Kelly v. Economy Fire & Cas. Co.

• Decision Date: 08 March 1990
• Docket Number: No. 3-89-0219,3-89-0219
• Citation: 553 N.E.2d 412,196 Ill.App.3d 337
• Parties: , 142 Ill.Dec. 898 Anthony KELLY and Angela Kelly, Plaintiffs-Appellants, v. ECONOMY FIRE & CASUALTY COMPANY, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 412

553 N.E.2d 412

196 Ill.App.3d 337, 142 Ill.Dec. 898

Anthony KELLY and Angela Kelly, Plaintiffs-Appellants, v. ECONOMY FIRE & CASUALTY COMPANY, Defendant-Appellee.

No. 3-89-0219.

Appellate Court of Illinois Third District.

March 8, 1990.

Peter Denger (argued), Rock Island, for Anthony and Angela kelly.

Linda E. Frischmeyer (argued), Katz, McAndrews, Balch, Lefstein & Fieweger, PC, Rock Island, for Economy Fire & Cas. Co.

Richard J. Trinrud, Bozeman, Neighbour, Patton & Noe, Moline.

Justice SCOTT delivered the opinion of the court:

Plaintiffs appeal from an order of the trial court dated March 9, 1989 denying plaintiffs' motion for reconsideration on the summary judgment granted defendant. Both parties acknowledge there are no material issues of fact and the question to be resolved is one at law.

Plaintiffs were mortgagees under a policy of fire insurance issued by defendant, effective October 1, 1984, covering property located in Rock Island, Illinois. On July 29, 1986, a notice of expiration was sent to both the insureds and the plaintiffs as mortgagees which, in part, stated:

"We would like to continue your insurance coverage. However, unless premium is received by the company by 08/13/86, your policy will terminate on the inception date of 07/25/86 in accordance with the policy provisions for non-payment.

If premium is received by the company after 08/13/86, your policy may be reinstated, at the option of the company, as of the date your payment is received.

Attention mortgagee and/or lienholder: your interest as lienholder will terminate on 08/13/86 in accordance with the policy provisions."

On August 9, 1986 one of the primary insured, Elizabeth Moore sent a check in the correct amount for the July 25, 1986 quarterly premium to Lohman Brothers Agency ("Lohman"), the agency who originally wrote the policy. This check was received by Lohman on August 14, 1986 and then forwarded to defendant who received it on August 18, 1986. On August 23, 1986 a fire occurred causing extensive damage to plaintiffs' property and notice of the loss was reported to defendant on August 26, 1986. On August 27, 1986, defendant returned the insured's check to Lohman with the following letter:

"We are returning the insured's check as it has been received too late to apply. The premium on this policy was due July 25, 1986.

We did send a late notice extending this due date to August 13, 1986. However, as you can see the insured's check was received August 18, 1986. Since it was too late to apply we will be unable to accept this and the policy will lapse effective July 25, 1986 accordance with our previous notice."

After the case was filed herein, discovery depositions revealed that late premium payments on this policy had been made in the past and accepted by defendant. In at least one instance defendant lapsed the policy but later reinstated on the date the late payment was received. Glenda Yeager, defendant's employee, stated the reason why the policy was reinstated previously is that on the first two instances the customer bill department had authority to automatically reinstate the policy. When a third lapse situation occurred, however, the policy was required to be sent to the underwriting department for a determination of whether the policy should be reinstated. This "in-house" policy of defendant was unknown to plaintiffs but was generally referred to within the insurance policy.

The parties agree there are no material questions of fact and that the matters to be decided are at law. Summary judgment "shall be rendered without delay if the pleadings, depositions and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." (Ill.Rev.Stat.1987, ch. 110, par. 2-1005(c)).

Plaintiffs propose three theories why coverage should exist. First, plaintiffs believe defendant has waived any right to rely on the notice provision for terminating the policy because it had reinstated the policy in the past after the policy had lapsed. Moreover, since plaintiffs were not privy to defendant's "in-house" rules, it should not be binding on plaintiffs. As authority on this issue, plaintiffs cite VanHulle v. State Farm Mutual Automobile Insurance Company (1970), 44 Ill.2d 227, 254 N.E.2d 457 and Tesk v. Sagerstrom (1942), 317 Ill.App. 231, 46 N.E.2d 131. In VanHulle and Tesk the respective courts each concluded that the insurance company or labor union involved, by its conduct, had waived its right to rely on policy provisions regarding termination of insurance coverage or union death benefits. In VanHulle, the court basically relied on the insurance provider's intervening notice of loss and subsequent acceptance of a tendered premium payment in holding that the insureds were entitled to retroactive coverage. In Tesk, the court determined that defendant labor union's prior course of dealing in frequently accepting union dues from decedent on an irregular basis constituted waiver of the labor union's right to rely on the union contract regarding union dues when it was "payday" time for the union. We do not disagree with the decisions of the respective courts in VanHulle or Tesk, but do not consider those cases controlling.

Waiver is the voluntary, intentional relinquishment of a known right. Although waiver may be implied, it requires that an intention to waive be clearly inferred from the circumstances (Tibbs v. Great Central Insurance Company (1978), 57 Ill.App.3d 866, 15 Ill.Dec. 146, 373 N.E.2d 492.) Obviously, whether waiver exists must be based on the particular circumstances of each case. We do not, however, believe waiver exists in this case.

Plaintiffs received notice that the policy would lapse for non-payment effective August 13, 1986 unless payment was received by that date. Any premium payment received after August 13, 1986, would, at the company's discretion, cause the policy to be reinstated as of the date the payment was...