American Freedom Ins. Co. v. Smith

• Decision Date: 08 March 2004
• Docket Number: No. 1-02-2343.,1-02-2343.
• Citation: 347 Ill. App.3d 1,282 Ill.Dec. 548,806 N.E.2d 1136
• Parties: AMERICAN FREEDOM INSURANCE COMPANY, Plaintiff-Appellant, v. Corey SMITH and Mark Whittington, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

806 N.E.2d 1136

347 Ill. App.3d 1

282 Ill.Dec. 548

AMERICAN FREEDOM INSURANCE COMPANY, Plaintiff-Appellant, v. Corey SMITH and Mark Whittington, Defendants-Appellees.

No. 1-02-2343.

Appellate Court of Illinois, First District, First Division.

March 8, 2004.

Schoen, Mangan & Smith, Ltd., Chicago (Lee J. Schoen and Linda J. Carwile, of counsel), for Appellant.

Arthur H. Levinson & Associates, P.C., Chicago (Arthur H. Levinson, of counsel), for Appellee. Justice McNULTY delivered the opinion of the court:

The parties to the instant appeal contest the interpretation and application of an automobile insurance policy's "automatic insurance" provision, which offers coverage for newly acquired vehicles for a limited period. The trial court found that the provision provided coverage. We affirm.

The day after his purchase of a second car, and while driving to the office of the insurer of his first car, defendant Corey Smith was involved in an auto accident which resulted in the total loss of the vehicle and injuries to himself and his passenger. Five days later, Smith made a claim under the uninsured motorist provision of the policy he had obtained for his first car. The insurer, plaintiff American Freedom Insurance Company (AFIC), filed a declaratory judgment action against Smith and his passenger, Mark Whittington, in pursuit of a determination that Smith's accident was not covered by the existing policy. On cross-motions for summary judgment, the parties disputed whether the policy had required Smith to provide notice of the acquisition of the Caprice, and whether such notice was given. The trial court found the accident to be covered under the policy.

BACKGROUND

Smith's policy had been obtained for a 1995 Chevrolet Monte Carlo he purchased early in 1999. The policy offered coverage for an "insured automobile" and its passengers for losses incurred as a result of accidents with uninsured motorists, and included in its definition of "insured automobile" two provisions pertinent to the instant litigation. The first relevant provision covered an automobile "acquired by the named insured during the policy period, provided it replaces an insured automobile." The second provision focused upon by the parties applied if AFIC insured all vehicles owned by the insured on the date of his acquisition and if "the named insured notifies the Company in writing within 30 days after the date of such acquisition of his election to make the Liability and Uninsured Motorist Coverages under this and no other policy issued by the Company applicable to such automobile."

According to his discovery deposition, Smith purchased a 1986 Chevrolet Caprice on October 12, 1999, and was involved in an accident in the vehicle the following day. Smith testified that as of the day of the accident, he had not notified AFIC of the purchase of the Caprice, that the Monte Carlo was still working, and that he was "supposed to sell" the Monte Carlo later that week.

Smith apparently made a claim under the Monte Carlo policy on October 18, 1999, although the record before us does not reveal the form or other particulars of that claim. AFIC then filed the action underlying the instant appeal: a complaint alleging that Smith "never submitted any application for insurance coverage" for the Caprice; seeking a declaratory judgment that Smith materially breached his insurance contract "by failing to apply for insurance coverage" for the Caprice; and seeking a judgment that AFIC owed no coverage under the policy to Smith or his passenger, Whittington. The answer filed jointly by Smith and Whittington (who have acted jointly through the representation of the same attorney throughout the trial court proceedings and in the instant appeal) denied that Smith had failed to make any application for insurance for the Caprice, affirmatively alleged that Smith "made a verbal application for insurance coverage" for the Caprice, and admitted that he made a claim for personal injury and property damage. In its assertion of affirmative defenses, the Smith-Whittington answer alleged that Smith "could not apply for insurance" for the Caprice because "the automobile was destroyed and became a total loss" and that he "made every effort possible to apply for insurance coverage" for the Caprice and "was on his way to the insurance agent's office, to apply for coverage when an accident occurred."

AFIC moved for summary judgment, asserting that Smith "had never applied for coverage" for the Caprice. As support for this proposition, AFIC's motion cited testimony from Smith's discovery deposition, in which the subject of Smith's communications with AFIC was addressed:

"Q. Now, on October 13th of `99, you owned both the `95 Monte Carlo and the `86 Chevy Caprice?

