Seventh Circuit Reversal in favor of insurance carrier

Robert Marc Chemers won a significant appeal in the 7th Circuit Court of Appeals. The 7th Circuit held that the insured’s 21-month delay in notifying his carrier of the accident was “inexcusable.” State Auto Prop. & Cas. Ins. Co. v. Brumit Serv’s, Inc., 877 F.3d 355 (7th Cir. 2017).

The insured, an owner of a construction company, backed his work truck from a parking place at a convenience mart into the 65-year-old plaintiff, a pedestrian. A passing driver alerted the insured that he struck a woman. The insured returned to the parking lot to find the plaintiff on the ground and telephoned for an ambulance. An EMT put a bandage and icepack on the scrapes and bruises of the plaintiff, who refused additional treatment and left the scene. The insured, believing the plaintiff was not seriously injured, chose not to notify his carrier, State Auto Property & Casualty Insurance Company (“State Auto”), of the accident. Six months later, the plaintiff had the first of two back surgeries mostly due to aggravation of pre-existing conditions. She later filed suit and the insured then notified State Auto once he was served. State Auto had a $500,000 policy, and limits were demanded from the time suit was filed.

We filed a declaratory judgment action asserting no coverage based on the insured’s breach of the notice provision in the State Auto business auto policy. On cross-motions for summary judgment, the district court found in favor of the insured reasoning that “the incident was trivial, resulted in no apparent harm, and furnished no reasonable ground for [the insured] to believe that a claim may arise.” The district court ultimately concluded that the insured’s 21-month delay in notifying State Auto about the accident was reasonable as a matter of law. State Auto Prop. & Cas. Ins. Co. v. Brumit Servs., Inc., 245 F. Supp. 3d 1048 (S.D. Ill. 2017).

The Seventh Circuit fully disagreed with the reasoning of the district court. In its decision, the Court considered the five factors the Illinois Supreme Court considers when assessing the reasonableness of notice and found all of them weighed strongly in favor of State Auto. The Court observed that “any reasonable driver would recognize that the accident might lead to a claim” and that “there was no reason for [the insured] to be so sure that no claim would be filed,” especially when he testified in a deposition that he was aware of latent injuries but never inquired on the plaintiff’s well-being. The Court concluded that the insured was sophisticated enough to understand that striking a person with his truck might lead to an insurance claim or a lawsuit and reversed the district court’s decision.