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FIRST DIVISION
March 29, 2002

Appellant Employers Reassurance Corporation (ERAC) was one of sevenreinsurers of now-insolvent life insurance provider Inter-American InsuranceCompany of Illinois (Inter-American). There were five reinsurance agreementsin force between Inter-American and ERAC. In 1988, certain aspects of thesegregated agreements were consolidated by the parties into a reinsuranceagreement known as the "Segregated Asset Portfolio Agreement" (SAPA). But,the insuring agreements in the original contracts were not modified. Inter-American became insolvent and was declared insolvent on December 23, 1991, andthe circuit court affirmed the Director of the Illinois Department ofInsurance as the statutory liquidator (the Liquidator).

ERAC contended that its agreement with Inter-American was "executory" asto policyholders who had not died at liquidation. However, the Liquidatorcontended that the agreement was not executory. The matter was resolved inthe Liquidator's favor on a cross-motion for declaratory relief. The trialcourt, after a full trial, also decided that ERAC had breached its reinsuranceagreements with Inter-American by not paying the bills tendered to it by theLiquidator. During trial, the Liquidator requested leave to file its thirdamended counterclaim. In its final ruling, the trial court granted theLiquidator leave to file his amended counterclaim.

ERAC now presents the following issues upon appeal: (1) whether thecontracts were executory; (2) whether the trial court erred in denying ERAC'smotion for directed finding; (3) whether the trial court erred in granting theLiquidator's third motion to amend; and (4) assuming the trial court properlygranted the Liquidator's third motion to amend, whether Inter-Americanprovided consideration under the contract and established waiver by clear andconvincing evidence.

For the reasons stated below, we affirm.

BACKGROUND

Inter-American entered into reinsurance contracts (Treaties) with ERAC,formerly known as Puritan Life Insurance Company, between 1984 and 1986. Pursuant to these Treaties, Inter-American was to cede reinsurance premiums toERAC and ERAC was to assume the reinsurance as reported by Inter-Americanaccording to the Treaties. In December 1987, the Department advised Inter-American that it would not approve of the Treaties because, in theDepartment's view, they did not reflect a transfer of investment risk from theceding company, Inter-American, to the reinsurer, ERAC. Amended Treaties weredue to the Department on or before March 15, 1988. If not amended andreceived by then, the Department would "take action to disapprove the treatyand reserve credit will be disallowed."

To address the concerns of the Department, the parties entered into theagreement known as the SAPA in March 1988, nunc pro tunc January 1, 1988. TheSAPA required Inter-American to establish and maintain assets in a portfolio. Articles V and VI of the SAPA required quarterly and year-end reporting of theinvestment results to ERAC. The insolvency clause in the SAPA provided, inpart:

"The ceding insurer [Inter-American] and the reinsurer [ERAC] agreethat, in the event of the insolvency of the ceding insurer, as to allreinsurance made, ceded, renewed or otherwise becoming effective afterthe effective date of this agreement, the reinsurance shall be payableby the reinsurer on the basis of the amount of liability of the cedinginsurer under the contract or contracts reinsured, without diminutionbecause of the insolvency of the ceding insurer."

The SAPA further provided: "The total amount of the portfolio shall beadjusted by the REINSURED as of the end of each calendar year" as described byNew York State Insurance Department Regulation 126 (Regulation 126). Inter-American made quarterly reports to ERAC from March 1988 through June 1991 andsubmitted reinsurance premium payments to ERAC.

Inter-American was declared insolvent on December 23, 1991. InSeptember 1992, the Liquidator filed a petition to conditionally reject the"surplus relief agreements" entered into by Inter-American and to declare thatthey were not executory. ERAC filed a cross-motion for declaratory relief. In April 1994, ERAC filed a motion for summary judgment on its cross-motionfor declaratory relief. The court later allowed ERAC's motion for summaryjudgment to be withdrawn. In September 1994, the liquidation court ruled thatthe policyholders who had not died by the date of liquidation could fileclaims against the estate for the current net present value of their policies. The court also approved the Liquidator's methodology for calculating the valueof the policies.

The Liquidator filed a renewed cross-motion for declaratory reliefagainst ERAC on July 26, 1995. ERAC filed its amended cross-motion fordeclaratory relief on the same date. In September 1995, the circuit courtruled that the reinsurance contracts were not executory. ERAC and AlabamaReassurance Company (Alabama Re) appealed that ruling. The Illinois AppellateCourt dismissed the appeal in an unpublished order as premature. See In reLiquidation of Inter-American Insurance Co., 284 Ill. App. 3d 1112, 708 N.E.2d1272 (1996).

