Court of Appeals of Illinois, First District, Fifth Division
Appeal from the Circuit Court of Cook County. No. 09 CH 33780 Honorable LeRoy Martin, Judge Presiding.
PRESIDING JUSTICE GORDON delivered the judgment of the court, with opinion. Justices Palmer and Taylor concurred in the judgment and opinion.
GORDON PRESIDING JUSTICE
¶ 1 Plaintiff Direct Auto Insurance Co. (DAI) filed an action seeking a declaratory judgment, arguing that: (1) an insurance policy it issued to defendant Elia Beltran was rescinded and null and void, ab initio; (2) that DAI owed no duties under the policy to any of the defendants; and (3) that defendants were not entitled to any recovery under the policy. DAI and defendant Acuity Insurance Company (Acuity), as subrogee of Alice Obermann, George Obermann, and Mark Obermann, filed cross-motions for summary judgment. The trial court granted Acuity's motion and denied DAI's motion, finding coverage. DAI filed a motion to reconsider, which the trial court denied. DAI appeals, and we affirm.
¶ 2 BACKGROUND
¶ 3 I. The Parties and The Policy
¶ 4 DAI is an insurance company with its principal place of business in Chicago, Illinois. DAI is duly licensed to underwrite policies for automobile insurance, and to sell such policies and coverage to members of the general public. Elia Beltran (Elia), Mario Beltran (Mario), and Araceli Beltran (Araceli) are Illinois residents. Elia speaks limited English and her Spanish literacy is limited by the fact that she cannot write in Spanish.
¶ 5 DAI received an application for automobile insurance from Northwest Insurance Network, Inc. (NIN), an insurance broker. The application listed Elia as the applicant. The application lists Elia's gender as "M, " despite Elia being a woman. The application states that Elia has an international driver's license. However, Elia testified in her deposition that she does not know how to drive an automobile. Elia owns a 2006 Ford Freestyle SE motor vehicle (the Elia vehicle). Elia purchased the Elia vehicle with the intent that Mario, her brother, would use it to drive her to and from work. Elia did not sign the application, and instead, the applicant signature lines bear the notation "T/O." After receiving the application, DAI issued a policy of insurance to Elia (the DAI policy). The DAI policy covered bodily injury, property damage, medical payments, uninsured motorist, and physical damage. The DAI policy had an effective date of November 23, 2008.
¶ 6 Acuity is a Wisconsin mutual insurance company, licensed and authorized to write insurance in the State of Illinois. Alice Obermann (Alice), George Obermann (George), and Mark Obermann (Mark) are Illinois residents. "Alice Obermann, George Obermann, and Mark Obermann had in force a certain policy of insurance with Acuity Insurance Company [(the Acuity policy)] which provided, among other things, automobile coverage for payment of property damage and medical payments incurred as a result of an automobile collision."
¶ 7 The other defendants, Crescend Technologies, LLC (Crescend), an Illinois limited liability corporation, and Lutheran General Hospital (Lutheran), an Illinois not-for-profit entity, did not participate in this appeal.
¶ 8 II. The Underlying Action
¶ 9 The declaratory judgment action in the case at bar arises from an underlying subrogation action filed by Acuity, as subrogee of Alice, George, and Mark. Acuity filed a two-count complaint in the circuit court of Cook County, alleging negligence against Mario and negligent entrustment against Elia. Acuity states in the underlying complaint that the lawsuit "is a subrogation action wherein the real parties in interest are Acuity Insurance Company and Mark Orbermann" with regard to the negligence claim, and "is a subrogation action wherein the real parties in interest are Acuity Insurance Company and Alice Obermann, George Obermann, and Mark Orbermann" with regard to the negligent entrustment claim.
¶ 10 The underlying complaint alleges the following facts. On or about December 15, 2008, Mario was operating the Elia vehicle, and Mark was operating his vehicle, which was covered by the Acuity policy. Mario had a duty to operate the Elia vehicle in a safe and reasonable manner, and Mario breached that duty. The two vehicles collided, "causing property damages to [Mark's] vehicle and injuries to [Mark] requiring medical treatment." The complaint further alleges that Elia placed the Elia vehicle "in the care and custody of [Mario] knowing that his ability to drive the vehicle and his reliability were such that she was placing a careless, negligent, reckless, incompetent and unsafe driver upon the streets when she knew, or in the exercise of ordinary care, should have known, that by doing so, she might or could cause injury to other persons on the public way." Pursuant to the Acuity policy, Acuity "paid policy benefits in the amount of $10, 000.00 for medical payments on behalf of [Mark] and property damage payments on behalf of Alice Obermann, George Obermann, and Mark Obermann in the amount of $9, 738.01, including towing charges and storage and a $500.00 deductible."
