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Econo Lease, Inc. v. Noffsinger

JUNE 25, 1975.




APPEAL from the Circuit Court of Cook County; the Hon. NATHAN B. ENGLESTEIN, Judge, presiding. MR. JUSTICE JOHNSON DELIVERED THE OPINION OF THE COURT:

Econo Lease, Inc., a lessor of automobiles, filed this lawsuit against James D. Noffsinger, the lessee. Noffsinger then filed a third-party action against Farmers Insurance Group, his insurer. The litigants initiated discovery and cross-motions for summary judgment were filed on the third-party complaint. The trial court granted Noffsinger's motion for summary judgment and ordered the insurer to defend the principal action on behalf of the insured and to pay fees to Noffsinger's attorneys. The insurer appeals from this order and on review the only question is whether the trial court properly granted summary judgment.

James D. Noffsinger, the defendant and third-party plaintiff-appellee, was issued an automobile insurance policy by Mid-Century Insurance Company, the third-party defendant-appellant. The initial policy provided coverage from March 13, 1968, to September 13, 1968, and was renewable for additional 6-month terms. Noffsinger renewed the insurance policy for another term and it was to expire on October 18, 1969. When Noffsinger received a notice that his insurance premium was due, during the week of October 18, 1969, he went to the offices of the Gridley Agency, agents of his insurer in Omaha, Nebraska. He explained to a woman in the office that he had been transferred from Chicago to Omaha and wanted to pay the premium on his insurance policy. The woman stated that the insured's premium would change as a result of his relocation in Omaha, and she instructed him to wait until another premium notice, with the new rate, was mailed.

Noffsinger complied with the woman's instructions and waited to hear from the insurance company. He received an "avoid lapse" notice from the insurer around October 29, 1969. It informed him that the policy was in the grace period; that it might lapse; but a call might save the coverage.

On September 19, 1969, Noffsinger signed a lease agreement with Econo Lease, Inc., and rented a 1970 Buick. The lease was for a 24-month period; however, the lessee had the privilege of canceling the lease if the lessor was given 30 days' notice. On November 15, 1969, the insured picked up the rented car in Milwaukee and drove it for 2 days. While driving from Milwaukee to his home in Omaha, on November 17, 1969, the insured was involved in an automobile accident in the leased car in Missouri Valley, Iowa. Repairs, appraisal fees and unpaid rental, less lease deposit, amounted to $2,900.15. Shortly thereafter, around November 19, 1969, the insurer sent the insured a "policy lapsed" notice which stated that the insured's insurance policy had lapsed as of 12 noon October 18, 1969, and that payment within 60 days from the lapse date would reinstate his insurance coverage after the date payment was received.

In August 1970, Econo Lease, Inc., filed a lawsuit against Noffsinger for damage to the rented automobile, and he filed a pro se answer to the complaint. Noffsinger engaged private counsel and on March 13, 1971, he filed a third-party complaint against his insurer alleging that the insured's automobile liability policy covered the loss claimed by the lessor, and that the insurer had wrongfully failed to protect its insured. The insurer answered that the automobile liability policy had lapsed due to nonpayment of premium as of October 18, 1969 and, therefore, no insurance was in effect at the time of the accident. Then the insurer filed a motion for summary judgment alleging that the automobile insurance policy was not in effect at the time of the accident. The insured filed a counter motion for summary judgment alleging that the exhibits attached to the insurer's motion for summary judgment showed that coverage under the insurance policy was in force, at least ex gratia, as of the time of the accident. The insurer filed an amended motion for summary judgment once against alleging that the policy was not in effect at the time of the accident, but also alleging that even if the coverage were in effect at the time of the accident, the insured's claim would still be denied because the automobile that is the subject matter of this lawsuit was a non-owned automobile, not the 1967 Volkswagen covered by his insurance policy.

