Farmers Auto. Ins. Ass'n v. Gitelson

• Decision Date: 09 December 2003
• Docket Number: No. 1-02-1023.,1-02-1023.
• Citation: 801 N.E.2d 1064,280 Ill.Dec. 119,344 Ill. App.3d 888
• Parties: FARMERS AUTOMOBILE INSURANCE ASSOCIATION, Plaintiff-Appellant, v. Susan GITELSON, Not Individually but as the Special Adm'r of the Estate of Susan Spelman, Deceased, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

801 N.E.2d 1064

344 Ill. App.3d 888

280 Ill.Dec. 119

FARMERS AUTOMOBILE INSURANCE ASSOCIATION, Plaintiff-Appellant, v. Susan GITELSON, Not Individually but as the Special Adm'r of the Estate of Susan Spelman, Deceased, Defendant-Appellee.

No. 1-02-1023.

Appellate Court of Illinois, First District, Second Division.

December 9, 2003.

Nunc Pro Tunc September 30, 2003.

Pretzel & Stouffer, Chartered, Chicago (Robert Marc Chemers and Daniel G. Wills, of counsel), for Appellant.

Corboy & Demetrio, P.C., Chicago (Shawn S. Kasserman and Daniel S. Kirschner, of counsel), for Appellee.

Justice CAHILL delivered the opinion of the court:

We consider whether the trial court's finding that defendant was entitled to underinsured motorists coverage under plaintiff's automobile insurance policy is against the manifest weight of the evidence. We find that it is and reverse.

Susan Spelman was killed in a car accident on August 7, 1991, in Illinois. On the date of the accident, Susan was living in an apartment she had leased in Elmhurst and had a full-time job in Lombard. Susan's parents, William and Betty Spelman, were insured under an automobile insurance policy issued by plaintiff Farmers Automobile Insurance Association (Farmers). The Spelmans lived in Wisconsin. The Farmers policy was in effect on August 7, 1991. The policy provided primary, uninsured and underinsured coverage. The underinsured coverage section read:

"We will pay damages which an `insured' is legally entitled to recover from the owner or operator of an `underinsured motor vehicle' because of bodily injury:

* * *

`Insured' as used in this part means:

1. You or any `family member.'"

"Family member" is defined as "a person related to you by blood, marriage, or adoption who is a resident of your household. This includes a ward or foster child."

The Spelmans received $100,000 from the other driver in the accident, then made a claim for $200,000 in underinsured motorists coverage on behalf of Susan's estate. Farmers denied the claim and filed a complaint for declaratory judgment. Farmers sought a declaration that Susan was not a resident of her parents' Wisconsin home for purposes of coverage. Defendant, the administrator of Susan's estate, filed a counterclaim for coverage. Defendant also filed a third-party complaint against Miles and Finch Insurance Agency, through which the Farmers policy was procured. Defendant alleged that, even if Susan was not a resident of her parents' Wisconsin home, a binding contract of insurance existed between the agency and the Spelmans, entitling Susan to coverage.

The parties filed cross-motions for summary judgment on the residency issue. The trial court denied the motions. The trial court also ruled that Farmers was not estopped from raising the residency requirement at trial. The following evidence was then taken at trial.

Susan moved to Chicago on graduating from college in May 1990. Susan's boyfriend Scott Arney and her brother Steve lived in Chicago. Susan first lived with Steve, later moving in with a friend when Steve moved to California. Susan then executed a one-year lease for an apartment in May 1991. Susan shared the apartment with her cousin. The apartment was in Elmhurst and close to Susan's full-time job in Lombard. Susan used the Elmhurst apartment as her permanent address. Susan used her boyfriend's mother's address before moving to Elmhurst. Susan had her own checking account from which she paid her rent. Susan's parents did not transfer money to her. Susan furnished her apartment with items from her family's home. She and her cousin also purchased new furniture.

Susan regularly visited her family in Wisconsin. The evidence was contradictory as to how much time Susan spent in Wisconsin. Susan had a room in her parents' house in which she kept her bed, dresser, some clothing and other personal belongings. Susan received mail from friends in Wisconsin, but all financial documents were sent to her Elmhurst address.

The evidence also showed that the Spelmans began procuring insurance through the Miles and Finch Insurance Agency (Miles and Finch) in 1984. Miles and Finch obtained all homeowners and automobile insurance as needed by the Spelmans. The Spelmans, who had just moved to Wisconsin, obtained the Farmers policy in July 1991 when Miles and Finch told the Spelmans that their present carrier did not write insurance in Wisconsin.

Miles and Finch spoke with Betty Spelman to complete an application for insurance with Farmers. Betty testified that she told Miles and Finch that Susan would be living in Wisconsin. Betty also said that Susan would be in school. Betty did not tell Miles and Finch about Susan's Elmhurst apartment or that she would be working in Illinois. The application was forwarded to Farmers on July 13, 1991. The application listed Susan as a Wisconsin resident and included the statement that she would be in school with an insured vehicle. Farmers did not independently verify the information provided, relying instead on Miles and Finch to ensure accuracy.

