delivered the opinion of the court:
Plaintiffs, Uhlich Children’s Advantage Network (UCAN) and Darlene Sowell, filed a complaint for declaratory judgment seeking a determination of whether defendants, National Union Fire Insurance Co. of Pittsburgh and AIG Domestic Claims, had a duty to defend them in underlying litigation and alleging breach of contract and a violation of section 155 of the Insurance Code (215 ILCS 5/155 (West 2006)). The trial court dismissed plaintiffs’ complaint on the basis that they failed to comply with the notice requirements of the policy. On appeal, plaintiffs argue that defendants had an obligation to provide coverage for both of them in the underlying suit.
I. BACKGROUND
A. Insurance Policies
AIG issued two insurancе policies that insured UCAN and Sowell: one in effect from July 1, 2004, through July 1, 2005 (first policy), and another in effect from July 1, 2005, through July 1, 2006 (second policy). Both policies, which were “claims first made and reported” policies, contained the following language:
“COVERAGE A: INDIVIDUAL INSURED INSURANCE
This policy shall pay on behalf of each and every Individual Insured Loss arising from a Claim first made against such Individual during the Policy Period or the Discovery Period (if applicable) and reported to the insurer pursuant to the terms of this policy for any actual or alleged Wrongful Act of the Organization, except when and to the extent that the Organization has indemnified the Individual Insured. The insurer shall, in accordance with and subject to Clause 8, advance Defense Costs of such Claim prior to its final disposition.
COVERAGE C: ORGANIZATION ENTITY COVERAGE
This policy shall pay on behalf of the Organization Loss arising from a Claim first made against the Organization during the Policy Period or the Discovery Period (if applicable) and reported to the insurer pursuant to the terms of this policy for any actual or alleged Wrongful Act of the Organization. The insurer shall, in accordance with and subject to Clause 8, advance Defense Costs of . such Claim prior to its final disposition.”
“Individual insureds” include directors, officers, and emplоyees of the organization. The policies define a “claim” as “a civil, criminal, regulatory, or administrative proceeding for monetary or non-monetary relief’ that is commenced by service of a complaint or similar pleading, return of an indictment, or receipt of filing of a notice of charges. A “wrongful act” includes “any breach of duty, neglect, error, misstatement, misleading statement, omission or act.”
“Related wrongful acts” are “wrongful acts” that are “the same, related or continuous” or that “arise from a common nucleus of facts. Claims can allege Related Wrongful Acts regardless of whether such Claims involve the same or different claimants, insureds or legal causes of action.” Clause 6 provides that a single retention amount or deductible “shall apply to Loss arising from all Claims alleging the same Wrongful Act or Related Wrongful Acts.”
Clause 8 of the policies provides that “[t]he Insurer does not assume any duty to defend. The insureds shall defend and contest any Claim made against them.” It further provides that “[n]otwithstanding the foregoing, the Insureds shall have the right to tender the defense of any Claim to the Insurer, which right shall be exercised in writing by the Named Organization on behalf of all Insureds to the Insurer pursuаnt to Clause 7 of this policy. This right shall terminate if not exercised within 30 days of the date the Claim is first made against an Insured, pursuant to Clause 7 of the policy.”
Clause 7 requires that notice to the insurer of a claim must be in writing. It further provides in relevant part:
“A claim shall be considered to have been first made against an Insured when written notice of such Claim is received by any Insured, by the Named Organization on behalf of any Insured or by the Insurer, whichever comes first.
(a) The Insureds shall, as a condition precedent to the obligations of the Insurer under this policy, give written notice to the Insurer of any Claim made against an Insured as sоon as practicable and either:
(1) anytime during the Policy Year or during the Discovery Period (if applicable); or
(2) within 30 days after the end of the Policy Year or the Discovery Period (if applicable), as long as such Claim is reported no later than 30 days after the date such Claim was first made against an insured.
(c) If during the Policy Period or during the Discovery Period (if applicable) the Insureds shall become aware of any circumstances which may reasonably be expected to give rise to a Claim being made against the Insureds and shall give written notice to the Insurer of the circumstances and the reasons for anticipating such a Claim, with full particulars as to dates, persons, and entities involved, then any Claim which is subsequently made against the Insureds and reported to the Insurer alleging, arising out of, based upon or attributable to such circumstances or alleging any Wrongful Act which is the same as or related to any Wrongful Act alleged or contained in such circumstances, shall be considered made at the time such notice of such circumstances was given.”
