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04/20/95 ECONOMY FIRE & CASUALTY CO. v. HUBERT

April 20, 1995

ECONOMY FIRE & CASUALTY CO., PLAINTIFF-APPELLEE,
v.
HUBERT HUGHES AND THE ROCK ISLAND BANK, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of the 14th Judicial Circuit, Henry County, Illinois. No. 93-MR-44. Honorable Jay M. Hanson, Judge, Presiding.

Released for Publication May 23, 1995. The Name of this Case has been Corrected by the Court November 2, 1995.

Honorable Peg Breslin, Justice, Honorable Michael P. Mccuskey, Justice, Honorable William E. Holdridge, Justice. Breslin and McCUSKEY, J.j., concurring.

The opinion of the court was delivered by: Holdridge

The Honorable Justice HOLDRIDGE delivered the opinion of the court.

Defendants, Hubert Hughes (Hughes) and Rock Island Bank (the Bank), appeal from an order entered by the circuit court of Henry County which granted the motion for summary judgment of plaintiff, Economy Fire & Casualty Co., and denied defendants' motions for summary judgment. The parties sought declaratory judgment in regard to whether a homeowners insurance policy (policy) issued by plaintiff to Hughes, which listed the Bank as the mortgagee, had been terminated properly. We affirm in part; reverse in part and remand with directions.

On or about May 1990 plaintiff issued to Hughes a policy renewable every three months upon the payment of a quarterly premium. This policy covered Hughes' residence and identified the Bank as the mortgagee.

The policy contained the following cancellation clause:

"b. We may cancel this policy only for the reasons stated in this condition. The cancellation notice shall be mailed to you at your last mailing address known to us, and we shall obtain a certificate of mailing. A copy of the cancellation notice will also be sent to the agent or broker and the last known mortgagee or lienholder, at the last mailing address known to us.

(1) When you have not paid the premium, whether payable to us or to our agent, we may cancel at any time by mailing you at least 10 days notice of cancellation." (Emphasis added.)

At the time the policy was issued to Hughes, section 143.14(a) of the Illinois Insurance Code (Code) provided:

"No notice of cancellation of any policy of insurance *** shall be effective unless mailed by the company to the named insured and the mortgagee or lien holder, at the last mailing address known by the company. The company shall maintain proof of mailing of such notice on a recognized U.S. Post Office form or a form acceptable to the U.S. Post Office or other commercial mail delivery service. A copy of all such notices shall be sent to the insured's broker if known, or the agent of record, and to the mortgagee or lienholder, if known, at the last mailing address known to the company." (Emphasis added.) (215 ILCS 5/143.14(a) (West 1992).)

In May 1993 a fire substantially destroyed the structure of Hughes' residence. In August 1993 plaintiff advised Hughes and the Bank that it declined coverage for the loss under the policy because Hughes failed to timely pay his quarterly premium for the period of February 24, 1993, through May 24, 1993.

Plaintiff maintained a notice of cancellation was generated on February 26, 1993, and forwarded to Hughes by regular mail on March 1, 1993, to advise him that if payment was not received by March 13, 1993, his coverage under the policy would terminate as of that date. Hughes denied receiving a notice of cancellation for nonpayment or delinquency of payment from plaintiff. However, plaintiff produced a certificate of mailing dated March 1, 1993, which indicated an unidentified piece of mail was received by the postmaster in Lincoln, Illinois, addressed to Hughes.

Plaintiff asserted a notice of cancellation was also mailed to the Bank, by regular mail, which identified the Bank as the mortgagee and included its correct mailing address. However, plaintiff failed to produce a certificate of mailing in regard to the Bank. Instead, plaintiff offered two affidavits which stated it was plaintiff's usual and customary business practice to send all premium notices when due, all cancellation notices when necessary and to further send a notice of cancellation to the mortgagee. The Bank maintained that ...


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