Are You My Agent? Insured’s Notice to Broker Deemed Sufficient

In First Chicago Insurance Company v. Molda and Wilson, 2015 IL App. (1st) 140548, First Chicago appealed an adverse verdict finding that it had a duty to defend its insured in the underlying lawsuit. The Appellate Court affirmed the district court’s ruling, finding, in pertinent part, that the insured’s notice of the claim and suit were proper and timely.

The insured’s employee, Molda, was involved in an automobile collision while driving as a salesman for the policyholder, Metrolift. First Chicago subsequently filed a declaratory judgment against Molda, Wilson (driver of other vehicle), and Metrolift, arguing it owed no duty to defend Molda in the underlying suit because: (1) Molda was not an insured under the policy, (2) Metrolift’s insurance broker was not the agent of First Chicago for purposes of providing notice, and (3) Molda did not provide timely notice of the loss. The district court ruled in favor of the defendants.

The Appellate Court upheld the district court’s ruling. The Appellate Court ruled, in relevant part, that the notice of loss was prompt and reasonable in light of the facts that: (1) First Chicago encouraged policyholders to report claims to their insurance agents, (2) Metrolift’s insurance broker was labeled an “agent” on the Metrolift policy documents and payment schedules, and (3) Metrolift’s normal course of dealings with policy matters involved contacting the broker first (not First Chicago). Accordingly, the court determined that Metrolift’s notice of loss was sufficient under the policy.

The Appellate Court further found that notice of the lawsuit was timely. It particularly found the insured exercised reasonable diligence in relying on Metrolift’s broker to notify First Chicago of the loss and lawsuit. The Appellate Court also found significant that First Chicago was not prejudiced by the late notice. Therefore, the Appellate Court held that First Chicago had a duty to defend Metrolift in the underlying personal injury lawsuit.