Rom v. Gephart

• Decision Date: 05 April 1961
• Docket Number: Gen. No. 48165
• Citation: 173 N.E.2d 828,30 Ill.App.2d 199
• Parties: Marguerite ROM, Appellant, v. Alvin K. GEPHART, Appellee. Alvin K. GEPHART, for the use of Marguerite Rom, Appellant, v. PREFERRED RISK MUTUAL INSURANCE COMPANY, Appellee.
• Court: United States Appellate Court of Illinois

Page 828

173 N.E.2d 828

30 Ill.App.2d 199

Marguerite ROM, Appellant, v. Alvin K. GEPHART, Appellee.

Alvin K. GEPHART, for the use of Marguerite Rom, Appellant, v. PREFERRED RISK MUTUAL INSURANCE COMPANY, Appellee.

Gen. No. 48165.

Appellate Court of Illinois, First District, Third Division.

April 5, 1961.

Charles M. May, Waukegan, for appellants.

Hinshaw, Culbertson, Moelmann & Hoban, Chicago, for appellees, Oswell G. Treadway, Chicago, of counsel.

McCORMICK, Justice.

This appeal is taken by Marguerite Rom (hereafter referred to as the plaintiff) from an order of the Circuit Court of Cook County setting aside a default judgment in the amount of $50,000 obtained by her against Alvin K. Gephart, a minor (hereafter referred to as the defendant).

The suit brought by the plaintiff against the defendant arose out of an automobile accident which occurred on July 23, 1958. The defendant drove his automobile into the rear of a car driven by one Berta Peterson, whose car in turn collided with the car in which the plaintiff was a passenger, and as a result thereof the plaintiff received personal injuries. At the time of the accident the Preferred Risk Mutual Insurance Company (hereafter referred to as the insurance company) was the insurer of Floyd Gephart, the father of the defendant, under a policy of automobile liability insurance which included as an insured the defendant. After the accident Floyd Gephart notified the insurance company, which investigated the facts and circumstances surrounding the accident, and in October the insurance company wrote letters to Floyd Gephart and to the defendant disclaiming liability on the ground that the accident was caused by an intentional act of the defendant which was outside of the coverage of the policy.

The plaintiff filed suit against the defendant and Berta Peterson. The complaint was in three counts, the second count setting up a claim against Berta Peterson. The first count was predicated upon the negligence of the defendant. The third count was a count alleging wilful and wanton conduct on the part of the defendant and also alleged that he intentionally drove his automobile against the automobile of Berta Peterson. Summons was served upon the defendant who failed to file any appearance or pleading in the case within thirty days after the date of the service. Thereupon the plaintiff procured an order from the court appointing Floyd Gephart as guardian ad litem of the defendant and allowing him thirty days within which to appear and plead. Notice of this appointment was served by the plaintiff upon Floyd Gephart and the defendant. The additional Thirty days expired and no appearance had been filed either by Floyd Gephart or the defendant. The defendant was defaulted, the wilful and wanton count in the complaint was dismissed, and after an ex parte hearing on December 30, 1959 judgment was entered in favor of the plaintiff and against the defendant in the sum of $50,000. The default order entered by the court recited the minority of the defendant, the appointment of the guardian ad litem and the failure of either the defendant or the guardian ad litem to appear.

After the suit had been filed by the plaintiff agaisnt the defendant the insurance company filed in the Circuit Court of Cook County a complaint for declaratory judgment in which it set up the terms of the policy and the accident, and alleged that a suit had been filed by the plaintiff against the defendant and Peterson and that the insurance company had been called upon to defend the action on the part of the defendant and to assume the obligation to pay any compromise or judgment against the defendant in favor of the plaintiff. The complaint also alleges that the defendant intentionally drove his car from a stopped position so that it struck the car operated by Berta Peterson, which car collided with the car occupied by plaintiff, allegedly causing property damage and personal injuries, and the insurance company prays that since the policy excludes damages caused intentionally by or at the direction of the insured, one of whom was the defendant, the court should enter a judgment declaring the insurance company not to be liable under the terms of the policy for any defense or payment of any claims or judgments arising out of the accident or the action at law.

