United Equitable Ins. Co. v. Thomas

• Decision Date: 22 November 2021
• Docket Number: 1-20-1122
• Citation: 2021 IL App (1st) 201122,193 N.E.3d 301,456 Ill.Dec. 333
• Parties: UNITED EQUITABLE INSURANCE COMPANY, Plaintiff-Appellant, v. Anthony THOMAS, Carl Henry, Unknown Insurers, and Shyeata Rascoe, Defendants (Anthony Thomas and Shyeata Rascoe, Defendants-Appellees).
• Court: United States Appellate Court of Illinois

2021 IL App (1st) 201122

193 N.E.3d 301

456 Ill.Dec. 333

UNITED EQUITABLE INSURANCE COMPANY, Plaintiff-Appellant,

v.Anthony THOMAS, Carl Henry, Unknown Insurers, and Shyeata Rascoe, Defendants

(Anthony Thomas and Shyeata Rascoe, Defendants-Appellees).

No. 1-20-1122

Appellate Court of Illinois, First District, FIRST DIVISION.

Filed November 22, 2021

Samuel A. Shelist, of Shelist & Peña LLC, of Chicago, for appellant.

Richard Lee Stavins and Diana H. Psarras, of Robbins, Salomon & Patt, Ltd., of Chicago, for appellees.

JUSTICE PUCINSKI delivered the judgment of the court, with opinion.

¶ 1 Plaintiff United Equitable Insurance Company (UEIC) appeals from the circuit court's order denying UEIC's motion for summary judgment, granting summary judgment to defendants Anthony Thomas and Shyeata Rascoe, and dismissing UEIC's declaratory judgment action. For the following reasons, we conclude that (1) UEIC's attempt to rescind coverage due to Thomas's misrepresentations was untimely pursuant to section 154 of the Illinois Insurance Code (Code) ( 215 ILCS 5/154 (West 2016) ) and similar policy language and (2) policy exclusions barring certain coverages for an insured vehicle "while used as a public livery or conveyance" were inapplicable to the underlying claim for uninsured motorist coverage. Thus, we affirm the judgment of the trial court.

¶ 2 BACKGROUND

¶ 3 This appeal arises from an automobile insurance coverage dispute arising from a collision that occurred in June 2017. The following facts are derived from the record on appeal and are not in dispute, unless otherwise noted.

¶ 4 In March 2016, Thomas sought automobile insurance through an insurance producer, Insure on the Spot Services, Inc. ("Insure"). In an application dated March 21, 2016, Insure, as Thomas's agent, submitted an application to UEIC for coverage for a Toyota Camry owned by Thomas. The application stated: "The agent for the applicant warrants that the information on this application was given to him/her by the applicant." Among other questions, the application asked: "Are any vehicles listed used for messenger, delivery, driver training or commercial purposes?" On behalf of Thomas, Insure indicated that the answer was no. Insure advised Thomas in a letter dated March 23, 2016 that

"[a]ny vehicle listed on the application and any vehicle endorsed to the policy/renewal at a later date is not to be used for delivery, business or commercial purposes; including all ride sharing services such as Uber or Lyft. Your insurance carrier will not cover any losses if the vehicle(s) is being used for such purposes."

¶ 5 UEIC issued an automobile insurance policy to Thomas, with a six-month term effective from March 22 to September 22, 2016. The policy set forth different types of coverage in numbered "parts." In part I, UEIC agreed to pay damages incurred by Thomas because of "bodily injury" or "property damage" arising from use of the insured vehicle. Part II set forth the terms of the policy's uninsured motorist coverage. Part III set forth coverage for "medical payments," and part IV set forth coverage for "physical damage."

¶ 6 Parts III and IV contained two similar exclusions that are relevant to this appeal. An exclusion in part III stated: "This policy does not apply under Part III to bodily injury: (a) sustained while occupying (1) an owned automobile while used as a public or livery conveyance." Similarly, part IV specified: "This policy does not apply under Part IV: (a) to any automobile while used as a public or livery conveyance."

¶ 7 Elsewhere, the policy enumerated various conditions, two of which are significant to this appeal. Condition 4 provided:

"4. Fraud and Misrepresentation. It is your duty to give full and complete information on all policy documents such as the application ***. This policy is null and void and of no benefit if any information or omission by you or made on your behalf *** is misrepresented either fraudulently or mistakenly and is material to our decision to issue, renew or change this policy ***. This policy is null and void and of no benefit and provides no coverage or benefit to anyone who makes a fraudulent statement or omission or engages in fraudulent conduct with respect to any accident or loss for which coverage or a benefit is sought under this policy or renewal. The Company shall not declare this policy void from its inception due to material misrepresentation or false warranty in the application after the policy has been in effect for one year or one policy term, whichever is less."

