First Chicago Insurance Company v. Molda, 36 N.E.3d 400

On August 17, 2005 Michael Molda, a Metrolift employee, was involved in an auto collision while driving his mother's vehicle; Metrolift held an auto policy with First Chicago covering categories 7, 8 and 9 (category 9 = “nonowned autos”).
Wilson sued Molda (later adding Metrolift); First Chicago sued for declaratory relief alleging late notice and that Molda was not an insured. Metrolift was later dismissed and the case proceeded to a bench trial.
Metrolift’s treasurer (Harrison) notified Associated (Metrolift’s broker/subproducer for First Chicago) shortly after the accident and discussed handling it with the broker; First Chicago was not notified until March 2008 when it received notice of Wilson’s suit from Associated.
Trial court held Molda was (a) an insured under the policy because his mother’s car qualified as a nonowned auto used in connection with Metrolift’s business, (b) Associated had apparent authority to receive notice on First Chicago’s behalf, and (c) notice was timely; First Chicago appealed.
The appellate court affirmed, finding (1) category 9 covers nonowned vehicles used in connection with the business, (2) apparent agency existed based on course of dealings and policy/declarations, and (3) notice (via Associated) was reasonable and not shown to have prejudiced First Chicago.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Molda was an insured under the First Chicago policy	Molda’s car was not a “covered auto” and he therefore was not an insured	Molda was driving a nonowned auto used in connection with Metrolift’s business and thus was an insured	Held: Molda was an insured; category 9 covers nonowned autos used in connection with the business (affirmed)
Whether Associated was First Chicago’s agent for notice	Associated was not First Chicago’s agent; notice to broker should not bind insurer	Course of dealings, declarations page listing Associated as agent, and First Chicago’s practice supported apparent authority	Held: Associated had apparent authority to accept notice for First Chicago (affirmed)
Whether notice of the accident was timely under the policy	Notice to First Chicago was 31 months late and unreasonable; failure to forward notice defeats coverage	Metrolift notified Associated promptly; given broker’s apparent authority and facts, notice was reasonable	Held: Notice via Associated was timely/reasonable; First Chicago did not show prejudice or fraud (affirmed)
Whether insurer must show prejudice from late notice	First Chicago argued policyholder cannot recover regardless of prejudice	Defendants argued reasonableness and lack of prejudice should control; First Chicago had not seriously investigated	Held: Prejudice is a factor in assessing reasonableness; here lack of demonstrated prejudice supports coverage (affirmed)

Addison Insurance Co. v. Fay, 232 Ill. 2d 446 (ill.) (insurance-contract construction; give effect to parties’ intent and construe policy liberally for insured)
Bazydlo v. Volant, 164 Ill. 2d 207 (ill.) (trial court as factfinder assesses witness credibility and weight)
State Sec. Ins. Co. v. Burgos, 145 Ill. 2d 423 (ill.) (apparent authority of broker to insurer; principal estopped by course of dealings)
Pekin Ins. Co. v. Benson, 306 Ill. App. 3d 367 (1st Dist.) (nonowned-auto definition construed to include vehicles owned by employees/others not in household when used in connection with business)
Country Mut. Ins. Co. v. Livorsi Marine, Inc., 222 Ill. 2d 303 (ill.) (notice provisions require notification within a reasonable time; reasonableness is fact-specific)
Kinney v. Continental Assurance Co., 42 Ill. App. 3d 263 (1st Dist.) (distinguishable on scope-of-employment and vicarious liability principles)
Hartford Fire Ins. Co. v. Whitehall Convalescent & Nursing Home, Inc., 321 Ill. App. 3d 879 (1st Dist.) (interpretation of "in connection with" construed against insurer)
Farmers Auto. Ins'n Ass'n v. Gitelson, 344 Ill. App. 3d 888 (1st Dist.) (judgment will not be reversed unless against manifest weight of evidence)