Ratliff v. Safeway Ins. Co.

• Decision Date: 28 December 1993
• Docket Number: No. 1-92-0997,1-92-0997
• Citation: 195 Ill.Dec. 473,628 N.E.2d 937,257 Ill.App.3d 281
• Parties: , 195 Ill.Dec. 473 Gail RATLIFF and Michael Ratliff, Plaintiffs-Appellants, v. SAFEWAY INSURANCE COMPANY, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 937

628 N.E.2d 937

257 Ill.App.3d 281, 195 Ill.Dec. 473

Gail RATLIFF and Michael Ratliff, Plaintiffs-Appellants, v. SAFEWAY INSURANCE COMPANY, Defendant-Appellee.

No. 1-92-0997.

Appellate Court of Illinois First District, Second Division.

Dec. 28, 1993.

William J. Harte, Ltd., Herbert F. Stride, Ltd., Chicago (William J. Harte, Herbert F. Stride and Katrina Veerhusen, of counsel), for plaintiffs-appellants.

Parrillo, Weiss & O'Halloran, Chicago (Keely Truax, of counsel), for defendant-appellee.

Justice DiVITO delivered the opinion of the court:

In this action for a declaratory judgment, plaintiffs Gail Ratliff and her son, Michael Ratliff (plaintiffs), sought a declaration that under the contract of insurance between Gail Ratliff and defendant Safeway Insurance Company (Safeway), Michael was also insured, and the protection of the Safeway policy extended to any claims arising out of Michael's operation of the 1978 Pontiac described in the policy. Plaintiffs also sought a declaration that Safeway had a duty to defend Michael in any claim made as a consequence of an accident that occurred on December 27, 1986, when Michael, while driving the 1978 Pontiac, collided with another vehicle. The circuit court, at the close of plaintiffs' case at trial, entered judgment for Safeway, finding that the policy of insurance was void. Plaintiffs appeal that judgment.

In 1984, Gail Ratliff entered into a contract of automobile insurance with Safeway. She applied through Lincoln Insurance Agency (Lincoln), an independent agency selling policies for several insurance companies. She renewed the policy in 1985 and again in 1986.

In response to a renewal notice received from Lincoln in August of 1986, Gail called the agency and spoke with an unidentified person who said he was from the renewal division. After telling him she wanted to renew the policy, she answered several questions. She said that none of the information from the previous year had changed; that she was the main driver of the automobile; that her son Michael was an "occasional" driver of the automobile; and that there were no "regular" drivers of the automobile under the age of 25. Gail never saw, read, or signed the application for renewal, and did not know whose signature appears on it.

The application for Gail's 1986 automobile insurance, which was completed by Lincoln, states in part that "APPLICANT WARRANTS THAT THERE ARE NO OTHER DRIVERS IN THE HOUSEHOLD, OTHER THAN THOSE LISTED BELOW." Below this statement are blank lines for the applicant to list the "Principal Driver and All Others." The application does not list Michael as a driver of the automobile. The signature line intended for the applicant is blank, and the line labelled "Applicant's Agent" contains an illegible signature. The application states in fine print that it forms a part of the policy of insurance, and that it is null and void if any of the attestations or statements it contains shall prove to be false or fraudulent in nature. The application also contains the statement that "THE INSURANCE POLICY ISSUED PURSUANT TO THIS APPLICATION IS VALID ONLY IF SIGNED BY THE APPLICANT OR THE AGENT OF THE APPLICANT ACTING ON BEHALF OF THE APPLICANT."

On December 27, 1986, while Michael Ratliff was driving the insured automobile with Gail's permission, he was involved in an accident with another vehicle. The driver of the other vehicle, Roger LeFebvre, later filed a complaint against plaintiffs, seeking damages as a result of the accident. Safeway refused to provide coverage or to defend plaintiffs in the lawsuit. Consequently, plaintiffs obtained independent counsel to defend them.

At the time of the accident, Michael was 20 years old, and had always lived with Gail. He drove the insured automobile approximately twice a week, and he always did so with Gail's permission.

Plaintiffs filed their complaint for declaratory judgment against Safeway on April 14, 1988. Safeway's answer generally denied their allegations, and set up as an affirmative defense that Gail fraudulently induced the policy of insurance through material misrepresentation on the application by failing to request or obtain insurance coverage for Michael.

