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05/18/88 Silvio Hernandez, A Minor v. State Farm Insurance

May 18, 1988





524 N.E.2d 1027, 170 Ill. App. 3d 1090, 120 Ill. Dec. 845 1988.IL.777

Appeal from the Circuit Court of Cook County; the Hon. Thomas J. O'Brien, Judge, presiding.


JUSTICE FREEMAN delivered the opinion of the court. WHITE, P.J., and McNAMARA, J., concur.


The subject of this appeal is an order entered by the circuit court of Cook County granting summary judgment in favor of plaintiff, Silvio Hernandez, a minor represented by his father and next friend, Alberto Hernandez.

Plaintiff brought an action seeking a declaratory judgment of his rights under two insurance policies for uninsured motorist coverage issued by defendant, State Farm Insurance Company. The complaint alleged that the two insurance policies were in full force and effect on May 12, 1980, when plaintiff was injured in a collision with an uninsured motorist. The defendant answered the complaint denying that the policies were in effect at the time of plaintiff's accident.

Defendant subsequently moved for summary judgment alleging that both policies had effectively been cancelled by defendant on May 4, 1980, eight days prior to plaintiff's accident. Defendant's motion was supported by copies of premium notices from defendant; excerpts from the deposition of plaintiff's father; and affidavits from three of defendant's employees. Plaintiff responded to defendant's motion and thereafter filed a cross-motion for summary judgment. Defendant responded to plaintiff's motion, and, after a hearing, the trial court granted plaintiff's motion for summary judgment and denied defendant's motion. On appeal, defendant argues that the trial court erred in denying summary judgment in its favor.

In the instant case, plaintiff's father obtained two insurance policies providing uninsured motorist coverage from defendant. When those policies were purchased, plaintiff's father applied for and received the right to pay for the policies on a monthly payment plan. Under that plan, he was not required to pay a large premium at the beginning of the policy period. Instead, he was obligated to make smaller premium payments each month throughout the policy period. The insurance policies themselves did not provide when the monthly payments were due, but plaintiff's father testified at his deposition that he received premium notices from defendant each month. At the outset, plaintiff's father paid the premiums for the first month of coverage and for an additional month. *fn1 Thereafter, he received premium notices each month from defendant. The premium for the additional month has been referred to by the parties as a reserve.

Defendant's motion for summary judgment was supported by the affidavit of Donna Mattingly, a monthly payment plan specialist, in which she stated that, pursuant to defendant's billing procedure, plaintiff's father was required to pay his premiums by the third day of every month. Also supporting defendant's motion were copies of two notices from defendant indicating that monthly premium payments were due on March 3, 1980, and on April 3, 1980, respectively.

Plaintiff's father admitted in his deposition that he did not make a premium payment by March 3, 1980. Because defendant did not receive that payment, a notice was sent to plaintiff's father stating that premiums for two months were due April 3, 1980. Plaintiff's father paid one monthly premium on or about March 25, 1980. Thereafter, defendant sent another notice indicating that the balance, the second monthly premium, was due on April 15, 1980. In her deposition, Mattingly explained that the payment of one premium on March 25, 1980, constituted a partial payment for the two premiums owed. Consequently, defendant sent the second notice for the balance reflecting an extended due date of April 15, 1980. Plaintiff's father made no payment at all in April of 1980.

Pursuant to section 143.15 of the Illinois Insurance Code (Ill. Rev. Stat. 1979, ch. 73, par. 755.15), defendant sent plaintiff's father notices on April 21, 1980, advising him that, due to his nonpayment of premiums, the two policies would be cancelled as of May 4, 1980. No payment was tendered by plaintiff's father until May 15, 1980, when he gave his insurance agent a check for two monthly premiums. Defendant returned the uncashed check to plaintiff's father with a letter indicating that the policies had been cancelled as of May 4, 1980.

Plaintiff asserts that the reserve premium paid when the policies were purchased was to have been applied to cover the unpaid April premium and, therefore, plaintiff would have been covered until defendant received the two premium payments on May 15, 1980. We find no evidence in the record to support this assertion. The testimony of Mattingly and the copies of the premium notices establish that the insurance premiums were due on the third day of every month. Mattingly acknowledged that the reserve was applied to cover the unpaid April premium. Yet, that afforded coverage only to May 3, 1980. Defendant sent plaintiff's father the cancellation notice on April 21, 1980, and because no payment was received thereafter, the policies were effectively cancelled as of May 4, 1980.

We must also reject plaintiff's contention that the defendant's mailing of the cancellation notices was premature and that defendant was required to send additional notices when the premiums paid, including the reserve, were fully earned. No such requirement is found in the Code or in plaintiff's policies. If this were the case, defendant would have been forced to wait until May 3, 1980, before it could send cancellation notices to plaintiff's father advising that coverage would be terminated in 10 ...

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