¶ 11 III. The Declaratory Action
¶ 12 A. The Complaint
¶ 13 DAI filed a declaratory judgment action, alleging that Elia made material misrepresentations in her application for insurance, and as a result, there was no coverage. DAI alleges the following facts: NIN was an "independent insurance agency" acting as Elia's agent for the purpose of securing insurance. On or about November 24, 2008, Elia, through NIN, submitted an electronic application for insurance to DAI. The DAI policy was issued on November 28, 2008, based on the application submitted by NIN. Elia was the named insured under the DAI policy, and owned the Elia vehicle.
¶ 14 The DAI policy was subject to the following terms and conditions:
"4. Fraud and Misrepresentation. Statements contained in the application for insurance are deemed to be representations relied upon by [DAI] in issuing this policy. In the event that any representation contained in the application is false, misleading or materially affects the acceptance or rating of risk by [DAI], by either direct misrepresentation, omissions, concealment of facts or incorrect statements, then coverage for the accident or loss in question shall not be provided by [DAI] and/or this policy shall be null and void and of no benefit whatsoever from its inception.
* * * 17. Declarations. By acceptance of this policy the named insured agrees that the statements and representations contained in the Application have been made by him/her or on his/her behalf and said statements are representations and the statements in the Application and in any subsequent application or questionnaire accepted by [DAI] are offered as an inducement to [DAI] to issue or to continue this policy and that this policy is issued and continued in reliance upon the truth of such statements and representations and that this policy embodies all agreements existing between himself/herself and [DAI] relating to this insurance."
¶ 15 The application requests a list of the known drivers of the Elia vehicle. The application lists Elia as a driver and states that "[a]pplicant warrants there are no other drivers other than those listed below." No other drivers are so listed. The application contains a paragraph stating that the applicant acknowledges that she has read and attests that all answers provided are true.
¶ 16 On or about December 15, 2008, Mario was operating the Elia vehicle, and at this time, the Elia vehicle "came into contact with the person or property" of Alice and Mark. As a result of the collision, Acuity, as subrogee of Alice and Mark, filed the underlying subrogation action against Mario and Elia.
¶ 17 DAI alleges that Elia, "either individually or through her agent, intentionally misled DAI as to the other drivers in her residence." DAI alleges that, had it known that the Elia vehicle was to be operated by drivers other than Elia, "said information would have materially affected DAI's decision to issue the DAI policy" to Elia, and that it would not have issued the DAI policy as written. DAI further alleges that, due to Elia's material misrepresentation, the DAI policy is null and void, ab initio. DAI rescinded the policy and returned Elia's full premium on or about December 29, 2008, and owes no duty to defend or indemnify Mario and Elia.
¶ 18 DAI asks the trial court to declare: (1) that as a result of Elia's material misrepresentations, the DAI policy is "rescinded and null and void, ab initio, and of no benefit whatsoever"; (2) that DAI owes no duty under the DAI policy to defend or indemnify Elia and Mario with regard to any claim or lawsuit made by them or the other defendants as herein named as a result of the vehicle collision; (3) that none of the defendants are entitled to recovery under the DAI policy for or in connection with any claim or lawsuit resulting from the vehicle collision; and (4) "any such other and further relief" that the trial court "deems just and appropriate in the circumstances."
¶ 19 B. Answer and Default
¶ 20 Defendants Acuity, Alice, George, and Mark filed an answer and counterclaim to the declaratory judgment action. The counterclaim also sought a declaratory judgment requesting: (1) the trial court to "declare and adjudicate the rights, obligations, and liabilities of the parties to this suit with respect to the DAI policy"; (2) a finding of coverage for indemnity of Mario and Elia for the underlying action under the DAI policy; (3) a finding that DAI owes a duty to defend Mario and Elia in the underlying action under the DAI policy; (4) a finding that DAI owes a duty to indemnify Mario and Elia in the underlying action under the DAI policy; (5) that Acuity is entitled to judgment in its favor; and (6) that Acuity is entitled to any other or further relief that the trial court deems just and equitable.
¶ 21 The counterclaim alleges that the DAI policy contains the following term:
"Persons Insured. The following are Insured under Part I: (a) With respect to the owned automobile; (1) the named insured, or
(2) any other person using such automobile to whom the named insured has given permission, provided the use is within the scope of such permission." Acuity alleges that Elia gave Mario permission to drive the Elia ...