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Phaholyothin v. State Farm Auto. Ins. Co.

OPINION FILED FEBRUARY 1, 1982.

CHAWALIT PHAHOLYOTHIN ET AL., PLAINTIFFS-APPELLANTS,

v.

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, DEFENDANT-APPELLEE.



APPEAL from the Circuit Court of Cook County; the Hon. THOMAS R. RAKOWSKI, Judge, presiding.

JUSTICE GOLDBERG DELIVERED THE OPINION OF THE COURT:

Chawalit and Chaunpim Phaholyothin (plaintiffs) brought this action against State Farm Mutual Automobile Insurance Company (defendant) to recover upon an automobile insurance policy between the parties. The trial court granted defendant's motion to dismiss. Plaintiffs appeal.

The well-pleaded and pertinent facts alleged in plaintiffs' complaint are "accepted as true." (Soules v. General Motors Corp. (1980), 79 Ill.2d 282, 284, 402 N.E.2d 599.) On or about October 3, 1979, a person representing himself as "Curtis Benson" indicated he would purchase plaintiffs' 1976 Datsun automobile for $5,200. On October 4, 1979, "Curtis Benson" gave plaintiffs a check which purported to be, on its face, a cashier's check executed by an officer of the United States Steel Corporation Credit Union payable to plaintiff Chawalit Phaholyothin in the amount of $5,200. "Benson" represented that he was employed by the United States Steel Corporation and maintained an account with the credit union. Therefore, plaintiffs delivered the vehicle and its title to "Benson." On October 16, 1979, plaintiffs discovered the representations made to them by "Benson" were false and the check given them had been stolen and its signature forged.

During this time, an insurance policy issued by defendant to plaintiffs remained in effect. This policy provided the following coverage:

"1. Loss to Your Car. We [defendant] will pay for loss to your car * * *.

Breakage of glass, or loss caused by missles, falling objects, fire, theft, larceny, * * * is payable under this coverage."

Plaintiffs further alleged defendant had refused to act upon this policy, resulting in damages to the plaintiffs' car when ultimately recovered and other damage in the amount of $3,258.82.

Defendant filed a motion to strike and dismiss the complaint. Defendant did not deny the policy to be in effect during the period in question. However, defendant contended the following exclusionary clause in the policy precluded any liability in this situation:

"THERE IS NO COVERAGE FOR:

3. LOSS TO ANY VEHICLE DUE TO:

d. CONVERSION, EMBEZZLEMENT OR SECRETION BY ANY PERSON WHO HAS THE VEHICLE DUE TO ANY LIEN, RENTAL OR SALES AGREEMENT."

In this court, plaintiffs contend the trial court erred in dismissing their complaint. Plaintiffs argue the above exclusionary clause did not relate to the type of loss they incurred.

The parties agree a provision of this type has not been examined by reviewing courts> of Illinois. We have examined the cases from other jurisdictions cited by plaintiffs and believe several of them to be relevant to the facts before us. In Modern Sounds & Systems, Inc. v. Federated Mutual Insurance Co. (1978), 200 Neb. 46, 262 N.W.2d 183, the plaintiff transferred title and possession of an automobile to one McMillon in exchange for a check for $10,200. The check was returned because of insufficient funds and was never paid. Plaintiff sought reimbursement from the defendant insurance company pursuant to a policy provision which provided for any loss "caused by theft or larceny." The court first noted no definition of either of those terms was found in the policy, and therefore construed the term "theft" to include "a loss caused by any unlawful or wrongful taking of the insured vehicle with criminal intent." 200 Neb. 46, 52, 262 N.W.2d 183, 187.

The Modern Sounds & Systems, Inc. court next considered the defendant's claim that coverage under the policy was precluded due to an exclusionary clause. The clause excluded coverage due to "loss or damage due to conversion, embezzlement or secretion by any person in possession of a covered automobile under a bailment lease, conditional sale, purchase agreement, mortgage or other ...


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