First Nat. Bank of Pittsfield v. Country Mut. Ins. Co.

• Decision Date: 20 October 1988
• Docket Number: No. 4-88-0033,4-88-0033
• Citation: 125 Ill.Dec. 363,530 N.E.2d 521,175 Ill.App.3d 860
• Parties: , 125 Ill.Dec. 363 FIRST NATIONAL BANK OF PITTSFIELD, Pittsfield, Illinois, a national banking association, Plaintiff-Appellee, v. COUNTRY MUTUAL INSURANCE COMPANY, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 521

530 N.E.2d 521

175 Ill.App.3d 860, 125 Ill.Dec. 363

FIRST NATIONAL BANK OF PITTSFIELD, Pittsfield, Illinois, a national banking association, Plaintiff-Appellee, v. COUNTRY MUTUAL INSURANCE COMPANY, Defendant-Appellant.

No. 4-88-0033.

Appellate Court of Illinois Fourth District.

Oct. 20, 1988.

Rammelkamp, Bradney, Dahman, Kuster, Keaton & Fritsche, Jacksonville (Barbara Fritsche, of counsel), for defendant-appellant.

William E. Lowry, Pittsfield, for plaintiff-appellee.

Justice KNECHT delivered the opinion of the court:

This appeal arises from an attempt by plaintiff First National Bank of Pittsfield to recover from defendant Country Mutual Insurance Company the unpaid mortgage balance on property destroyed by fire. The issue presented is whether defendant's notice of intent not to renew the policy insuring the premises was sufficient. The circuit court of Pike County ruled it was not. For the reasons that follow, we reverse and remand.

The facts are undisputed. Plaintiff's complaint alleges the following: On November 6, 1981, Burdette and Eloyce Carlton (Carltons) executed a mortgage on their 40 acres and home in plaintiff's favor and agreed to keep the premises insured; on January 10, 1986, defendant issued to the Carltons a "Multi-Purpose Farm Owner Policy" to insure the premises; plaintiff was listed as an additional insured on the Declarations of Insurance; the declaration form plus section 143.17 of the Illinois Insurance Code (Code) ( Ill.Rev.Stat.1985, ch. 73, par. 755.17) require 10 days' notice for cancellation of a policy for nonpayment of premium; plaintiff did not receive 10 days' notice of any cancellation; defendant refused to allow plaintiff to file a proof of loss following the destruction of the Carltons' home by fire January 23, 1987; defendant failed to respond to plaintiff's demand for payment. Plaintiff requested judgment in the amount of the unpaid principal balance of the mortgage plus accrued interest.

Attached to the complaint were the insurance policy and the declarations of insurance. The nonrenewal provisions of the policy state in pertinent part:

"If we decide not to renew this policy, we will mail a written notice to you at least 30 days before the expiration date. * * *

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The notice will be sent to your last mailing address known to us. Proof of mailing will be sufficient proof of notice. If you fail to pay the renewal, the policy will lapse on the expiration date."

The "Conditions" portion of the policy does not state membership in the Pike County Farm Bureau (Farm Bureau) is required to purchase this policy. A section in the policy entitled "Mutuality of Policy" indicates the insured, by accepting the policy, becomes a member of Country Mutual Insurance Company with all the rights and privileges of a member as provided in the company's bylaws. No copy of the bylaws appears in the record on appeal. Also attached to the complaint were a copy of the mortgage instrument and the declarations of insurance form listing plaintiff mortgagee as an "additional interest" under the policy.

Defendant's answer, filed November 30, 1987, admitted plaintiff did not receive a notice of the policy cancellation, but stated defendant mailed plaintiff a notice of intent not to renew more than 30 days in advance, in accordance with section 143.17(a) of the Code. Ill.Rev.Stat.1985, ch. 73, par. 755.17(a).

The parties filed cross motions for summary judgment pursuant to section 2-619 of the Code of Civil Procedure (Ill.Rev.Stat.1985, ch. 110, par. 2-619). Defendant's motion, filed November 30, 1987, was accompanied by affidavits of Mary Schlabowske and D.R. Gordon. Schlabowske, defendant's underwriting administration supervisor, stated she supervised processing of files in cases where notice of nonrenewal of Farm Bureau membership has been received. She stated the Carlton policy was a six-month policy effective January 10, 1986, and the policy was renewed July 10, 1986, for another six months. She stated the Carlton policy expired January 10, 1987, at 12:01 a.m. On December 1, 1986, her department mailed a "Notice of Intent not to Renew" to the Carltons and to plaintiff. To her knowledge, the Carltons' Farm Bureau membership was not reinstated.

