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Horace Mann Insurance Co. v. Brown

AUGUST 1, 1973.




APPEAL from the Circuit Court of Sangamon County; the Hon. J. WALDO ACKERMAN, Judge, presiding.


The plaintiff sought a declaratory judgment, claiming that an automobile libility insurance policy issued by plaintiff to defendant was not in effect on October 7, 1968, when defendant was involved in an automobile collision. The trial court, sitting without a jury, found that the insurance policy was still in force at the time of the accident.

A chronological summary of the events involving the insurance policy is necessary. Sometime in early March, 1968, plaintiff issued two automobile liability insurance policies to defendant Lewis: No. 218794-FA, covering a 1966 Buick, with a premium of $62.30, and No. 218795-FA, covering a 1965 Mustang, having a premium of $66.10. The total premium paid by defendant Lewis was $128.40 for six months' coverage, beginning March 18, 1968.

On July 31, 1968, plaintiff had not yet sent any notice for the next premium for the period commencing September 18, but defendant anticipated being away on vacation when such payment would be due so; wishing to continue both policies, defendant prepared two checks totaling $128.40, payable to the plaintiff and mailed them to the plaintiff. Defendant's name and address were on the envelope but no explanation as to what the payment was to be applied was included with the checks which were received by plaintiff on August 2, 1968.

The plaintiff's sole witness, its underwriting manager, testified that pursuant to an unvarying company policy, a notice was sent to the defendant no later than August 18, 1968 (30 days prior to the premium due date) which notice would state:

"NOTICE of automobile insurance premium. This is the only notice you will receive prior to date premium is due. Receipt is sent upon request only. * * * This premium must be paid before date shown or policy lapses 12:01 a.m. date shown."

The plaintiff's records indicate that the premiums for defendant's policies due on September 18, 1968 were $78.60 for the policy covering the Buick and $84.40 for the other policy, for a total of $163.00. The underwriting manager could not testify from his personal knowledge that such a notice was sent to defendant Lewis. Lewis testified that he did not receive any notice which would alert him to the higher premium until September 26, and in an earlier deposition had stated that he did not remember ever receiving any premium notice. Plaintiff cashed the defendant's two checks totaling $128.40, but on September 26, 1968, mailed their check for that amount to the defendant, along with the following letter:

"We are with regret forced to enclose our check for $128.40. This is a combination of the amount of two checks which you have sent to us. Our records reflect that we billed you for $84.40 renewal premium on policy 218795 and $78.60 renewal premium on policy 218794. So, as you can see, your checks totallng [sic] $128.40 are not sufficient to pay the policies in full and therefore must be considered partial payments. We cannot accept partial payments.

It is our suggestion that you immediately reissue a check or checks in the full amount to assure continuous coverage under your policies."

The insurance company explained that the long delay was caused by a lack of explanation or premium notice with the checks received from the defendant. The underwriting manager said that by August 29, 1968 it was deduced that the defendant intended the $128.40 to be applied to his automobile liability insurance policies, but that the money was not returned until September 26 due to "just the normal amount of time required to process it after it had been identified."

On the insurance company's copy of the premium notice a pencil line was drawn through the date of September 18, 1968, and a pencil notation of "10/12" made and likewise the expiration date of March 18, 1969 was changed to "4/12". That was explained by the underwriting manager as being made by a clerk in the underwriting department to indicate that if the defendant Lewis made payment by October 12, the company would consider reestablishing coverage.

The terms of the policy in regard to "Cancellation" reads:

"After this policy has been in effect for sixty days or, if the policy is a renewal, effective immediately, the company shall not exercise its right to cancel the insurance afforded under Part I unless:

1. The named insured fails to discharge when due any of his obligations in connection with the payment of premium for this policy or any installment thereof whether ...

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