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Auto-Owners Insurance Company v. Merle Yocum

March 29, 2013

AUTO-OWNERS INSURANCE COMPANY,
PLAINTIFF AND COUNTERDEFENDANT- APPELLANT AND CROSS-APPELLEE,
v.
MERLE YOCUM, MERLE YOCUM TRUCKING, GARY E. DOWDING,
HARMON GRAIN, LLC, AND MICHIGAN MILLERS MUTUAL INSURANCE COMPANY, DEFENDANTS AND COUNTERPLAINTIFFS- APPELLEES AND CROSS-APPELLANTS.
AUTO-OWNERS INSURANCE COMPANY,
PLAINTIFF AND COUNTERDEFENDANT- APPELLANT,
v.
MERLE YOCUM, MERLE YOCUM TRUCKING, GARY E. DOWDING,
HARMON GRAIN, LLC, AND MICHIGAN MILLERS MUTUAL INSURANCE COMPANY, DEFENDANTS AND COUNTERPLAINTIFFS- APPELLEES.



Appeal from the Circuit Court of Ogle County. No. 09-MR-2 Honorable Robert T. Hanson, Judge, Presiding.

The opinion of the court was delivered by: Justice Schostok

Appeal from the Circuit Court of Ogle County. No. 09-MR-2 Honorable Robert T. Hanson, Judge, Presiding.

JUSTICE SCHOSTOK delivered the judgment of the court, with opinion. Justices McLaren and Zenoff concurred in the judgment and opinion.

OPINION

¶ 1 Defendants Merle Yocum and Merle Yocum Trucking (collectively Yocum) had an automobile insurance policy with the plaintiff, Auto-Owners Insurance Company. On September 22, 2005, defendant Gary Dowding, while driving a truck owned by Yocum and hauling a trailer owned by defendant Harmon Grain, LLC (Harmon), was in an automobile accident with a car driven by Joseph Kerwin III. Kerwin died. Kerwin's representative filed a wrongful death suit against Yocum, Dowding, and Harmon. Yocum, Dowding, and Harmon tendered their defense to Auto-Owners. Defendant Michigan Millers Mutual Insurance Company (Millers) insured Harmon and asserted a claim against Auto-Owners for equitable contribution. Auto-Owners filed a declaratory judgment action seeking a declaration that it had no duty to defend or indemnify in the underlying suit because Yocum's policy had been effectively cancelled prior to the date of the accident. Both parties filed cross-motions for summary judgment. On November 17, 2011, following a hearing, the trial court denied Auto-Owners' motion and granted summary judgment in favor of the defendants. The trial court also denied the defendants' claim for sanctions under section 155 of the Illinois Insurance Code (Insurance Code) (215 ILCS 5/155 (West 2008)). Auto-Owners appeals, and the defendants cross-appeal, from the trial court's order. We affirm.

¶ 2 I. BACKGROUND

¶ 3 Yocum purchased an automobile insurance policy from Auto-Owners, effective from June 23, 2004, through June 23, 2005. Two vehicles were covered under the policy. When the policy was issued, Yocum was required to pay approximately two months' premium up front. Thereafter, Yocum was required to make additional premium payments on a monthly basis. At the end of 2004, Yocum had failed to make a timely monthly premium payment on two occasions. Both times, Auto-Owners sent a notice of cancellation, requiring payment by a certain date and warning that the policy would be cancelled if payment was not received. Both times, Yocum made the required payment before the cancellation date.

¶ 4 On April 14, 2005, Auto-Owners issued an endorsement effective March 22, 2005, adding a third vehicle to the policy. This increased the policy premium. On May 16, 2005, the policy was renewed for the period of June 23, 2005 through June 23, 2006. When Yocum did not make the premium payment due May 3, 2005, Auto-Owners sent a notice of cancellation on June 3, 2005, requesting $876.72, which was $342.22 for the remaining premium on the 2004-05 policy, plus late fees ($20), plus two months' premium for the 2005-06 policy ($257.25 per month for a total of $514.50). Yocum paid the requested amount on June 23, 2005, and ultimately received a reinstatement notice informing him to disregard the prior cancellation notice.