A. Yes.

Q. Had you notified anybody at American Freedom Insurance Company of the purchase of the `86 Caprice?

A. No, no.

Q. Okay. Do you remember how many miles were on that `95 Monte Carlo, approximately, if you can remember?

A. 83,000 or something like that.

* * *

Q. That car was on the American Freedom policy, correct?

A. Yes.

Q. Do you remember giving a statement to American Freedom?

A. About the car accident?

Q. Yes. Well, about your policy?

A. Yes.

Q. And about the car accident?

A. No, I do not remember.

Q. I will show it to you. That is a statement.

A. When I called them and explained to them about the accident.

Q. I do not know when you made it. Is that your signature at the bottom of the page?

A. Yes, it is."

The attorney representing AFIC at the deposition asked that the document Smith signed be marked as an exhibit, but no copy of that document has been made a part of the record presented to this court. Upon additional examination, Smith confirmed that both the Monte Carlo and the Caprice were owned by him and operational at the time of the accident. AFIC's summary judgment motion attached its complaint, Smith's policy and declarations page, and the title certificate reflecting Smith's purchase of the Caprice, but was not further supported by any additional admissions, testimony, or other evidence.

Smith and Whittington also moved for summary judgment, asserting that "Defendants are covered by American Freedom Insurance Company's policy because, at the time of the accident, less than 30 days had passed from the date of purchase and Corey Smith still had time to notify the insurance company and insure the car in question;" and that "Smith should be excused from not getting insurance coverage on that car subsequently because it was total [sic] loss and there was nothing to insure." The motion attached Smith's affidavit, which averred that the Caprice had been a total loss as a result of the accident, but did not address the issue of Smith's notification to AFIC. Smith and Whittington included with their motion a supporting memorandum, which contended that "Smith did not notify the insurance company of the purchase of the 1986 Chevy Caprice prior to the accident, but he notified that afterwards, when reporting the accident, within the 30 day limit." The parties' replies to the summary judgment motions did not shed further light on the notice issue.

In their oral arguments on the summary judgment motions, the parties initially focused on the interpretation of the "replacement" provision of the policy's uninsured motorist coverage. AFIC asserted that because Smith still owned his first car, the Monte Carlo, the subsequently purchased Caprice could not be a replacement car under the policy. Smith and Whittington responded that the policy had not explicitly required disposal of the first car before the second car could be categorized as a replacement, and that this lack of specificity, at a minimum, created an ambiguity which should have been construed against AFIC, the policy's drafter.

Smith and Whittington also argued that the Caprice, as an additional, newly acquired automobile, was an insured vehicle for purposes of the uninsured motorist provision, and that Smith had invoked the policy's newly acquired vehicle coverage by notifying AFIC of the accident. AFIC's counsel responded, "The problem with the notification is it came after the vehicle was a total loss." AFIC's counsel then cited Smith's deposition admission that he had not notified the company about the purchase of the Caprice. Counsel for Smith and Whittington pointed out that the cited question and answer followed a question which was directed to October 13, 1999, the date of the accident, and argued that Smith's acknowledged failure to notify AFIC referred only to the situation at the time of the accident.

The trial court found that the Caprice was an insured automobile as defined by either the replacement vehicle provision or the additional vehicle provision. In interpreting the replacement provision, the court noted Smith's uncontradicted deposition testimony that he had planned to sell the Monte Carlo within days of the purchase of the Caprice, and found nothing in the policy language which defined "replacement" to include a requirement that the first auto be disposed of before coverage could be applied to the later-purchased car. Turning to the additional vehicle provision, the court observed that if the Caprice had not been a total loss, Smith's notice to AFIC "would have resulted in it being scheduled on the policy, and it would have been covered as an auto policy." Having concluded that the Caprice was an insured automobile under the policy, the court denied the AFIC summary judgment motion and granted the opposing Smith-Whittington motion. This appeal followed.

DISCUSSION

Where the underlying facts are undisputed, the construction of an insurance policy is a question of law which is particularly appropriate for resolution by summary judgment; we conduct de novo review of the trial court's judgment in such instances. Mijes v. Primerica Life Insurance Co., 317 Ill.App.3d 1097, 1100, 251 Ill.Dec. 589, 740 N.E.2d 1160 (2000).

The...