In November 1995, the Liquidator moved to dismiss counts II through VIIof ERAC's amended cross-motion for declaratory relief. The circuit courtdenied the motion and ordered the Liquidator to answer those counts. In itsanswer, the Liquidator asserted its affirmative defenses: (1) laches; (2)waiver and estoppel; and (3) negligence by Inter-American. Additionally, theLiquidator presented a counterclaim for breach of contract.

In January 1997, ERAC moved to dismiss the Liquidator's counterclaim andfiled its responses to the Liquidator's affirmative defenses. The Liquidatorfiled an amended counterclaim asserting breach of contract and quantum meruit. ERAC filed a motion to dismiss the Liquidator's quantum meruit claim and alsofiled an answer to the breach of contract claim. The parties submitted anagreed order dismissing the quantum meruit count.

An agreed pretrial stipulation was filed by the parties in May 1998. OnMay 11, 1998, the Liquidator filed its revised second amended counterclaim,which alleged that Inter-American performed all of its material obligationsunder the Treaties and that ERAC breached the contract by refusing to pay thesums to Inter-Americans policyholders. The trial commenced in June 1998. Rick Browne of Inter-American testified for the Liquidator that when hediscussed the SAPA drafts with James Maughn of ERAC, they discussed Inter-American's "ability to do Regulation 126 type testing or asset adequacyanalysis, that Inter-American at that time was not equipped, did not have thesystems to do that, but that we would--we both knew that it was a requirementthat insurance companies were going to have to do this type of testing in thenear future." Browne had several conversations with Maughn relative to whatassets where in the segregated asset portfolio and what sort of reporting wasprovided to ERAC by Inter-American. Browne did not recall any specificrequest from Maughn to perform Regulation 126 analysis and he never toldMaughn that Inter-American had conducted Regulation 126 analysis.

Browne further testified that at year-end 1990, Inter-American had notupdated the segregated asset portfolio listing to reflect transactions for1990. When Browne discovered that the individuals responsible for completingthe work had not updated the portfolio, he and Inter-American actuary TerrenceErickson resolved that they would estimate the investment returns that shouldbe credited to ERAC under the agreements, based on their knowledge of thehistoric performance of the portfolio and their general historic knowledge ofwhat transactions were likely to have occurred.

Browne stated that during "1989, 1990, or the first six months of 1991,"no one from ERAC came in to inspect the records of Inter-American pertainingto the portfolio. Inter-American prepared quarterly reports and typicallysent them to ERAC auditor Laura Fields. He stated that she would contactInter-American if she observed errors or if she had questions about thereports. He further testified that Inter-American paid ERAC the quarterlyamounts due for the reinsurance ERAC provided. Browne recalled having a 20-minute phone conversation with Fields in approximately March 1990 informingher that estimates had been made.

In November 1991, Browne met with Laura Fields, James Maughn, and areinsurance intermediary from Mystic Reinsurance in Inter-American's Chicagooffices. At that meeting, they discussed the Department's investigation andInter-American's "need to do cash flow scenario testing on the [ERAC] block ofbusiness, and at that meeting Mr. Maughn suggested that Mystic Reinsurancemight be able to help us with that type of cash flow testing." Browne did notrecall any complaints regarding the use of estimated figures during thatmeeting.

Peter Gallanis, a special deputy receiver for the Department, testifiedthat when Inter-American went into liquidation, Inter-American had not paidall of its liabilities under its insurance policies. Gallanis furthertestified that Inter-American's nonpayment did not release ERAC from itsreinsurance obligations.

Raymond Schlude, Jr., a consulting actuary, testified on behalf of theLiquidator. He was asked to assist the Liquidator in determining whether andhow much ERAC owed Inter-American's estate for reinsurance. Schlude statedthat in his investigation, he reviewed the asset portfolio as of December 31,1988, but did not find a portfolio as of December 31, 1989. He also testifiedthat Inter-American was specifically required by the SAPA to conductRegulation 126 analysis. He further testified that based on the reports thathe made, "Employers Re owes Inter-American 9.55 million on the date ofliquidation."

ERAC moved for a directed finding after the direct examination of Browneand the full testimony of Gallanis and Schlude. That motion was denied. Thefollowing day, after the cross-examination of Rick Browne and the close of theLiquidator's case in chief, ERAC renewed its motion for directed finding. That motion was also denied.