B. Leonard Claim
On January 31, 2005, Andrew Leonard, a former UCAN employee, filed a charge with the Equal Employment Opportunity Commission (EEOC) alleging that UCAN discriminated against him in viоlation of the Americans With Disabilities Act of 1990 (ADA) (42 U.S.C. §12101 (2000)). He amended his charge on July 13, 2005.
Leonard received a right-to-sue letter in August 2005 with respect to the EEOC charge against UCAN. On September 29, 2005, Leonard filed a complaint in the United States District Court for the Northern District of Illinois against UCAN and Darlene Sowell, UCAN’s then-executive vice-president of human resources. The federal complaint alleged that UCAN discriminated against him in violation of the ADA and that both UCAN and Sowell retaliated against him for exercising his rights under the Family and Medical Leave Act of 1993 (FMLA) (5 U.S.C. §6381 (2000)). UCAN received a copy of the complaint on October 10, 2005, and “notifiеd AIG” of the complaint on the same day. AIG acknowledged receipt of the complaint on November 3, 2005, but on March 2, 2006, AIG stated that it would not provide coverage for Leonard’s claims.
On February 4, 2008, UCAN filed a complaint seeking a declaration that defendants had a duty to defend them in the Leonard action and alleging breach of contract and a violation of section 155. Defendants filed a motion to dismiss pursuant to section 2 — 615 of the Code of Civil Procedure (735 ILCS 5/2 — 615 (West 2006)), arguing that the Leonard claim was first made on January 31, 2005, during the policy period of the first policy, but was not reported until the рolicy period for the second policy. Defendants argued that because both policies provided that only a claim made and reported during the first policy period was covered, the complaint should be dismissed. The trial court dismissed the complaint, and this appeal followed.
II. ANALYSIS
A motion to dismiss pursuant to section 2 — 615 attacks the legal sufficiency of the complaint. R&B Kapital Development, LLC v. North Shore Community Bank & Trust Co.,
A. Estoppel
A court’s primary objective in construing the language of an insurance contract is to ascertain and give effect to the intent of the parties to the contract. American Service Insurance Co. v. Pasalka,
Claims-made and occurrence-based insurance policies insure different risks. “ ‘In the occurrence policy, the risk is the occurrence itself. In the claims made policy, the risk insured is the claim brought by a third party against the insured.’ ” Continental Casualty Co. v. Coregis Insurance Co.,
“Conventional liability insurance policies are ‘occurrence’ policies; they insure against a negligent or other liability-causing act or omission that occurs during the policy period regardless of when a legal claim arising out of the act or omission is made against the insured. Because of the indefinite future liability to which an occurrence policy exposes the insurance company, these companies now offer (also or instead) ‘claims made’ policies, which limit coverage tо claims made during the policy period. The coverage is less, but so, therefore, is the cost.” National Union Fire Insurance Co. of Pittsburgh v. Baker & McKenzie,997 F.2d 305 , 306 (7th Cir. 1993).
The purpose of a claims-made policy is to allow the insurance company to easily identify risks, allowing it to know in advance the extent of its claims exposure and compute its premiums with greater certainty. Aetna Casualty & Surety Co. of Illinois v. Allsteel, Inc.,
Plaintiffs argue that defendants owed both UCAN and Sowell a duty to defend because the Leonard lawsuit falls within the coverage provided by the policies. Plaintiffs further argue that because defendants breached their duty to defend, the estoppel doctrine precludes them from asserting their policy-based “late notice” defenses.
The general rule of estoppel provides that an insurer that takes the position that a complaint potentially alleging coverage is not covered under a policy that includes a duty to defend may not simply refuse to defend the insured. Employers Insurance of Wausau v. Ehlco Liquidating Trust,
An insurer’s duty to defend, whiсh is much broader than its duty to indemnify, is generally determined by comparing the allegation of the underlying complaint against the insured to the language of the insurance policy. Outboard Marine Corp. v. Liberty Mutual Insurance Co.,
1. Darlene Sowell
We find that defendants had a duty to defend Sowell in the federal case brought by Leonard. As an officer of the organization, Sowell was an “individual insured” under the policies at issue in this case. Defendants argue that, similаr to UCAN, Sowell was on notice that she was likely to be sued when Leonard filed his amended EEOC charge. We note that the EEOC amendment was made early during the second policy period and that Sowell gave defendants notice of the claim later in the second policy period. Both the amendment and notice occurred during the second policy period.
