Court of Appeals of Illinois, First District, Third Division
DARYL C. HUNT, Individually and as Assignee of Deborah Smith, Plaintiff-Appellant,
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.
Rehearing denied July 25, 2013.
Summary judgment was properly entered for defendant insurer in an action plaintiff filed as assignee of defendant’s insured seeking to enforce the judgment plaintiff obtained against the insured for the automobile accident she caused, since defendant cancelled the policy several months prior to the accident for nonpayment of premiums, and defendant was not estopped from denying liability based on cancellation, especially when it maintained proof of mailing of the cancellation notice on a form acceptable to the United States Postal Service.
Appeal from the Circuit Court of Cook County, No. 08-CH-14207; the Hon. Lee Preston, Judge, presiding.
Timothy J. Lowery, of Lowery & Associates, LLC, of Barrington, for Appeal appellant.
Frank C. Stevens, of Taylor Miller LLC, of Chicago, for appellee.
Panel JUSTICE HYMAN delivered the judgment of the court, with opinion, Sterba and Pierce Justices concurred in the judgment and opinion.
¶ 1 Sometimes a legal technicality can turn into a costly mistake, and the law of insurance is saturated with technicalities. The appellant casts the proof of mailing of an automobile cancellation notice as flawed under the Illinois Insurance Code (215 ILCS 5/1 et seq. (West 2008)), thereby triggering coverage. But, the facts reveal otherwise, and the technicality disappears.
¶ 2 This declaratory judgment action, brought by appellant Daryl Hunt, as the assignee of Deborah Smith, against Smith's insurer, State Farm Fire and Casualty Company (State Farm),  involves cross-motions for summary judgment. Hunt's complaint alleged State Farm breached its duty to defend Smith in an underlying personal injury lawsuit Hunt filed against Smith following an automobile accident and was, therefore, estopped from denying that Smith's insurance policy provided coverage for the accident. Hunt sought to recover the $900, 000 judgment entered against Smith. State Farm argued it had no duty to defend Smith in the underlying lawsuit because it cancelled Smith's policy for failure to pay the premium five months before the accident. Both Hunt and State Farm filed cross-motions for summary judgment. Based on the briefs and the arguments of counsel, the trial court granted State Farm's motion for summary judgment and denied Hunt's cross-motion for summary judgment.
¶ 3 Hunt argues the trial court erred in finding State Farm was not liable for the judgment against Smith because State Farm did not properly maintain proof of mailing of Smith's cancellation notice. Therefore, Hunt asserts, the policy was still in effect at the time of the accident and since State Farm neither defended its insured nor filed a declaratory judgment action, it is estopped from denying liability on the ground of cancellation. For the following reasons, we affirm the trial court.
¶ 4 I. Background
¶ 5 In March 2005, State Farm issued two insurance polices to Deborah Smith for two automobiles she owned. Smith arranged to have the premiums paid by automatic monthly withdrawal from her checking account. Smith made an initial payment of $151.96, but when her next payment was due in April 2005, the bank notified State Farm there were insufficient funds in Smith's account to make the payment. State Farm automatically generated a cancellation notice, which was mailed to Smith on April 15, 2005, informing her that the polices were cancelled as of April 29, 2005.
¶ 6 On October 11, 2005, Smith was involved in a motor vehicle accident with Hunt, who was driving an ambulance while employed in his official capacity with the Kankakee fire department. Hunt filed a lawsuit against Smith in Kankakee County. State Farm did not defend Smith in that lawsuit, and she was represented by her own attorney. On March 10, 2008, the court in Kankakee County entered a stipulated order of judgment in favor of Hunt for $900, 000. In the judgment, Smith admitted she negligently caused the accident and violated section 11-907 of the Illinois Vehicle Code, by failing to yield to an emergency vehicle. 625 ILCS 5/11-907 (West 2008). Smith assigned her rights against State Farm to Hunt, who agreed to only enforce the judgment against any policies of insurance available to Smith and not against any of Smith's other assets.
¶ 7 On April 17, 2008, Hunt, as the assignee of Smith, filed a two-count complaint against State Farm Mutual. Count I sought a declaration that State Farm had a duty to defend Smith in the lawsuit Hunt filed against her and is now estopped from raising any policy defenses, because it failed to defend her or file a declaratory judgment action. Count II alleged State Farm breached its contract of insurance with Smith by failing to defend, indemnify, or settle Hunt's claim against Smith. Hunt sought $900, 000 plus costs, attorney fees, and postjudgment interest of 9% per annum, as well as statutory penalties under section 155 of the Insurance Code. 215 ILCS 5/155 (West 2008).
¶ 8 The parties filed cross-motions for summary judgment. In its motion, State Farm asserted it had no duty to defend Smith or settle the underlying lawsuit because it cancelled Smith's insurance policy effective April 29, 2005, five months before the accident. State Farm attached to its motion an affidavit from Jane Mattingly, a State Farm payment plan team manager, stating the policy was cancelled for nonpayment of premium, a copy of the cancellation notice, and a copy of proof of mailing of the cancellation notice.
¶ 9 Hunt's motion for summary judgment alleged State Farm did not properly cancel Smith's insurance policy, because it failed to maintain proof of mailing of the cancellation notice on a recognized United States Post Office form or a form acceptable to the United States Post Office as required by section 143.14(a) of the Insurance Code (215 ILCS 5/143.14(a) (West 2008)). Specifically, Hunt contended that State Farm was required to comply with the provisions of the Domestic Mail Manual, which states, "[w]hen requesting a certificate of mailing for three or more pieces presented at one time, a mailer may use Form 3877 or a privately printed facsimile." Hunt asserted that the form used by State Farm was not Form 3877 or a facsimile of that form. Hunt further argued that under the doctrine of collateral estoppel, the appellate court's decision in Great West Casualty Co. v. State Farm Mutual Automobile Insurance Co., No. 1-05-1300 (2006) (unpublished order under Supreme Court Rule 23), rejecting essentially the same form used here, estops State Farm from arguing that its form complied with the Insurance Code. Therefore, Hunt asserted, the policy was in full force at the time of the accident.
¶ 10 On October 8, 2010, with leave of court, State Farm refiled its motion for summary judgment, again arguing it had no duty to defend Smith in Hunt's lawsuit because the policy had been cancelled five months earlier. In addition to the Mattingly affidavit, State Farm attached an affidavit from Kenneth J. Metroff, a technical business analyst with State Farm, stating the insurer uses a facsimile Form 3877, which contains the same information as the postal provided form, and a letter from Randy L. Davis, manager of the business entry ...