ERAC accountant Laura Fields testified for ERAC that she conducted anaudit of Inter-American in 1988. In March 1990, Fields received a fax from Inter-American actuary Erickson that included the annual accounting for year-end 1989. There was a notation on that fax transmittal that indicated toFields that the portfolio listing would follow. Months later, Fields calledInter-American to follow up on the portfolio listing that she had not yetreceived. At that time, no one at Inter-American informed her that Inter-American had stopped maintaining the portfolio. Fields testified that Brownenever told her that Inter-American had stopped maintaining the portfolio. Shestated that as an accountant, she did not have the authority to change any ofthe terms of the SAPA. Fields recalled that the year-end 1990 report fromInter-American reflected an unanticipated increase in the amount of surplusrelief that ERAC granted them.

Fields further testified that she, James Maughn, and an ERAC internalaudit employee met with Rick Browne in Chicago on November 5, 1991. Sherecalled that they discussed the asset listing and other concerns. JimKnutson of Inter-American asked Fields to accompany him to his office toretrieve the listing. However, "he couldn't seem to place his hands on it,"so she asked him to send it to her by mail. She never received it. Duringthe first week of December 1991, Fields returned to Chicago for an unrelatedaudit and notified Inter-American that she would be by to pick up the listing. She recalled receiving a packet of information but later discovered that "[i]twas not what [she] asked for."

James Maughn, ERAC's chief actuary and senior executive, testified attrial that he had a telephone conversation with Rick Browne prior to thecompletion of the SAPA. In that conversation, "we agreed to try to worksomething out that would have some element of risk in it that would be deemedacceptable to them [the Department]." The agreement "was the maximum risktransfer which we found acceptable to enter into relative to Inter-American,and had the Department chosen not to approve it, that was okay with us." Maughn testified that per the agreement, Inter-American was not required toplace the potential pledged assets in an escrow or trust. However, therewould have been consequences if Inter-American chose to sell those pledgedassets and purchased other assets once they had been placed in the assetportfolio. Maughn stated that while the agreement required that Regulation126 testing be conducted at "calendar year-end," it would have beenappropriate and accurate to conduct it quarterly. He stated that theagreement called for a "calendar year matching" but did not "necessarilyrequire that they provide that to us."

Maughn recalled that there was an audit of Inter-American at the end of1988 and the end of 1990. Maughn spoke to Rick Browne of Inter-American viatelephone on October 31, 1991, regarding his desire to "review the actualinvestment results and return on the portfolio as well as see the actualassets in the segregated asset portfolio." He explained that ERAC was "tryingto figure out the reserve correction and we need an explanation for that andwhether it's appropriate and whether or not we want evidence that if there isan adjustment necessary to the portfolio that they have in fact been makingit, as required by the agreement." During that telephone conversation withBrowne, Maughn was not told that Inter-American was no longer maintaining theportfolio.

While in Chicago on other business in November 1991, Maughn stopped bythe Inter-American offices. Maughn, Rick Browne and Jim Knutson participatedin a meeting on November 5, 1991. Maughn recalled that during the meeting,"We discussed the requirements under our agreement about maintaining thesegregated asset portfolio, including the asset liability analysis, which italso requires, and in essence, we were told we would be given the portfolio,but we were also told that they had not been doing the analysis in accordancewith the agreement at this time." He further testified that, "The point is Isuppose we could have walked away. They weren't performing under theagreement, but we did acknowledge that with the portfolio, it would bepossible-- it would be possible with the portfolio to establish what theappropriate amounts of relief they should have been reporting was." He statedthat at this November 5, 1991, meeting, Inter-American was still promising toprovide the portfolio. He further testified, "In fact, they were still askingus for additional relief at this point. When we subsequently learned thatthey aren't maintaining the portfolio, it kind of becomes clear why theydidn't tell us at this meeting." In a letter written on November 19, 1991,from Maughn to Browne, Maughn indicated that ERAC was still looking forward togetting the portfolio of assets as maintained over the years.

Maughn reviewed the packet of documents provided to Fields in December1991 and he described it as "garbage" and "it in no way, shape or form is itclose to the portfolio of assets and an indication of what had been investedand reinvested, sold, bought, balances." Maughn testified that this packetwas the first indication that Inter-American was not maintaining theportfolio.

During trial, on June 12, 1998, ERAC moved to voluntarily dismiss,without prejudice, its amended cross-motion for declaratory relief. Thatmotion was granted.