Furthermore, neither the original EEOC charge nor the amended charge made a claim against Sowell for wrongful acts. While defendants argue that the amended charge’s mention of the “Human Resources Vice President” put Sowell on notice, the EEOC charge alleging an ADA violation could not have made such a claim against her, as ADA claims may not be brought against officers of a corporation. See Albra v. Advan, Inc.,
Defendants cite American Center for International Labor Solidarity v. Federal Insurance Co.,
The court found that the insurance company was not obligated to provide сoverage for the executive director. American Center for International Labor Solidarity,
The pivotal difference between American Center for International Labor Solidarity and this case is that the definition of “claim” in defendants’ policies does not state that all suits or proceedings arising out of the same facts are a single “claim.” Indeed, there is no language in the policies overtly establishing that related wrongful acts constitute one loss, unlike the provision in American Center for International Labor Solidarity,
2. Uhlich Children’s Advantage Network
Plaintiffs argue that because defendants had a duty to defend Sowell, they also had a duty to defend UCAN, relying on International Insurance Co. v. Rollprint Packaging Products, Inc.,
Defendants, citing Graman, contend that “an additional element” must be considered in determining whether a claim is potentially covered under a “claims made and reported policy,” i.e., whether the claim was actually first made and reported as required by the policy. In Graman, the defendant insurance company sold the plaintiff, an architect, a claims-made policy, which required any claim аgainst the plaintiff to be made during the period of the policy and be reported to the insurer no later than 60 days after the end of the policy period.
The plaintiff performed work on a new school building, but in September 1973, the school notified him of problems with the roof. For four years, the plaintiff, contractor, and school district unsuccessfully attempted to rectify the problem, and in October 1977, the school district filed a lawsuit against the plaintiff. The plaintiff tendered the defense of the suit to the defendant, which denied coverage, and the plaintiff filed a complaint for declaratory judgment. On appeal, the court noted that the claims-made policy is characterized by coverage for acts discovered during and brought to the attention of the insurer during the policy term. Graman,
The plaintiff argued, however, that there was a potential for coverage under the poliсy, and since the defendant failed to defend it under a reservation of rights or to file a declaratory judgment action, it was estopped from denying liability under the policy. The court disagreed, finding that the time qualifications “control the coverage provision” and related “directly to the coverage afforded under the policy.” Graman, 87 111. App. 3d at 901, 902. The court continued:
“Plaintiff would excise the time clause from the contract, thereby allowing any insured who once owned such a policy to assert coverage no matter when it notified the insurer of such a claim. However, we do nоt believe the allegation of a situation which technically falls under the error, omission, or negligent act definition of coverage is all that is needed to show potentiality of coverage under the policy at issue here. The insured must notify the insurer of such a claim within the time constraints listed in the policy or there is no coverage for the acts, omissions or negligent acts of the insured, no matter when they occurred.” Graman,87 Ill. App. 3d at 902 .
Because the plaintiff did not present the claim to the insurer within 60 days after the expiration of the policy, no potential coverage existed. Graman,
Citing Graman, defendants argue that under a “claims first made and reported” policy, failure to timely notify the insurer is a condition precedent to coverage. However, Ehlco, decided 19 years after Graman, expressly rejected this argument:
“The decisions recognizing an exception for late-notice defenses reason that an insured’s compliance with a notice provision in a liability insurance policy is a condition precedent to coverage. As a result, where the insured breaches the notice provision, that breach negates any duty to defend or indemnify on the insurer’s part. Furthermore, because the duty to defend has been negated, the general rule estopping the insurer from denying coverage where it breaches the duty to defend does not apply. *** We are not persuaded by this argument. To accept it would be to contradict long established law governing the insurers’ duty to defend and the consequences of breaching that duty.” Ehlco,186 Ill. 2d at 152-53 .
