APPELLATE COURT OF ILLINOIS, SECOND DISTRICT
Counterdefendant-Appellee; Dean Lyman,
503 N.E.2d 565, 151 Ill. App. 3d 929, 104 Ill. Dec. 850 1987.IL.22
Appeal from the Circuit Court of De Kalb County; the Hon. John A. Leifheit, Judge, presiding.
JUSTICE HOPF delivered the opinion of the court. LINDBERG, P.J., and NASH, J., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE HOPF
This appeal arises from an attempt by plaintiff, Farmers & Merchants Bank, to recover on a check cashed in the bank by defendants, the Davises, after payment had been stopped on the check. Payment had been stopped because the issuer, Economy Fire & Casualty Company, had previously received an NSF check from the Davises in payment of an insurance premium. Economy Fire & Casualty Company had also canceled the Davises' insurance policy. The Davises (counterplaintiffs) raise three issues on appeal: (1) whether the insurance company waived its right to declare a forfeiture of their insurance coverage; (2) whether the bank was estopped from disclaiming liability for nonpayment of the insurance premium; and (3) whether the third- party defendant, a local agency of the insurer, was properly granted a directed verdict.
LaVerne and Alice Davis (the Davises) purchased auto insurance from Economy Fire & Casualty Company (Economy) through the Dean Lyman Insurance Agency (Lyman). On September 7, 1982, Economy mailed a premium notice to the Davises indicating that the insurance premium on the Davises' autos was due on or before October 17, 1982. The Davises did not make the payment by October 17. Three days later Economy sent the Davises a notice that the payment was overdue but would not lapse if payment was received by November 4, 1982. On November 4 the Davises phoned Lyman and asked how to reinstate the policy. The Davises then sent a check, drawn on Farmers & Merchants Bank and dated November 4, 1982, in payment of the premium. The check was received by Economy on November 10, 1982. The next day, November 11, 1982, the Davises' car was vandalized. The vandalism was reported to the Lyman Insurance Agency.
On November 29, 1982, Economy sent to the Davises an endorsement advising that the policy had been reinstated, effective November 10, 1982, and that all the terms and conditions of the old policy were in effect. The old policy contained language indicating that acceptance of a check in payment of a premium was conditional on the check being honored by the payors' bank. The Davises received payment from Economy for damages resulting from the November 11 vandalism on December 1, 1982.
It is not clear when Economy deposited the Davises' premium payment check, which they had received on November 10, but it was not processed at the Federal Reserve Bank until December 1. It was received by F & M on December 1 or 2.
Although there had been enough money in the Davises' checking account to cover the check at the time it was written, by the time the check got to F & M those funds were no longer sufficient. Another check, which was supposed to have been held until December 1, was processed on November 30, thus depleting the account. F & M dishonored the premium payment check and returned it to Economy marked NSF. Also, on December 1, LaVerne Davis was involved in an automobile accident. His damaged car was towed to a body shop owned by Billy Marbutt.
On December 10, 1982, before it learned of F & M's dishonor of the Davises' check, Economy gave Billy Marbutt a check for $2,577.35 in payment ...