## Facts

- Livorsi Marine, Inc. and Gaffrig Performance Industries, Inc. became adverse parties in consolidated federal trademark litigation over use of the “Gaffrig Precision Instruments” name on marine products.
- Each company held a commercial general liability policy issued by Country Mutual Insurance Co. that included “advertising injury” coverage and a contractual duty to defend covered “suits.”
- The policies required the insured to give notice of an “occurrence” or “suit” to the insurer “as soon as practicable” as a condition of coverage.
- The federal suits were filed in December 1999, but neither insured notified Country Mutual until roughly 18 months later.
- Before the federal suits were filed, Livorsi’s owner spoke with the insurer’s agent about the business dispute, but the insurer did not receive timely notice that a lawsuit had been filed.
- Country Mutual filed an Illinois declaratory judgment action seeking a ruling that it owed no duty to defend or indemnify due to late notice.
- In the underlying federal case, injunctive relief issued and no damages were awarded, leaving the coverage dispute focused on the duty to defend.

## Issues

1. Whether an insurer must prove prejudice from late notice before denying coverage based on breach of a policy requirement to give notice “as soon as practicable.”
2. Whether an approximately 18-month delay in providing notice of filed lawsuits satisfied the policies’ notice requirement under the circumstances.
3. Whether, given the late notice, the insurer still owed a duty to defend the insureds in the underlying trademark litigation.

## Decision

- The Illinois Supreme Court affirmed judgment for Country Mutual.
- Illinois does not impose a general “notice-prejudice” requirement for occurrence-based liability policies when timely notice is an express condition precedent to coverage.
- The insureds’ 18-month delay was unreasonable and unexcused and therefore breached the notice condition.
- Because the notice condition precedent was breached, Country Mutual had no duty to defend the insureds in the underlying suits.

## Legal Principles

- Compliance with a liability policy’s notice provision may be a condition precedent to the insurer’s obligations to defend and indemnify.
- For occurrence-based liability policies governed by Illinois law, an insurer may deny coverage for unreasonable and unexcused late notice without proving actual prejudice.
- Whether notice was given “as soon as practicable” is assessed for reasonableness in light of the policy language and surrounding circumstances, including the insured’s sophistication and diligence in identifying potential coverage.
- Informal communications about a developing dispute do not substitute for notice of an actual filed “suit” when the policy requires prompt notice of suits.

## Conclusion

The court enforced the policy’s prompt-notice requirement as a condition precedent and held that the insureds’ unreasonable, unexcused 18-month delay barred the insurer’s duty to defend, without any need for the insurer to prove prejudice.


Country Mutual Insurance Co. v. Livorsi Marine, Inc., 222 Ill. 2d 303 (Ill. 2006)