On February 1, 1960 the insurance company was served with a garnishment summons in the case, and on February 2, 1960 it notified the defendant and the guardian ad litem by letter that it was retaining a firm of attorneys to enter into the proceedings and to attempt to vacate the default judgment and defend the interests of the defendant until the rights under the policy should be determined in the declaratory judgment suit. In that letter the insurance company specifically and distinctly stated that it was reserving all rights under the provisions of the policy as stated in the letter of disclaimer previously sent and stated further that it did not wish the letter to be construed that by affording the defendant this defense the insurance company waived any rights which it had under the policy. Thereupon on February 9, 1960 a motion was filed in the office of the clerk of the Circuit Court of Cook County, which stated, 'Now comes the defendant, Alvin K. Gephart, a minor, by Hinshaw, Culbertson, Moelmann & Hoban, his attorneys * * *,' and in the motion the court was asked to open and vacate the default judgment and to give the defendant leave to appear and plead. The plaintiff had served on the insurance company interrogatories in the garnishment proceedings, to which the insurance company filed an answer. The plaintiff filed a reply.

The plaintiff on February 9, 1960 filed a motion asking the court to deny the petition of the Hinshaw firm to vacate the judgment, based upon the allegation that the said firm was employed by the insurance company and was not employed either by the defendant or the guardian ad litem. A hearing was held before the court on February 9, 1960, and at the beginning of that hearing Mr. Moelmann stated that he had been hired by the insurance company to defend the defendant, and in answer to a contention raised by the attorney for the plaintiff that he (Moelmann) was not representing the minor or the guardian, stated that this was a collateral issue. He further stated: 'The defendant Alvin Gephart contends he is entitled to coverage under a policy of insurance. That policy of insurance entitles the insurance company to retain counsel to represent him. Now, there is a dispute as to coverage under that policy, which is the subject of litigation in a declaratory judgment action pending in this court * * *. But we are coming in here under a reservation of rights notice and pursuant to the terms of that policy which he contends was in effect * * *.' The attorney for the plaintiff stated that Moelmann was not in court on a reservation of rights but that both he and the insurance company were in court on a complete disclaimer of liability. The letters of disclaimer of liability were introduced in evidence. In that hearing the guardian ad litem stated that neither he nor the defendant had retained the Hinshaw firm to represent him.

The hearing was continued and was resumed on April 8, 1960, at which time the guardian ad litem stated that he had on that day authorized Mr. Molemann of the Hinshaw firm to represent the minor in attempting to vacate the judgment. He further stated that the insurance company had agreed to defend the suit on behalf of the minor defendant and that it had agreed to pany any attorney's fees which he had incurred to date. In a portion of the record which was not abstracted, Mr. Molemann, in answer to a question by the court, said that the insurance company agreed to dismiss the declaratory judgment action in case the judgment against the minor was vacated. (The declaratory judgment action was still pending at the time the appeal was argued in this court.) The trial court, in asking further about the agreement on the part of the insurance company to pay the attorney's fees incurred by the guardian ad litem, observed that those fees were incurred because of the failure of the insurance company to defend the suit in reliance on the defense which it claimed under the policy. The court then asked the guardian ad litem if the insurance company now waived that defense, and he answered that it did. It was stated that the amount of the judgment was within the monetary coverage of the policy. Mr. Molemann then stated that the insurance company had conceded everything in order to get the judgment vacated, and the court thereupon set aside the judgment and dismissed the garnishment action against the insurance company. From that order of the trial court the plaintiff took the instant appeal.

In this court the firm of Hinshaw, Culbertson, Molemann and Hoban filed an appearance for the defendant and for the insurance company. In the briefs filed in the instant case the Hinshaw firm contended that if the order of the trial court was sustained the insurance company still had the right to assert that the liability of the...