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Copley v. Pekin Insurance Co.





Appeal from the Appellate Court for the Fourth District; heard in that court on appeal from the Circuit Court of Champaign County, the Hon. George S. Miller, Judge, presiding.


On December 15, 1981, fire destroyed an appliance business owned by Joel Copley in Farmer City. Pekin Insurance Company, to which Copley had paid an annual insurance premium in August 1981, denied Copley's claim for the loss. Pekin maintained that, under the doctrine of cancellation by substitution, Copley's policy with Pekin was no longer in effect at the time of the fire. Pekin asserted that Copley had purchased a new insurance policy on his appliance business from Federated Mutual Insurance Company, that he had intended to cancel the Pekin policy, and that he had communicated this intent to a Pekin agent. Copley acknowledged that he had purchased insurance from Federated, and admitted at trial that, at the time of the purchase, he had intended to retain only one insurance policy on his business.

Although Federated Mutual Insurance Company compensated Copley to the limits of his insurance policy with Federated, Copley's losses exceeded the coverage limits of the policy. Copley and Federated Mutual, as coplaintiffs, sued Pekin Insurance, contending that defendant Pekin, under its policy with Copley, was liable for its pro rata share of Copley's loss.

Following a bench trial in the circuit court of Champaign County, the court held that Copley's policy with Pekin Insurance was in effect when the fire occurred. The trial court found that, under the appellate court's decision in Sizelove v. INA Insurance Co. (1982), 104 Ill. App.3d 864, defendant Pekin had failed to establish the requisites of the doctrine of cancellation by substitution. The court awarded plaintiffs damages in the stipulated amount of $38,390.20. The appellate court reversed, holding that, under Sizelove, Copley's policy with Pekin Insurance had been cancelled by substitution. (130 Ill. App.3d 299.) We allowed plaintiff's petition for leave to appeal under Rule 315 (94 Ill.2d R. 315).

Trial testimony revealed that Joel Copley had owned an appliance sales and service business known as Appliance Alley, located in Farmer City. After buying the store in August 1979, Copley had procured a special multiperil insurance policy through defendant Pekin Insurance Company. The policy provided coverages in the amounts of $25,000 for the building, $30,000 for building contents, and $6,000 for business loss. Copley renewed this policy in 1980. In August 1981, Copley tendered the annual premium for the following year's coverage to John Colvis, an agent for Pekin Insurance and a friend of Copley; approximately a month before paying his premium, however, Copley had indicated to Colvis that he was considering changing insurers.

Emmanuel DeFrates, an agent for Federal Mutual Insurance Company, contacted Joel Copley on a number of occasions prior to September 1981, in an attempt to persuade Copley to replace his existing insurance with a Federated Mutual policy. Although he had tendered the annual premium to Pekin a month earlier, Copley purchased insurance from Federated Mutual, with coverage beginning on September 28, 1981. The Federated policy listed $25,000 in coverage on Copley's store building and $40,000 in coverage for inventory and other building contents. It is not disputed that Copley's policy with Pekin was in force when the Federated policy became effective.

DeFrates testified at trial that he delivered the Federated policy to Copley's wife, Marsha, at Appliance Alley, on or about November 18, 1981. At that time, Mrs. Copley voiced concern over receiving a refund of the premium the Copleys had paid to Pekin Insurance. DeFrates volunteered to visit the Pekin agency in Farmer City, to inquire about the Copley's refund. Mrs. Copley consented.

After leaving Appliance Alley, DeFrates went to Farmer City Insural, where he met with Robert Bockler, an owner of the insurance agency. Bockler and his father had purchased the agency from John Colvis, effective November 1, 1981, and continued to represent Pekin Insurance. DeFrates asked Bockler to cancel the Pekin policy on Copley's business, and to refund the premium to Copley. At Bockler's request, DeFrates showed Bockler the declaration sheet of the policy which Copley had purchased from Federated Mutual. DeFrates did not, however, give Bockler either Copley's insurance policy with Pekin, or a written release of the Pekin policy signed by Copley. When DeFrates later advised Joel Copley of his visit to the Pekin agency, Copley did not object.

Bockler testified that when DeFrates left Farmer City Insural on November 18, 1981, Bockler did not consider Copley's insurance policy cancelled. Bockler stated that, to cancel Copley's policy with Pekin, someone from Bockler's agency had to contact Joel Copley to obtain either a policy release signed by Copley, or a return of the actual policy itself. Betty Yeagle, a Pekin agent who managed Bockler's office, explained that after DeFrates visited Farmer City Insural, she prepared a policy release for Copley to sign. Although she attempted several times to contact Joel Copley, Yeagle was unable to reach Copley to ascertain whether he would sign the policy release or return the actual policy to Pekin.

Joel Copley stated at trial that John Colvis stopped in Appliance Alley on November 18, 1981, after DeFrates had left and Copley had returned to the store. Apparently, Robert Bockler had asked Colvis to speak with Copley. Although Colvis was no longer a Pekin agent and was not employed by Bockler, Colvis voluntarily assisted Bockler after Bockler took over the insurance agency from Colvis on November 1. During his visit on November 18, Colvis attempted to convince Copley not to change insurers, stating that Colvis would have to pay back the sales commissions he had received on the Pekin policy if Copley cancelled the policy. Colvis felt that the Pekin policy offered Copley more protection than the Federated policy. Although he agreed to compare the two policies with Colvis, Copley indicated at trial that neither Colvis nor anyone from Bockler's agency recontacted Copley until after the fire. Copley testified that, after Colvis left Appliance Alley on November 18, Copley was uncertain as to whether he would cancel the Pekin policy.

Copley admitted during the trial that, up to the time of the fire, neither he nor his wife would have objected had they received a refund of their insurance premium from Pekin Insurance. Pekin did not tender a refund to the Copleys, however, until February 16, 1982, two months after the fire and nearly three months after DeFrates visited the Farmer City office of Pekin Insurance. When they received the refund of their premium, the Copleys did not endorse or negotiate the refund check, but returned the check to Pekin's home office.

Immediately after fire destroyed Appliance Alley on December 15, 1981, Copley informed DeFrates of his claim under the policy with Federated Insurance. That morning, Copley advised DeFrates that he thought the Pekin insurance policy also remained in effect. Copley did not inform the Bockler agency of his claim under the Pekin policy, however, until some three or four weeks after the fire. Federated Mutual honored Copley's claim to the policy limits. Pekin denied liability under its policy. The present litigation ensued.

At the conclusion of trial, the circuit court of Champaign County held that Copley's policy with Pekin Insurance was in effect on the date of the fire. In light of the guidelines announced in Sizelove v. INA Insurance Co. (1982), 104 Ill. App.3d 864, the court ruled that the Pekin policy was not terminated under the doctrine of cancellation by substitution. The court found that although DeFrates had gone to Farmer City Insural on behalf of Copley to cancel the Pekin policy, Bockler, Pekin's agent, did not accept the notification of cancellation in the absence of a surrender of the policy or a signed release. Rather, Bockler had sought to discover, through John Colvis and Betty Yeagle, whether Copley actually desired to cancel the policy. The court also found that Copley waivered in his intention to cancel the Pekin policy. The court ...

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