The Liquidator filed a motion for leave to file its third amendedcounterclaim on June 15, 1998. The Liquidator's third amended counterclaimalleged breach of contract and asserted that Inter-American had substantiallyperformed all of its material obligations under the treaties as of the date ofliquidation. In the alternative, the amendment alleged that the Liquidatorand Inter-American substantially performed all of their material obligationsunder the SAPA "except insofar as they had been waived by ERAC expressly andby consistent course of performance." ERAC objected to the amendment. Thecourt took the motion to amend under advisement.

In its May 23, 2000, ruling, the trial court granted the Liquidatorleave to file its third amended complaint and found in favor of theLiquidator. Relative to the existence of consideration, the court held that"[c]ertainly ERAC knew that Inter-American had not performed the Regulation126 testing" and ERAC "certainly benefitted from its relationship with Inter-American." Finally, based on the testimony of Raymond Schlude, an ERACactuary, the court found that the Liquidator presented an adequate basis forthe court to award damages.

On June 23, 2000, the Liquidator filed a motion for prejudgment intereston the court's award of $9,552,215. On August 25, 2000, the court granted theLiquidator's motion for prejudgment interest on the breach of contract claimaward and ordered ERAC to pay a total of $11,137,177 million to theLiquidator.

ANALYSIS

I

The first issue is whether the SAPA provides coverage for the "Class C"claims presented to it after Inter-American's liquidation. For purposes ofthis appeal, Class C insureds generally involved living insureds with noclaims at the time of Inter-American's insolvency. ERAC asserts that the SAPAwas an executory contract that the Liquidator did not assume and under whichit has no postliquidation rights. ERAC asks that the lower court decision bereversed. The Liquidator responds that the contracts were not executory onthe date of liquidation because Inter-American's material obligations withrespect to reinsurance "then-owed" had all been performed.

The Liquidator also asserts that ERAC has waived its argument that ERAChad no contractual obligation to Class C policyholders. We agree. During apretrial hearing on September 7, 1994, before the Honorable Edward C. Hofert,the following colloquy occurred:

"MR. SUNU [ERAC attorney]: When Inter-American went into liquidationin December of 1991, that policyholder knew exactly what the cashsurrender value of his policy was. And we believe that that is thevalue that the policyholder claims should be.

It is set forth in the contract documents between Inter-American andthe policyholder. We believe it is a fair --

THE COURT: Is there anything in the policy itself which wouldenlighten us as to the expectations of the policyholder?

MR. SUNU: I think that's the cash surrender value.

* * * 

MR. SUNU: Your honor, we as a reinsurer, we are not saying we don't have to pay these claims.

THE COURT: You are just saying that the amount should be less?

MR. SUNU: That's right. Because we believe that the formula thatthey are using is inflating the policyholder's claim value.

THE COURT: All right."

The court ruled as follows:

"THE COURT: All right. ***

The court feels that the insurance companies and reinsurancecompanies have a duty to the policyholders.

To what extent that duty is, is dependent to the extent that, Isuppose, it is measured by the damage which is afforded to thatparticular party.

* * *

And I believe the reinsurance company by virtue of taking thepremiums accepts the risk, a risk that they could ameliorate by cautiousaudit and so forth.

Under the circumstances, I will approve the Liquidator's plan andoverrule the objections. And will sign an order to that effect." (Emphasis added.)

In November 1995, during a hearing before Judge McBride on the parties' cross-motions for declaratory judgment, attorney William Snyderfor Alabama Re stated to the court:

"MR. SNYDER: There was never any issue of this litigation as towhether policyholders who fell within example C, people who had survivedand simply had policies in place, had some claim against the estate. The only issue is that to be valued." (Emphasis added.)

Judge McBride ruled:

"THE COURT: *** Having reviewed all of that, I'm going to grant theliquidator's request for declaratory relief, and I find that thecontracts are not executory.

Although the liquidator asked for alternative relief, I'm findingtoday that the contracts are not executory.

I'll enter an order to that effect, and those obligations at thetime, as of the date of liquidation, are going to be recoverable.

So that is the order. It may be written up as such. And that isbased upon the authority, and I find that the authority cited by theliquidator is more persuasive, and in particular, In re Sudbury. Sothat will be the order today."

Based on these colloquies, we hold that ERAC has waived its argument that thereinsurance contracts do not provide coverage for the Class C living insuredsat the time of insolvency. Even if the argument were not waived, we wouldnonetheless hold that the contracts were not executory at the time ofliquidation.

