West American Insurance Co. v. Yorkville National Bank - Follow the Agreement.
Once someone files suit or makes a claim against you, just how long do you have to tender it to your insurance company… and how does that tender have to happen?
This issue is addressed in West American Insurance Co. v. Yorkville National Bank (Doc. No. 3-07-0104, 3rd Dist.). While the case involves matters relative to coverage for defamation suit, the principals are ones we should be aware of.
The policy involved in this case had a notice provision that you are likely to see in many policies:
"If a claim is made or ‘suit’ is brought against any insured, you must:
(1) Immediately record the specifics of the claim or ‘suit’ and the date received; and
(2) Notify us as soon as practicable.
You must see to it that we receive written notice of the claim or ‘suit’ as soon as practicable."
Although the defendants in the action had known that a suit had been filed against 
them on September 24, 2001, and although they had allegedly had conversations about the suit with their insurance broker, they waited until January 19, 2004 – over 27 months – to tender written notice of the suit to their insurer. The case had been ongoing for over two years and was set to go to trial in March of 2004.
They were likely a bit surprised when their insurer filed an action against them seeking a court’s declaration that the insurer had no duty to defend or indemnify their insured given the 27 month lack of notice. The insureds argued to the trial court that the conversations should be enough to trigger coverage, and the trial court agreed. The insurer appealed and the appellate court found that the conversations didn’t matter.
Where the contract was specific in requiring written notice, the decision by the trial court that the conversations were enough effectively read the “written notice” requirement out of the agreement… and that’s not correct.
The appellate court reversed and found that failure to provide written notice for 27 months was a breach of the policy and therefore, the insureds were not entitled to coverage.
Coverage they would probably otherwise have had if they just sent the written notice when they were informed about the suit. Don’t forget to follow the letter of the contracts. Insurance is a necessity and it's there to protect you, but you need to make sure you’re upholding your end of the agreement if you expect that protection.
