In IMC Global v. Continental Ins. Co., 378
Ill. App. 3d 797, 883 N.E.2d 68 (2007), the insured acquired an abandoned fertilizer
plant that was leaking toxic chemicals. At a town hall meeting, local residents
demanded $175 million to relocate the community and to compensate them for past
"injustices." Sixteen months later, they filed a class action in federal court.
The insured's legal department sent over a stack of materials to the risk
manager with instructions to notify the company's historic CGL insurers on the
risk from 1910 to 1986. The paperwork contained copies of notice letters the
company had previously sent out regarding a 1996 claim at the plant. One of
the 1996 notice letters concerning 1967–68 CGL policies was addressed to "Employer's
Mutual Casualty Company" in Des Moines, Iowa. The risk manager did not verify
the accuracy of the address and sent notice of the class action to the same
place. When the class action was dismissed and refiled, the risk manager sent
another notice using the same Iowa address block as before.
As it turned out, the 1967–68 policies were issued by "Employer's Mutual
Insurance Company" of Wisconsin (which had
been taken over by Wausau), not the "Employers Mutual
Casualty Company" of Des Moines, Iowa. The
two companies were unrelated. So Wausau never received the risk manager's letters.
Eventually the insured's defense counsel notified Wausau, demanding that it
pay 100 percent of the ongoing defense costs, but by that time it was too late.
On these facts, the appellate court held:
- The risk manager's wayward
letters sent to Iowa were not sufficient to serve notice to Wausau.
- Accidentally sending notices
to the wrong insurer does not legally excuse the policyholder from its obligations
under the policy.
- Notice sent to Wausau by
outside counsel, some 13 months after the original suit, and 6 months after
the refiled suit, was unreasonable as a matter of law.
The trial court had held that Wausau was prejudiced as a result of the late
notice, and the insured did not appeal that part of the decision. Therefore,
the appellate court affirmed the trial court's judgment that no coverage was
owed under the 1967–68 policies.
Several steps should have been taken to avoid this kind of mistake.
- It should be the risk manager's responsibility (not legal's) to keep
correct and current contact information on each of the company's historic
CGL insurers.
- The risk manager should not have relied on the address blocks from old
notice letters sent in 1996 when issuing new notices 4 or 5 years later.
Things could have changed in the interim.
- The risk manager should have double-checked the address blocks of all
notice letters against the insurer identified in the policies themselves.
This, of course, would require the risk manager to keep copies of all policies
for future reference.
- The risk manager should have kept up with the merger/acquisition activity
of the 70 or so primary and excess insurers providing legacy coverage. He
should have known that Wausau took over as the insurer for the 1967–68 policies
at issue.
- The risk manager should have maintained a chart showing which of the
70 primary and excess insurers did or did not respond
to each notice letter sent.
- There should have been a tickler system to prompt the risk manager to
follow up if one of the insurers in the notice matrix did not respond in
a timely fashion.
As they say, the devil is in the details. When trying to notify legacy insurers,
one of the critical details is to make sure you are sending notices to the correct
insurer (or the correct successor to the correct insurer). If you don't pay
close attention to details like that, you may lose your opportunity for coverage.