, but Gordon said there were fact issues as to whether or not they so agreed.
He also rejected First Chicago's argument that notice to an agent is not imputed to a principal when the facts support the inference that the agent will conceal the information from the principal. The cases relied on by First Chicago, according to Gordon, all had to do with information concealed at the time of an application for coverage and thus were distinguishable.
Late Notice Fact Issues
As to the appellants' second argument, that notice by Molda was reasonable, Gordon observed that the notice-of-accident condition in the policy required that notice be given by Metrolift to First Chicago. Relying on Country Mutual Insurance Co. v. Livorsi Marine, Inc., 222 Ill. 2d 303 (2006), however, Gordon said that he could not conclude that the notice was necessarily unreasonable.
That case identified a variety of factors, such as an insured's sophistication, an insured's diligence and prejudice to the insurer as factors relevant to the timeliness of notice. Gordon said these factors gave rise to fact issues.
First Chicago relied on case law, such as Safeco Insurance Co. of Illinois v. Treinis, 238 Ill. App. 3d 541 (1992), where a delay in notice of as little as six months was found to be unreasonable. Gordon distinguished that case on the ground that, here, there were fact issues concerning Metrolift's communications with Associated, prejudice to First Chicago and so forth.
The court, therefore, reversed summary judgment in favor of First Chicago and remanded for a determination of the outstanding fact issues.
Key Point
According to this court, a course of dealing between an insured and its broker can give rise to fact issues concerning whether notice of an occurrence provided to the broker constitutes notice to the insurer.