¶ 5 On June 29, 2005, two of the vehicles on Yocum's policy were damaged in a traffic accident, and they were no longer being used. As a result, Yocum requested that those two vehicles be removed from the policy. Ultimately, Auto-Owners issued an endorsement on August 30, 2005, effective as of June 30, 2005, reflecting the reduced number of vehicles on the policy and the reduced policy premium. The original monthly premium was $257.25, and the reduced monthly premium was $104. The auto policy provided that "[p]remium adjustments will be made at the time of such changes or when we [Auto-Owners] become aware of the changes, if later." There is no documentary evidence of Yocum's request to remove the two vehicles, other than the endorsement.

¶ 6 Yocum failed to make the monthly premium payment in July 2005 and Auto-Owners mailed him a notice of cancellation dated August 3, 2005. The notice required Yocum to pay $539.50 (two premium payments of $257.25 plus additional fees of $25) by August 25, 2005, and stated that the policy would be cancelled on that date if payment were not received. The notice also stated that "if you wish, you may pay any amount greater than the Minimum Due up to your Account Balance." Yocum did not make any payments or request any extensions to do so. On August 31, 2005, Auto-Owners sent Yocum a notice of cancellation, stating that the policy was cancelled effective August 25, 2005. On September 7, 2005, Auto-Owners issued a check to Yocum in the amount of $238.66, a refund for unearned premium. The check was sent to Yocum's insurance agent, who received it on September 12, 2005.

¶ 7 On September 22, 2005, Dowding, an employee of Yocum, was in an automobile accident while driving a truck that was owned by Yocum and had been covered by the 2005-06 Auto-Owners policy at issue. The accident resulted in Kerwin's death. At the time of the accident, Dowding was pulling a trailer, owned by Harmon and insured by Millers. Yocum and Dowding were additional insureds under the Millers policy, but on an excess basis. On February 28, 2007, Kerwin's representative filed a wrongful death suit against Yocum, Dowding, and Harmon. Yocum, Dowding, and Harmon tendered their defense to Auto-Owners. Additionally, Millers asserted a claim against Auto-Owners for equitable contribution. Auto-Owners denied coverage to the defendants on the ground that the policy had been cancelled. Millers defended the underlying case and eventually settled the suit in July 2009 for $2 million.

¶ 8 In an affidavit, Yocum attested as follows. He never received a cancellation notice from Auto-Owners dated August 3 or August 31, 2005. The first time he knew that his policy was cancelled was after the September 22, 2005, accident. Since he had paid the $876.72 on June 23, 2005, he believed that his insurance was in effect at the time of the accident. On June 29, 2005, he was involved in a collision and two of his vehicles were badly damaged. As a result of the accident, he called his insurance agent to request that the two vehicles be dropped from his policy because they were no longer being used. He understood that this lowered his total annual premium from $3,300 to $1,248. He believed that the amount paid in June 2005 was sufficient to provide coverage, because he had dropped the two vehicles from the policy. He did not receive a premium refund check until after the September 2005 accident. He informed his insurance agent of the accident, but Auto-Owners denied any coverage. Yocum therefore requested that Millers handle his defense.

¶ 9 On July 10, 2007, Auto-Owners filed a declaratory judgment action in Cook County. On November 20, 2008, the defendants' motion to transfer venue was granted. Auto-Owners refiled its complaint in Ogle County. On April 24, 2009, Auto-Owners filed an amended complaint. In its amended complaint, Auto-Owners noted that Yocum, Dowding, and Harmon had been named in a wrongful death suit filed by Kerwin's representative and had tendered their defense to Auto-Owners. Auto-Owners further noted that Millers had asserted a claim against Auto-Owners for equitable contribution based on its alleged coverage of mutual insureds involved in the Kerwin suit. Additionally, Harmon and Millers had filed a small claims suit against Yocum and Auto-Owners to recover for damage to the load of beans in the Harmon trailer at the time of the accident. The defendants had each sought coverage from Auto-Owners for defense and indemnification in these suits. Auto-Owners denied coverage to each on the basis that prior to the September 22, 2005, accident the policy had been cancelled for nonpayment of premium, effective August 25, 2005.

Auto-Owners sought a declaration that the policy was properly cancelled and that it owed no duty to defend or ...


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