Ragan v. Columbia Mut. Ins. Co.

• Decision Date: 16 September 1997
• Docket Number: No. 5-96-0512,5-96-0512
• Parties: , 226 Ill.Dec. 112 Jerald L. RAGAN, Plaintiff-Appellee, v. COLUMBIA MUTUAL INSURANCE COMPANY, Defendant-Appellant (Looking Glass Mutual Insurance Company, Bernice Pollman, Orville Bierbaum, and Roosevelt Bank, Defendants).
• Court: United States Appellate Court of Illinois

Page 1108

684 N.E.2d 1108

291 Ill.App.3d 1088, 226 Ill.Dec. 112

Jerald L. RAGAN, Plaintiff-Appellee, v. COLUMBIA MUTUAL INSURANCE COMPANY, Defendant-Appellant

(Looking Glass Mutual Insurance Company, Bernice

Pollman, Orville Bierbaum, and Roosevelt

Bank, Defendants).

No. 5-96-0512.

Appellate Court of Illinois,

Fifth District.

Sept. 16, 1997.

Michael Reda, John W. Hoffman, Edwardsville, for Defendant-Appellant.

Rex Carr, Michael B. Marker, Carr, Korein, Tillery, Kunin, Montroy & Glass, East St. Louis, for Plaintiff-Appellee.

Justice CHAPMAN delivered the opinion of the court:

Plaintiff Jerald Ragan owned a seven-unit apartment building in Granite City, Illinois. In the fall of 1992, Ragan contacted defendant Orville Bierbaum, an agent of defendant, Looking Glass Insurance Company, to change the insurance coverage on the property. Bierbaum suggested that Ragan apply to defendant Columbia Mutual Insurance Company ("Columbia Mutual"), and Bierbaum filled out the policy application for Ragan. Columbia Mutual is the only defendant involved in this appeal.

On August 31, 1993, the apartment building was destroyed by fire. Ragan sought insurance benefits under the policy issued by Columbia Mutual. Columbia Mutual claimed it had cancelled the insurance policy on January 4, 1993, effective retroactively to December 26, 1992, for Ragan's failure to pay six premium payments. Ragan sued Columbia Mutual and others and alleged that Columbia Mutual failed to notify him that the policy was cancelled for nonpayment of premiums. Columbia Mutual denied all of Ragan's allegations and asserted as affirmative defenses that the insurance policy was cancelled for the nonpayment of premiums and that notice of the policy's cancellation was properly sent.

On March 29, 1996, the court granted Ragan's motion for summary judgment but reserved the determination of the amount of damages. On June 24, the court denied Columbia Mutual's motion to reconsider and entered judgment on counts I and IV, including ordering Columbia Mutual to pay $117,888.75, the amount of the loss to the property, plus prejudgment interest. The court also awarded $64,411.79 in taxable costs, including reasonable attorney fees (1/3 of $116,471.25), the statutory maximum amount for vexatious and unreasonable conduct, the filing fee, and the fee for service of the summons.

Columbia Mutual argues that the court erred (1) by granting summary judgment on count I (the fire insurance claim), (2) by granting summary judgment on count IV (the claim based on vexatious and unreasonable conduct), and (3) by denying Columbia Mutual's motion to reconsider and its motion for leave to amend its prior response to Ragan's request to admit fact.

Columbia Mutual's first argument is that the court erred by granting summary judgment to Ragan on count I of Ragan's complaint. Count I alleged that Ragan's property was damaged by a fire and that the loss of $94,500 was covered by a Columbia Mutual insurance policy. Ragan alleged that Columbia Mutual failed to notify him of the amount or due dates of the six premium payments due. Ragan further argued that his reliance on the fact that Columbia Mutual was to send all correspondence regarding the property to his post office box rather than the address of the apartment estopped Columbia Mutual from denying the applicability of the policy. Columbia Mutual argued that it satisfied the statutory requirements of section 143.14(a) of the Illinois Insurance Code (215 ILCS 5/143.14 (West 1994)), when it mailed the notification of cancellation on December 11 1992, and informed Ragan the policy would be cancelled on December 26, 1992. Therefore, according to Columbia Mutual, the policy provided no coverage for the loss sustained in the August 31, 1993, fire. Ragan argued that although Columbia Mutual produced the envelope containing the notice of cancellation and it included a stamp indicating that it had been processed and mailed to Ragan on December 11, 1992, there was no proof of mailing on an official United States Post Office form or a form recognized by the United States Post Office or other commercial mail delivery services, as required under section 143.14(a) of the Illinois Insurance Code.

