APPEAL from the Circuit Court of Cook County; the Hon.
REGINALD J. HOLZER, Judge, presiding.
MR. JUSTICE RIZZI DELIVERED THE OPINION OF THE COURT:
This action was brought against defendant, Allstate Insurance Company, by several plaintiffs who owned certain homeowners or fire insurance policies issued by Allstate. In each of the first four counts, different plaintiffs allege that Allstate improperly cancelled or refused to renew their policies. In the fifth count, plaintiffs seek to maintain a class action on behalf of other policyholders treated in a similar manner. The trial court dismissed counts II, III and IV pursuant to Allstate's motion to dismiss. After a trial on count I, the trial court dismissed counts I and V with prejudice. We affirm in part, reverse in part and remand.
As to count I, plaintiffs are Johnnie and Katie Steward, owners of a home insured by Allstate for more than 20 years. During this period, the Stewards had a "Homeowners Deluxe" policy. In a letter dated February 28, 1977, Allstate informed plaintiffs that their homeowners policy would not be renewed after it expired on April 21, 1977. The letter stated:
"In preparing your Allstate Homeowners policy for renewal, we have determined that your home is insured for substantially less than what it would cost to rebuild or replace it in the event of a loss. Because of this, we do not feel we can continue to insure you at the present coverage level. Accordingly, this policy will continue only until the time and date shown below."
In the letter, Allstate invited the Stewards to contact an Allstate agent so that they could complete an application for fire and extended coverge insurance.
The Stewards subsequently applied to Allstate for the fire and extended coverage insurance, and a policy was issued. This policy had less extensive coverage than the homeowners policy. The new policy contained the following cancellation endorsement which is similar to section 143.21 of the Illinois Insurance Code (Ill. Rev. Stat. 1977, ch. 73, par. 755.21):
"[A]fter this policy has been in effect for one year, or if such policy is a renewal policy, Allstate shall not exercise its right to cancel the insurance afforded by this policy except for one or more of the following reasons:
(a) for non-payment of premium;
(b) when a policy was obtained by misrepresentation or fraud; or
(c) for any act which measurably increases the risk originally accepted."
Subsequently, plaintiffs received a letter dated June 13, 1977, from Allstate, advising them that their fire and extended coverage policy would be terminated on July 13, 1977. Plaintiffs contacted an attorney who, in a letter of July 13, 1977, demanded a hearing from the Department of Insurance pursuant to section 143.23 of the Code (Ill. Rev. Stat. 1977, ch. 73, par. 755.23). In a letter dated July 26, 1977, plaintiffs' attorney again demanded a hearing. No hearing was held. According to an assistant deputy director of the Department of Insurance, no hearing was scheduled because the policy was not a renewal policy. Section 143.23 of the Code provides for a hearing only if a policy of fire and extended coverage has been effective for one year or if such policy is a renewal policy. See Ill. Rev. Stat. 1977, ch. 73, pars. 755.21, 755.23.
In a letter dated July 29, 1977, Allstate informed plaintiffs that the cancellation of their policy "was in error." Allstate reinstated the policy effective July 13, 1977. On August 8, 1977, plaintiffs filed this lawsuit. After a trial on the merits of count I, the trial judge entered an order in which he stated, "Count I of the subject case is dismissed with prejudice." *fn1
The Stewards argue that a breach of the insurance contract was proved, and therefore, they are entitled to at least nominal damages. Allstate, on the other hand, argues that it did not breach the contract or violate the Code by sending the notice of cancellation. Allstate contends that it was entitled to cancel the policy since the policy had been in effect for less than a year and was not a renewal policy.
Section 143.21 of the Code (Ill. Rev. Stat. 1977, ch. 73, par. 755.21) and the cancellation endorsement in the policy limit the right of an insurance company to cancel a policy only if the policy has been in effect for one year or if it is a renewal policy. A renewal policy includes successive policies issued by the same insurer to the same insured for the same or similar coverage. (Ill. Rev. Stat. 1977, ch. 73, par. 755.13(c).) Thus, the question is whether the fire ...