Northbrook Property & Casualty Insurance Co. v. Applied Systems, Inc.

313 Ill.App.3d 457, 729 N.E.2d 915, 246 Ill. Dec. 264 (1st dist. 3rd div. 2000)

Words & Phrases

Late Notice: In General

Appellate Judge

David Cerda

Holding

General Counsel's failure to appreciate scope of coverage was no excuse for late notice.

Fact Summary

We find Applied's belief that coverage was not available under the policies to be unreasonable as a matter of law. The policies do not mandate Applied to give notice of every lawsuit that is filed against it, but only those suits that fall within the definition of that term, namely any civil proceeding in which damages because of advertising injury to which the insurance applies is alleged. An insured, in deciding whether to provide notice to Northbrook, must necessarily evaluate the third-party's complaint in light of the policy provisions to ascertain whether advertising injury coverage is implicated so as to require notice of the suit. Applied accordingly should have reviewed the policies and Harbor's complaint together. Yet, Applied did not do so because, according to its general counsel, it did not understand the coverage it procured.

        Applied, a corporation engaged in the business of developing computer software for the insurance industry, having obtained more than one commercial liability policy, and retaining in-house and outside counsel who could have made a coverage evaluation, was not an unsophisticated insured. By failing to review the policies and the complaint together to determine whether advertising injury coverage was implicated, Applied, and specifically Camasta as general counsel, failed to act like a reasonably prudent insured under the circumstances. A reasonable insured's attorney would have examined the complaint and relevant policy provisions to gauge the applicability of coverage rather than "assuming," as Camasta did, that coverage was excluded. A reasonable insured additionally would not have simply concluded that the advertising injury coverage was uncomprehensible. If Camasta did indeed find the policies too complicated to understand, he could have easily conferred with someone knowledgeable in the subject within a reasonable time period to determine if notice and a tender of defense should have been given to Northbrook.

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