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Bellmer v. Charter Security Life Ins.

OPINION FILED MARCH 30, 1982.

GEOFFREY M. BELLMER, A MINOR, BY AMY BELLMER, HIS MOTHER AND NEXT FRIEND, ET AL., PLAINTIFFS-APPELLANTS,

v.

CHARTER SECURITY LIFE INSURANCE COMPANY ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Sangamon County; the Hon. SIMON L. FRIEDMAN, Judge, presiding.

JUSTICE TRAPP DELIVERED THE OPINION OF THE COURT:

This is an appeal by plaintiffs, Geoffrey Bellmer and Amy Bellmer, his mother, from an order of the circuit court of Sangamon County granting defendant Oscar McNear's motion pursuant to section 45 of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 45) to dismiss, with prejudice, count II of plaintiff's complaint, and finding no just reason for delay of an appeal. See Ill. Rev. Stat. 1979, ch. 110A, par. 304(a).

This action was commenced by plaintiffs against Charter Security Life Insurance Co. (count I) and Oscar McNear, Sr., agent of defendant Charter Security Life Insurance (count II), seeking recovery of damages for failing to notify plaintiff Amy Bellmer, the owner of a life insurance and annuity policy, of the default of her ex-husband (insured) in making premium payments under the policies and their subsequent lapse. The circuit court granted defendant Oscar McNear's motion to dismiss count II for failing to state a cause of action, and it is from this order that plaintiffs appeal.

• 1 In determining whether count II states a cause of action, it is well settled that a motion to dismiss admits all well pleaded facts and inferences therefrom (Bray v. Illinois National Bank (1976), 37 Ill. App.3d 286, 345 N.E.2d 503), and that the granting of such a motion can be sustained only if no set of facts would support a cause of action. (Browder v. Hanley Dawson Cadillac Co. (1978), 62 Ill. App.3d 623, 379 N.E.2d 1206.) We conclude that the trial court acted properly in dismissing count II of plaintiffs' complaint.

In count II of plaintiffs' amended complaint, plaintiffs allege that Louisiana & Southern Life Insurance Co., the predecessor corporation of Charter Security Life Insurance Co., issued through its agent, Oscar McNear, Sr., a $100,000 life insurance policy and a $100,000 retirement annuity policy to James M. Bellmer on March 9, 1976. The owner of both policies was listed as plaintiff Amy Bellmer. On March 9, 1977, plaintiff Amy Bellmer and James Bellmer obtained a decree of divorce in the circuit court of Sangamon County which provided that James Bellmer was to maintain a life insurance policy on his life for $100,000 with the parties' minor child, Geoffrey Bellmer, named as beneficiary. It was further alleged that defendant McNear was aware of the divorce decree provision requiring James Bellmer to maintain a policy for the minor's benefit and of the fact that plaintiff was no longer residing with her ex-husband.

On October 12, 1978, James Bellmer failed to pay the premiums on either policy and also later failed to make payment during the 45-day grace period provided in the policy. Plaintiffs alleged that defendant McNear was aware of the provisions of the divorce decree requiring the insured to change the beneficiary of the policy to the minor, Geoffrey Bellmer, and of the failure of the insured to pay the premiums during the 45-day grace period and that notwithstanding such awareness, McNear failed to provide the beneficiary forms or notify plaintiff Amy Bellmer of James Bellmer's default.

On January 29, 1979, the Charter Security Life Insurance Co., returned a premium check to James Bellmer dated December 31, 1978, in the amount of $299.01 and advised him that payment was made beyond the grace period and could not be applied toward his life insurance policy. The letter further advised Mr. Bellmer of what amounts were owing and what steps were necessary to reinstate the insurance policy. (The annuity premium had been paid by virtue of an automatic loan provision in that policy.) Plaintiffs alleged that both Charter Security and McNear's failure to advise plaintiff Amy Bellmer of the letter was a breach of the duty owed her and that both defendants had breached a duty owed her in failing to provide reinstatement forms, and to advise her of the right to exchange the annuity for other paid up life insurance policies. On July 14, 1979, James Bellmer was killed in an automobile accident and as a result of the breaches of the foregoing duties plaintiffs alleged they were damaged in the sum of $200,000.

The controlling question we must decide in passing upon plaintiffs' complaint is whether defendant Oscar McNear, Sr., as agent of Charter Security Life Insurance Co., had a duty to advise Amy Bellmer of her ex-husband's default in premium payments and the subsequent termination of the policy or otherwise advise her of her right to reinstate the insurance policy or exchange the annuity policy for other paid up life insurance policies. Plaintiffs, citing Talbot v. Country Life Insurance Co. (1973), 8 Ill. App.3d 1062, 291 N.E.2d 830, and Omni Overseas Freighting Co. v. Cardell Insurance Agency (1979), 78 Ill. App.3d 639, 397 N.E.2d 112, argue that the defendant had such a duty in the case at bar.

In Talbot, a suit was filed againt an insurance company and its agent for unreasonable delay in acting on a life insurance application submitted September 13, 1969, and rejected February 21, 1970, two days after the proposed insured's death. There, the court held that both the insurance company and its agent could be held liable in tort for failing to act promptly on the application. In discussing the duties of the insurance agent, the court concluded that one who enters into an undertaking to perform a service for another is required to exercise reasonable care to avoid injury to the beneficiary of the undertaking. Though the court noted that the agent was primarily answerable to the demands of the insurance company, a duty of reasonable care would still be imposed when an undertaking was agreed to and acted upon by the agent on behalf of the proposed insured.

In Omni, the plaintiff, an international cargo company, hired the defendant insurance broker to procure insurance coverage for possible damage to cargo while in plaintiff's possession. The broker obtained one policy which was subsequently discovered to be insufficient and was canceled. Later, another policy was issued which purportedly provided the requested coverage but this policy was also canceled by the insurer effective on its date of issuance. The insurance broker failed to notify plaintiff of the policy's cancellation and no further efforts were undertaken to produce the desired coverage. As a result, a subsequent loss was not insured. In ruling on the merits of plaintiff's complaint against the defendant broker, the court held that the broker's failure to notify plaintiff of the cancellation of the insurance policy was a breach of the broker's duty to exercise competence and skill in his dealings with the plaintiff. The court stated:

"Raguso [the broker] breached his obligation to exercise competence and skill in his dealings with the plaintiff in failing to communicate the fact of the cancellation of the inland transit policy to the plaintiff while he knew or should have known that the plaintiff believed he had appropriate liability coverage." 78 Ill. App.3d 639, 643, 397 N.E.2d 112, 116.

Two other cases dealing with the liability of an insurance broker for failing to notify an insured of the cancellation of an insurance policy, though not arising in the courts> of this State, are Foster v. Nunmaker Discount Co. (La. App. 1967), 201 So.2d 215, and Adkins & Ainley, Inc. v. Busada (D.C. App. 1970), 270 A.2d 135. In Foster, the plaintiff had obtained an insurance policy through its broker, Carver General, underwritten by Marquette Casualty, on an auto which was subsequently destroyed by fire. The policy had been canceled by Marquette prior to the loss, but the broker failed to relay this information to the plaintiff. Plaintiff sued the broker and recovered a judgment in his favor. On appeal the judgment was affirmed, the court stating:

"We must now decide just what duty the Carver Agency had toward the Plaintiff. To do this we must first determine the relationship between the parties. From the record it is obvious that the Carver Agency was an insurance `broker' rather than an exclusive agent for Marquette Casualty Co.

We conclude that the Carver General Insurance Agency was an agent of the Plaintiff and owed him a duty to inform him that the contract of insurance had been cancelled failing in which it * * * is ...


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