APPEAL from the Circuit Court of Lee County; the Hon. JAMES E.
BALES, Judge, presiding.
MR. JUSTICE GUILD DELIVERED THE OPINION OF THE COURT:
Rehearing denied May 21, 1974.
This is an appeal by defendant-third-party plaintiff, State Farm Mutual Automobile Insurance Company (State Farm), from a declaratory judgment entered against it by the Circuit Court of Lee County. The sole question presented both in the trial court and on appeal is whether an automobile insurance policy issued by State Farm remained in force after its expiration date even though the insured failed to pay the premium due. The trial court ruled that State Farm failed to "cancel" the policy as required under the terms thereof, and therefore, the policy was still in effect after the policy's stated expiration date.
There is no dispute as to any of the material facts. State Farm issued an automobile insurance policy to John Chupp on June 8, 1970. The policy provided liability and other insurance for a 1963 GMC one-half ton pickup truck. The policy period was for a 6-month term from June 8, 1970, to December 8, 1970. The policy was renewed for a 6-month period extending the term of the policy from December 8, 1970, to 12:01 A.M. June 8, 1971.
On May 6, 1971, State Farm mailed John Chupp a notice indicating his premium payment was due on or before June 8, 1971, but no payment of the premium was made by June 8.
On June 11, 1971, 3 days after the expiration date, Chupp was sent another notice from State Farm which again informed him of the date payment was due and the amount due. This notice further stated:
"To have continuous protection make payment to the company or State Farm agent within ten days after the policy due date. If payment is not made within 10 days after the due date, but is made in less than 40 days, protection will be reinstated as of date payment is received by the company. * * *"
No payment was made within 10 days of the due date.
On June 18, 1971, John Chupp allowed George Shiaras to drive the pickup truck listed on the original policy. While operating this truck, Shiaras was involved in an accident with a motorcycle driven by Edward De Pauw.
After this accident Chupp mailed the premium payment to State Farm in an envelope postmarked June 21, 1971. He also notified a State Farm agent about the accident. The testimony, however, is not clear as to whether he did so before or after he sent in the payment. The premium payment was received by State Farm on June 22, 1971, and the new policy of insurance was issued to Chupp for the period of June 22, 1971, to December 8, 1971. State Farm re-computed the premium due for the shorter period of time and assessed the premium of 92.2% of the amount that should have been paid on June 8, 1971. This resulted in a $4 reduction in the premium. A check dated June 27, 1971, for $4 was mailed to Chupp and was cashed by him.
After De Pauw commenced suit for personal injuries in Lee County against Shiaras, Shiaras filed the complaint herein for declaratory judgment against John Chupp and State Farm in order to determine the rights of the parties under the State Farm insurance policy. Subsequently, State Farm filed a third-party complaint against De Pauw and Country Mutual Insurance Company, Shiaras' insurance company. Although the complaint was commenced by Shiaras, it is clear that the real party in interest is the Country Mutual Insurance Company. If Chupp's State Farm policy were still in effect at the time of the accident, State Farm would have to defend and provide coverage in the event De Pauw won his suit against Shiaras. However, in the event no coverage is afforded by State Farm because the policy had expired, Country Mutual would have to provide coverage for George Shiaras.
The pertinent part of the State Farm policy reads as follows:
The policy period shall be as shown under "Policy Period" and for such succeeding periods of six months each thereafter as the required renewal premium is paid by the named insured on or before the current policy period * * *. The policy period shall begin and end at 12:01 A.M. at the address of the named insured as stated ...