Do Time Qualifications Control the Coverage Provision and Relate Directly to the Coverage Afforded Under An Insurance Policy ?
In Graman v. Continental Casualty Co., 87 Ill. App. 3d 896, 899, 409 N.E.2d 387, 42 Ill. Dec. 772 (1980), the defendant insurance company sold the plaintiff, an architect, a claims-made policy, which required any claim against the plaintiff to be made during the period of the policy and be reported to the insurer no later than 60 days after the end of the policy period.
The plaintiff performed work on a new school building, but in September 1973, the school notified him of problems with the roof.
For four years, the plaintiff, contractor, and school district unsuccessfully attempted to rectify the problem, and in October 1977, the school district filed a lawsuit against the plaintiff.
The plaintiff tendered the defense of the suit to the defendant, which denied coverage, and the plaintiff filed a complaint for declaratory judgment.
On appeal, the court noted that the claims-made policy is characterized by coverage for acts discovered during and brought to the attention of the insurer during the policy term. Graman, 87 Ill. App. 3d at 899.
It concluded that "it would appear that plaintiff is foreclosed from pressing his claim" that the insurer owes him coverage, since the lawsuit "was not filed and the insurer did not receive notification thereof until more than three years after the effective cancellation date." Graman, 87 Ill. App. 3d at 900.
The plaintiff argued, however, that there was a potential for coverage under the policy, and since the defendant failed to defend it under a reservation of rights or to file a declaratory judgment action, it was estopped from denying liability under the policy.
The court disagreed, finding that the time qualifications "control the coverage provision" and related "directly to the coverage afforded under the policy." Graman, 87 Ill. App. 3d at 901, 902.
The court continued:
"Plaintiff would excise the time clause from the contract, thereby allowing any insured who once owned such a policy to assert coverage no matter when it notified the insurer of such a claim.
However, we do not believe the allegation of a situation which technically falls under the error, omission, or negligent act definition of coverage is all that is needed to show potentiality of coverage under the policy at issue here.
The insured must notify the insurer of such a claim within the time constraints listed in the policy or there is no coverage for the acts, omissions or negligent acts of the insured, no matter when they occurred." Graman, 87 Ill. App. 3d at 902.
Because the plaintiff did not present the claim to the insurer within 60 days after the expiration of the policy, no potential coverage existed. Graman, 87 Ill. App. 3d at 902.