• 1, 2 The purpose of summary judgment proceedings is to determine whether there is a genuine issue as to a material fact that would require a trial. (Fountaine v. Hadlock (1971), 132 Ill. App.2d 343, 346, 270 N.E.2d 222; McVey v. Discher (1970), 122 Ill. App.2d 408, 259 N.E.2d 300.) Judgment will be rendered if the pleadings, depositions, and admissions on file together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment or decree as a matter of law. (Ill. Rev. Stat. 1971, ch. 110, par. 57(3).) The appellate court on review must determine if the pleadings raised a material fact. (O'Brien v. Highland Lake Construction Co. (1972), 9 Ill. App.3d 408, 413, 292 N.E.2d 205.) We have concluded, after reviewing the pleadings, that the trial court properly granted summary judgment.

The threshold question to be resolved is whether the trial court properly determined as a matter of law that insurance coverage was in effect. The appellant argues that unless the insured paid his premium the contract of insurance would be nonexistent. Furthermore, it contends that a review of his bank records revealed no evidence of payment. This may be so, however, we do not think that it is conclusive evidence of nonpayment by the insured.

• 3 In Illinois, the general rule is that where a question arises as to the legal construction to be placed upon the language of an insurance policy, it will be strictly construed in favor of the insured. (Fisher ex rel. Kiniry v. Associated Underwriters, Inc. (1938), 294 Ill. App. 315, 13 N.E.2d 809.) This rule of construction is particularly applicable in the instant case since the insurer claims a right of cancellation, but, as pointed out by our supreme court in Budelman v. American Insurance Co. (1921), 297 Ill. 222, 130 N.E. 513, courts will permit the insurer to cancel an insurance policy only where the insurance company demonstrates that it has a clear right of forfeiture.

In Mitchell v. Burnett (1971), 1 Ill. App.3d 24, 272 N.E.2d 393, this court was faced with the problem of determining whether the liability insurance policy issued by an insurer was cancelled for nonpayment of premium, when the insurer issued an avoid cancellation notice, and subsequently tendered a final notice of cancellation. The court held that a cancellation notice with an equivocal title, that is conciliatory in tone, and contains some contemplation of future action, is ineffective to cancel the policy. See Burnett v. Illinois Agricultural Mutual Insurance Co. (1943), 318 Ill. App. 629, 48 N.E.2d 559; McNellis v. Aetna Insurance Co. (1913), 176 Ill. App. 575.

In the case under review, the cancellation notice is ineffective because it violates the rules set forth in Burnett. The title of the cancellation notice in this case, "Avoid Lapse," is clearly equivocal. The notice contains the following language: "This policy is now in the grace period and it may lapse. A call may save the coverage." The language contained in the notice is hardly a positive and unequivocal cancellation of Noffsinger's insurance. The notice is conciliatory in tone and is an attempt by the insurer to secure reinstatement of the insured's policy. This language manifests an intent on the part of the insurer to cancel the policy in the future. Finally, as was the case in Burnett, the insurer took future action by tendering to the insured a "policy lapsed" or final cancellation notice after the avoid lapse notice. In our opinion, given the facts in this case and following the rule that the language of an insurance policy should be strictly construed against the insurer, the avoid lapse notice failed to cancel the policy. Therefore, the insured was covered on November 17, 1969, the date of the accident.

• 4 Since the insurance policy was in effect, we must now determine if the insured is barred from recovery by the "non-owned" exclusion contained in the policy as urged by the insurer. The policy defines a non-owned automobile as follows:

"* * * [A]n automobile not owned by or regularly or frequently used by the named insured or any resident of the same household, other than a substitute automobile."

In the case under review, Noffsinger had been driving the leased automobile for 2 days. The automobile was not regularly or frequently used and, therefore, it was not a non-owned automobile as defined by the policy. Consequently, the lessee is not barred from recovery by the non-owned exclusion contained in the policy.

The appellant cites State Farm Mutual Automobile Insurance Co. v. Berke (1970), 123 Ill. App.2d 455, 258 N.E.2d 838, as support for the proposition that insurance coverage is not extended to "non-owned" vehicles. This case can be easily distinguished. In Berke, the policy defined a non-owned automobile as follows: "`* * * [F]urnished or available for the frequent or regular use of the named insured, * * *.'" (123 Ill. App.2d 455, 456.) In the instant case, the definition of a non-owned automobile does not ...

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