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Reznick v. Home Insurance Co.





APPEAL from the Circuit Court of Cook County; the Hon. DAVID R. BABB, Judge, presiding.


Joel Reznick (plaintiff) brought suit on a comprehensive coverage insurance policy issued by Home Insurance Company (defendant) to recover for the loss of his Ford LTD station wagon which he claimed was covered by this policy. Summary judgment was entered for defendant, and on appeal plaintiff raises the following issues: (1) did plaintiff have an insurable interest in the vehicle; and (2) did the comprehensive coverage provision of plaintiff's policy cover loss of an automobile caused by confiscation due to the fact the vehicle had been stolen when the insured was a good faith purchaser.

The relevant facts underlying this cause of action are as follows. In October 1965, plaintiff entered into an insurance agreement with defendant for plaintiff's 1961 Chevrolet. In February 1973, this insurance agreement was amended to include coverage of a 1971 Ford LTD station wagon purchased, as described below, by plaintiff in February of that year. The insurance agreement included comprehensive coverage which, amongst other things, provided that:

"The Company will pay for loss to an owned automobile or to a non-owned private passenger automobile, except loss caused by collision, but only for the amount of each such loss in excess of the deductible amount, if any, stated in the Declarations as applicable hereto, except no deductible shall apply to loss by (a) theft or larceny of the entire automobile, (b) fire or lightning, (c) smoke or smudge due to a sudden, unusual and faulty operation of any fixed heating equipment serving the premises in which the automobile is located, or (d) the stranding, sinking, burning, collision or derailment of any conveyance in or upon which the automobile is being transported. For the purpose of this Coverage, breakage of glass and loss caused by missiles, falling objects, fire, theft or larceny, explosion, earthquake, windstorm, hail, water, flood, malicious mischief or vandalism, riot or civil commotion or colliding with a bird or animal shall not be deemed to be loss caused by collision."

Plaintiff purchased the Ford LTD station wagon in response to a newspaper advertisement and paid $2,600 for that car. Plaintiff received a notarized bill of sale for the vehicle and a certificate of title from the Illinois Secretary of State. The title was revoked several months after the vehicle was confiscated, on November 20, 1973, as a stolen vehicle by agents from the Secretary of State's office and the Chicago Police Department.

Plaintiff filed a complaint against defendant alleging he had entered an insurance agreement with defendant for which he had paid consideration and which promised to compensate him for any loss of the Ford, except that caused by collision. He further alleged defendant had been given proper notice of plaintiff's claim. Defendant answered admitting the insurance agreement but denying that plaintiff had an insurable interest in that Ford. Affirmatively defendant pleaded that the Ford was not an "owned automobile" *fn1 as defined in plaintiff's policy; and that plaintiff did not have an insurable interest in the Ford.

The parties entered into a stipulation as to the following pertinent facts: (1) the Ford was stolen from Affiliates Steam Equipment Co. on January 10, 1973; (2) plaintiff purchased on February 9, 1973, the Ford from a person holding himself out to be James Miterko and paid $2,600 for that car; (3) plaintiff requested that this insurance policy be amended to include the Ford; (4) on February 17, 1973, the policy was so amended to include that Ford; (5) on November 20, 1973, the Ford was identified as the stolen vehicle and confiscated by agents from the Secretary of State's office and the Chicago Police Department; (6) the title previously issued by the Secretary of State to plaintiff was revoked on April 11, 1974; (7) the policy attached to the pleadings was a true and correct copy of the agreement between the parties; and (8) the fair market value of the Ford at the time it was confiscated was $2,300.

Neither by way of pleadings, stipulations, nor in the briefs do the parties indicate whether the premiums were paid, unpaid, or whether the insurance company had retained the premiums (if) paid by plaintiff or tendered these premiums back to plaintiff after claiming plaintiff had no insurable interest in the vehicle.

Both parties moved for summary judgment, and on July 30, 1975, the trial court denied plaintiff's motion and granted judgment for defendant, specifying the following reasons for its decision:

"The definition of `owned auto' necessarily includes the meaning inherent in the words `owned auto;' the Court finds that the insured had an insurable interest against all persons except the true owner and none as against the true owner."


• 1 First we consider whether plaintiff had an insurable interest in the Ford. It is well settled that in order to collect under an insurance agreement, one must have an insurable interest in the insured item. (Couch on Insurance 2d § 24:1.) Insurable interest is not necessarily equated with clear title, and the meaning of the term "insurable interest" is not without dispute. See Ernie Miller Pontiac, Inc. v. Home Insurance Co. (Okla. 1975), 534 P.2d 1; Treit v. Oregon Auto Insurance Co. (1972), 262 Ore. 549, 499 P.2d 335; Skaff v. United States Fidelity & Guaranty Co. (Fla. App. 1968), 215 So.2d 35, 33 A.L.R. 3d 1414; Lieberman v. Hartford Fire Insurance Co. (1st Dist. 1972), 6 Ill. App.3d 948, 287 N.E.2d 38.

While some states have statutes defining insurable interest, in Illinois we do not have the guidance of such a statutory definition. In discussing "insurable interest," Lieberman cites Couch on Insurance § 24:13 (2d ed. 1960), which states:

"Generally speaking, a person has an insurable interest in property whenever he would profit by or gain some advantage by its continued existence and suffer some ...

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