Schlabowske's December 1, 1986, notice, submitted with the affidavit, shows the heading "Notice of Intent Not to Renew" in capital letters on the upper right-hand side of the page. "Certificate of Mailing" appears immediately below. The notice is addressed to the Carltons and plaintiff. It reads:

"Re: Farm Bureau Membership

Pike County Farm Bureau has notified us that you have not renewed your Farm Bureau membership. That membership is required in order to be insured by Country Mutual Insurance Company.

Therefore, unless you reinstate your Farm Bureau membership, nonrenewal of Farmowner Policy AL0528365 will be necessary, with coverage terminating effective January 10, 1987. If you hold a membership in a county other than Pike, please contact that Farm Bureau office so the records may be corrected.

We are required to provide you with at least 30 days advance notice when we nonrenew a policy. If you do not renew your Farm Bureau membership, you may contact your agent if you need assistance in obtaining other insurance. You may also write to the Illinois Automobile Insurance Plan, Suite 1740, 20 N. Wacker Drive, Chicago, Illinois 60606.

If you have any questions on this matter, please contact the Pike County Farm Bureau.

The Illinois Insurance Code provides that you may request a hearing by doing so in writing not less than 20 days prior to the termination date. Such request should be addressed to the Director of Insurance, State of Illinois, Department of Insurance, Springfield, Illinois 62767."

The affidavit of D.R. Gordon, defendant's senior claims attorney, stated Farm Bureau membership was required for buying the kind of insurance purchased by the Carltons, but was not required for all Country Companies policies. He stated the Farm Bureau was not defendant's agent, and that Farm Bureau dues were paid directly to the Farm Bureau. Attached to the affidavit was a letter from plaintiff's attorney dated February 17, 1987, which stated in part:

"Our file contains a letter dated December 1, 1986 informing the Carltons of Country Companies intent to cancel coverage due to non-payment of the Farm Bureau membership. We never received a notice of cancellation and assume that the Carltons paid their Farm Bureau membership as demanded in your December 1, 1986 letter. We never received from you any notice of cancellation or termination of the policy and assume the same is still in effect, otherwise, we would have purchased other insurance or advanced the premium."

Plaintiff filed its motion for summary judgment December 17, 1987. Attached to the motion was the affidavit of Kent Turnbull, one of plaintiff's loan officers. Turnbull stated he received defendant's December 1, 1986, letter to the Carltons concerning "Farm Bureau Membership." Attached to Turnbull's affidavit were two examples of standard notices of cancellation to mortgagees sent to plaintiff on other occasions by defendant. He stated the December 1, 1986, letter was the first of its type received during Turnbull's employment with plaintiff. Plaintiff also filed a second affidavit by Turnbull January 6, 1988, setting forth the amount of the unpaid principal balance plus interest, and the amount for which the Carltons' dwelling was insured.

In denying defendant's motion for summary judgment and granting that of the plaintiff, the court stated:

"I believe that the bank could reasonably rely upon the Statute to the extent that it could require or expect to receive the actual Notice of Intent to Terminate, and I do not consider your exhibit being the letter of December 1, 1986 from the Personal Lines Underwriting Mary Schlabowske as an actual notice to terminate. It appears to be a solicitation for Farm Bureau membership dues."

The court's December 17, 1987, written order stated in pertinent part:

"Motion granted for plaintiff as court rules that the 'Notice of Intent Not to Renew' is not sufficient to meet the 10 day notice requirement of sect. 143.17 of Insurance Code as Court finds the notice to be a solicitation for Farm Bureau membership."

Judgment was entered in plaintiff's favor for $20,656.32. The court denied defendant's motion to reconsider January 8, 1988. Defendant's notice of appeal was filed January 13, 1988.

On appeal, defendant contends the notice was unambiguous and did not constitute a solicitation for Farm Bureau membership. It also argues the 10-day notice referred to in the court's order is irrelevant, as defendant complied with the 30-day notice requirements for nonrenewal notices under the Code. Plaintiff argues the notice is ambiguous and actually constitutes a cancellation for nonpayment of premium, for which the Code requires 10 days' notice not given here.

Summary judgment should be granted only when the pleadings, depositions, and admissions, together with any affidavits, show there is no genuine issue as to a material fact, and that the movant is entitled to judgment as a matter of law. (Clifford-Jacobs Forging Co. v. Capital Engineering & Manufacturing Co. (1982), 107 Ill.App.3d 29, 33, 62 Ill.Dec. 785, 788, 437 N.E.2d 22, 25.) We first address the granting of plaintiff's motion for summary judgment.

The Code defines the following terms:

"(c) 'Renewal' or 'to renew' means the issuance and delivery by an insurer of a policy superseding at the end of the policy period a policy previously issued and delivered by the same insurer or the issuance and delivery of a certificate or notice extending the term of a policy beyond its policy period or term; however, any successive policies issued by the same insurer to the same insured, for the same or similar coverage, shall be considered a renewal policy.

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(d) ...