Additional Insureds Finds Timely Notice Just As Important As For Insureds

March 2, 2016 / Writing and Speaking

The 1st District Appellate Court recently held that an additional insured has obligations similar to a named insured in giving prompt notice of an occurrence or lawsuit to the insurer, and that the additional insured’s failure to comply negated coverage.

The case is AMCO Insurance Co. v. Erie Insurance Exchange, 2016 IL App (1st) 142660.

AMCO Insurance Co., the party seeking recovery by way of contribution from the additional insurer, was represented by Cray, Huber, Horstman, Heil & VanAusdal LLC.

Hinkhouse, Williams, Walsh LLP represented the additional insurer, Erie Insurance Exchange.

Kevin Smith was injured at a construction site and brought the underlying lawsuit in March 2007. Hartz Construction Co., the general contractor, was one of the original defendants named in the suit. Smith later added subcontractor Cimarron Construction Co. as a defendant and in June 2008 added subcontractor Van Der Laan Brothers Inc. (VDL)

The insurance coverages were as follows: Hartz by Cincinnati Insurance Co.; Cimarron by AMCO; and VDL by Erie.

Hartz, the general contractor, was an additional insured on the AMCO policy and selectively tendered to AMCO, which provided a defense. Hartz was also an additional insured on the Erie policy issued to VDL. It was provided coverage on the Erie policy for liability “arising out of” VDL’s operations. After VDL was added as a defendant, Hartz thus tendered to Erie, which accepted the tender but appears not to have incurred any defense costs.

Although Erie’s insured, VDL, was added as a defendant in June 2008 and Erie had notice of the underlying lawsuit by July 2008, Hartz did not give formal notice of the action to Erie until it tendered in December 2009, which the court noted was “almost three years” after Hartz was initially sued in March 2007.

AMCO settled on behalf of Hartz and Cimarron in March 2011. It ended up paying $1 million on behalf of Hartz and $450,000 on behalf of Cimarron. It then brought the current lawsuit against Erie seeking contribution for both the settlement and defense costs.

Following cross-motions for summary judgment, the trial court entered summary judgment for Erie on late notice grounds. AMCO took this appeal.


In an opinion by Justice Joy V. Cunningham, the 1st District affirmed. She initially observed that notice provisions in insurance policies are conditions precedent to triggering coverage, and that Hartz, as additional insured under the Erie policy, therefore had a duty to timely notify Erie of the underlying action.

She further observed that an insured under the Erie policy had the obligation to give notice of the occurrence “as soon as practicable” and provide copies of suit papers “immediately.” In determining the adequacy of notice, Cunningham looked to a number of factors.

The first was the notice language in the Erie policy. Here, Hartz’s failure to notify Erie for almost three years violated both the “as soon as practicable” requirement and the “immediately” requirement for suit papers, and notice thus was untimely as a matter of law. This was so, Cunningham said, even though Erie learned about the underlying lawsuit in July 2008, shortly after VDL, Erie’s direct insured, was sued.

A second factor Cunningham considered was the sophistication of the parties. She found that Hartz was sophisticated in insurance matters in that it had been sued before and had been instructed about the importance of prompt notice by its general counsel.

The third factor was the insured’s awareness of a lawsuit that may trigger insurance coverage. Cunningham said this factor weighed in favor of Erie because Hartz knew about the lawsuit since March 2007.

The fourth factor concerned the insured’s diligence in ascertaining policy coverage. Cunningham here looked to some of the evidence adduced as part of the underlying lawsuit, which suggested that VDL’s operations may have contributed to Smith’s injury. Based on this evidence, she found that Hartz should have been put on notice of the potential Erie coverage when the lawsuit was originally filed in 2007, even before VDL was added as a defendant.

The final factor was prejudice to Erie. Cunningham found prejudice in the fact that discovery was nearly complete by the time Hartz gave notice in December 2009. Accordingly, all five factors weighed in favor of Erie.

Cunningham also rejected AMCO’s reliance on The Cincinnati Companies v. West American Insurance Co., 183 Ill.2d 317 (1998). In that case, Cunningham noted, the Supreme Court held that an insurer could not decline coverage for an additional insured where the additional insured did not discover until the eve of trial that the insurer provided coverage.

The court found that the insurer already had “actual notice” of the action because it had been actively defending the identical lawsuit for another insured.

Cunningham distinguished the case on the ground, among others, that late notice was not an issue in that case and the case focused on the duty to defend, whereas the current case focused on the duty to indemnify. On the latter point, she noted that AMCO made its argument for defense costs “in a single sentence.”

The court therefore affirmed summary judgment for Erie.

Key Point

An additional insured must give timely notice to the additional insurer of both the occurrence and the lawsuit under the same standards that apply to the named insured.

  • Chicago

    Illinois 60603

    10 South LaSalle Street

    Chicago, Illinois 60603

    T: 312.855.1010 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Dennis D. Fitzpatrick

  • New York

    New York 10005

    28 Liberty Street 39th Floor

    New York, New York 10005

    T: 212.805.3900 TF: 800.826.3505 F: 212.805.3939 Office Managing Partner: Carl M. Perri

  • Mission Viejo

    California 92691

    27285 Las Ramblas

    Suite 200

    Mission Viejo, California 92691

    T: 949.260.3100 TF: 800.826.3505 F: 949.260.3190 Office Managing Partner: Ian R. Feldman

  • Florham Park

    New Jersey 07932

    100 Campus Drive

    Florham Park, New Jersey 07932

    T: 973.410.4130 TF: 800.826.3505 F: 973.410.4169 Office Managing Partner: Carl M. Perri

  • Michigan City

    Indiana 46360

    200 Commerce Square

    Michigan City, Indiana 46360

    T: 219.262.6106 TF: 800.826.3505 F: 312.606.7777 Office Managing Partners: Paige M. Neel, Kimbley A. Kearney

  • Milwaukee

    Wisconsin 53202

    250 E. Wisconsin Avenue

    Suite 1800

    Milwaukee, Wisconsin 53202

    T: 414.279.5525 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: James M. Weck

  • Stamford

    Connecticut 06902

    68 Southfield Avenue

    2 Stamford Landing Suite 100

    Stamford, Connecticut 06902

    T: 203.921.0303 TF: 800.826.3505 F: 212.805.3939 Office Managing Partner: Matthew J. Van Dusen

  • Tampa

    Florida 33609

    4830 West Kennedy Boulevard, One Urban Center

    Suite 600

    Tampa, Florida 33609

    T: 813.509.2578 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Dennis D. Fitzpatrick Co-Managing Partner: Kelly M. Vogt

  • San Francisco

    California 94111

    100 Pine Street

    Suite 1250

    San Francisco, California 94111

    T: 415.287.2744 TF: 800.826.3505 F: 949.260.3190 Office Managing Partner: Ian R. Feldman

  • Houston

    Texas 77019

    2929 Allen Parkway

    American General Center, Suite 200

    Houston, Texas 77019

    T: 346.229.4612 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Ramy P. Elmasri

  • Dallas

    Texas 75201

    325 N. Saint Paul Street

    Suite 3100

    Dallas, Texas 75201

    T: 469.942.8635 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Ramy P. Elmasri

  • Boca Raton

    Florida 33434

    7777 Glades Road

    Suite 405

    Boca Raton, Florida 33434

    T: 561.765.5305 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Dennis D. Fitzpatrick Co-Managing Partner: Kelly M. Vogt