Illinois Union Insurance v. NRI Construction Inc., 846 F. Supp. 2d 1366

Plaintiff Illinois Union filed a declaratory judgment action seeking a declaration of no duty to defend/indemnify under a CGL policy issued to NRI Construction, Inc. (later assets acquired by NRI of Delaware)
Policy year May 6, 2007–May 6, 2008 included a notice provision requiring prompt notice of occurrences that may give rise to a claim; occurrence defined as an accident
In April 2008, Alonzo, a worker for a subcontractor, allegedly fell eight feet from a ladder on a project in Hattfield, PA; NRI did not notify Illinois Union at the time and later learned of the incident
Alonzo filed an underlying action in PA in January 2010; Illinois Union began investigating after notice from NRI of Georgia in February 2010
Illinois Union sent a reservation of rights (ROR) letter on the same day to the most senior NRI contacts, noting rights to withdraw from defense and seek recoupment
The court later granted Illinois Union’s summary judgment on coverage and denied as moot Illinois Union’s default-judgment motion as to Alonzo; ordered expenses to be sought within 20 days

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether NRI of Georgia failed to provide timely notice, breaching the policy condition	NRI of Georgia delayed nearly two years despite knowledge of incident	Delay was reasonable because Alonzo may have been covered by workers’ compensation	Yes, delay unreasonable as a matter of law
Validity and effect of the reservation of rights letter	ROR was timely, explicit, and properly directed; consent implied by defense	ROR sent to former employees; no effective notice to NRI of Georgia	ROR valid; implied consent by accepting defense; permits cost recoupment
Right to recoup defense costs when insurer had no duty to defend	Insurer entitled to recoupment under quasi-contract/implied in fact contract theory	No such right unless policy expressly permits; would alter contract terms	Majority Georgia approach adopted; Illinois Union entitled to recoupment of defense costs
Effect of default as to Alonzo on the merits of coverage	Res judicata not at issue; default would not affect merits		Default judgment denied as moot; merits resolved on summary judgment

United Nat’l Ins. Co. v. SST Fitness Corp., 309 F.3d 914 (6th Cir. 2002) (reservation of rights and implied in fact contract theory for cost recoupment)
Colony Insurance Co. v. G & E Tires & Service, Inc., 77 So.2d 1039 (Fla. 2000) (reimbursement under reservation of rights when insured accepts defense)
Cincinnati Ins. Co. v. Grand Pointe, LLC, 501 F. Supp. 2d 1145 (E.D. Tenn. 2007) (quasi-contract/implied assurance when insurer defends under reservation of rights)
Terra Nova Ins. Co. v. 900 Bar, Inc., 887 F.2d 1213 (3d Cir. 1989) (insurer defense under reservation of rights; unjust enrichment concerns)
Gen. Agents Ins. Co. of Am., Inc. v. Midwest Sporting Goods Co., 215 Ill. 2d 146, 828 N.E.2d 1092 (Ill. 2005) ( Illinois Supreme Court on reimbursement under reservation of rights)
Jacore Systems, Inc. v. Central Mut. Ins. Co., 194 Ga. App. 512, 390 S.E.2d 876 (Ga. App. 1990) (consent implied when insured accepts defense under reservation of rights)
State Farm, etc., Ins. Co. v. Anderson, 104 Ga. App. 815, 123 S.E.2d 191 (Ga. App. 1961) (consent implied for reservation of rights)
State Farm Fire and Casualty Co. v. Walnut Avenue Partners, 296 Ga. App. 648, 675 S.E.2d 534 (Ga. App. 2009) (unilateral reservation of rights allowed; implied consent)
Sierra Contracting Corp. v. Illinois Union Ins. Co., 744 F. Supp. 2d 1349 (N.D. Ga. 2010) (precedent on notice under Georgia law)