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Commercial Auto |
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Primary Versus Excess
Coverage |
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Notice Of Lawsuit |
While delivering pizza for
his employer, Pizza Nova on January 22, 1999, Francisco Araujo (Araujo) struck
and injured a pedestrian, Luz Mendez. Araujo was driving his father's car,
which was insured by Universal Casualty Company (Universal). Progressive
Insurance Company (Progressive) insured Pizza Nova. The Progressive policy
insured any automobiles used in the course of Pizza Nova's business that it did
not own.
On January 17, 2001, Mendez
filed a complaint naming Araujo and Pizza Nova as defendants but Mendez was
unable to serve the Araujos with process regarding the lawsuit. On May 1, 2001,
Progressive settled the case with Mendez for $57,500. Progressive then filed a
complaint for declaratory judgment, requesting a finding that Universal was the
primary insurer of the car and that Progressive was an excess insurance
carrier. Under this theory, Progressive sought reimbursement of the $57,500.
Universal denied any obligation to reimburse Progressive, claiming its duty to
defend the lawsuit never arose because it never received notice of the lawsuit.
The trial court granted
summary judgment in favor of Progressive and Universal appealed.
On appeal, the primary issue
was whether Universal had actual notice of the underlying action. However, as a
preliminary matter, the Appellate Court of Illinois evaluated several technical
aspects of the case. It first determined that Pizza Nova was the insured party
under the Universal policy because the policy language included "any other
person or organization legally responsible for the use of . . . any owned
automobile." Next, the court evaluated the language of the Progressive
policy to determine whether Progressive was a true excess insurer. To reach
this conclusion, it was necessary for the court to find the existence of
primary coverage. Progressive's policy provided "For any covered 'auto'
you don't own, the insurance provided by this Coverage Form is excess over any
other collectible insurance." Thus, to find a primary insurer it was
necessary to determine whether Universal's insurance coverage was
"collectible." Universal argued that its coverage was not collectible
because the insured did not comply with certain conditions necessary to trigger
coverage. Progressive argued that Universal could not assert such an argument
(i.e., it was "estopped" from doing so) because it improperly refused
to defend the insured in the underlying lawsuit. Universal claimed it never
received notice of the lawsuit in the first place and whether Universal had
actual notice of the underlying action was the key question in the case.
The parties provided
conflicting evidence regarding the issue of notice. Progressive provided a copy
of a letter from Mendez's attorney to Universal stating he had been retained by
Mendez to represent her, a copy of a letter from a Universal claims
representative acknowledging receipt of the attorney's letter, and copies of
two letters from Progressive to Universal referencing the Mendez matter.
Progressive also provided an affidavit of an officer of the company stating
that the existence of the lawsuit was communicated to Universal. Universal
submitted an affidavit in which an officer of the company stated Universal knew
of the Mendez matter but not of the lawsuit itself. Because this evidence was
in conflict, the court reversed the trial court's grant of summary judgment in
favor of Progressive and remanded the cause to the trial court for further
consideration.
Progressive Insurance
Company v. Universal Casualty Company-No. 1-03-1445-Appellate Court of
Illinois, First District, First Division-March 15, 2004-807 North Eastern
Reporter 2d 577