Failure to Provide Immediate Notice of An Occurrence Dooms First Party Asbestos Claim
January 30, 2008
On December 27, 2007, the Illinois Appellate Court affirmed Clausen Miller's successful motion for summary judgment in Board of Education of Township High School District No. 211, Cook County, Illinois v. TIG Insurance Co., No. 1-05-1732, Ill. App., 1st Dist.; 2007 Ill. App. LEXIS 1365.
Two first party property policies spanning 1981 through 1986 required a suburban Chicago school district to provide its insurer with immediate written notice of "any occurrence the cost of which is likely to result in payment." Though the school district first learned in June, 1983, that asbestos in some of its high schools had become friable, it waited until July, 1991, to notify its insurer, many years after it had expended nearly $15 million on asbestos removal projects.
The court found the policies' notice provision, a condition precedent to coverage which cannot be ignored, clear and unambiguous. "By any measure, a notice that is sent over eight years after an occurrence cannot be considered immediate," wrote Justice Joy Cunningham for a unanimous panel. Citing to a 1989 decision by the Illinois Supreme Court, the panel "concur[red] with the trial court that there is no merit to the Board's contention that it was not aware of any legal precedent for an action against [the insurer] in the first years after discovery of friable asbestos in their schools." After all, two years before providing written notice to its property insurer, the school district had sued any number of asbestos manufacturers, distributors and sellers for costs incurred in removing asbestos.
While disposition of the case ultimately turned on the application of a straightforward notice provision, the litigation spanned 15 years and included an earlier appeal. In an effort to excuse its failure to provide proper notice and circumvent application of the policies' "wear and tear" and "contamination" exclusions, the school district pursued several convoluted theories regarding manifestation of physical damage, the number of "occurrences," ordinance deficiency coverage and extra-contractual damages.
On January 24, 2008, the appellate court rejected the school board's petition for rehearing. The appeal was briefed by James T. Ferrini and Sava Alexander Vojcanin. Sava also successfully litigated the matter in the trial court, giving rise to the school board's appeal of summary judgment in favor of the insurer.
The decision is likely to have a significant impact on first and third party coverage analyses in Illinois and elsewhere. Look for a more detailed analysis of the case in an upcoming issue of the CM Report.
