APPEAL from the Circuit Court of Jackson County; the Hon. BILL
F. GREEN, Judge, presiding.
MR. JUSTICE KARNS DELIVERED THE OPINION OF THE COURT:
The plaintiff, State Farm Mutual Automobile Insurance Company (hereinafter State Farm), appeals from the judgment of the Circuit Court of Jackson County refusing to relieve it of its duty to defend and from coverage under its automobile liability policy insuring defendant, Michael Green. Judgment was entered in favor of the defendants, Imogene McSpadden, administrator of the estate of Jack L. McSpadden, deceased, and Green.
Imogene McSpadden, as administrator for her son's estate, sued Michael Green for the wrongful death of Jack McSpadden arising out of an automobile accident. State Farm asserted that Green had breached the cooperation clause of the policy and sought to terminate its duties under the policy by filing this action for declaratory judgment. The complaint alleged that Green had breached his duty to cooperate by giving false information to State Farm. The administrator of the estate of Jack McSpadden was joined as a necessary party, having an interest in the viability of Green's insurance policy. Williams v. Madison County Mutual Automobile Insurance Co. (1968), 40 Ill.2d 404, 407, 240 N.E.2d 602, 604.
This case involves an insured's knowing misstatement of the identity of the driver of his car on the morning of October 17, 1976, when a fatal accident occurred. The defendant, Green, owned a 1974 Caprice which was insured at the time of the accident by State Farm. Green and Jack McSpadden had gone out on the evening of October 16, 1976, to a bar. On the return trip, Green had been stopped by a Jackson County deputy at 3:18 a.m., about 30 minutes prior to the accident, for an undetermined reason. At that time, Green was the driver of the car. When the car proceeded along Illinois State Route 149 it hit a guardrail, went down an embankment, and struck a tree. The passenger's side of the car was severely damaged. Jack McSpadden was killed. Green escaped with only a few minor injuries.
After the accident occurred Green stated on numerous occasions that he was not the driver of the car at the time of the accident. On October 17, 1976, Green told State Trooper Ivan S. Castens that McSpadden had changed places with him shortly after being stopped and that McSpadden was driving when the accident occurred. Green indicated that he was asleep on the passenger side when he was thrown clear of the car. Similar statements were made to State Farm agents on three other occasions in the following week. On November 16, 1976, Green testified at an inquest under oath to the same effect.
It was not until March 17, 1978, one day after being served with a complaint in the wrongful death action, that Green first told State Farm that he was driving the car when McSpadden was killed. It is this series of inconsistent statements which State Farm asserts is a breach of the cooperation clause in Green's insurance policy. The policy included the following language:
"3. Assistance and Cooperation of the Insured. The insured shall cooperate with the Company and upon its request, attend hearings and trials, assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of any legal proceeding in connection with the subject matter of this insurance * * *."
• 1 All parties to this controversy agree that the controlling principles of law are set out in M.F.A. Mutual Insurance Co. v. Cheek (1977), 66 Ill.2d 492, 363 N.E.2d 809. The applicable test, enunciated in Cheek, to determine whether an insured's actions warrant termination of the insurer's responsibility is that, "* * * unless the alleged breach of the cooperation clause substantially prejudices the insurer in defending the primary action, it is not a defense under the contract." 66 Ill.2d 492, 499-500, 363 N.E.2d 809, 813.
State Farm contends that it was prejudiced as a matter of fact and a matter of law and that the decision of the trial court was against the manifest weight of the evidence. The allegations are threefold. First, State Farm claims that its reliance on Green's statements precluded a detailed investigation. Second, Green's inconsistent statements have destroyed his credibility thus prejudicing any possibility of settlement and successful defense at trial. Finally, it is claimed that Green's inconsistent statements put State Farm in the position of having to forego a viable defense, that is, that Green was not the driver, if it is compelled to defend Green.
As to the inadequate investigation, prior to Green's admission, State Farm had conducted a limited investigation of the accident for purposes of paying Green's claim for property damage to his vehicle. The investigation included viewing the accident scene, taking pictures of the automobile after the accident and obtaining a copy of the police report made by the investigating officer. No effort was made to locate pre-occurrence or post-occurrence witnesses. It is agreed that there were probably no eyewitnesses to the actual accident.
The limited scope of the investigation is justified by State Farm as a good-faith reliance on Green's account of the accident. While an insurer should be able to rely on the statements of its insured in many circumstances, doing so will not always absolve the insurer of its duty to investigate an accident. As was recognized in Cheek, the ordinary automobile insurance policy is affected with considerations of public interest. An insurer cannot escape its responsibility to the public by claiming reliance on an insured's statements when the insured has a strong motive to falsify material facts concerning liability and circumstantial evidence points to actual falsification.
Green had a motive to falsify who was driving on the night of the accident. Under section 9-3 of the Criminal Code of 1961 (Ill. Rev. Stat. 1977, ch. 38, par. 9-3), it is possible that Green, if found to be the driver, could be charged with reckless homicide, a Class 4 felony. This certainly provided a motive for Green to falsify.
There was not only a motive to falsify, but there was also strong circumstantial evidence that Green was not telling the truth. The report that Green had been stopped while driving shortly before the accident, the heavy damage to the passenger side of the car, and Green's slight injuries all point to the fact that Green was driving and not riding as a passenger.
• 2 In light of these facts we cannot say that State Farm's investigation was prejudiced by Green's statements. State Farm had already conducted a partial investigation, and State Farm only speculates that further evidence could have been found by a more extensive investigation. Inasmuch as prejudice cannot be presumed, such speculation falls short of proving substantial prejudice (Cheek, 66 Ill.2d 492, 500, 363 N.E.2d 809, 813.) In any event, the responsibility for the inadequate investigation cannot be shifted solely to Green when his motive to falsify and circumstantial evidence all point to the suspect nature of his statements.
This case is to be distinguished from United States Fire Insurance Co. v. Watts (5th Cir. 1966), 370 F.2d 405, relied on by State Farm. In that case the insured's misstatements were actually shown to prevent the discovery of a material witness. Also, the insured's misstatements were revealed only the day before the trial thus adding an element of surprise to the actual ...