Hawkeye-Security Ins. Co. v. Presbitero & Sons

• Decision Date: 14 January 1954
• Docket Number: No. 10890.,10890.
• Citation: 209 F.2d 281
• Parties: HAWKEYE-SECURITY INS. CO. v. PRESBITERO & SONS, Inc., et al.
• Court: U.S. Court of Appeals — Seventh Circuit

209 F.2d 281 (1954)

HAWKEYE-SECURITY INS. CO. v. PRESBITERO & SONS, Inc., et al.

No. 10890.

United States Court of Appeals Seventh Circuit.

January 14, 1954.

Paul A. LaRocque, Chicago, Ill., for appellant.

Frank J. Mackey, Jr., Joseph H. Taylor, Chicago, Ill., for appellees.

Before MAJOR, Chief Judge, and FINNEGAN and LINDLEY, Circuit Judges.

LINDLEY, Circuit Judge.

Plaintiff brought suit in the District Court seeking to have declared void a policy of insurance issued by it to defendant Presbitero & Sons, Inc., and to be relieved from any liability under the same. The case was tried before the court without a jury. Plaintiff appeals from the judgment entered against it, contending that, in view of the fact that the corporation did not own a certain Chrysler automobile included in the policy under the terms of the latter, the misrepresentation as to ownership was such that the court should have cancelled the contract instead of holding it in full force and effect.

Plaintiff issued the policy to the corporation on November 28, 1950, insuring some nine automobiles, in addition to other insurance, against property damage incurred by third persons and against liability for bodily injury to third persons, arising out of the use of any automobile covered by the policy. The contract provided that the vehicles might be used for "Business and Pleasure and Commercial." It contained a declaration that the insured was the sole owner. Among the nine cars was a 1950 Chrysler purchased by Michael O. Presbitero, the son of the President of the Corporation and an employee of that company, who used it, at least part of the time, in the business of the company, transporting workmen and materials to and from various construction jobs upon which the corporation was engaged. On or about March 19, 1951, while he was driving the Chrysler, it collided with another car driven by a third person who, as a consequence of the collision, claimed damages for bodily injury and brought suit therefor against the company and Michael O. Presbitero. Plaintiff declined to assume liability or to defend the suit brought, and instituted this action to have the policy declared void.

The court found amongst other facts the following. The Chrysler was included in the list of vehicles insured under the policy, at the request of the corporation, for the protection of the latter's interest. The company's president, who procured the insurance, had no knowledge of insurance rate classifications or of the basis for rate determinations used in the writing of such policies. No misrepresentation regarding ownership of the Chrysler was made with intent to deceive the insurer. The insured had an insurable interest in the Chrysler, in view of the fact that the coverage was extended to all vehicles listed therein, whether used for business or for pleasure purposes, so long as the actual use was with the permission of the named insured. Michael had operated the Chrysler both in the business of the company and for his own pleasure, with the permission of the insured. Any representation with respect to the ownership of the Chrysler was not material to the acceptance of the risk assumed with respect to bodily injury or property damage liability to third persons.

The court found also that the accident occurred on March 19, 1951; that plaintiff was immediately notified and, on the following day, took statements from both the Presbiteros, father and son, concerning the accident and the ownership of the automobile, receiving full disclosure of the interest of the son in the automobile; that, on March 22, 1951, the plaintiff had full knowledge of the ownership of the Chrysler and, with such knowledge, placed on the policy an endorsement effective April 2, 1951, increasing the coverage from $25,000 to $50,000 and from $50,000 to $100,000; that, early in April, 1951, Michael sold the Chrysler and purchased an Oldsmobile, whereupon the company issued to Michael a new policy covering the Oldsmobile effective as of April 25, 1951; that on April 26, 1951 plaintiff eliminated the Chrysler from coverage but retained as earned the portion of premium covering the period up to April 26, 1951. Thus there was uninterrupted coverage first of the Chrysler and then of the Oldsmobile.

The court concluded that the policy was not issued in contravention of any state statute; that plaintiff knew at the time the policy was issued that three of the vehicles were private cars and that the use to be made of them was not limited to commercial but covered also business and pleasure purposes; that the policy was not a fleet policy as defined by the statutes of Illinois; that plaintiff insurer, being in the business of writing insurance, was charged with knowledge of rate making procedures and the statutes applicable thereto, and was, in this respect, in a superior position to that of the insured; that the insurer had knowledge superior to that of the insured; that if plaintiff issued any policy in violation of the statute in this respect, such violation would not operate to invalidate the policy as to liability to third persons or defeat the rights of third party beneficiaries; that plaintiff had, by its action, taken with full knowledge of the fact with respect to ownership, waived any right to cancel because of misrepresentation, by interpreting the policy as extending coverage to the Chrysler.

An examination of the record discloses that the facts as found by the court are amply sustained by the evidence and that the real issue presented to us is whether the alleged misrepresentation as to ownership by the insured, under the circumstances of the case, was such as to require a declaration that the policy was void. This question of course must be decided in accord with the Illinois law. In a comparatively recent case, Mid-States Ins. Co v. Brandon, 340 Ill.App. 470, 92 N.E.2d 540, the facts were quite similar to those before us. There Chris G. Brandon procured a policy for automobile collision insurance representing himself to be the actual owner of a certain automobile. In fact, however, his minor son Chris L. Brandon was the owner. The insurer insisted that it had been released by the father's misrepresentation with respect to the title. The court commented, 340 Ill. App. at page 473, 92 N.E.2d at page 541: "Illinois Revised Statutes 1949, State Bar Ed., ch. 73, sec. 766 (11 Jones Ill. Stats.Ann. 66.829) provides that `no such misrepresentation or false warranty shall defeat or avoid the policy unless it shall have been made with actual intent to deceive or materially affects either the acceptance of the risk or the hazard assumed by the company.'" The court held that the representations made were not material to the risk assumed by the insurer and defined the difference between collision insurance intended to provide indemnity for automobile drivers against...