Section 143.14(a) of the Illinois Insurance Code states:

"(a) No notice of cancellation of any policy of insurance, to which Section 143.11 applies, shall be effective unless mailed by the company to the named insured and the mortgage or lien holder, at the last mailing address known by the company. The company shall maintain proof of mailing of such notice on a recognized U.S. Post Office form or a form acceptable to the U.S. Post Office or other commercial mail delivery service. A copy of all such notices shall be sent to the insured's broker if known, or the agent of record, and to the mortgagee or lienholder, if known, at the last mailing address known to the company." 215 ILCS 5/143.14(a) (West 1994).

The affidavits, depositions, and evidence submitted by Ragan reveal the following facts. The apartment building at issue was located at 2509 Grand Avenue in Granite City. Ragan told his insurance agent Orville Bierbaum that he was remodeling one of the units for himself, but that he had not moved into the building. Ragan told Bierbaum to send any correspondence about the policy to Post Office Box 8091, Granite City, where Ragan received all of his business mail. Bierbaum filled out the insurance application on Ragan's behalf and listed 2509 Grand Avenue as Ragan's mailing address but directed all correspondence to Ragan's post office box.

Bierbaum sent a copy of the issued policy and declaration sheet to Ragan's post office box. That same day Ragan contacted his mortgage company, Roosevelt Bank, to inform them that he had new coverage of the apartment building and that he had six premium installments due on the policy. The bank's agent, Mr. Pehse, told Ragan to bring the policy to the bank so they could check on when the premiums were due. Ragan spoke with Pehse about a week later, and Pehse verified that he had received a copy of the policy and that he was taking care of the insurance. Unknown to Ragan, Roosevelt Bank did not, in fact, make any premium payments to Columbia Mutual. The nonpayment of the six premium bills prompted Columbia Mutual to send a letter of cancellation to Ragan on January 4, 1993, effective retroactively to December 26, 1992.

On August 14, 1995, Ragan sent Columbia Mutual a request to admit, which stated:

"1. The Columbia Mutual Insurance Co. did not maintain proof of mailing of notice of cancellation of Policy No. CPP0011270 to Jerald L. Ragan on a recognized U.S. Post Office form or a form acceptable to the U.S. Post Office or other commercial mail delivery service."

On the same day, Ragan sent Columbia Mutual a notice to produce, which stated:

"You are hereby requested to produce all proofs of mailing of the notice of cancellation of Insurance Policy No. CPP0011270 to the plaintiff Jerald L. Ragan as may be maintained by you. If you maintained no proof of mailing of such notice on a recognized U.S. Post Office form or a form acceptable to the U.S. Post Office or other commercial mail delivery service, please so state in your response to this request to produce."

On August 25, 1995, Columbia Mutual filed its response to the request to admit, stating:

"Columbia Mutual Insurance Company maintains the cancellation letter in its file and, therefore, denies the request to admit."

On September 5, 1995, Ragan filed a motion to strike Columbia Mutual's response to the request to admit. On January 12, 1996, the court struck Columbia Mutual's response as nonresponsive and gave Columbia Mutual an additional week to respond to the request to admit and the notice to produce. Columbia Mutual did not respond within the additional week or at any time before February 6, 1996, when Ragan filed a motion for summary judgment on the grounds that Columbia Mutual had failed to satisfy the statutory criteria for effectively cancelling Ragan's policy. Even then, Columbia Mutual did not respond. On March 29, 1996, when Columbia Mutual filed its response to Ragan's motion for summary judgment, it again filed no response to Ragan's request to admit or Ragan's notice to produce. On March 29, 1996, the court granted Ragan's motion for summary judgment.

Finally, on May 30, 1996, when Columbia filed a motion to reconsider the court's order allowing Ragan's motion for summary judgment, it produced a document titled "Certificate of Mailing," which it argued was the United States Post Office form referred to in the statute. Columbia Mutual stated that it had not previously produced the certificate of mailing because there was a misunderstanding with its attorneys. On June 24, 1996, the court denied Columbia Mutual's motion to reconsider and ordered Columbia Mutual to pay Ragan $117,888.75, plus $64,411.79 in taxable costs.

Columbia Mutual argues that it produced more than enough evidence to demonstrate policy cancellation, as a matter of law, under section 143.14(a) of the Illinois Insurance Code. Columbia also argues that even if the trial court had considered its evidence insufficient to entitle it to a judgment as a matter of law, the court erred in granting summary judgment on count I because there was an issue of fact as to whether Ragan received a copy of the insurance policy's cancellation. In support of the second argument Columbia Mutual points to the document it produced as a "Certificate of Mailing" and the affidavits of Wayne Wilde, a Columbia Mutual employee, which state that Columbia Mutual maintained the certificate of mailing in its files. Columbia Mutual also points to Bierbaum's testimony that he forwarded several notices of cancellation to Ragan at his post office box, none of which were returned as "undeliverable", thereby giving Ragan notice that his policy would be cancelled unless payments were received.

The...