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Central Ill. Harvestore v. Hartford Ins.





APPEAL from the Circuit Court of Peoria County; the Hon. JAMES HEIPLE, Judge, presiding.


Plaintiff, Central Illinois Harvestore, Inc., brought this declaratory judgment action against defendant, Hartford Insurance Co., to resolve a dispute concerning coverage under workmen's compensation insurance issued by defendant to the plaintiff. Whether coverage exists rests upon a determination as to when the policy period commenced. The circuit court of Peoria County granted plaintiff's motion for summary judgment and this appeal followed. The following uncontested facts appear from the pleadings as well as the documents pertaining to the motion for summary judgment.

In December of 1976, plaintiff was informed by its workmen's compensation insurance carrier (Firemen's Fund) that plaintiff's coverage would be cancelled as of the middle part of January. After being rejected by two other workmen's compensation insurance carriers, plaintiff applied to the Illinois Industrial Commission for a policy of workmen's compensation insurance under the assigned risk plan. (Ill. Rev. Stat. 1975, ch. 73, pars. 1081 through 1091.1.) The application was made on plaintiff's behalf by an insurance agent, James Riley, of Mueller, Riley, McClellan & Assocs. Riley and defendant had previously entered into a written agency agreement, and as will appear, the relationship created by this agreement is central to the issues on appeal.

The Commission assigned the risk to the defendant and a notice of that assignment was sent out on January 12, 1977. On January 19, 1977, the defendant transmitted its proposed policy to Riley and the plaintiff. The correspondence stated:

"Please send your CERTIFIED CHECK in the amount of $12,770 made payable to `Hartford', along with a copy of this letter, to the attention of the writer. Upon its receipt, we shall issue your policy for a one year period."

On January 26 Riley received this proposal from defendant and telephoned Ray Garrison, comptroller of the plaintiff corporation, and informed him of the policy as well as the premium amount. Garrison agreed to send plaintiff the check in the amount requested made payable to defendant. Riley told Garrison coverage would be bound as of January 26, 1977. As of January 26, plaintiff had not received its copy of the notification from defendant. In a sworn affidavit in support of plaintiff's motion for summary judgment, Garrison stated that he relied on Riley's representation, as an authorized agent of the defendant, that plaintiff was bound with coverage for workmen's compensation.

On January 27 one of the plaintiff's employees was injured in the course of employment and subsequently filed a claim. On March 14, Riley notified defendant of the claim and on March 23 defendant denied liability, claiming the effective date of the policy was February 11, 1977. Plaintiff then filed a verified complaint requesting a declaratory judgment that defendant provided workmen's compensation coverage on January 27, 1977.

Our consideration of the issues on appeal involves an examination of the authority granted to Riley under the agency agreement and how this authority relates to certain provisions of the Insurance Code and rules of the Illinois Industrial Commission dealing with the assigned risk plan.

Section 3(a) of the Workmen's Compensation or Occupational Diseases Insurance for Rejected Employers Act provides:

"The Commission shall grant binding authority to a licensed insurance agent upon collection of at least 25 percent of the premium and immediate notice of binding mailed or submitted to the Commission, and subject to such rules as promulgated by the Commission." (Ill. Rev. Stat. 1977, ch. 73, par. 1083(a).)

Pursuant to this authority the Commission has adopted certain rules and among them are the following in pertinent part.

"Rule 2

[T]he Industrial Commission will designate an insurance carrier which shall calculate the annual premium and notify the employer or licensed agent as to the amount of the annual premium required. On receipt of notice of premium the employer shall forward to the assigned carrier, a certified or cashier's check payable to the assigned carrier at the carrier's address indicated in the assignment letter for the full amount of the premium. The ...

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