Marketview Motors, Inc. v. Colonial Ins. Co. of California

• Decision Date: 31 January 1996
• Docket Number: No. 4-95-0379,4-95-0379
• Citation: 277 Ill.App.3d 627,660 N.E.2d 1337
• Parties: , 214 Ill.Dec. 388 MARKETVIEW MOTORS, INC., an Illinois Corporation, Plaintiff-Appellant, v. COLONIAL INSURANCE COMPANY OF CALIFORNIA, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 1337

660 N.E.2d 1337

277 Ill.App.3d 627, 214 Ill.Dec. 388

MARKETVIEW MOTORS, INC., an Illinois Corporation, Plaintiff-Appellant, v. COLONIAL INSURANCE COMPANY OF CALIFORNIA, Defendant-Appellee.

No. 4-95-0379.

Appellate Court of Illinois Fourth District.

Argued Oct. 18, 1995.

Decided Jan. 31, 1996.

John E. Maloney, Maloney & Davis, Urbana, for Marketview Motors, Inc. John M. Sturmanis, Thomas, Mamer & Haughey, Champaign, for Colonial Insurance Company of California.

Justice STEIGMANN delivered the opinion of the court:

In November 1994, plaintiff, Marketview Motors, Inc. (Marketview), a car dealership that held a lien on a certain vehicle, filed an action for declaratory judgment against defendant, Colonial Insurance Company of California (Colonial), seeking a judicial determination that the vehicle was covered under an insurance policy issued by defendant. In April 1995, the trial court granted summary judgment for Colonial, finding it had given Marketview proper notice of cancellation of the insurance policy on the vehicle, in accordance with section 143.15 of the Illinois Insurance Code (Code) (215 ILCS 5/143.15 (West 1992)). Marketview appeals, arguing that section 143.15 of the Code requires an insurance Company to provide at least 10 days' actual notice before cancellation due to nonpayment of premiums becomes effective. We agree and reverse.

I. BACKGROUND

In February 1994, Lawrence T. Miller purchased a 1987 Chevrolet Monte Carlo on which Marketview retained a lien. Miller procured an automobile insurance policy from Colonial for the car. Subsequently, Miller failed to pay the premium due on the policy and, on March 17, 1994, Colonial mailed Marketview, as the lien holder, a notice of cancellation of the policy as required by section 143.14 of the Code (215 ILCS 5/143.14 (West 1992)).

The notice purported to cancel the policy as of 12:01 a.m. on March 28, 1994. At approximately 5:15 a.m. on March 28 or March 29, 1994 (the record reflects disagreement between the parties as to the date of the accident), the 1987 Monte Carlo was involved in an accident which, Marketview alleges, resulted in a $4,427.08 loss. As the designated loss payee of the policy, Marketview demanded payment from Colonial, pursuant to Colonial's claim procedures. However, Colonial denied coverage, asserting that it had cancelled Miller's policy as of 12:01 a.m. on March 28, 1994, and had provided all necessary parties with proper notice of the cancellation.

After Marketview filed suit against Colonial for coverage under the policy, each party filed a motion for summary judgment. In April 1995, the trial court conducted a hearing on the motions and ordered summary judgment in favor of Colonial. The court concluded that the policy was effectively cancelled at 12:01 a.m., on March 28, 1994.

II. ANALYSIS

Section 143.15 of the Code provides as follows:

"All notices of cancellation of insurance as defined in subsections (a), (b), and (c) of Section 143.13 must be mailed at least 30 days prior to the effective date of cancellation to the named insured and mortgagee or lien holder, if known, at the last mailing address known to the company. All notices of cancellation shall include a specific explanation of the reason or reasons for cancellation. However, where cancellation is for non-payment of premium, at least 10 days['] notice of cancellation shall be given." (Emphasis added.) 215 ILCS 5/143.15 (West 1992).

Marketview argues that section 143.15 of the Code should be interpreted to provide 10 days' actual notice of cancellation because interested parties must be allowed sufficient time to arrange for the protection of their interests in property. Specifically, Marketview asserts that had it been afforded 10 days' actual notice, it would have either encouraged Miller to pay his premium, advanced him the premium, or obtained other insurance coverage on the vehicle pursuant to the loan agreement with Miller.