The construction of an insurance policy is a question of law subject tode novo review. American States Insurance Co. v. Koloms, 177 Ill. 2d 473,479-80, 687 N.E.2d 72 (1997). Although there is no precise definition of whatcontracts are executory, they are generally contracts on which performanceremains due to some extent on both sides. In re Reda, 54 B.R. 871 (Bankr.N.D. Ill. 1985). The widely accepted definition provides that a contract isexecutory if the "obligation[s] of both the bankrupt and the other party tothe contract are so far unperformed that the failure of either to completeperformance would constitute a material breach excusing performance to theother." In re Liquidation of Inter-American Insurance Co. of Illinois, 303Ill. App. 3d 75, 97, citing V. Countryman, Executory Contracts in Bankruptcy:Part I, 57 Minn. L. Rev. 439, 460 (1973).

Section 194 of the Illinois Insurance Code (215 ILCS 5/194 (West 1994))provides:

"The rights and liabilities of the company and of its creditors,[and] policyholders *** shall be fixed as of the date of the entry ofthe Order directing liquidation or rehabilitation unless otherwiseprovided by Order of the Court." 215 ILCS 5/194 (West 1994).

Relative to the instant case, the trial court in deciding that thereinsurance contracts were not executory at the time of liquidation found Inre Sudbury, 153 B.R. 776 (Bankr. N.D. Ohio 1993), instructive. In Sudbury,the bankruptcy debtor requested a declaration that its insurance policies andrelated premium agreements were not executory contracts. Sudbury, 153 B.R. at776. In that case, the insurers adjusted, administered, and paid claimsarising from occurrences that took place during the policy period. Sudbury,153 B.R. at 777. The court ruled that the insurance polices of the insolventcompany were not executory contracts. Sudbury, 153 B.R. at 778. The Sudburycourt reasoned that "denying executory contract status to the Policies wouldnot impair the Insurer's rights or remedies. *** Therefore, not treating thePolicy as an executory contract will not affect the [i]nsurers." Sudbury, 153B.R. at 780.

In our view, when Inter-American became insolvent, its failure tomaintain the portfolio did not excuse ERAC's performance. Inter-American paidpremiums to ERAC and ERAC accepted those payments. ERAC's duty, in turn, wasto provide reinsurance. Because the contracts were not executory, ERAC wasstill obligated under them. Importantly, in the instant case, based upon aformula that has been recognized and accepted for determining the value ofpolicies when the policyholders are alive when an insolvency occurs, theparties stipulated that the policies at issue had a net value of $9.55million. In our view, the trial court did not err in finding that thereinsurance agreement obligated ERAC to pay the Class C insureds the netpresent value of their policies at the time of Inter-American's liquidation.

II

ERAC also contends that the trial court erred when it denied its motionfor directed finding. The Liquidator responds that ERAC waived its right toappeal that denial when it introduced its own evidence and did not renew themotion at the close of its case in chief. Generally, where a defendant electsto present evidence following the denial of his motion for a directed finding,any error in the trial court's ruling on the motion is waived unless thedefendant renews the motion at the close of all the evidence. People v.Clark, 221 Ill. App. 3d 303, 310, 581 N.E.2d 722 (1991); People v. Wilson, 143Ill. 2d 236, 245, 572 N.E.2d 937 (1991). The record reveals that ERAC'smotion was not renewed at the close of all the evidence. Therefore, ERAC'scontention has been waived.

Even if ERAC's argument had not been waived, we hold that the trialcourt's decision to deny ERAC's motion for a directed verdict was not againstthe manifest weight of the evidence. See Denis F. McKenna Co. v. Smith, 302Ill. App. 3d 28, 31, 704 N.E.2d 826 (1998). In support of its motion fordirected verdict, ERAC argued that the Liquidator had not met its burden ofproving that Inter-American met all of the material obligations of thecontract. The Liquidator responded that ERAC acquiesced to Inter-American'snoncompliance and ERAC would gain an unfair advantage by being allowed to walkaway from the contract after the acquiescence.

To meet the burden in a breach of contract action, the plaintiff mustestablish an offer and acceptance, consideration, definite and certain termsof the contract, plaintiff's performance of all required contractualconditions, the defendant's breach of the terms of the contract, and damagesresulting from the breach. Mannion v. Stallings & Co., 204 Ill. App. 3d 179,186, 561 N.E.2d 1134 (1990). At the time of ERAC's first motion for directedverdict, Rick Browne of Inter-American, actuary Raymond Schlude, and specialdeputy Gallanis all testified for the Liquidator. Their testimony providedinformation as to the offer, the acceptance, the terms of the contract, Inter-American's fulfillment of the material terms of the contract by payingpremiums to ERAC, the fact that ERAC refused to pay to Class C policyholders,and the damages ERAC still owed to the Inter-American estate. III

At trial, ERAC argued that the Liquidator's third motion to amend wasuntimely and changed the theory of the entire case. On appeal, ERAC maintainsthat the trial court erred in allowing the Liquidator to amend hiscounterclaim. The Liquidator responds that ERAC was not prejudiced by theamendment.

