Essex Insurance Co. v. Structural Shop, Ltd., No. 18-3530 (7th Cir. 2019)
Annotate this CaseIn 2002, Condominium sued TSS, claiming defective building design and construction. TSS never responded. In 2003, the state court declared TSS in default. In 2009, the court entered a default judgment and awarded damages of $1,356,435. Essex did not insure TSS until it sold TSS a policy for claims “first made” from May 2012 to May 2013. The policy defined “first made” to mean the time when TSS received either a “written demand for money damages” or “the service of suit or institution of arbitration proceedings.” In 2012, when TSS became aware of efforts to collect the judgment, no proof of service was found. The Illinois court vacated the judgment. Essex, with the mistaken belief that Condominium first made a claim in 2012, began funding and monitoring the defense. Essex rejected a settlement offer although Condominium had begun to compile evidence that TSS’s agent had been served. In 2014, the state court reinstated the judgment. Essex continued its defense but notified TSS that it was denying coverage. TSS, without any involvement by Essex, settled the case for $550,000. In 2015, Essex sought a federal declaratory judgment that it had no indemnification obligation. The district court granted Essex summary judgment. The Seventh Circuit affirmed, rejecting an estoppel argument because TSS suffered no prejudice. TSS never lost control of its defense, was aware that Essex would not cover the matter if proof of service was found, and settled without Essex’s approval.
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