APPEAL from the Circuit Court of Cook County; the Hon. EDWARD
C. HOFERT, Judge, presiding.
MR. PRESIDING JUSTICE ROMITI DELIVERED THE OPINION OF THE COURT:
Mr. PRESIDING JUSTICE ROMITI delivered the opinion of the court:
The plaintiff purchased property, obtained an assignment of an insurance policy covering the property from the vendor but failed to obtain the insurance company's consent to the assignment. After the property was destroyed by fire, the insurer paid the vendor the amount of the mortgage but refused to pay the plaintiff the amount of its loss. On cross-complaint for summary judgment the trial court denied the plaintiff's claim to recover for its own loss, holding that the insurer's payment to the mortgage did not waive its defense against the plaintiff. We agree that there was no waiver but reverse and remand for a determination whether the transfer increased the insured's risk.
Until December 19, 1975, the property at 11317-24 South Michigan, Chicago, was owned by Pullman Trust & Savings Bank (Pullman) as trustee. Hazel Fisher was the beneficiary of the trust. On August 21, 1973, defendant issued a multi-peril insurance policy insuring both the building and the contents. "Pullman Trust and Savings Bank as Trustee under Trust #7180076 for Hazel M. Fisher" was designated as the named insured. The premiums were billed to Hazel Fisher, who paid the premiums. Hazel Fisher's address was given as the address of the named insured. The policy provides on the declaration page that "Assignment of this policy shall not be valid except with the written consent of this Company." The policy was for a three-year period, which period had not expired either on December 19, 1975, or on February 1, 1976, the date of the fire loss.
On December 19, 1975, the property was sold to the plaintiff, National Discount Shoes, Inc. In light of plaintiff's subsequent arguments, it is interesting to note that the contract of sale was signed by Hazel Fisher and not by Pullman Trust & Savings Bank. Hazel Fisher was also listed as the seller in the closing statement. At the time of the sale, plaintiff gave a note and trust deed for $13,000 to Hazel Fisher as part of the purchase price. At the closing Pullman executed an assignment of the policy, assigning it to National Discount as owner of the property and Hazel Fisher as mortgagee. The assignment stated that it was subject to the consent of Royal Globe Insurance Company. Furthermore, under an upper case heading "Consent by Company to Assignment of Interest," space was provided for the insurer's signature. The form was never signed, and it is undisputed that the insurer never consented to the assignment.
On February 1, 1976, the building was totally destroyed by fire. The next day plaintiff's attorney contacted the insurance agency which had issued the policy, reported the fire and told the agent that its policy was supposed to have been assigned on December 19, 1975, to the new owner and mortgagee. The agent told him that the assignment would have to be dated February 2, 1976. The insurer received notice of loss on February 5, 1976. On February 24, 1976, it and the plaintiff executed a non-waiver agreement in which it was agreed any action insurer took in investigating the claim would not waive or invalidate any of the conditions of the policy.
On May 4, 1976, the insurer denied liability to Pullman, Fisher and the plaintiff because Pullman's and Fisher's insurable interest terminated at the time of the sale and it had not consented to the assignment of the policy to the new owner and new mortgagee. It also returned $331 representing the unearned premium. When insurer discovered Fisher was the mortgagee, it paid her $13,000, the amount of the mortgage and took an assignment of the mortgage.
The trial court held that the plaintiff was not entitled to recover on the policy for its own loss. It ruled, however, that the mortgage assignment was null and void since, as the insurer was aware, plaintiff had paid the pro rata portion of the unearned premium at the time of the closing.
Originally both parties appealed. However the insurer has not in its brief contended that the trial court's ruling as to the assignment was in error. Accordingly, this contention is waived.