¶ 8 Condition 20 specified:

"20. Declarations. By acceptance of this policy, the insured *** agrees that the statements contained in the Application, a copy of which is attached to and forms a part of the policy, have been made by him or on his behalf and that said statements and the statements of the Declarations and in any subsequent Application *** are offered as an inducement to the Company to issue or continue this policy and that the same are his agreements and representations, and that this policy is issued and continued in reliance upon the truth of such statements and representations and that this policy embodies all agreements existing between himself and the Company or any of its agents relating to this insurance."

¶ 9 Following the initial six-month term, the policy was renewed for a new term, effective from September 22, 2016, to March 22, 2017. The policy was renewed a second time in March 2017, to be effective from March 22 to September 22, 2017. The parties do not dispute that the renewals did not alter the aforementioned conditions and exclusions.

¶ 10 While the policy was in effect, Thomas sometimes used the insured vehicle to earn money transporting passengers through the Uber ridesharing service. In April 2016, Thomas became an independent contractor for Uber. Information provided by Uber pursuant to a subpoena indicates that between April 8, 2016, and November 12, 2019, Thomas completed 4711 trips as an Uber driver.

¶ 11 On June 11, 2017, Thomas was driving the insured vehicle, with Rascoe as a passenger, when it was involved in a collision with another vehicle. According to Thomas and Rascoe, the Camry was rear-ended by an uninsured vehicle driven by Carl Henry. UEIC has never disputed that Thomas was not driving the vehicle for Uber at the moment of the collision and that Rascoe was Thomas's private passenger.¹

¶ 12 The parties do not dispute that, after the collision, Thomas and Rascoe made a claim for uninsured motorist coverage under part II of the policy.² Thomas and Rascoe maintain that their "underlying claim [was] brought solely under" part II. Whereas UEIC asserts on appeal that Thomas and Rascoe also made a claim under part IV, the record on appeal does not suggest there was any claim for coverage that was not a part II claim.³

¶ 13 Shortly after the collision, UEIC informed Thomas in writing that its investigation "show[ed] that you may have been driving your vehicle for the purpose of ridesharing (Uber, Lyft, etc)" and posed several questions about whether he had used the insured Camry for ridesharing. In written responses dated June 17, 2017, Thomas stated that he had been driving with Uber since "[a]bout 9 months ago" about "twice a week." Thomas answered "No" when asked if he was using the insured vehicle "for the purpose of ride-sharing (Uber, Lyft, etc) at the time of this accident."

¶ 14 The record reflects that Thomas sent an e-mail to UEIC on July 3, 2017, in which he stated that he "ma[d]e around $200-250 per week from [U]ber before the accident." In a July 9, 2017, e-mail to UEIC, Thomas asked why it was taking so long to have his car repaired and stated that, due to the car's damage, he was "unable to earn the weekly money I was earning via Uber," which caused him "great hardship."⁴

¶ 15 In a letter to Thomas dated July 13, 2017, UEIC stated its finding that the vehicle had been used for "transporting passengers for monetary compensation under the Uber platform." UEIC thus stated that it would deny "Medical Payments Coverage," citing part III's exclusion for bodily injury "sustained while occupying" an "owned automobile while used as a public or livery conveyance."

¶ 16 Thomas responded to UEIC and Insure in a letter dated July 19, 2017, in which he demanded return of all monies he had paid for the insurance. In the same letter, Thomas stated that "at the time of the accident * * * my car was not being used for Uber."

¶ 17 UEIC sent another letter to Thomas dated July 26, 2017, stating that it was denying coverage under part IV's exclusion for "any automobile while used as a public or livery conveyance." UEIC informed Thomas "Your policy with us will be canceled in 30 days."

¶ 18 On May 11, 2018, UEIC sent a letter to Thomas and Rascoe's attorney, Gregg Mandell, stating that "Coverage is being denied as [Thomas] failed to give full and complete information on [his] application and/or renewal by failing to disclose" the "insured vehicle's use as a public or livery conveyance." UEIC recited conditions 4 and 20 and concluded: "We must respectfully deny any all coverage's [sic ] related to this loss."

¶ 19 The record reflects that Thomas and Rascoe made a demand for arbitration to the American Arbitration Association (AAA), although a copy of that demand is not in the record. By letter dated September 24, 2018, UEIC informed the AAA that UEIC "object[ed] to any and all AAA filings."

¶ 20 On January 17, 2019, UEIC initiated the underlying declaratory judgment action by filing a complaint in the chancery division of the circuit court of Cook County. In the complaint, UEIC alleged that, when the policy was entered into, "the parties did not contemplate nor agree to insure a commercial or livery vehicle." UEIC alleged that Thomas "affirm[ed] no commercial, delivery, or ride share use" in his application and that, "had this been disclosed, UEIC would not accept the risk and would not write the policy."

¶ 21 The...