APPEAL from the Circuit Court of Cook County; the Hon. EDWARD
J. EGAN, Judge, presiding.
MR. JUSTICE HALLETT DELIVERED THE OPINION OF THE COURT:
Rehearing denied June 7, 1973.
This was a declaratory judgment action brought by the plaintiff insurance company against the defendant seeking to have a predated insurance policy issued to defendant Moss declared void ab initio. A third party action filed by said defendant against Louis Kamberos was severed at the time of trial and is not involved on this appeal. After a bench trial, the court held the policy to be valid and entered judgment in favor of the defendants and against the Plaintiff, and this appeal followed. No questions are raised on the pleadings.
On Friday, August 16, 1968, defendant Moss telephoned his broker, the Kamberos Insurance Agency, and asked to speak to Louis Kamberos, who had previously obtained auto insurance for him. Kamberos was not in but the call was transferred to a William Dante, an independent insurance broker, who shared offices with Kamberos but was not associated with him. Moss told Dante that he intended to buy a boat, motor and trailer and wanted physical damage and public liability on it and gave him its value.
At about noon the next day, Saturday, August 17, 1968, Moss bought the boat, motor and trailer and telephoned Kamberos, who was out. Again he talked to Dante, who told him that the serial numbers of the boat, motor and trailer would be needed. Moss told him that he was going over to pick up the boat and asked if he could put him under a binder. Dante said that he could but that he would have to be there by 2:00 that afternoon. At about that time Moss went to Kamberos' office but neither Kamberos nor Dante was there. Moss left a piece of paper with the serial numbers on it with someone else in the office and both of them marked on the envelope the time. Moss thought that he was then insured.
On Saturday and Sunday Moss used the boat. On Monday morning Kamberos found the serial numbers with Dante's note on his desk and assumed that Moss had bought the boat on August 17, 1968, and wanted the effective date of insurance to begin on that date. In the afternoon, in response to a message to call Kamberos, Moss contacted him. Kamberos told Moss that he needed the exact cost breakdown on the boat, motor and trailer and Moss told him to call Milo-Craft, the vendor, for those details. Moss also told Kamberos that he had used the boat twice and thought that he was insured and that he intended to use it again that night. Kamberos told him that he was insured. Kamberos tried twice unsuccessfully on Monday to reach Fencil, of Milo-Craft, to get the breakdown figures, and left word for Fencil to call him.
On Monday evening August 19, 1968, the boat collided with a barge on the Calumet River. Moss suffered serious injuries, was in intensive care for 14 days and was hospitalized for 31 days. The other occupants of the boat, defendants O'Malley, Regan and Steglisch, also suffered injuries. George O'Donnell, Jr. was killed and his administrator is a defendant in this action.
On Tuesday morning, August 20, 1968, Kamberos finally reached Fencil and got the cost breakdown on the boat, motor and trailer and, unaware of the accident the night before, completed the application for insurance effective on August 17, 1968, and mailed it to the Buschbach Agency, an agent for the plaintiff, Western Fire Insurance Company.
That afternoon, Tuesday, August 20, 1968, Moss' sister notified Kamberos' secretary that "there was an occurrence" and she passed this on to him. Kamberos did not contact either the Buschbach Agency or Western Fire because he did not know "where it happened; or who or what was involved", although he did testify that had he known of the accident before he mailed in the application, he would not have mailed it.
On the 21st or 22nd of August, the Buschbach Agency received the application. There had been no prior conversations with Kamberos or Moss and no request for a binder had been made. The Buschbachs put their sticker on the application and forwarded it on to Western Fire. It was not unusual for the Buschbach Agency to receive boat applications in the mail and they did not contact the Kamberos Agency. Had the Buschbach Agency known of the August 19th accident when it received the application on August 21, it would not have accepted the risk.
The application, which read "no losses", was received at Western Fire on August 23, 1968. Also unaware of the loss, Western Fire proceeded to issue its insurance policy effective August 17, 1968, the date Kamberos had put on the application. Had Western Fire been aware that a loss had occurred on August 19, 1968, or that the application had not been received at the Buschbach Agency until August 21, 1968, it would have declined the application. It does not follow a practice of predating policies and assumed that the agency had issued a binder as of August 17, 1968.
On August 27, 1968, Kamberos received the policy and a bill and mailed them to Moss.
After his release from the hospital, Moss received the policy and bill from Kamberos and paid the premium. Thereafter, on September 27, 1968, Moss reported the accident to Kamberos, who then telephoned the Buschbach Agency and gave them their first notice of the August 19th loss. Buschbach immediately telephoned Western Fire and also forwarded to it a written notice of the loss.
After such notice, Western Fire, under a non-waiver agreement, investigated the facts and in January of 1969, wrote Moss declaring the policy void and returning the full amount of the premium. The present declaratory judgment followed.
After a bench trial developing the facts as above stated, the trial court found that Kamberos was the agent of Moss and not of Western Fire; that Western Fire was not aware of the accident when it issued the policy; that, since Moss was unconscious from the time of his accident until after the policy had been issued and could not have informed the insurance company of the accident, he was not guilty of any fraud in not reporting it before the policy was issued; that Moss did pay the premium; and, "as to whether or not the failure of Mr. Kamberos, who was the agent of Moss * * * to inform them could be imputed to Moss", that
"I conclude that it cannot. He is a limited agent. His agency is that, simply, of getting them insurance and the fact that might have been negligence, whether it was knowingly or otherwise, that he failed to inform them cannot be imputed to the insured. He was an agent for that purpose, so that is absent."
The trial court therefore found the issues in favor of the defendants and against the plaintiff and entered judgment accordingly, thus sustaining the validity of the policy. This appeal followed.
• 1 The general principles of law in this field are well established and are not seriously disputed. The trouble, as often, comes when refinements of the rules are applied to a specific set of facts.
In 9 Couch on Insurance, 2d in section 38:21, it is said:
"2. KNOWLEDGE OF SUBSEQUENT FACTS
"Sec. 38:21. Knowledge after application but before issuance of policy.
Known changes in conditions material to the risk which occur between the opening of negotiations for insurance and the issuance of the policy must be divulged. That is, there is a continuing duty on the part of an applicant to disclose newly discovered matters arising between the application for, and the confirmation of, the contract where they come to the applicant's knowledge and render his former answers no longer true." (Footnotes omitted.)
In 7 Couch on Insurance, 2d in section 35:98, it is said:
"Sec. 35:98. Duty of subsequent disclosure.
In consequence of the continuing character of the representation from the moment of its making to the time when the contract is binding, a duty rests upon the insured to reveal conflicting knowledge acquired by him between those two dates. So it is held that matters material to the risk. occurring and becoming known to insured between the time of making the application and the final completion of the contract and concerning which inquiries had been made, must be disclosed; and if, while the insurer is deliberating upon the application for insurance, the applicant discovers facts which make portions of his statements in the original application no longer true, the most elementary spirit of fair dealing calls for a full disclosure." (Footnote omitted.)
In 12 Appleman, Insurance Law and Practice, it is said, in section 7275:
"Sec. 7275. Changes in Risk of Hazard.
Under a good faith doctrine, the insured is under a duty to disclose to the insurer all facts affecting the risk which arise after application and before the contract has been consummated. * * *."
"The relationship between an applicant and an insurer requires good faith on the part of the applicant because of the peculiar character of the insurance contract. The applicant has an obligation imposed by law to notify the insurer of any changed condition materially affecting the risk during the pendency of the application for insurance. Western and Southern Life Insurance Co. ...