A bench trial began in the circuit court on February 24, 1992. At the close of plaintiffs' case, Safeway moved for judgment. The circuit court granted the motion on February 26, 1992, finding that: (1) Michael Ratliff was not contemplated as an insured in the policy; (2) disclosure of Michael as a driver in the application would have presented an increased risk to Safeway; (3) the complaint in the case arising out of Michael's accident could not state a cause of action against Gail solely on the basis of ownership of the automobile; and (4) the insurance policy was void. Plaintiffs timely filed their Notice of Appeal.

The only issue on appeal ¹ is whether the circuit court's finding that the contract of automobile insurance between Gail and Safeway did not provide coverage for Michael was against the manifest weight of the evidence. This might be so if any of the following circumstances are present: (1) if Lincoln was acting as Safeway's agent when it filled out the application for renewal of insurance; (2) if the non-disclosure on the application form of Michael as another driver of the insured automobile was not material and did not affect Safeway's risk; or (3) if the insurance contract was ambiguous as to Michael's coverage.

Plaintiffs argue the insurance policy should not have been held void because Lincoln was serving as Safeway's agent when it filled out the application for renewal. Pointing out that the undisputed evidence was that Gail told Lincoln that Michael was an occasional driver of the insured automobile, plaintiffs contend that because Lincoln's knowledge is imputed to Safeway, the latter is estopped from denying coverage because the pertinent information was not included on the application for renewal.

Safeway responds that Lincoln was not their agent but rather plaintiffs' agent. Because plaintiffs alleged that Lincoln was Safeway's agent, plaintiffs had the burden of proof on the issue and they failed to meet that burden. Safeway further contends that the general rule in Illinois is that an insurance broker such as Lincoln is the agent of the insured, and that plaintiffs presented no evidence to bring this case within an exception.

We note initially that there is evidence in the record that Lincoln served as Gail Ratliff's agent in filling out the renewal application and forwarding it to Safeway. Condition 17 of the policy provides as follows:

"17. Declarations. By acceptance of this policy, the insured * * * agrees that the statements contained in the application, a copy of which is attached to a forms a part of this policy, have been made by him or on his behalf and that said statements * * * are offered as an inducement to the company to agree to issue or continue this policy * * *, and that this policy is issued and continued in reliance upon the truth of such statements and representations * * *." (Emphasis added.)

The plain language of the application states that it "is valid only if signed by the applicant or the agent of the applicant acting on behalf of the applicant." Gail Ratliff never signed the application, and claims she never saw it; the illegible signature that does appear is affixed directly above the words "Applicant's Agent." If Lincoln was not acting as Gail Ratliff's agent, then neither Gail nor her agent signed the application. In order for the contract of insurance not to be void, Safeway must have waived the requirement that either Gail or her agent have signed the application for renewal. This is a reasonable argument, although not one made by plaintiffs.

However, the request for renewal with Lincoln that Gail Ratliff signed on August 16, 1986, contains a power of attorney enabling Lincoln to execute a premium financing agreement with Lincoln Acceptance Company. Gail paid $96 at the time of the application toward the insurance, and would have paid the additional $499 to insure her two automobiles to Lincoln on a monthly basis. This information is contained in Defendant's Exhibit 1, which was properly before the court as a stipulated exhibit. Even if Safeway can be said to have accepted the application for renewal without Gail's (or her agent's) signature, this document presents adequate evidence that Lincoln was Gail's agent for purposes of applying for insurance. Gail Ratliff is thus bound by any mistakes made by her agent in the application process, including the failure to list Michael as a regular driver of the insured automobile under the age of 25 living in the same household.

It is, however, possible for an independent insurance broker to act as the agent both of the insured and the insurance company. (City of Chicago v. Barnett (1949), 404 Ill. 136, 88 N.E.2d 477; Empire Fire & Marine Insurance Co. v. Faith Truck Lines (1988), 178 Ill.App.3d 356, 359, 127 Ill.Dec. 569, 533 N.E.2d 441.) The question here is limited to whether there is sufficient evidence in the record to support a finding that Lincoln acted as Safeway's agent.

Insurance law in Illinois clearly distinguishes between an agent and a broker. Krause v. Pekin Life Insurance Co. (1990), 194 Ill.App.3d 798, 141 Ill.Dec. 402, 551 N.E.2d 395, defines a "broker of insurance" and an "agent":

"A broker is an individual who procures insurance and acts as a middleman between the insured and the insurer, who solicits insurance business from the public under no employment from any special company and who, having secured an order, places the insurance with the company selected by the insured, or in the absence of any selection by the insured, with a company he selects himself. [Citation.] An agent is an individual who has a fixed and permanent relation to the companies he represents and who has certain duties and allegiances to such companies." K...