In Illinois, courts are encouraged to freely and liberally allow theamendment of pleadings. Barille v. Sears Roebuck & Co., 289 Ill. App. 3d 171,179, 682 N.E.2d 118 (1997). The circuit court has broad discretion in rulingupon motions to amend pleadings, and its ruling will not be disturbed absentan abuse of discretion. Barille, 289 Ill. App. 3d at 179. To determinewhether the circuit court abused its discretion, four factors are considered: (1) whether the proposed amendment is timely; (2) whether previousopportunities to amend the pleading can be identified; (3) whether otherparties will sustain prejudice or surprise by virtue of the proposedamendment; and (4) whether the proposed amendment will cure the defectivepleading. Barille, 289 Ill. App. 3d at 179.

Amendments ordinarily will not be permitted after trial has begun if theproposed amendment raises matters of which the pleader had full knowledge atthe time of interposing the original pleading and there is no excuse forfailing to raise those matters in the original pleading. Bank of Chicago v.Park National Bank, 266 Ill. App. 3d 890, 904, 640 N.E.2d 1288 (1994). Atrial court has broad discretion to allow the addition of new defenses on justand reasonable terms at any time before final judgment so long as otherparties do not thereby sustain undue prejudice or surprise. See 735 ILCS 5/2-616 (West 1994).

In our view, the trial court did not abuse its discretion in allowingthe Liquidator to file its third amended complaint. The record shows that theLiquidator's answer to counts II through VI of ERAC's amended cross-motion fordeclaratory relief and counterclaim included the affirmative defense ofwaiver. Moreover, in light of the fact that at the time of the filing of thethird amended complaint, ERAC sought dismissal of its counterclaims, it standsto reason that the Liquidator wished to preserve its affirmative defenseabsent those counterclaims.

IV

ERAC's final contention is that the trial court erred in holding thatthe Liquidator established the waiver of strict compliance with the terms ofthe contract. We hold that the court did not err in finding that ERAC waivedstrict compliance. Parties to a contract have the power to waive provisionsplaced in the contract for their benefit and such a waiver may be establishedby conduct indicating that strict compliance with the contractual provisionswill not be required. Whalen v. K mart Corp., 166 Ill. App. 3d 339, 343, 519N.E.2d 991 (1988). An implied waiver of a legal right may arise when conductof the person against whom waiver is asserted is inconsistent with any otherintention than to waive it. Whalen, 166 Ill. App. 3d at 343. Whether therewas in fact a waiver of contractual provisions depends upon the intent of thenonbreaching party. Whalen, 166 Ill. App. 3d at 343. If a party hasintentionally relinquished a known right, either expressly or by conductinconsistent with an intent to enforce that right, the party has waived it andmay not thereafter seek judicial enforcement. Whalen, 166 Ill. App. 3d at343. Whether waiver has occurred is a question of fact when the materialfacts are in dispute or where reasonable minds might differ in the inferencesto be drawn from undisputed facts. Melrose Park National Bank v. Carr, 249Ill. App. 3d 9, 16, 618 N.E.2d 839 (1993).

The trial court in the instant case outlined the indications andimplications of ERAC's conduct. The court wrote in its final order:

"Certainly ERAC knew that Inter-American had not performed theRegulation 126 testing as set forth in the SAPA yet ERAC continued toreceive payments from Inter-American. If the testing was a materialbreach, it was waived by ERAC's conduct. ERAC did not demand thetesting and therefore cannot now be heard to complain."

Further the court wrote, "Here ERAC certainly benefitted from its relationshipwith Inter-American. It is uncontested that ERAC received a fee for itsservices although my notes do not reflect the amount. I find that we do haveconsideration." It is our view that ERAC accepted reinsurance premiumpayments from Inter-American over an extended period without complaining of orobjecting to Inter-American's method of portfolio maintenance. Therefore,ERAC waived strict compliance with the Inter-American's portfolio maintenance.

For the foregoing reasons, we affirm the holding of the trial court.

Affirmed.

TULLY and McNULTY, JJ., concur.