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10/20/88 Horan and Company, v. Republic Insurance Group

October 20, 1988

HORAN AND COMPANY, PLAINTIFF-APPELLEE

v.

REPUBLIC INSURANCE GROUP, DEFENDANT-APPELLANT



APPELLATE COURT OF ILLINOIS, THIRD DISTRICT

530 N.E.2d 275, 175 Ill. App. 3d 735, 125 Ill. Dec. 247 1988.IL.1555

Appeal from the Circuit Court of Peoria County; the Hon. Robert E. Manning, Judge, presiding.

APPELLATE Judges:

JUSTICE WOMBACHER delivered the opinion of the court. HEIPLE and SCOTT, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE WOMBACHER

The defendant appeals the trial court's judgment holding the plaintiff was entitled to be defended and indemnified by the defendant.

The plaintiff, Horan and Company, owned the real estate on which was located an establishment known as E.T.'s Spirits and Stuff (E.T.'s). E.T.'s requested a liability insurance policy from the Hawk Agency, Inc. (Hawk). Hawk, an independent insurance agent, is not employed by any particular company, including Republic Insurance Group (Republic), the defendant in this case. Hawk dealt directly with Republic's general agent, Insurance Management, Inc. , rather than with Republic. IMI, not Hawk, possessed the requisite authority to bind Republic to different insurance policies.

Republic issued a liquor liability policy naming E.T.'s and Horan as the insureds. The policy commenced on January 6, 1983, and expired on January 6, 1984. IMI routinely sent an insurance binder to the insureds covering the successive period from January 25, 1984, and ending on January 6, 1985. Republic sent Hawk the actual policy, with the agreement that Hawk was to collect and forward the premiums to Republic.

On February 6, 1984, E.T.'s tendered an insufficient premium check to Hawk, which then notified Republic to cancel the policy flat, as the policy was not taken by the insured. Hawk never notified Republic or anyone else that the policy was actually to be cancelled for nonpayment of the premium.

On January 27, 1984, an allegedly intoxicated person was involved in a motor vehicle accident which is the subject of the underlying claim against the insureds under their liquor liability policy.

Republic argues the trial court erred in finding that it was bound to defend and indemnify the insureds for the accident occurring on January 27, 1984. Republic also claims that Hawk was not its agent. We reject both contentions.

It was established that IMI possessed the requisite authority to bind Republic to their insurance policies. Pursuant to this grant of authority, IMI did in fact bind Republic to this liability policy which covered E.T.'s and Horan from January 25, 1984, through January 6, 1985. On February 7, 1984, Republic, through IMI, sent the actual policy to Hawk covering the same.

At the time of the accident, the policy was in effect and had not been cancelled. The Illinois Insurance Code (hereinafter the Code) provides that insurance policies must include cancellation provisions setting forth the manner in which policies may be cancelled. (Ill. Rev. Stat. 1987, ch. 73, par. 755.11.) Without unnecessary elaboration about the cancellation provisions, it is suffice to state that the insureds were not effectively notified that this particular policy was cancelled at the time of the accident.

Insurance companies must be held to a strict standard with reference to termination and forfeiture of insurance contracts for nonpayment of a premium. (Conley v. Ratayzcak (1980), 92 Ill. App. 3d 29, 414 N.E.2d 500.) The insurer is held to two standards when cancelling a policy. The insurer must first comply with the terms contained in its own policy, and then must comply with the notice provisions of the ...


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