AMCO Insurance Company v. Erie Insurance Exchange
49 N.E.3d 900
Ill. App. Ct.2016Background
- Plaintiff AMCO insured Cimarron (carpentry sub), which defended Hartz (general contractor) under a reservation of rights and later settled the underlying personal-injury suit for $1,450,000, allocating $1,000,000 to Hartz.
- Defendant Erie insured VDL (concrete sub) and issued a certificate naming Hartz as an additional insured for VDL’s operations; Erie defended VDL and paid VDL’s small settlement but did not reimburse AMCO.
- The underlying personal-injury suit was filed March 15, 2007 naming Hartz; VDL was added by third amended complaint on June 27, 2008.
- Hartz formally tendered defense to Erie on December 2, 2009 — nearly three years after initial complaint and ~18 months after VDL was named — and Erie accepted under a reservation of rights.
- AMCO sued Erie for contribution/equitable subrogation/other-insurance after AMCO settled Hartz’s exposure; the trial court granted summary judgment to Erie, holding Hartz’s notice to Erie untimely as a matter of law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Hartz’s notice to Erie timely under Erie policy’s "as soon as practicable"/"immediately" notice clauses? | Hartz (via AMCO) argues notice was timely or Erie had "actual notice" by July 2008 when Erie appeared for VDL. | Erie argues formal tender was nearly three years late (or 16–17 months after Erie had actual notice), so notice was unreasonable as a matter of law. | Court held Hartz’s notice was untimely as a matter of law; notice requirement not satisfied. |
| Does the "actual notice" rule (Cincinnati Cos.) excuse lack of formal tender and trigger indemnity/contribution? | AMCO contends Cincinnati Cos. means Erie’s actual knowledge in July 2008 triggered duties and should bar the tender-formality defense. | Erie says Cincinnati Cos. is inapplicable; here policy notice provisions and indemnity (not just duty to defend) control. | Court rejected Cincinnati Cos. as inapplicable to indemnity/contribution context and found actual-notice argument insufficient; even if applied, delay was unreasonable. |
| Was Erie prejudiced by late notice? | AMCO asserts Erie suffered no prejudice because substantive discovery occurred after Erie’s involvement with VDL. | Erie contends late tender prevented meaningful investigation/defense for Hartz and discovery was largely complete by December 2009. | Court found prejudice factor (and other factors) favored Erie — late notice deprived Erie of timely investigation/defense. |
| Can AMCO recover equitable contribution/other-insurance share from Erie given the late notice defense? | AMCO seeks half of Hartz’s $1,000,000 share and defense costs from Erie. | Erie asserts no obligation because notice condition precedent failed; also disputes other theories (different risks, etc.). | Court held AMCO cannot recover from Erie because notice breach bars coverage; AMCO forfeited argument on unreimbursed defense costs. |
Key Cases Cited
- Collins v. St. Paul Mercury Ins. Co., 381 Ill. App. 3d 41 (establishing de novo review of summary judgment in this context)
- Livorsi Marine, Inc. v. Country Mut. Ins. Co., 222 Ill. 2d 303 (reasonableness of notice and notice factors framework)
- Cincinnati Cos. v. West American Ins. Co., 183 Ill. 2d 317 (actual-notice rule discussed—duty to defend context)
- Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90 (distinction between duty to defend and duty to indemnify)
- Northern Ins. Co. of New York v. City of Chicago, 325 Ill. App. 3d 1086 (notice as condition precedent to coverage)
- Kerr v. Illinois Central R.R. Co., 283 Ill. App. 3d 574 (purpose of notice requirements—timely investigation)
- Northbrook Prop. & Cas. Ins. Co. v. Applied Systems, Inc., 313 Ill. App. 3d 457 (delay in notice may be unreasonable as matter of law)