Appeal from the Circuit Court of Cook County; the Hon. HARRY
G. HERSHENSON, Judge, presiding. Affirmed.
MR. JUSTICE MURPHY DELIVERED THE OPINION OF THE COURT.
Defendant, a licensed insurance broker, appeals from a $20,000 judgment entered against him in a non-jury trial. Defendant, having failed to perform his contract to procure public liability insurance covering Ronald Jackson, was held to stand in the place of the intended insurer and to be liable on judgments against Jackson, secured by the plaintiffs, to the extent of the coverage ordered.
Defendant asserts (1) that he had no duty, as a matter of law, to obtain insurance coverage for Jackson before the date of the occurrence which resulted in the subject judgments against Jackson, and (2) plaintiffs, not being parties to the contract to procure insurance, have no cause of action against defendant for a breach, if any, of this contract.
On December 10, 1956, Ronald Jackson, a minor, telephoned the office of the Illinois State Auto Insurance Agency, a sole proprietorship operated by the defendant, Leo Nemerovski. In response to the call, Albert Levenstein visited Jackson's home on December 11, 1956. In the presence of Mrs. Jackson, his step-mother, Jackson and Levenstein discussed insurance coverage. Terms were agreed upon, and an ititial payment of $10 was made by Jackson to Levenstein. A receipt of the "Illinois State Auto Insurance Agency," dated December 11, 1956, and signed by Levenstein, as agent, was given to Jackson. Levenstein then told Jackson and his mother, in response to their inquiry, that the policy would go into effect when he returned to the office "within an hour." On the face of the receipt given to Jackson was stamped, "The Insurance For Which You Have Applied For Which This Is A Payment On Account Is Not Effective Until A Written Binder Or Policy Is Issued And Delivered."
Several days later, Jackson received a form letter on the letterhead of the "Illinois State Auto Insurance Agency," signed by "Leo Nemerovski." It opened with, "It is with sincere pleasure that we welcome you into our large and growing family of protected and satisfied policyholders. Our Mr. Levenstein has informed us that your insurance has been ordered as of December 12, 1956. The down payment required was $35.40 towards which you have paid $10 leaving a balance of $25.40 which must be paid . . . by December 31, 1956. . . . [W]hen the final payment has been made your policy will be mailed to you." The notice that was stamped on the receipt for $10 was also stamped on the letter. Under the heading of "Important," was printed: "If for some reason you find it impossible to make any of the payments on time, please telephone our office immediately so that we will understand and be able to help you with your problem, and thereby continue your insurance protection." (Emphasis supplied.)
The letter was first read by Mrs. Jackson, and after a discussion with her, Jackson telephoned the Illinois State Auto Agency. He asked to speak with Levenstein, and was told by a woman who answered the phone that Levenstein was not in the office. In response to her offer of assistance, he told her that he "didn't quite understand the letter" of December 12, 1956; "that the letter led me to believe that I was insured and that after I read it I didn't understand whether I was or not." Indicating that she had Jackson's file in front of her, she said, "You have nothing to worry about. You have insurance as of December 12th because the application for the policy left here on December 14th." Jackson then asked "if she could please repeat that to my mother because the car was in my father's name and I couldn't drive it until she knew that I was insured. She said, yes, she would repeat it. I then handed the telephone to my step-mother, and she spoke into it."
Jackson then began to drive the automobile and on December 23, 1956, was involved in an automobile collision in the State of Minnesota. On December 26, 1956, Jackson went to defendant's office and asked if his policy had "come in yet," as he wanted to report an accident. A woman in the office told him, "Well, if your if the policy is dated after the accident your insurance wasn't in effect, so therefore it wasn't covered," and Jackson left the office.
Jackson continued to make the payments as agreed with Levenstein on December 11, 1956, and Prudence Mutual Casualty Company issued a policy covering Jackson, effective January 15, 1957.
Plaintiffs filed two separate actions in Minnesota against Jackson, on which they obtained default judgments in 1959. On April 21, 1960, plaintiffs sued defendant Nemerovski and Prudence Mutual to recover the limits of the policy, which they claim should have been procured for Jackson before the occurrence. Before trial and on motion of plaintiffs, Prudence Mutual was dismissed as a party defendant. The trial proceeded against Nemerovski, and judgment was entered against him for the limits of the policy ultimately issued to Jackson by Prudence Mutual.
Initially, defendant contends (1) the acceptance by defendant of Ronald Jackson's application for insurance was a "conditional acceptance"; (2) defendant was under no legal duty to procure insurance until Ronald Jackson paid the required initial premium; and (3) there was no competent evidence to show that the effective starting date of the insurance would be prior to the receipt of the full down payment.
