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Black v. Illinois Fair Plan Association

OPINION FILED SEPTEMBER 4, 1980.

JOHN BLACK ET AL., PLAINTIFFS-APPELLANTS,

v.

ILLINOIS FAIR PLAN ASSOCIATION ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of St. Clair County; the Hon. WILLIAM B. STARNES, Judge, presiding.

MR. JUSTICE KARNS DELIVERED THE OPINION OF THE COURT:

Plaintiffs, John and Dora Black, appeal from the judgment of the Circuit Court of St. Clair County granting summary judgment in favor of the defendants, Illinois Fair Plan Association and Marion M. Glore. All parties filed motions for summary judgment prior to trial and attached thereto affidavits and portions of discovery depositions.

This case concerns the liability of the Illinois Fair Plan Association and an insurance agent for Allstate Insurance Co., Marion M. Glore, for issuing and obtaining, respectively, a fire insurance policy covering the wrong premises. The facts are relatively undisputed.

In December 1975, the plaintiffs, John and Dora Black, purchased a house located at 631 N. 32nd Street, East St. Louis, Illinois. This property was adjacent to property already owned by the Blacks and occupied as their residence, at 629 N. 32nd Street.

The Blacks desired to insure the property at 631 N. 32nd Street and contacted Glore who had previously obtained insurance on this property. Glore filled out an application and submitted it to Allstate, which initially issued its policy on the premises; however, on January 18, 1976, Allstate cancelled the policy because the Blacks did not reside on the property. Glore then suggested that coverage might be obtained through the Illinois Fair Plan Association, a program under the Illinois Insurance Code (Ill. Rev. Stat. 1979, ch. 73, par. 1065.69 et seq.) requiring insurers, under certain conditions, to provide insurance to property owners who cannot obtain insurance through private companies.

An application to the Illinois Fair Plan Association (Association) was completed by Glore and signed by John Black. In filling out the application Glore inserted 629 N. 32d Street as the premises to be insured, rather than 631 N. 32d Street. Black signed the application without detecting the error, and, according to his testimony, signed the application in blank at Glore's direction. In any event, the application was approved and became effective on February 18, 1976. When Black received the policy he glanced at it but failed to detect the mistake. Glore admitted that he inserted the incorrect address in the application. A fire loss occurred on June 17, 1976. Liability was denied by the Association because it had insured 629 N. 32d Street, not 631 N. 32d Street. Thereafter, the Blacks brought this action seeking to reform the contract of insurance and to recover damages from Glore for his negligence in obtaining insurance on the wrong property.

Black's action against the Association sought reformation of the insurance contract. Recovery on the contract as reformed was sought. The trial court ruled that plaintiff was entitled to neither reformation nor recovery on the contract inasmuch as Glore was not the agent of the Association, but of the Blacks in obtaining the policy of insurance.

Section 57 of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 57) provides that summary judgment may be entered for a party where "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." However, if a reviewing court finds that a material question of fact does exist, an order granting summary judgment must be reversed.

• 1 Applying the above standard to the ruling with respect to the Association, it cannot be said that any material fact was left unresolved as to any issue before the trial court. The trial court was correct when it stated that for there to be any right to reformation, Glore must be the agent of the Association. This premise is logically related to the rule followed in Illinois regarding reformation of contracts. That rule was stated in Phillips v. Salk, Ward & Salk, Inc. (1974), 20 Ill. App.3d 359, 367, 314 N.E.2d 262, 268:

"In order to reform a contract of insurance the party seeking reformation must show by clear and convincing evidence that at the time the contract was executed there existed a mutual mistake of fact, not law, common to both parties to the contract, and that because of this mutual mistake of fact the policy as issued does not reflect the real agreement between the parties."

Because the mistake must be mutual between the parties to the contract before reformation may be granted, it was the plaintiff's burden to show that the Association and the Blacks were mistaken as to the same material fact regarding the contract, namely, that the Association also intended to insure the property at 631 N. 32d Street. Plaintiff sought to satisfy this burden by showing that Glore was the agent for the Association, and thus, his knowledge would be imputed to the principal.

There was no evidence that Glore was the agent for the Association. The definition of "insurance agent" is codified in section 490(a) of the Illinois Insurance Code (Ill. Rev. Stat. 1979, ch. 73, par. 1065.37(a)) as an "individual, firm, partnership, association or corporation appointed by an insurer to solicit, negotiate or bind coverages for or on applications or policies of insurance on its behalf, covering property or risks located in this State."

In defining an insurance agent, a useful test was set down in Galiher v. Spates (1970), 129 Ill. App.2d 204, 207, 262 N.E.2d 626, 628. "Insurance agents have a fixed and permanent relation to the companies they represent and have certain duties and allegiances to such companies." In the instant case, Glore had no fixed and permanent relation to the Association. Rather, his contract of employment was with Allstate Insurance Company. Glore's contract provided that he could submit applications to the Association but to no other insurance company. The reason this exception existed was because Allstate was required under section 525 of the Illinois Insurance Code (Ill. Rev. Stat. 1979, ch. 73, par. 1065.72) to participate in the Association's program of insuring homeowners who were refused coverage by private insurance companies.

Thus, while Glore could solicit applications for the Association, his ability to do so was not fixed by means of any permanent relation with the Association. Rather, this relationship was established through his contract ...


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