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08/15/89 Community State Bank of v. Hartford Insurance Company

August 15, 1989

COMMUNITY STATE BANK OF GALVA, PLAINTIFF-APPELLEE

v.

HARTFORD INSURANCE COMPANY, DEFENDANT-APPELLANT



APPELLATE COURT OF ILLINOIS, THIRD DISTRICT

542 N.E.2d 1317, 187 Ill. App. 3d 110, 134 Ill. Dec. 810 1989.IL.1257

Appeal from the Circuit Court of Henry County; the Hon. Edward Keefe, Judge, presiding.

APPELLATE Judges:

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

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE SCOTT

Defendant-Appellant, Hartford Insurance Company (Hartford), appeals from certain orders entered by the trial court of Henry County granting plaintiff-appellee Community Bank of Galva's (the Bank's) motion for summary judgment and awarding the Bank damages under section 155 of the Insurance Code (Ill. Rev. Stat. 1987, ch. 73, par. 767).

Hartford issued to the Bank a banker's benefit bond, No. 85 -- BPPRR6767, covering a policy period of October 16, 1985, to October 16, 1988. The Bank alleged in its complaint filed March 26, 1987, that on or about August 17, 1986, Leland T. Everett delivered to the Bank a certain power of attorney purportedly executed by Peter S. Craig, trustee, and appointing Leland T. Everett as agent. Craig was the Bank's customer but Everett was not. The Bank then tendered to Everett the sum of $30,000 in consideration of a promissory note executed as Peter S. Craig, trustee, by Leland T. Everett, agent. This note was executed at the request of the Bank at the same time Everett delivered the power of attorney to the Bank's employee Barbara Nelson. There is no dispute that Nelson relied on the purported power of attorney when agreeing to lend money to Everett in exchange for the note. An extension on the remaining $20,000 balance due on the note was later given to Everett by the Bank.

It is undisputed that the power of attorney delivered to the Bank by Everett on August 12, 1985, was a forgery. As such, the Bank turned in a claim under its policy with Hartford for coverage under the blanket bond. Hartford refused coverage, thereby prompting this suit.

The relevant provisions for coverage are listed in the "Insuring Agreements" section of the policy and state as follows:

"Forgery or Alteration

Loss resulting directly from

(2) Forgery or alteration of, on or in any Negotiable Instrument (except an Evidence of Debt), Acceptance, Withdrawal Order, Receipt for the Withdrawal of Property, Certificate of Deposit or Letter of Credit. . . .

Securities

Loss resulting directly from the Insured having, in good faith, for its own account or ...


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