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Zak v. Fidelity-phenix Ins. Co.

APRIL 26, 1965.




Appeal from the Circuit Court of Cook County; the Hon. EZRA J. CLARK, Judge, presiding. Reversed and remanded with directions.


Rehearing denied May 20, 1965.

This is a declaratory judgment action based on an automobile liability insurance policy, issued by defendant to plaintiff and cancelled by defendant prior to an automobile collision which resulted in judgments against plaintiff. A non-jury trial terminated in a judgment for defendant, supported by thirty specific findings by the trial court.

Plaintiff appeals, contending that the cancellation was not effective, and the defendant insurer's liability has been established as a matter of law.

The action is defended by Fidelity-Phenix Insurance Company, successor to the Metropolitan Casualty Insurance Company of New York, the original defendant.

The amended complaint alleges that the insurer issued its automobile liability policy to plaintiff, Joanne Zak, effective for the period from July 18, 1958, to July 18, 1959; that on or about November 14, 1958, plaintiff was involved in a collision while operating the automobile covered by the policy; that an action was commenced against her for personal injuries and damage to an automobile; that plaintiff demanded the defense and indemnification provided by the policy; that Metropolitan refused to assume its policy obligations on the grounds that plaintiff failed to pay the premium on the policy; that judgments were entered against plaintiff, which remain unpaid; and that plaintiff has been required to pay legal expenses for her protection with regard thereto, although plaintiff has complied with the policy provisions, including the payment of the premium.

The answer of the defendant admits all of the substantial allegations of the complaint, except that it denies that the premium was paid, and alleges that the policy was cancelled on October 28, 1958, by notice received by the plaintiff on October 16, 1958. The answer alleges "the defendant denies that the plaintiff paid the premium established and set forth in the policy of insurance and for that reason the policy was cancelled, as aforesaid, and therefore not in effect on the date of the alleged occurrence."

Initially, we do not consider this case to present the question of whether the judgment was against the manifest weight of the evidence. There is no substantial dispute on the evidence. In entering judgment for defendant, the trial court made the following findings of fact. Although we do not agree with some of the conclusions contained therein, the findings have been helpful to this court:

1. On March 1, 1958, Tom J. Agres was designated an agent by the Metropolitan Casualty Insurance Company of New York, and application for that designation was made by the company with the Director of Insurance of the State of Illinois.

2. The agency designation was for a period of one year, expiring on February 28, 1959, was effective and in existence during the month of July 1958, but as between Tom J. Agres and the defendant insurance company was cancelled at some time prior to October 16, 1958.

3. No notice of any kind was given to the plaintiff of any cancellation of the Agres agency.

4. Nick Kafkis, in the month of July 1958, and for a period of time following that date, was in the office of Tom J. Agres and attended to various aspects of the Agres insurance business, and solicited insurance business which was placed with various companies through the Agres agency.

5. A policy of automobile liability insurance, effective from July 18, 1958, to July 18, 1959, was issued to the plaintiff through the office of Tom J. Agres who had authorized Nick Kafkis, with whom the plaintiff was in direct contact, to place insurance with companies in which risks were generally placed by the Agres agency.

6. The amount of the premium was remitted in full by the plaintiff immediately after the policy was delivered to her, the remittance being by a draft payable to Nick Kafkis in accordance with his specific direction to her.

7. Neither the amount paid to Kafkis nor any part of it has been returned to the plaintiff and there has been no offer of return thereof to her.

8. The defendant's notice of policy cancellation was given to the plaintiff by registered mail on or about October 16, 1958, the notice stating that it would become effective on October 28, 1958.

9. The cancellation provision of the policy is as follows:

"15. CANCELLATION. All Parts.

". . . This policy may be cancelled by the Company by mailing to the Insured named in Item 1 of the declarations at the address shown in this policy written notice stating when not less than ten days thereafter such cancellation shall be effective. The mailing of notice as aforesaid shall be sufficient proof of notice. The effective date and hour of cancellation stated in the notice shall become the end of the policy period. Delivery of such written notice either by such Insured or by the Company shall be equivalent to mailing.

". . . If the Company cancels, earned premium shall be computed pro rata. Premium adjustment may be made either at the time cancellation is effected or as soon as practicable after cancellation becomes effective, but payment or tender of unearned premium is not a condition of cancellation."

10. The cancellation notice served upon the plaintiff appears as follows:

"Notice of Cancellation

Loyalty Group Loyalty Group

Policy No. AFW 618973, dated July 18, 1958, issued to you by Metropolitan Casualty Insurance Company of New York, is hereby cancelled in accordance with its terms and conditions.

The cancellation will be effective on the 26th day of October 1958 at 12:01 ...

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