Ehlco concluded that “there is no exception to the estoppel doctrine for late-notice defenses” and held that “[i]f an insurer believes that it received notice too late to trigger its obligations, it should dеfend its insured under a reservation of rights or litigate the matter in a declaratory judgment action.” Ehlco,
We agree with defendants’ argument that there are some instances in which an insurance company may decline to defend an entity that claims to be an insured. In United Stationers Supply Co. v. Zurich American Insurance Co.,
Defendants correctly note that UCAN did not give them timely notice, as it received notice of the EEOC charge during the first policy period but did not give defendants notice until the second policy period, when Leonard filed his lawsuit in federal court. See Baker & McKenzie,
However, once the insurer breaches its duty to defend, the estoppel doctrine “has broad application and operates to bar the insurer from raising policy defenses to coverage, even those defenses that may have bеen successful had the insurer not breached its duty to defend.” Ehlco,
Defendants further contend that they did not assume a duty to defend under the policies. Defendants argue that the duty to defеnd is a creature of contract (Conway v. Country Casualty Insurance Co.,
“[T]he Insureds shall have the right to tender the defense of any Claim to the Insurer, which right shall be exercised in writing ***. This right shall terminate if not exercised within 30 days of the date the Claim is first made against an Insured, pursuant to Clause 7 of the policy. *** Provided the Insureds have complied with the foregoing, the Insurer shall be obligated to assume the defense of the Claim even if such Claim is groundless, false or fraudulent.”
Defendants contend that the complaint does not allege, and there is no evidence in the record suggesting, that UCAN tendered the defense in writing. We note, however, that plaintiffs forwarded the federal Leonard complaint to defendants on October 10, 2005, the same day they received it. AIG also admitted in its March 2, 2006, letter that “this Claim was reported to AIGDC on October 10, 2005.” We conclude that plaintiffs’ action in sending a copy of the complaint to defendants complied with the requirements of Cincinnati Cos. v. West American Insurance Co.,
Defendants argue that estoppel should not apply in this case for the additional reason that they actively sought a judicial determination of their rights and duties after plaintiffs filed their complaint for declaratory relief. Defendants cite Village of Melrose Park v. Nautilus Insurance Co.,
“While there need not be a race to the courthouse and the insured should not be able to estop the insurer from asserting policy defenses by filing a complaint for declaratory judgment first, the insurer must take some action to adjudicate the issue of coverage or undertake to defend the insured under a reservation of rights, and it must take that action within a reasonable time of a demand by the insured.” Korte Construction Co. v. American States Insurance,322 Ill. App. 3d 451 , 458 (2001).
Forcing the insureds to file a declaratory action two years after defendants denied their claim did not constitute “a reasonable time of a demand by the insured.” Korte Construction Co.,
Accordingly, we conclude that because defendants failed to either represent plaintiffs under a reservation of rights or file a declaratory action, they are estopped from asserting their late-notice defense. Ehlco,
B. Section 155 Claim
Plaintiffs next argue that the trial court erred in dismissing their count based on vexatious refusal to settle under section 155 of the Insurance Code (215 ILCS 5/155 (West 2006)). Section 155 of the Insurance Code provides that an insurer is liable for certain penalties when “there is in issue the liability of a company on a policy or policies of insurance or the amount of the loss payable thereunder, or for an unreasonable delay in settling a claim, and it appears to the court that such action or delay is vexatious and unreasonable.” 215 ILCS 5/155 (West 2006). Section 155 was enacted by the legislature to provide a remedy to an insured who encоunters unnecessary difficulties when an insurer withholds policy benefits. McGee v. State Farm Fire & Casualty Co.,
The “key question” in a section 155 claim is whether an insurer’s conduct is vexatious and unreasonable. McGee,
Plaintiffs argue that “AIG’s refusal to cover the Leonard claims when examined in light of AIG’s undisputed ‘actual notice’ of the claim against UCAN and Sowell may be sufficient evidence” from which a trier of fact could find vexatious behavior on the pаrt of both defendants. Plaintiffs further contend that they made clear their disagreement with defendants’ decision to deny coverage, and they invited defendants to participate in early efforts to settle the Leonard claim.
“An insurer’s delay in settling a claim will not be deemed vexatious or unreasonable for purposes of section 155 sections where a bona fide dispute over coverage exists.” Baxter International, Inc. v. American Guarantee & Liability Insurance Co.,
III. CONCLUSION
For the foregoing reasons, we reverse the dismissal of plaintiffs’ declaratory action but affirm the dismissal of their claim based on section 155.
Affirmed in part and reversed in part; cause remanded.
QUINN and STEELE, JJ., concur.