The opinion of the court was delivered by: Justice Nickels
The issue presented here is whether an insurance company's failure to produce the proof of mailing on a form as required by the cancellation provisions of the Illinois Insurance Code (215 ILCS 5/143.14(a) (West 1994)) invalidates the cancellation. The circuit court of Madison County found that cancellation is ineffective unless the insurance company produces the properly completed form. The appellate court affirmed in part and reversed in part. 291 Ill. App. 3d 1088. We allowed the petition for leave to appeal under Rule 315 (166 Ill. 2d R. 315). We affirm the appellate court.
Plaintiff, Jerald Ragan, purchased a seven-unit apartment building in Granite City, Illinois, in 1988 or 1989. In 1992, Ragan contacted defendant Looking Glass Mutual Insurance Company through its agent Orville Bierbaum to gather information on changing the carrier of the liability and property insurance on his apartment building.
Bierbaum submitted an application for Ragan's liability and property insurance to Columbia Mutual Insurance Company. Ragan told Bierbaum that he was remodeling one of the units for himself but he had not moved into the building. Ragan asked that any notices under the policy be sent to his post office box. In the "Applicant Information" section of the application form, Bierbaum listed the address of the insured property as Ragan's mailing address along with a note to the side that said "Send P.O. Box 8091."
Ragan was quoted an annual premium of $529 and made the first payment of $132.50 along with his application in order to bind coverage from the date of the application. Under the policy's payment plan, in addition to Ragan's initial payment, Ragan would have an installment of $82.10 due on December 7, 1992, and four more installments of $82.35 due throughout the year. Ragan asserts that he advised Bierbaum that he intended to have his mortgage company make the payments due under the policy. The application was later approved and Bierbaum sent a copy of the approved policy and declaration sheet to Ragan's post office box. After he received the policy and declaration sheet from Bierbaum, Ragan claims, he contacted his mortgage company, Roosevelt Bank, and requested that the bank make any further premium payments. No additional payment was ever made to Columbia Mutual under the policy.
On December 11, 1992, Columbia Mutual allegedly sent notice of cancellation to Ragan at the apartment building address. Columbia Mutual admits that it did not send a copy to Ragan's post office box. The cancellation notice cites Ragan's failure to make the December 7, 1992, installment and it purports to cancel the policy effective December 26, 1992.
On January 4, 1993, Columbia Mutual sent a letter to Looking Glass stating that Ragan's policy had been cancelled and that a refund check for unearned premiums was "holding." It is unclear from the record how Ragan received the check, but Ragan endorsed and deposited the $8.50 refund check. On August 31, 1993, the apartment building was destroyed by fire and Ragan sought insurance benefits from Columbia Mutual through his agent Bierbaum. Bierbaum advised Ragan that Columbia Mutual had canceled the policy effective December 26, 1992.
On December 15, 1993, Ragan filed a complaint in the circuit court against Columbia Mutual, Looking Glass, Bernice Pollmann, the owner of Looking Glass, Orville Bierbaum and Roosevelt Bank. Count I of the complaint alleges that Columbia Mutual's attempted cancellation of Ragan's insurance policy was ineffective and that under the policy Ragan was entitled to recover $94,500, his policy limits. Columbia Mutual denied all of the allegations in an answer filed March 8, 1994. Counts II and III allege wrongdoing by other defendants who are not participating in this appeal.
On June 12, 1995, Ragan filed an amendment to his complaint, set out as count IV, which adds claims of vexatious and unreasonable delay and prayers for statutory penalties, attorney fees and costs. Count IV also adds a prayer for prejudgment interest. Ragan was never granted leave to file this amendment. Columbia Mutual denied all of the allegations in an answer filed October 11, 1995.
On August 14, 1995, Ragan, pursuant to discovery rules, sent Columbia Mutual a request to admit that Columbia Mutual did not maintain a proof of mailing the cancellation notice as required by the Insurance Code. 215 ILCS 5/143.14(a) (West 1994). Ragan also sent Columbia Mutual a notice to produce the proof of mailing form. Columbia Mutual replied to the request to admit on August 25, 1995, as follows: "Columbia Mutual Maintains the cancellation letter in its file and, therefore, denies the request to admit." Upon motion by Ragan, on January 12, 1996, Columbia Mutual's reply to the request to admit was stricken as non-responsive and the circuit court granted Columbia Mutual additional time to respond. Columbia Mutual did not respond. Columbia Mutual also failed to produce the proof of mailing form requested in Ragan's notice to produce. During discovery, Columbia Mutual did produce what it alleges to be the original envelope, containing a cancellation notice. The envelope was metered and imprinted with the date December 11, 1992, addressed to the apartment building address, and returned as undeliverable.
On February 6, 1996, Ragan filed a motion for summary judgment. The trial court granted Ragan's motion for summary judgment on counts I and IV on March 29, 1996. On May 30, 1996, Columbia Mutual filed a motion to reconsider the order granting Ragan's motion for summary judgment. At the same time Columbia Mutual produced a copy of its unsigned form entitled "Certificate of Mailing" which listed the December 11, 1992, cancellation letter to Ragan. Columbia Mutual argued that this form satisfies the proof of mailing requirements of the Insurance Code.
On June 24, 1996, the circuit court denied Columbia Mutual's motion to reconsider, and ordered Columbia Mutual to pay Ragan a total of $182,300.54. Ragan was granted $94,500 under count I, which includes the fire insurance claim. Count IV, as set forth in Ragan's amendment to his original complaint, alleges vexatious and unreasonable conduct by Columbia Mutual in not paying the amount of the loss under the insurance policy and contains a prayer for prejudgment interest. Ragan was granted the following under count IV: $38,823.75 (attorney fees); $25,000 (statutory maximum for vexatious and unreasonable delay); $352 (filing fee); $236.04 (service of summons); and $23,388.75 (prejudgment interest).
On July 19, 1996, Columbia Mutual moved to vacate and set aside the summary judgment and award of damages. Columbia Mutual alleged that there remained genuine issues of material fact. The motion also contained a request for leave to amend Columbia Mutual's prior response to the request to admit. The amended response denied the allegation that Columbia Mutual did not maintain the form and contained a ...