As to the meeting with Levenstein on December 11, 1956, Jackson testified, "I asked Mr. Levenstein how much of a down payment was required to make the policy effective, and he said $10. He also said that I would have three payments to make on the policy. I gave him the $10 and he gave me a receipt. After he gave me the receipt, my mother asked him when the policy would go into effect. He said the minute he got back to the office and put it on file the policy would go into effect. He said that he intended to return to the office within an hour." Jackson further testified as to his telephone call of December 12, 1956, and his visit to defendant's office on December 26, 1956.
Mrs. Jackson testified that on December 11, 1956, Levenstein came to their home and they went into the living room. Present were "my son Ronald and a companion by the name of Billy Joe Stroud. There was a conversation regarding different types of automobile insurance. An application for automobile insurance was made out, and my son gave him a payment of $10 toward the insurance. I asked Mr. Levenstein when this insurance would become effective, as the car was in my husband's name and we wouldn't let Ronald drive it until he was covered by insurance. He told me that Ronald would be covered as soon as he returned to his office and filed his application in about an hour." Mrs. Jackson further testified about the receipt of the letter of December 12, 1956, and her part in the telephone conversation. "I identified myself and told the other party that we had received plaintiff's exhibit 1 [letter of December 12, 1956] and that neither I nor my son could understand it. We read the letter thanking us for placing the policy and then there was a stamp at the bottom and we don't understand it, and I wanted to know if he [Ronald Jackson] was covered or not. . . . She assured me that he was fully covered because the policy had been applied for and was mailed out of their office on the 14th of December, 1956." Also, Mrs. Jackson identified Levenstein in open court.
Defendant Nemerovski testified that he was the sole owner of the Illinois State Auto Insurance Agency. He was a broker, licensed to sell insurance and represent persons in the procuring of insurance. During the period from November 1956 through February 1957, he personally employed no female employees. The total amount of premium received for the policy of insurance issued to Ronald Jackson was $101.40. Of this amount, $64.08 represented the premium and the balance represented a service charge for financing the payment of the premiums. "When an uninsured person applies for insurance, the general custom is to issue the policy as of the date of the application for insurance, even though the policy might not be issued for a week or more thereafter. When a policy of insurance is ordered by a broker, whether through an agent or another broker, or directly from the company, the issued policy is delivered to the ordering broker or agent of the particular company and not to the insured."
The Prudence Mutual policy issued to Jackson "was not delivered from the company to me but to C. Waters, as the broker. He later delivered it to me. I did not deliver that policy to Ronald Jackson, but I have retained it in my files. . . . The $10 payment by Ronald Jackson towards the down payment for his insurance was received by Mr. Al Levenstein on December 12, 1956, and forwarded to me. He was the broker who solicited the business. I furnished him with forms of receipt that he was to issue when he received any payment." Levenstein was paid for his services on a commission basis.
On cross-examination, Nemerovski testified that when financing a policy, "it is customary to hold the original policy so that in case of a delinquency we have it in our possession to return for cancellation. The insurance company looked to me, not the insured, for the premium. The insurance company was not interested in the fact that I financed the policy. The insurance policy would be dated the day following the day on which I ordered it. I did not send the application of Ronald Jackson to the insurance company until sometime in January when I received the balance of his down payment. That was in line with the agreement. When I say `that was the agreement,' I don't know what the conversation was between Ronald Jackson and Al Levenstein; but that was the system that I had. The reason for making no application for insurance coverage of the type applied for by Ronald Jackson until the down payment had been received is as follows: When we order a policy, we are liable for the premium. If I order a policy with no money, or with a few dollars, and the balance is not paid, then the policy has to be cancelled and I would have to pay for the earned premium. If I had received the down payment on December 12, 1956, I would have ordered the policy at that time."
Albert Levenstein testified that he called on Jackson at his home on December 10th or 11th in the afternoon. "At this meeting only Mr. Jackson and myself were present. There was no one else. Our discussion took place in the living room of Mr. Jackson's home. . . . I showed him what the coverages were that were afforded, $10,000 for injury to one person, $20,000 if there were two or more people involved in the accident and $5,000 for property damage to others. I may have gone into a much more detailed explanation. We normally do. Then I told him what it would cost to obtain this insurance and the breakdown of the payment schedule. I said that $35.40 would be the required down payment. Mr. Jackson related that he did not have the full $35.40, but only $10, and asked me whether this would insure him. I said that this would not. I took the $10 from him with the stipulation that this was a deposit against the down payment and that there was no coverage afforded with the $10. The normal procedure on any application ...