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Copley v. Pekin Insurance Co.





Appeal from the Circuit Court of Champaign County; the Hon. George S. Miller, Judge, presiding.


Rehearing denied March 4, 1985.

Doctrine of cancellation by substitution?


We reverse.

Joel Copley and Federated Mutual Insurance Company (Federated) filed their two-count complaint on August 10, 1982, naming Pekin Insurance Company (Pekin) as defendant. In count I, Copley asked the court to declare his rights under an insurance policy which he had purchased from Pekin. In count II, Federated asked the court to declare the respective rights and liabilities of Pekin and Federated with regard to a fire loss suffered by their alleged insured, Copley. Pekin contended that its policy with Copley had been cancelled pursuant to the doctrine of cancellation by substitution. The trial court subsequently entered judgment in favor of the plaintiffs, holding that the Pekin policy was in full force and effect at the time of the fire.

A bench trial was held on March 26 and 27, 1984. Testimony at trial indicated that Copley was the owner of an appliance business in Farmer City. In August 1979 Copley purchased a special multiperil insurance policy from Pekin. Copley subsequently renewed the policy in 1980 and again in August 1981. The policy was renewed through John Colvis, an agent of Pekin and personal friend of Copley. In August 1981 Copley paid a lump sum premium to renew the policy for the following year.

Emmanuel DeFrates, an agent for Federated, met with Joel Copley several times prior to September 1981 in an attempt to convince Copley to transfer his insurance coverage to Federated. Copley subsequently bought insurance from DeFrates, which took effect on September 28, 1981. The Federated policy provided $25,000 in insurance coverage for the building which contained Copley's business and $40,000 for the contents and personal property therein. The Pekin policy had provided $25,000 in coverage for the building and $30,000 for personal property therein.

At trial, Copley testified that he never intended to "keep" both policies. Instead, he intended to cancel the Pekin policy after the Federated policy took effect.

On approximately November 18, 1981, DeFrates delivered the Federated policy to Copley's appliance store. Copley was not present at that time, but DeFrates did speak to Copley's wife, Marsha, who also worked at the store. DeFrates testified that Marsha was concerned about the insurance premium that had been paid to Pekin. DeFrates then asked her if he could go to the Pekin insurance agency to determine what had become of the premium payment and to see if he could get a refund for the Copleys. Marsha Copley agreed that DeFrates could act on her behalf in this manner. DeFrates then visited the offices of Farmer City Insural. This insurance agency had been purchased from John Colvis on October 31, 1981, and continued to represent Pekin. DeFrates asked Robert Bockler, vice-president of Farmer City Insural, to cancel Copley's policy with Pekin and to return to the Copleys a premium refund.

DeFrates then returned to the Copley's store and informed Joel Copley of where he had been and what he had done. Copley testified that on November 18, 1981, he was "probably" expecting a refund of his Pekin premium. He knew that DeFrates had visited Farmer City Insural to find out if the Pekin policy had indeed been cancelled. Copley testified that he wouldn't have refused a refund prior to the time of the fire. After he learned of DeFrates' actions on November 18, 1981, Copley expressed no objection.

Copley further testified that John Colvis also visited his store on November 18, 1981, apparently at the request of Robert Bockler. Colvis told Copley that if he cancelled the Pekin policy, Colvis would have to "pay back all of the commissions." Although he no longer represented Pekin, Colvis also attempted to persuade Copley that the Pekin policy offered more coverage than the Federated policy. After speaking to Colvis, Copley decided to obtain more information about both policies. However, Copley testified that up to the date of the fire, he would not have objected if he had received a refund of his Pekin premium and that he was "looking to get a refund back."

Marsha Copley testified that she had spoken to John Colvis on the day before DeFrates came to the appliance store. She asked Colvis why they had received no refund check for their Pekin policy premium. When she spoke with DeFrates on the next day she directed him to Farmer City Insural when he offered to find out "what was going on." She testified that DeFrates later returned to the store and informed her of what he had done. She assumed that she and her husband would then receive a refund.

Robert Bockler testified that DeFrates visited his office on approximately November 18, 1981, and requested that he cancel Joel Copley's policy with Pekin. Bockler asked DeFrates to provide him with a copy of the declaration page of the Federated policy that was to replace the Pekin policy. DeFrates complied with this request. Bockler then told DeFrates that he would "take care of it." Bockler testified that, in order to cancel the policy, he needed to contact Joel Copley to obtain a signed cancellation or the return of the actual policy. Bockler also testified that he did ask John Colvis to talk to Copley to see if Copley actually wanted to cancel the policy. However, Colvis never contacted ...

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