DeGraw v. State Sec. Ins. Co.
| Citation | 351 N.E.2d 302,40 Ill.App.3d 26 |
| Decision Date | 22 June 1976 |
| Docket Number | No. 58978,58978 |
| Parties | Joseph DeGRAW, Plaintiff-Appellee and Cross-Appellant, v. STATE SECURITY INSURANCE COMPANY, Defendant-Appellant, and County Insurance Service, Inc., Defendant-Cross-Appellee, and Leo R. Cox, Defendant-Cross-Appellee and Cross-Appellant. |
| Court | United States Appellate Court of Illinois |
William J. Harte, Ltd., Chicago, for plaintiff-appellee.
Andrew H. Marsch, Wheaton, for defendant-appellant.
Peterson, Ross, Rall, Barber & Seidel, Chicago, for defendant-Cross-appellee.
Paul W. Schroeder, Chicago, for defendant-cross-appellee and cross-appellant.
This action was commenced by Joseph DeGraw against State Security Insurance Company (hereinafter referred to as 'State'), County Insurance Service, Inc. (hereinafter referred to as 'County'), and Leo Cox, whereby DeGraw sought payment of a judgment previously entered against him and in favor of one Jerry Stastny in the amount of $55,000. The trial court entered judgment on the jury's verdict which had found in favor of DeGraw as against State, and in favor of County and Cox as against DeGraw. DeGraw's damages were assessed in the amount of $55,500 plus costs. Pursuant to DeGraw's motion, this judgment was subsequently modified to $69,651.70 plus costs to include the interest which had accrued on the Stastny judgment previously entered against DeGraw.
On appeal, State seeks reversal of the judgment entered against it; on cross-appeal, DeGraw asks that the judgments in favor of County and Cox be reversed; and in the event the judgment in favor of Cox is reversed, Cox on his cross-appeal seeks reversal of the dismissal of his counterclaim against State and the entry of judgment in his favor on the said counterclaim. 1
This controversy arose from an automobile accident involving vehicles driven by DeGraw and one Jerry Stastny on October 15, 1965. Thereafter, Stastny joined DeGraw as a party defendant in an action commenced in Kane County, Illinois. (Stastny v. Dave's Lounge, Inc., et al., No. 65--3056.) That suit was filed on behalf of Stastny individually, his three children, and the estate of his wife who was killed in the accident.
DeGraw asked State to defend him in the action brought by Stastny, and, in the event of an adverse judgment, to indemnify him within the terms of an automobile liability insurance policy which he believed was in effect on the date of the accident. State provided DeGraw with a defense, but under a reservation of rights agreement, signed by DeGraw, wherein it was provided that State neither waived its right to deny coverage, nor admitted liability, as a result of its legal representation of DeGraw.
When State declined to pay any portion of the $55,000 judgment entered against DeGraw, DeGraw (hereinafter referred to as 'plaintiff') brought this action against State demanding that it pay the full amount of the judgment, together with interest thereon, and $500 for his personal medical expenses which he alleged was also covered by the insurance policy. Joined with State as defendants were Cox, plaintiff's insurance broker, and County, a producer of insurance which placed insurance with various companies for local brokers. The counts alleged against each defendant sounded in both tort and contract. In addition, 'bod faith' on the part of State during its legal representation of plaintiff in the Stastney action was alleged.
The principal issues presented for review are the following: (1) whether sufficient evidence was adduced at trial to establish State's liability to plaintiff; (2) whether the jury correctly found in favor of both County and Cox; (3) whether the legal representation granted plaintiff by State was conducted in such a manner as to justify a verdict against State for an amount exceeding the limits of the insurance policy; (4) whether the trial court committed prejudicial error by excluding a written statement and certain answers to interrogatories by plaintiff; and (5) whether certain rulings by the trial court with respect to tendered instructions constituted reversible error.
Much of the evidence adduced at trial pertained to the business relationship established among defendants. In 1965, State primarily engaged in extending sub-standard or 'high risk' automobile insurance coverage. County placed insurance with various companies, including State, pursuant to its receipt of applications for insurance submitted by individual brokers. In 1964, County and State entered into a written agreement wherein their business relationship was delineated. Although County was not authorized to solicit applications for insurance on behalf of State, County was granted the authority to bind certain risks for State and to collect premiums. 2 2 However, County's power to bind certain risks was limited to applications for the issuance of a new insurance policy by State, but did not extend to requests for the renewal of an existing policy. It was further agreed by State and County that the terms of the written agreement would remain in confidence.
The president of County testified that his company communicated daily by telephone with State's underwriting department to ascertain what risks would be accepted by State. This frequency of communication was deemed necessary since the type of risk considered acceptable by State often varied. As established through the ordinary course of business between County and State, it was the witness' belief that if 3--4 days elapsed after a written order was submitted by County to State for the issuance of a new policy or for the renewal of an existing policy, the failure of State to notify County within that 3--4 day period of its rejection of the order would indicate to County that the risk had been accepted and that a policy would be issued. If less than 3--4 days remained before the date on which the coverage was desired, the order would be transmitted to State by telephone with a written request to follow. By this latter procedure, County would know whether the risk woule be accepted by State prior to the date on which the coverage was desired. In the event of a rejection of an order by State, County would then attempt to secure coverage through another insurance company.