Miles and Finch had authority to sign insurance applications on the Spelmans' behalf. Miles and Finch also paid premiums for the Spelmans, billing them later. Miles and Finch were authorized to bind coverage from 20 different insurers. The extent of this binding authority is determined by the underwriting guidelines of the insurer. Miles and Finch cannot bind more coverage than is offered by a policy. The insurer decides whether to issue the policy.

The trial court concluded that Susan was entitled to underinsured motorists coverage based on a finding that Farmers was estopped from asserting the residency requirement. The trial court reasoned that Miles and Finch acted as Farmers' agent when it procured insurance for the Spelmans. The agency relationship imputed Miles and Finch's oral representation that the entire family was covered under the automobile policy to Farmers, estopping Farmers from relying on the residency requirement to deny underinsured motorists coverage. The trial court also made an alternative finding that, estoppel aside, Susan could be considered a "family member" or "resident of [the Spelman] household" based on evidence that she spent "up to" 50% of her time at her parents' Wisconsin home. Farmers argues on appeal that the trial court erred in finding that it was estopped from asserting the residency requirement based on an agency relationship. Farmers also challenges the trial court's alternative finding that Susan was a resident of her parents' household. Last, Farmers contends that it was improperly required to bear the burden of proof at trial.

We will not reverse a trial court's judgment unless it is against the manifest weight of the evidence. 1350 Lake Shore Associates v. Mazur-Berg, 339 Ill.App.3d 618, 628, 274 Ill.Dec. 264, 791 N.E.2d 60 (2003). "Against the manifest weight of the evidence" means that the opposite conclusion is "clearly evident" or the finding is "unreasonable, arbitrary or not based on the evidence." 1350 Lake Shore,339 Ill. App.3d at 628-29,274 Ill.Dec. 264,791 N.E.2d 60, citing Brody v. Finch University of Health Sciences/The Chicago Medical School, 298 Ill.App.3d 146, 153, 232 Ill.Dec. 419, 698 N.E.2d 257 (1998). The trial court's ruling finding coverage here is against the manifest weight of the evidence where the record does not support the trial court's agency/estoppel analysis. The alternative residency finding overlooked critical evidence of Susan's intent in favor of the belief that she spent up to 50% of her time in Wisconsin. But the record was contradictory at best as to how much time Susan spent in Wisconsin. Susan's boyfriend estimated she spent 20% of her time in Wisconsin. Susan's father estimated 25% and her mother guessed 25% to 50%. Susan's cousin, with whom she shared the Elmhurst apartment, testified that Susan visited her parents only four times in the three months she and Susan lived together. We note that the controlling factor in determining residency is intent. Cincinnati Insurance Co. v. Argubright, 151 Ill.App.3d 324, 330, 104 Ill.Dec. 371, 502 N.E.2d 868 (1986). The amount of time Susan spent in Wisconsin is not dispositive, but one of many factors that must be considered in determining Susan's intent.

Miles and Finch did not act as Farmers' agent when it bound coverage for the Spelmans. An insurance broker generally acts as an agent of the insured instead of the insurer. State Security Insurance Co. v. Burgos, 145 Ill.2d 423, 431, 164 Ill.Dec. 631, 583 N.E.2d 547 (1991). But a broker can act as an agent of the insurer or as the agent of both the insured and insurer under certain circumstances. State Security, 145 Ill.2d at 431, 164 Ill. Dec. 631, 583 N.E.2d 547. Conduct, not title, determines the relationship between the independent insurance agent, the insured and the insurer. A & B Freight Line, Inc. v. Ryan, 216 Ill.App.3d 1093, 1097, 159 Ill.Dec. 894, 576 N.E.2d 563 (1991). Our analysis involves four factors: (1) who first set the agent in motion; (2) who controlled the agent's action; (3) who paid the agent; and (4) whose interests the agent was protecting. A & B, 216 Ill. App.3d at 1097, 159 Ill.Dec. 894, 576 N.E.2d 563. The determination of whether a person is acting as an agent or broker governs to whom a duty is owed. Zannini v. Reliance Insurance Co. of Illinois, Inc., 147 Ill.2d 437, 451, 168 Ill.Dec. 820, 590 N.E.2d 457 (1992). A broker owes a duty to the insured; an agent owes a duty to the insurer. Zannini, 147 Ill.2d at 451, 168 Ill.Dec. 820, 590 N.E.2d 457.

Applying these four factors here, we find that the Spelmans set Miles and Finch in motion. Evidence presented at trial demonstrated a long-existing relationship between the Spelmans and Miles and Finch. The Spelmans used Miles and Finch to fulfill all their insurance needs. In furtherance of this relationship, Miles and Finch routinely completed insurance applications and paid...