West Bend Mutual Insurance Co. v. TRRS Corp.

2022 IL App (2d) 210506, 216 N.E.3d 332, 465 Ill. Dec. 1081

• Court: Appellate Court of Illinois
• Decided: September 9, 2022
• Docket: 2-21-0506
• Status: Published

Opinion

2022 IL App (2d) 210506 No. 2-21-0506 Opinion filed September 9, 2022 ______________________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT ______________________________________________________________________________

WEST BEND MUTUAL ) Appeal from the Circuit Court INSURANCE COMPANY, ) of McHenry County. ) Plaintiff-Appellee, ) ) v. ) No. 18-MR-798 ) TRRS CORPORATION; ) COMMERCIAL TIRE SERVICES, INC.; ) and GARY BERNARDINO, ) Honorable ) Thomas A. Meyer, Defendants-Appellants. ) Judge, Presiding. ______________________________________________________________________________

JUSTICE HUTCHINSON delivered the judgment of the court, with opinion. Justices Jorgensen and Brennan concurred in the judgment and opinion.

OPINION

¶1 Defendants, TRRS Corporation, Commercial Tire Services, Inc., and Gary Bernardino

(collectively, TRRS) appeal from a grant of summary judgment in favor of TRRS’s insurer, West

Bend Mutual Insurance Company (West Bend), which denied coverage on an underlying workers’

compensation and personal injury claim. We agree with TRRS that questions of fact remain that

may affect the result and that thus summary judgment was premature. Therefore, we vacate and

remand.

¶2 I. BACKGROUND 2022 IL App (2d) 210506

¶3 TRRS, a local tire retreading and repair company, carried a commercial general liability

and workers’ compensation policy with West Bend. TRRS has a plant in Lake in the Hills, where

Bernardino was the plant manager. In April 2017, Bernardino was using a forklift to install a “tire

curing chamber.” During the installation, Bernardino went out onto the lift’s raised platform, fell

off, and injured his left shoulder. This was the second time Bernardino had injured his left shoulder

at work.

¶4 While Bernardino was in the emergency department, Michael Sardinas, TRRS’s general

manager, came by to visit him. Sardinas told Bernardino that TRRS would compensate him for his

lost wages and medical expenses, just as it had done with his first shoulder injury a few years

earlier. Bernardino either used a company credit card to pay for his medical bills or submitted them

to Sardinas for the next few months.

¶5 Then, in March 2018, Bernardino hired his own counsel and began to chart a new course.

First, he filed a workers’ compensation claim and then a personal injury suit against TRRS and

two of its suppliers. Bernardino v. Michelin North America, No. 18-LA-295 (Cir. Ct. McHenry

County). When TRRS received Bernardino’s notice of adjustment of claim from the Illinois

Workers’ Compensation Commission (IWCC), TRRS both reported the workers’ compensation

claim and tendered Bernardino’s suit to West Bend.

¶6 In response, West Bend filed this coverage action seeking a declaratory judgment that it

was not obligated to cover Bernardino’s claim, because it had received “late notice” of his injury,

which occurred 11 months earlier. West Bend also sought a declaration that it was not obligated

to reimburse TRRS for its voluntary payment of Bernardino’s medical expenses before it filed its

insurance claim (although the record does not indicate that TRRS sought to be reimbursed).

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¶7 West Bend then asked the trial court to stay Bernardino’s proceedings before the IWCC,

which the court granted. Bernardino appealed the stay, and we reversed, explaining that West

Bend’s late-notice claim did not grant the trial court the authority under the doctrine of primary

jurisdiction to suspend the IWCC proceedings. West Bend Mutual Insurance Co. v. TRRS Corp.,

2019 IL App (2d) 180934, ¶¶ 17-34. Our supreme court affirmed. West Bend Mutual Insurance

Co. v. TRRS Corp., 2020 IL 124690.

¶8 While that interlocutory appeal was pending, the parties conducted discovery and

ultimately West Bend filed a motion for summary judgment. West Bend asserted that TRRS’s late

notice was per se unreasonable and dispositive. TRRS, however, maintained that the

reasonableness of its notice to West Bend was a question of fact, which precluded the entry of

summary judgment.

¶9 At a hearing, the trial court stated that it was difficult to determine the framework for

evaluating such a claim under the holding in Country Mutual Insurance Co. v. Livorsi Marine,

Inc., 222 Ill. 2d 303 (2006). The trial court also stated that it was uncertain how to evaluate

prejudice to the insurer in this context where the notice was, at the very least, delayed, even if the

parties had not jointly stipulated that it was “late.”

¶ 10 The trial court granted judgment in favor of West Bend. The court found that Sardinas, as

a corporate manager, was a sophisticated insured and that the 11-month gap between the injury

and the notice was unreasonable. The trial court also observed that “Illinois courts have found

shorter delays to be ‘unreasonable.’ ” Finally, the trial court noted that, under Livorsi, 222 Ill. 2d

at 317, “once it is determined that the insurer did not receive reasonable notice of an occurrence

or lawsuit, the policyholder may not recover under the policy, regardless of whether the lack of

reasonable notice prejudiced the insurer.” TRRS appealed.