Insurer contends that it cannot be held liable because neither waiver nor estoppel can be used to extend coverage or grant coverage where none exists, and that the insurer's actions could not be found to create a waiver or estoppel since at that time the property no longer existed. While it has frequently been stated, as an axiom, that coverage can never be extended by waiver and estoppel, in fact such statements are too broad. (16B Appleman, Insurance Law and Practice § 9090 (1981).) An insurer can always create even a new contract by an express waiver. Furthermore courts> have frequently employed the doctrine of implied waiver or estoppel to bar an insurer from relying on the defense of noncoverage. (See, for example, Gibraltar Insurance Co. v. Varkalis (1970), 46 Ill.2d 481, 263 N.E.2d 823; Anderson v. Safeway Insurance Co. (1973), 10 Ill. App.3d 597, 295 N.E.2d 117 (abstract); Security Insurance Co. v. Mato (1969), 108 Ill. App.2d 203, 246 N.E.2d 685; Wille v. Farmers Equitable Insurance Co. (1967), 89 Ill. App.2d 377, 232 N.E.2d 468; Zak v. Fidelity-Phenix Insurance Co. (1966), 34 Ill.2d 438, 216 N.E.2d 113; Rom v. Gephart (1961), 30 Ill. App.2d 199, 173 N.E.2d 828; appeal denied (1961), 21 Ill.2d 622; Insurance Co. of North America v. Federated Mutual Insurance Co. (6th Cir. 1975), 518 F.2d 101; Bankers Life & Casualty Co. v. Arizona Public Service Co. (9th Cir. 1966), 365 F.2d 697; Salerno v. Western Casualty & Surety Co. (8th Cir. 1964), 336 F.2d 14; Claverie v. American Casualty Co. (4th Cir. 1935), 76 F.2d 570, cert. denied (1935), 296 U.S. 590, 80 L.Ed. 417, 56 S.Ct. 102; Burns v. Consolidated American Insurance Co. (Fla. App. 1978), 359 So.2d 1203; American Home Mutual Life Insurance Co. v. Harvey (1959), 99 Ga. App. 582, 109 S.E.2d 322; Old Equity Life Insurance Co. v. Jones (Miss. 1969), 217 So.2d 648; Harr v. Allstate Insurance Co. (1969), 54 N.J. 287, 255 A.2d 208; Shichman v. Commercial Travelers Mutual Accident Association of America (1944), 267 App. Div. 389, 46 N.Y.S.2d 32, appeal denied (1944), 267 App. Div. 906, 47 N.Y.S.2d 486; Security Insurance Co. v. Greer (Okla. 1968), 437 P.2d 243; Crescent Co. v. Insurance Co. of North America (1976), 266 S.C. 598, 225 S.E.2d 656; Combined American Insurance Co. v. Parker (Tex. Civ. App. 1964), 377 S.W.2d 213.) Moreover, it is also not true that a property insurance contract can never be created after the loss has occurred (4 Appleman, Insurance Law & Practice § 2291 (1969)), or that an insurer cannot by acts occurring after the loss be held liable on a contract which did not actually exist at the time of the loss. See, for example, Van Hulle v. State Farm Mutual Automobile Insurance Co. (1968), 99 Ill. App.2d 378, 241 N.E.2d 320, aff'd (1969), 44 Ill.2d 227, 254 N.E.2d 457 (expiration of policy for nonpayment of premium).
• 1 In any event, there was a contract in existence. Indeed if the insurer's contention that there was no contract was true, if the sale had terminated the contract as it did in Truglio v. Zurich General Accident & Liability Insurance Co. (1928), 247 N.Y. 423, 160 N.E. 774, relied upon by the defendant, then defendant was not justified in paying Fisher. The sole question was whether the assignment (also in existence at the time of the loss) was binding on the insurance company so as to permit the plaintiff to benefit from the policy's existence. The provision in the contract requiring the consent of the insurer before any assignment is enforceable against it serves a valid purpose in preventing the increase of risk without the insurer's knowledge and consent. (University of Judaism v. Transamerica Insurance Co. (1976), 61 Cal.App.3d 937, 132 Cal.Rptr. 907; National American Insurance Co. v. Jamison Agency, Inc. (8th Cir. 1974), 501 F.2d 1125.) Thus such clause is generally held to be valid and binding on the alleged assignee who cannot recover absent such consent. (See Pfeffer v. Farmers State Bank (1931), 263 Ill. App. 360, cert. denied; 5A Appleman, Insurance Law & Practice § 3425 (1970).) But since the clause is inserted in the policy solely for the benefit of the insurer, it can be waived by the insurer or the insurer can be estopped from relying on it and courts> have frequently found an insurer barred from relying on the clause (5A Appleman, Insurance Law & Practice § 3428 (1970): 17 Appleman, Insurance & Practice §§ 9677, 9678 (1945)), even by conduct occurring after the loss had occurred. Harbour v. Reliable Insurance Co. (1963), 94 Ariz. 344, 385 P.2d 220; First of Georgia Insurance Co. v. Josey (1973), 129 Ga. App. 14, 198 S.E.2d 381; and see Borchers v. Barckers (1911), 158 Mo. App. 267, 138 S.W. 555; Pruitt v. Meyer (1970), 2 Wn. App. 14, 467 P.2d 364.
Since it is clear that the requirement that the insurer's consent to an assignment can be waived and the insurer can be estopped from relying on it, it is necessary to determine whether the trial court correctly ruled as a matter of law that the ...