A basic principle of insurance law requires an insurance company, when sending a notice of cancellation, to strictly comply with policy provisions and any applicable statute. (Bates v. Merrimack Mutual Fire Insurance Co. (1992), 238 Ill.App.3d 1050, 1051, 178 Ill.Dec. 832, 833, 605 N.E.2d 626, 627; Green v. J.C. Penney Auto Insurance Co. (7th Cir.1983), 722 F.2d 330 (interpreting Illinois law); Conley v. Ratayzcak (1980), 92 Ill.App.3d 29, 34, 46 Ill.Dec. 616, 619, 414 N.E.2d 500, 503; 43 Am.Jur.2d Insurance §§ 382, 388 (West 1982).) Accordingly, the issue in this case is whether section 143.15 of the Code requires an insurance company to provide at least 10 days' actual notice before cancellation due to nonpayment of premiums becomes effective. For the reasons that follow, we hold that it does.

In their briefs, both parties discuss Stewart v. Republic Insurance Corp. (1994), 267 Ill.App.3d 361, 205 Ill.Dec. 24, 642 N.E.2d 889, in which this court interpreted the notice provision contained in section 143.14 of the Code (Ill.Rev.Stat.1989, ch. 73, par. 755.14 (now 215 ILCS 5/143.14 (West 1992))). The language in section 143.14 establishes who is entitled to notice, as follows: "[n]o notice of cancellation * * * shall be effective unless mailed by the company to the named insured and the mortgage or lienholder * * * at the last mailing address known by the company." (Ill.Rev.Stat.1989, ch. 73, par. 755.14 (now 215 ILCS 5/143.14(a) (West 1992)).) Because section 143.14 does not set forth the time frames insurers must adhere to, Stewart provides little assistance to this case.

The legislative history of section 143.15 of the Code provides little indication of what the legislature intended with respect to this notice provision. (See Pub.Act 79-686, § 1, eff. January 1, 1976 (1975 Ill.Laws 2152); Pub.Act 80-1128, eff. July 1, 1978 (1977 Ill.Laws 3376).) However, Tunprasert v. Prince (1975), 33 Ill.App.3d 710, 712, 342 N.E.2d 244, 245, addresses the apparent precursor to section 143.15 of the Code and gives some insight into the evolution of the 10-day notice provision. In its earlier version, this provision was extremely specific as to the notice requirement. (Ill.Rev.Stat.1971, ch. 73, par. 755.1b.) The statute read, "where cancellation is for non-payment of premium, at least 10 days' notice of cancellation shall be mailed or delivered to the named insured. Proof of mailing of notice of cancellation to the named insured at the address shown in the policy, shall be sufficient proof of notice." (Emphasis added.) (Ill.Rev.Stat.1971, ch. 73, par. 755.1b.) The legislature repealed this section in 1976 and substituted a new section addressing cancellation of policies due to unpaid premiums. Significantly, this new section was changed to read, "[w]here cancellation is for nonpayment of premium at least 10 days['] notice of cancellation shall be given." (Ill.Rev.Stat.1975, ch. 73, par. 755.14.) Later, in the 1979 version of the statute, the legislature added the word "[h]owever" at the beginning of this provision, indicating that cancellations due to the nonpayment of premiums are to be handled differently than the cancellations discussed in the first several lines of the section. Ill.Rev.Stat.1979, ch. 73, par. 755.15.

Additionally, the fact that the legislature specifically uses the word "mailing" earlier in section 143.15 of the Code, referring to cancellation due to reasons other than nonpayment of premiums, strongly indicates that a cancellation due to the non-payment of premiums is to be handled differently. The plain language of the clauses within the section differentiates between cancellations requiring, on the one hand, 30-days' advance mailing and, on the other hand, 10-days' notice; in the latter provision, the verb "mail" is conspicuously absent.

We conclude that the legislature indeed intended to shift from a mailing requirement to a requirement of actual notice with respect to cancellations for nonpayment of premiums.

Little Illinois case law exists on this particular portion of section 143.15 of the Code. In Conley, the appellate court for the second district strongly implied that actual notice may be required:

"[I]nsurance policies are 'cancelled' * * * when the insurer sends a written notice in which it positively and affirmatively indicates to the insurer [sic ] its intention that the policy shall cease to be binding as such upon the expiration of a stipulated number of days from the time when this intention is made known to the insured." (Emphasis added.) Conley, 92 Ill.App.3d at 33, 46 Ill.Dec. at 619, 414 N.E.2d at 503.

Major treatises on insurance law, as well as legal encyclopedias, state that (as a general rule) where an insurance policy provides that the policy may be cancelled by giving a specified number of days' notice, without stipulating a form or way such notice must be given, actual receipt of notice by the insured is a condition precedent to cancellation. (6A J. Appleman & J. Appleman, Insurance Law and Practice § 4186, at 551 (1972), § 4186, at 204-05 (1994 Supp.); 45 C.J.S. Insurance § 498, at 254 (1993); Annot., 40 A.L.R.4th 867, §§ 2[a], 5 (1985).) Accordingly, courts throughout the country have held that...