The testimony of State's underwriting manager, who was also its vice-president, conflicted in part with the testimony of County's president. This witness emphasized that the written agreement between County and State in respect of County's power to bind referred solely to applications and not to renewal requests. The witness further stated that, if a renewal request was rejected by State, County would usually be advised of that decision within 2--3 days, if possible, after the request was received by State. Under some circumstances, however, more than 2--3 days would be required for State to evaluate the risk. Consequently, the witness believed that County could not assume that a policy would be issued until notified of State's decision, notwithstanding the lapse of time from the date on which State received the order.
In 1965, Cox was an insurance broker who occasionally utilized County's services for placing high risk automobile insurance with State. Cox was not an agent for State, and as a result, he corresponded with County pertaining to policies issued by State for his clients. Pursuant to conversations he had with County's president, it was Cox' understanding that County was authorized to bind both applications and renewal requests with State. Although Cox did not enter into a written business agreement with either County or State, he conducted his business in accordance with an understanding that he would be notified by County within 2--3 days after he submitted a renewal request if that order was rejected by State. After 3--4 days had elapsed, Cox would assume that the risk was covered if he had not been advised to the contrary.
The chronology of events underlying this controversy is undisputed. Due to the large number of events and the significance of the date on which each occurred, these facts will be set out in tabular form. All dates listed occurred in 1965.
DATE DESCRIPTION OF EVENT
---- --------------------
APRIL Plaintiff secured an automobile insurance policy from
12 State through County and Cox. The policy was scheduled
to terminate on October 12
SEPTEMBER Cox mailed a letter to plaintiff suggesting that plaintiff
1 renew his policy
OCTOBER While driving his automobile, plaintiff struck a pedestrian.
1
4 (1) Cox was notified by plaintiff of the accident on October 1.
(2) Notice of the accident was transmitted from Cox' office
to State.
6 Plaintiff went to Cox' office, requested a renewal of his
policy, and paid a deposit on the premium for the renewal
policy.
7 (1) County was notified by State of the accident on
October 1.
(2) Plaintiff's renewal request was received by County
from Cox.
(3) Plaintiff's renewal request was forwarded to State
from County.
OCTOBER
(Friday)
8 State received plaintiff's renewal request.
9 Plaintiff paid the remainder of the premium for the
renewal policy to Cox.
12 Plaintiff's original policy with State expired.
(Tuesday)
15 (1) Cox mailed a letter to County requesting that plaintiff's
(Friday) renewal policy be forwarded to Cox.
(2) First action taken by State on the renewal request.
(3) That evening, plaintiff was involved in the accident
with the Stastny automobile. (This is the occurrence that
caused the litigation at bar.)
16 State mailed a letter to County advising that plaintiff's
policy would...To continue reading
Request your trial
-
International Ins. Co. v. Sargent & Lundy, 1-90-2222
...conduct between the parties here. Only International's general practice is referred to. (DeGraw v. State Security Insurance Co. (1976), 40 Ill.App.3d 26, 34, 351 N.E.2d 302 ("evidence of this kind [custom and usage] if indeed an identifiable custom or business practice * * * could be dispos......
-
Associated Indem. Co. v. Insurance Co. of North America
...185 N.E.2d 603, overruled on other grounds, Smith v. Andrews (1964), 54 Ill.App.2d 51, 203 N.E.2d 160; DeGraw v. State Security Insurance Co. (1976), 40 Ill.App.3d 26, 351 N.E.2d 302; Annot., 49 A.L.R.2d 694 (1956).) In certain situations, however, if an insurance carrier acts in bad faith ......
-
Florsheim v. Travelers Indem. Co. of Illinois
... ... a separate motion sought to have Count II dismissed for failure to state a cause of action. Thereafter it filed a motion for summary judgment on ... (1979), 69 Ill.App.3d 422, 26 Ill.Dec. 399, 388 N.E.2d 23; DeGraw v. State Security Insurance Co. (1976), 40 Ill.App.3d 26, 351 N.E.2d 302, ... ...
-
National Discount Shoes, Inc. v. Royal Globe Ins. Co.
...Mutual Casualty Co. v. Clark (1977), 53 Ill.App.3d 274, 11 Ill.Dec. 151, 368 N.E.2d 702; DeGraw v. State Security Insurance Co. (1976), 40 Ill.App.3d 26, 351 N.E.2d 302, leave to appeal denied ; 16B Appleman, Insurance Law and Practice § 9081.) Since the plaintiff does not contend and has n......
-
CHAPTER § 5.09 When a Claim Arises: Handling of Claims Negotiations
...Ins. Co., 167 A. 180 (Conn. 1933); Foremost Dairies v. Campbell Coal Co., 196 S.E. 279 (Ga. App. 1938); DeGraw v. State Sec. Ins. Co., 351 N.E.2d 302 (Ill. App. 1976); Bennett v. Conrady, 305 P.2d 823 (Kan. 1957); Long v. Union Indem. Co., 178 N.E. 737 (Mass. 1931); Thompson v. State Farm M......