Failure to notify an insurer of a claim on a timely basis justifies a decision not to defend the parties to the lawsuit, the Illinois Supreme Court ruled yesterday, upholding existing precedent in that state on the issue.

The decision supports a friend of the court brief filed on behalf of the insurer in a case by the Illinois Insurance Association and the National Association of Mutual Insurance Companies.

"This is a very fair decision and a positive result for insurers doing business in Illinois," said Marsha Harrison, regulatory affairs counsel for NAMIC. "For the Supreme Court to decide otherwise would have turned Illinois insurance contract law on its head."

NAMIC had joined with the Illinois Insurance Association Nov. 22 to file an amicus brief in the case Country Mutual Insurance Co. vs. Livorsi Marine Inc.

"The Supreme Court affirmed the appellate court's conclusion that the insurer did not receive the notice to which it was entitled by contract," Ms. Harrison continued.

She noted that the appellate court had in part premised its decision on a concession by the insureds that the notice given to Country Mutual was unreasonably and inexcusably late.

"In applying case law that has been on the books for 50-plus years, the court rejected urgings that it rewrite the rules and not consider all the relevant factors," she said.

To effectively perform their contractual obligations to a policyholder, insurers must be able to investigate claims on a timely basis, Ms. Harrison said.

"The more time that passes after a claim occurs, the more difficult it is for any interested party, including an insurer, to determine what happened," she said."This is the rationale behind the policy requirement that an insured give timely notice to his insurer of a lawsuit filed against the insurer."

Special Reports /

Ill. Court Upholds Timely Notice

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