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Universal Casualty Co. v. Lopez

September 17, 2007

UNIVERSAL CASUALTY COMPANY, PLAINTIFF-APPELLANT,
v.
ALEJANDRO LOPEZ; ELSA ALARCON; SUSAN GOODMAN; RANDY L. FINFER; BARBARA R. WEISS; MINDA H. SMITH; AND ALLSTATE INSURANCE COMPANY, DEFENDANTS-APPELLEES.
AMERICAN SERVICE INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
SERGIO RUIZ; JOSE D. GONZALEZ; AND BETH KIM, INDIV. AND AS MOTHER AND NEXT FRIEND OF ANDREA KIM, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County Nos. 02 CH 18264 & 03 CH 20669.

The opinion of the court was delivered by: Presiding Justice Cahill

Published opinion

Plaintiff insurers appeal from a trial court's denial of motions for declaratory judgments. Plaintiffs alleged fraudulent misrepresentation in defendants' applications for automobile insurance. Plaintiffs rescinded the insureds' policies and returned their premiums after drivers who were not disclosed as household members on the insureds' applications for insurance were in accidents while driving cars owned by the insureds.

The other defendants in these cases are the drivers and passengers in other cars who were injured in the accidents (third-party defendants).

These actions were filed in separate complaints and considered at separate bench trials. We have consolidated these cases and now affirm the judgments of the circuit court.

The facts are slightly different in each case, but the legal issue is the same: whether the insureds had made material misrepresentations on their applications for insurance, voiding coverage. Universal Casualty Company alleged in its complaint that Alejandro Lopez, its insured, and Elsa Alarcon lived in the City of North Chicago. It alleged that at the time of the accident Alarcon was driving a car owned by Lopez. It alleged that Lopez applied for insurance on November 26, 2001, while Alarcon lived in his household. Universal claimed that although Lopez was obligated to name and identify all drivers in his household, he failed to disclose Alarcon. Universal alleged Lopez's "fraudulent misrepresentation" voided the insurance policy. Universal claimed that had it known Alarcon lived with Lopez, it would not have issued the policy.

Neither Lopez nor Alarcon answered the complaint. The trial court entered an order of default against them on May 11, 2004. But the third-party defendants did appear and answer. They denied knowledge and information sufficient to form a belief as to Universal's claims of misrepresentation. In response to interrogatories, Universal disclosed a police report from the accident that listed Alarcon's address as Lopez's address. Universal also disclosed a summons in the underlying tort suit addressed to Alarcon at Lopez's address.

At a bench trial on May 16, 2005, Universal introduced documents, including the 2004 judgment of default against Lopez and Alarcon. Universal moved for a directed verdict, arguing that Lopez and Alaracon had admitted the allegations in the complaint by defaulting. The trial court denied the motion, pending completion of the trial.

Universal called Ronald Clark, its claims supervisor, as a witness. Clark testified that although Alarcon was not listed as an operator on Lopez's policy, he believed Alarcon lived at Lopez's address. On cross-examination, Clark admitted he never spoke with Lopez or Alarcon. He said he did not believe there were attempts to reach Lopez and Alarcon by telephone. He admitted that Alarcon's address on the police report of the collision would not establish that she was a driver in the Lopez household at the time of the application. Clark admitted he had no knowledge of whether Alarcon was a driver of Lopez's car before the accident, either as a household member or a permissive driver. Clark said Universal's only evidence of Alarcon's address was the police report.

The trial court entered a written opinion and order, ruling in Universal's favor. The court found that Clark's testimony "revealed that Clark did not have personal knowledge of Alarcon's residency at the time Universal contracted with Lopez." The trial court concluded that although Clark's testimony was "weak," it showed that Universal's decision to contract with Lopez would have been different had it known that Alarcon lived with Lopez. The trial court noted that the third-party defendants "offered no evidence to rebut Clark's testimony."

The third-party defendants filed a posttrial motion to reconsider, arguing that Universal had presented no evidence of a material misrepresentation, but had relied entirely on the default judgment against Lopez. The trial court granted the third-party defendants' motion to reconsider, vacated its earlier judgment and found that Universal had the duty to defend and indemnify Lopez and Alaracon.

American Service Insurance Company made essentially the same claims as Universal against its insured, Sergio Ruiz, and Jose Gonzalez. It alleged that Ruiz and Gonzalez were both residents of Palatine and that a car owned by Ruiz and driven by Gonzalez was involved in an accident on September 27, 2003. It alleged Ruiz violated the terms of his policy by failing to disclose Gonzalez as a driver when he applied for the insurance.

Ruiz and Gonzalez did not answer the complaint. The trial court entered a judgment of default against them on February 19, 2004. The third-party defendants, the Kims, answered the complaint.

Before trial, the court allowed the Kims to file an affidavit under section 2-610(b) of the Code of Civil Procedure (735 ILCS 5/2-610(b) (West 2002)) to support their claims of insufficient knowledge to admit or deny American's allegations. The Kims also filed a motion for summary judgment (735 ILCS 5/2-1005 (West 2002)). They attached affidavits of the defaulted Ruiz, Ruiz's wife, Gonzalez and Margarita Abame, a Ruiz family friend. The affidavits averred that Gonzelez did not live with Ruiz on the date of the application and that Gonzalez did not move into Ruiz's residence until after the application was made. The affiants stated that the only time Gonzalez drove ...


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