APPEAL from the Circuit Court of Monroe County; the Hon. ALVIN
H. MAEYS, JR., Judge, presiding.
MR. JUSTICE GEORGE J. MORAN DELIVERED THE OPINION OF THE COURT:
M.F.A. Mutual Insurance Company appeals from a judgment of the circuit court of Monroe County dismissing its complaint for a declaratory judgment against Harold Miller and Marie Miller that an automobile insurance policy sold to George Cheek was void because of a breach of the cooperation clause in the policy by Cheek, who told M.F.A. that he was driving his car when it struck Harold Miller, a pedestrian, and then later told M.F.A. that William Valleroy was driving.
The stipulated facts disclosed that M.F.A. Mutual Insurance Company (herein called M.F.A.) sold an automobile insurance policy to George Cheek which protected Cheek against liability incurred in an automobile accident up to the amount of $10,000 per accident victim. An omnibus clause in the policy protected any person who used Cheek's automobile with his permission. A cooperation clause was included in the policy which said:
"Assistance and Cooperation of the Insured The insured shall cooperate with the Company, disclosing all pertinent facts known or available to him, and upon the Company's request, assist in making settlements, in the conduct of suits and in enforcing any right of contribution or indemnity against any person or organization that may be liable to the insured with respect to which insurance is afforded under the policy; * * *."
The policy was to be in effect from September 11, 1971, to March 11, 1972. On November 12, 1971, Cheek was riding in his car with William Valleroy and two other persons when it struck and injured Harold Miller while he was crossing a street.
Cheek informed the police officer who investigated the accident that he had been driving when Miller was injured and that evening Cheek called an M.F.A. representative on the telephone and said that he had been driving at the time of the accident. On the following day, Cheek went to the representative's office and completed a form in which he stated that he had been the driver of the automobile. On November 16, 1971, an M.F.A. employee visited Cheek, Valleroy, and the two other persons who had been in the car. All of them said that Cheek had been driving.
Miller filed a complaint against Cheek in the circuit court of Monroe County on June 7, 1972. The complaint alleged that Cheek's negligence had caused Miller's injuries, and prayed for $50,000 damages from Cheek. Marie Miller, the wife of Harold Miller, also asked for $25,000 damages from Cheek for the loss of her husband's services. Because Harold Miller and Marie Miller occupy the same position with respect to M.F.A., only Harold Miller will be referred to below for the sake of convenience.
Cheek was served with a summons and a copy of Miller's complaint on June 13, 1972. On the next day Cheek went to an M.F.A. office and told a supervisory employee that he had not been driving the automobile at the time of the accident, and that William Valleroy actually had been driving.
M.F.A. promptly sent Cheek a letter disclaiming its liability on the policy on the ground that Cheek had breached the cooperation clause of the policy by withholding from M.F.A. pertinent information about the accident. M.F.A. filed a complaint in the circuit court of Monroe County requesting a declaratory judgment against Cheek and Miller that the policy was void because of a breach of the cooperation clause. Cheek did not make an appearance in this action, and a default judgment was entered against him. M.F.A. then added Valleroy as a defendant. Valleroy did not appear, and a default judgment was also entered against him.
After a trial in the action for a declaratory judgment, the circuit court held that "all issues presented herein are found in favor of the defendants and against the plaintiff," and dismissed M.F.A.'s complaint.
M.F.A. contends (1) that the default judgments against Cheek and Valleroy extinguished M.F.A.'s liability on the policy and precluded Miller from recovering damages from M.F.A., (2) that a breach of the policy's cooperation clause occurred which voided the policy, and (3) that the circuit court should have entered an order that declared the rights of the parties instead of an order that dismissed the complaint.
• 1 The statement has often appeared in Illinois decisions that an accident victim cannot recover from an insurer on a liability insurance policy unless the insured could recover if he were to sue the insurer. (See, e.g., Zitnik v. Burik, 395 Ill. 182, 69 N.E.2d 888 (1946); Firebaugh v. Jumes, 341 Ill. App. 1, 92 N.E.2d 790 (1950).) This simply means that an insurer may assert against an accident victim all the substantive defenses based upon the terms of the policy that the insurer could assert against the insured. The statement does not mean, however, that a procedural misstep by the insured which terminates his rights against the insurer nullifies the rights of an accident victim against the insurer.
• 2, 3 An accident victim must be given a chance to litigate the question of the validity of a liability insurance policy before his interest in the insurance can be terminated. (Fourniotis v. Woodward, 63 Ill. App.2d 79, 211 N.E.2d 571 (1965); Sobina v. Busby, 62 Ill. App.2d 1, 210 N.E.2d 769 (1965).) If an accident victim declines an opportunity to litigate this matter in a declaratory judgment proceeding brought by an insurer, he may be deprived of his interest in the insurance without being given another opportunity to be heard. (Williams v. Madison County Mutual Automobile Insurance Co., 40 Ill.2d 404, 240 N.E.2d 602 (1968).) The accident victim must nevertheless be given at least one opportunity to be heard on the question of the policy's validity. Because Miller was entitled to an opportunity to be heard, the default judgments entered against Cheek and Valleroy did not preclude Miller from recovering from M.F.A.
Because an insured's breach of the cooperation clause is a substantive defense based upon the terms of a liability insurance policy, an insurer may urge this defense against an accident victim. (Schneider v. Autoist Mutual Insurance Co., 346 Ill. 137, 178 N.E. 466 (1931).) Moreover, if William Valleroy were the driver of the automobile, he was a permissive user who was insured by the omnibus clause in Cheek's policy, and his cooperation with M.F.A. was a condition upon M.F.A.'s duty to pay on the policy. (Zitnik v. Burik.) M.F.A. could, ...