Children's Advantage Network v. National Union Fire Company of Pittsburgh, PA

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State: Illinois

Court: 1st District Appellate

Docket No: 1-08-3400 Rel

Case Date: 02/03/2010

Preview:THIRD DIVISION February 3, 2010

No. 1-08-3400

UHLICH CHILDREN'S ADVANTAGE NETWORK and DARLENE SOWELL, Plaintiffs-Appellants, v. NATIONAL UNION FIRE COMPANY OF ) PITTSBURGH, PA, and AIG DOMESTIC CLAIMS, INC., Defendants-Appellees.

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Appeal from the Circuit Court of Cook County, Illinois No. 08 CH 4394 Honorable Rita M. Novak, Judge Presiding

PRESIDING JUSTICE MURPHY 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.

1-08-3400

I. BACKGROUND A. Insurance Policies AIG issued two insurance 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

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1-08-3400 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, officer, and employees 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 pursuant 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

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1-08-3400 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 soon 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

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1-08-3400 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 violation of the Americans With Disabilities Act of 1990 (ADA) (42 U.S.C.

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