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¶ 11 II. ANALYSIS

¶ 12 Before this court, the parties maintain the same positions they asserted in the trial court,

with TRRS asserting that the reasonableness of their late notice was a question of fact. West Bend,

on the other hand, asserts that reasonableness here was a matter of law and that the trial court

correctly granted summary judgment. We agree with TRRS.

¶ 13 Summary judgment is proper only where the pleadings and evidence on file show “that

there is no genuine issue as to any material fact and that the moving party is entitled to a judgment

as a matter of law.” 735 ILCS 5/2-1005(c) (West 2020). The purpose of summary judgment is not

to try a question of fact but, rather, to determine whether a triable question of fact exists. Lewis v.

Lead Industries Ass’n, 2020 IL 124107, ¶ 14. A genuine issue of material fact precluding summary

judgment exists where the parties either dispute the material facts or, if the facts are undisputed,

reasonable persons might draw different inferences from them. Id. ¶ 15. Our standard of review is

de novo. Id.

¶ 14 We begin with the language of the insurance policy, as it is a contract between the parties.

The policy provides that TRRS will notify West Bend “at once if injury occurs that may be covered

by this policy.” As the trial court noted, there are no Illinois cases within the last century construing

the phrase “at once”; however, the word “immediately” has been uniformly interpreted to mean

“within a reasonable time” or “as soon as practicable” (internal quotation marks omitted) (West

American Insurance Co. v. Yorkville National Bank, 238 Ill. 2d 177, 186 (2010)). That same

interpretation seems reasonably interchangeable for the phrase “at once,” and, as important, West

Bend does not argue for a contrary interpretation. So, although West Bend points out that an 11-

month delay is not literally “at once,” the ultimate question is whether, under all of the

circumstances, TRRS nonetheless provided West Bend with reasonable notice.

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¶ 15 Here, unresolved issues of material fact mean that, at this juncture, we cannot say whether

notice was reasonable or not. We note that, in Livorsi, the insureds conceded that the notice they

gave their insurer was unreasonably late. Livorsi, 222 Ill. 2d at 309. But here, TRRS has asserted

that their notice to West Bend was reasonable under the circumstances, which a fortiori makes

Livorsi distinguishable.

¶ 16 Furthermore, we note that, in Livorsi, our supreme court identified several factors that

might bear on the reasonableness of a party’s untimely notice. See id. at 310-20. Although these

factors were discussed at length, that discussion was largely tangential to the holding because,

again, there the insureds had conceded that their notice was unreasonable. Instead, their argument

was that the insurer needed to plead and prove prejudice arising from the late notice, even if the

lateness was unreasonable, and our supreme court rejected that notion. Rather, the supreme court

held that prejudice is but one factor to be considered in evaluating whether the insured’s late notice

was unreasonable in the first place. Id. at 317.

¶ 17 In addition, in Yorkville, 238 Ill. 2d at 185, our supreme court was clear that “[t]he

timeliness of an insured’s notice to its insurer generally is a question of fact for the trier of fact.”

The Yorkville court also clarified that “a lengthy delay in providing notice is not an absolute bar to

coverage provided the insured’s reason for the delay is justifiable under the circumstances.” Id. at

187. Then, the supreme court restated the Livorsi factors as follows:

“The following factors may be considered in determining whether notice to an insurer has

been given within a reasonable time: (1) the specific language of the policy’s notice

provision; (2) the insured’s sophistication in commerce and insurance matters; (3) the

insured’s awareness of an event that may trigger insurance coverage; (4) the insured’s

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diligence in ascertaining whether policy coverage is available; and (5) prejudice to the

insurer.” Id. at 185-86 (citing Livorsi, 222 Ill. 2d at 313).

¶ 18 By our count, the trial court in this case considered three of the five listed factors: that is,

the language of the policy; whether Sardinas, the insured’s general manager—as opposed to TRRS

itself—was a sophisticated insured; and that Sardinas was aware of Bernardino’s injury. We

determine that those factors were insufficient to be dispositive at this point in the litigation.

¶ 19 The trial court neglected to consider TRRS’s claims regarding whether its late notice was

reasonable. Specifically, TRRS points to Sardinas’s deposition, wherein he testified that he

decided not to report Bernardino’s injury to West Bend because it was to the same shoulder that

Bernardino had previously injured, and Sardinas worried that it might be excluded from coverage

as a “pre-existing condition” to Bernardino’s detriment. That belief, if it was reasonable at all, was

made somewhat more reasonable when one considers that Bernardino and TRRS dealt with his

first shoulder injury without reporting it to their commercial insurance company. And in addition,

Sardinas stated that he was uncertain what effect, if any, handling Bernardino’s first shoulder

injury in that fashion would have had upon coverage for his second shoulder injury. Finally,

Sardinas testified that, while he believed the Lake in the Hills facility was covered under West

Bend’s policy, it was not one of the five sites specifically named in the policy itself.

