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Pickett v. First Amer. Sav. & Loan Ass'n

OPINION FILED NOVEMBER 12, 1980.

JIMMY A. PICKETT ET AL., PLAINTIFFS-APPELLANTS,

v.

FIRST AMERICAN SAVINGS & LOAN ASSOCIATION, DEFENDANT-APPELLEE.



APPEAL from the Circuit Court of Franklin County; the Hon. ROBERT S. HILL, Judge, presiding.

MME JUSTICE SPOMER DELIVERED THE OPINION OF THE COURT:

Rehearing denied December 10, 1980.

The plaintiffs, Jimmy and Marilyn Pickett, arranged with defendant, the First American Savings and Loan Association, to procure a contract of credit life and disability insurance in conjunction with a home loan extended to them on October 12, 1973. After discovering in March of 1975, following a disabling injury, that the defendant had no record of such insurance covering Mr. Pickett, the plaintiff filed a complaint in Franklin County Circuit Court charging the defendant with negligence and requesting the equitable remedy of an accounting for the amounts to which they would have been entitled had the policy been procured. The Picketts appeal from a judgment entered April 30, 1979, following a bench trial, in favor of the defendant. The court found the savings and loan association liable only for amounts collected as intended premium payments for the insurance on the basis of a contract implied in fact.

• 1 The issues presented by the plaintiffs are whether a savings and loan association, acting in behalf of a borrower, which collects and holds payments intended to be applied as credit insurance premiums after indicating that such insurance is to be obtained, may be held accountable for insurance benefits where it failed to procure such a policy and failed to promptly notify the intended insured that no such policy had been procured; and secondarily, whether, under such circumstances, it is necessary for a litigant to establish the terms of a particular policy in order to maintain a claim for failure to procure insurance. We reverse the trial court.

On the afternoon of October 8, 1973, the plaintiffs met with Larry Nolen, executive vice president of First American Savings and Loan (hereinafter First American), at the association's office in Benton, Illinois, in order to arrange a loan for the purchase of property located in West Frankfort, Illinois. All of the pertinent negotiations were made through Nolen, and the loan of $15,398.38 was closed on October 12. In discussing the various terms of the loan, Marilyn Pickett inquired about the advisability of obtaining credit life and disability insurance. Nolen checked the cost of such insurance in a rate book and informed them of the amount. The plaintiffs asserted that they desired to carry this form of insurance, and Nolen provided them with an application form which they completed and signed.

In negotiating the loan, the parties used a printed work sheet supplied by First American entitled "Loan Settlement Statement," which was in all respects identical in form with that used as a memorandum regarding the terms of the loan when officially closed on October 12. In the bottom left quarter of the work sheet, under the title "Monthly Loan Payment" is found an itemized list of the five components which comprised each monthly payment. They include a charge for (1) principal and interest, $108; (2) real estate taxes, $16; (3) hazard insurance, $8; (4) mortgage insurance, $3; and (5) credit life and disability insurance, $5.70. Category number 5 on the form was a reserved blank space immediately above the word "total," which was presumably used for any specifically tailored payment provision which a borrower or the lender might require. In that space the words "credit life and disability" were printed in longhand capital letters by Nolen. On the typed form signed by the couple on October 12, the words just mentioned are missing from the space used for category 5, perhaps simply for lack of typewriting space; but in the column immediately adjacent the identical figure of $5.70 is typed in below the other figures. Total payments due each month commencing on the 15th of October 1973, were to be $140.70.

Following the customary practice of First American, after the closing the Picketts were sent an account book by mail in which their loan payment record was to be written. It, too, contained an itemization of each installment to be paid, and this itemization contained a provision of $5.70 for credit life, accident and health insurance. Over the ensuing 19 months the plaintiffs paid $140.70 each month, assuming that this amount included payment of premiums for the insurance coverage.

On March 5, 1975, Mr. Pickett injured his back while at work. Later that month Mrs. Pickett called First American to activate the credit insurance benefits and was informed that after reviewing their file, the association had determined that the plaintiffs had never obtained such a policy. Shortly thereafter, Mr. Pickett called concerning the matter, and it was also explained to him that he was not covered. There was some confusion in the testimony concerning correspondence between the parties during April; however, it appears that First American sent the Picketts credit insurance application forms, related to specific insurers, in an attempt to aid them in obtaining a credit insurance policy. On May 5, the defendant mailed plaintiffs a check in the amount of $108.30, with a letter stating that this figure constituted the amounts collected by First American as premiums for credit life and disability insurance.

Mr. Pickett, an electrician by trade, had been employed by an electrical contractor since July, 1973, and following his March 5 back injury, he was unable to withstand the physical exertions required in this employment. He could not resume work until October 20, 1975. Six months later he reinjured his back, returned to work in November 1976, and in April 1977, was injured again. Since that time he has not been able to work and has undergone two operations as a result of the March 1975 injury. Expert testimony offered at trial indicated that, in the case of physically demanding work such as that in which he had been formerly engaged, Pickett's incapacity was of a permanent nature. The condition was diagnosed as an intervertebral disc syndrome with chronic sciatic neuritis and lumbar myositis.

The present complaint was filed on January 24, 1977. The complaint alleged that defendant committed the following act of negligence:

"That while said mortgage and promissory note were in full force and effect, defendant negligently and carelessly failed to secure said policy of credit life and disability although accepting plaintiff's monthly payments which included amounts attributable to said insurance."

The complaint was amended to further allege the following act of negligence:

"That while said mortgage and promissory note were in full force and effect, defendant failed to notify plaintiff that defendant had failed to secure said policy of credit life and disability insurance although accepting plaintiff's monthly payments which included amounts attributable to said insurance."

The complaint prayed for judgment as follows:

"(a) Ordering an accounting by defendant of the amount of benefits plaintiffs would have been entitled to had defendant secured a credit life and disability policy at the rate of $5.70 per month;

(b) Ordering defendant to pay to plaintiffs such sums as an accounting shall show to be due plaintiffs together with interest on all sums due plaintiff;

(c) Awarding attorney fees, costs of suit, and such other and further relief as the Court may deem just and proper."

As part of discovery, the plaintiffs filed a request to produce documents, requesting, inter alia, the "rate book of the carrier, or carriers, of credit accident and health insurance with respect to which defendant were [sic] ...


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