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Stock v. Reliance Ins. Co.

MAY 31, 1968.




Appeal from the Circuit Court of Marion County; the Hon. F.R. DOVE, Judge, presiding. Judgment reversed and cause remanded with directions.


This is an action for declaratory judgment brought by plaintiffs, Michael J. Stock, hereafter referred to as Stock, and Amanda Rose Stock, to determine the rights and liabilities of the parties under policies of insurance issued by the defendants, Reliance Insurance Company, hereafter called Reliance, and Pekin Insurance Company, hereafter called Pekin, and to recover monies allegedly due plaintiffs under the policies. The Circuit Court of Marion County, after trial without a jury, entered judgment in favor of plaintiffs and against Reliance in the amount of $6,066.13, held that there was no valid contract of insurance between plaintiffs and Pekin, and entered judgment for Pekin. Reliance appeals from the judgment, and plaintiffs have cross-appealed.

On November 23, 1963, Reliance had issued its "homeowner's" policy to plaintiffs providing various coverages at premises described as 10 Phyllis Drive, Centralia.

Plaintiffs, in order to complete the construction of a dwelling on the premises, borrowed money from William H. Roffman, hereafter called Roffman. To secure the loan, the property was conveyed to Roffman, his wife and son, and on February 15, 1964, they, as vendors, entered into a contract for deed with the plaintiffs as vendees. On that date an endorsement was made to the Reliance policy naming the Roffmans as "additional assureds."

As amended by endorsement dated February 1, 1965, the Reliance policy provided the following coverages: for the dwelling house, $20,000; for personal property, $8,000; for additional living expenses, $2,000.

The evidence shows that at the time plaintiffs obtained the loan from the Roffmans it was estimated it would take a year to complete construction of the dwelling. Plaintiffs, at the suggestion of Charles Rude, Jr., of the Rude Insurance Agency, procured a builders' risk policy to protect the interests of the Roffmans. This policy was issued by Pekin, through the Rude Agency. While this policy was in force, the building suffered water damage. A claim was presented, and was denied by Pekin. Plaintiff, Stock, was much perturbed by the denial of liability, and told Charles Rude, Jr. that he did not think "Pekin was too good a company," but nevertheless, did not cancel the policy, and did not at any time direct Mr. Rude to refrain from placing other insurance with Pekin. The builders' risk policy expired in November, 1964.

The testimony shows that Roffman, over a period of some years, had purchased real estate contracts, and insurance, through the Rude Agency. He had instructed the agency that it was never to allow a policy of insurance to expire, or be cancelled, on any property on which he had a loan. Rude had been instructed that when the property in question qualified, he was to obtain a "homeowner's" type policy, since that type afforded a greater range of protection at a low premium.

The contract for deed contains the following provision:

"The Purchasers shall also procure insurance on the building or buildings now on said lot, or that shall hereafter be erected on said lot for a sum at least equal to the amount due on this contract on the date of its execution, in some good company or companies to be selected by the Sellers, such insurance to be for the benefit and for the further security of the Sellers . . ."

At no time did the indebtedness exceed the amount of insurance provided on the dwelling in the Reliance policy.

Charles Rude, Jr. testified that he was a real estate and insurance broker. During the period in question he represented several insurance companies, one of which was Pekin. On February 15, 1965, he prepared and submitted to Pekin an application for a "homeowner's" policy. This was done because of Roffman's standing orders with respect to insurance. There was no specific request for the insurance by either Stock or Roffman, and neither of them signed the application. At that time Rude did not know of the Reliance policy, and the application states there was no other insurance in force. The policy shows Charles H. Rude, Jr. to be the issuing agent.

Mr. Rude testified that under the rules and regulations of the Illinois Department of Insurance governing the writing of "homeowner's" policies, he could not have written the policy in the name of the Roffmans without naming the plaintiffs as insureds, because Roffman did not live in the house. It was his intention to insure the interests of both the Roffmans and the plaintiffs.

He testified that in the ordinary course of doing business with Pekin, policies had been issued without signed applications.

Mr. Rude testified further that when the policy was issued he delivered a copy to Roffman, and kept Stock's copy, intending to give it to ...

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