¶ 20 These are facially valid reasons to doubt that Bernardino’s second shoulder injury claim

would have been covered by West Bend. Again, our task is not to evaluate the reasonableness of

TRRS’s claims but only to determine if they raise a fair question that would preclude the entry of

summary judgment. We find that they do. TRRS’s claims bear on four of the Livorsi factors,

including the insured’s sophistication, the insured’s awareness, the insured’s diligence, and

potential prejudice to the insurer. Thus, the trial court’s analysis of the Livorsi factors, without

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taking TRRS’s claims into consideration, was necessarily incomplete. “Courts have recognized

that an insured’s reasonable belief of noncoverage under a policy may be an acceptable excuse for

the failure to give timely notice, even where the delay is lengthy.” Yorkville, 238 Ill. 2d at 187; see

also Brotherhood Mutual Insurance Co. v. Roseth, 177 Ill. App. 3d 443, 449 (1988) (two-year

delay excused because insureds reasonably believed that an accidental shooting that occurred

outside of their home would not be covered by their homeowner’s policy and they reasonably

believed that their friends would not file a late claim). Put differently, that proposition would have

no currency if the mere fact that notice was “late” was the only dispositive issue.

¶ 21 We further note that, in contrast to the trial court, we find insufficient information to

conclude that either Sardinas or TRRS were sophisticated in insurance matters. Based on the

evidence in the record, the only experience Sardinas appears to have was that he acted as TRRS’s

representative purchasing the commercial and workers’ compensation policies through a broker.

And Sardinas attended a four- or five-day seminar (he could not remember which) on risk

management roughly seven years before his deposition. That would make him closer to a layman

than a sophisticate. Cf., e.g., Equity General Insurance Co. v. Patis, 119 Ill. App. 3d 232, 233

(1983) (upholding that an “experienced insurance agent” could be considered a sophisticated

insured). There is also no evidence that Sardinas “had outside counsel or other assistance with his

insurance matters that would supplement his personal lack of insurance experience and qualify

him as a sophisticated insured.” Berglind v. Paintball Business Ass’n, 402 Ill. App. 3d 76, 88

(2010).

¶ 22 With respect to TRRS, the trial court stated that “[g]enerally, corporate entities are

presumed to be sophisticated” and cited Yorkville for that proposition. But neither Yorkville, nor

any other decision we are aware of, states that all corporations are presumptively well-versed in

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insurance or business matters. The insured in Yorkville was a bank, which was “presumed to be

sophisticated in the areas of commerce and insurance” because it was a bank, which is of a different

order from a generic corporation or an area tire-retreading company. See Yorkville, 238 Ill. 2d at

186. More must be understood about TRRS before it can be labeled a sophisticated insured. For

example, in MHM Services Inc. v. Assurance Co. of America, 2012 IL App (1st) 112171, ¶ 64, the

court found the insured party to have been sophisticated where it had both primary and excess

coverage, general counsel, local litigation counsel, coverage counsel, and enough cash to pay

litigation and settlement expenses. We do not know whether TRRS possessed any similar

attributes.

¶ 23 Finally, although it is only one factor to be considered, it is unclear from the record what,

if any, prejudice West Bend suffered as a result of TRRS’s late notice. On this point, West Bend’s

policy told TRRS as follows: “Do not voluntarily make payments, assume obligations or incur

expenses, except at your own cost.” (Emphasis added.) That provision suggests that an insured can

attempt to mitigate potential claims short of filing an insurance claim, else the policy would say

that no payments could be made without notifying West Bend first. Accordingly, while it is

arguable that TRRS may not be reimbursed for the payments it voluntarily made vis-à-vis

Bernardino, it does not follow that, by making those payments, TRRS disclaimed its insurance

coverage altogether.

¶ 24 III. CONCLUSION

¶ 25 As in Berglind, “[w]e cannot say the 11-month delay in notification was unreasonable as a

matter of law under the facts and circumstances of this case.” Berglind, 402 Ill. App. 3d at 88.

Questions remain that preclude summary judgment at this point. Accordingly, we vacate the

judgment of the circuit court of McHenry County and remand for further proceedings.

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¶ 26 Vacated and remanded.

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West Bend Mutual Insurance Co. v. TRRS Corp., 2022 IL App (2d) 210506

Decision Under Review: Appeal from the Circuit Court of McHenry County, No. 18-MR- 798; the Hon. Thomas A. Meyer, Judge, presiding.

Attorneys James M. Urtis, of Chicago, for appellants TRRS Corporation and for Commercial Tire Service, Inc. Appellant: No brief filed for other appellant.

Attorneys Thomas F. Lucas and Kristin D. Tauras, of McKenna Storer, of for Chicago, for appellee. Appellee:

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