{ "id": 1034125, "name": "STATE FARM INSURANCE COMPANY, Plaintiff-Appellee and Cross-Appellant, v. AMERICAN SERVICE INSURANCE COMPANY, Defendant-Appellant and Cross-Appellee", "name_abbreviation": "State Farm Insurance v. American Service Insurance", "decision_date": "2002-06-24", "docket_number": "No. 1-01-1512", "first_page": "31", "last_page": "40", "citations": [ { "type": "official", "cite": "332 Ill. App. 3d 31" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "203 Ill. App. 3d 453", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2580385 ], "year": 1990, "pin_cites": [ { "page": "462" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/203/0453-01" ] }, { "cite": "247 Ill. App. 3d 538", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2927506 ], "year": 1993, "pin_cites": [ { "page": "549-50", "parenthetical": "both noting a distinction between a policy defense and a claim that a policy is void" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/247/0538-01" ] }, { "cite": "285 Ill. App. 3d 573", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 1295603 ], "year": 1996, "pin_cites": [ { "page": "577" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/285/0573-01" ] }, { "cite": "186 Ill. 2d 127", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 243917 ], "weight": 2, "year": 1999, "pin_cites": [ { "page": "150-51" }, { "page": "151" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/186/0127-01" ] }, { "cite": "307 Ill. App. 3d 872", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 173519 ], "year": 1999, "pin_cites": [ { "page": "878" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/307/0872-01" ] }, { "cite": "293 Ill. App. 3d 1089", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 847596 ], "year": 1997, "pin_cites": [ { "page": "1091" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/293/1089-01" ] }, { "cite": "327 Ill. App. 3d 128", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 79391 ], "year": 2001, "pin_cites": [ { "page": "134" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/327/0128-01" ] }, { "cite": "312 Ill. App. 3d 374", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 411705 ], "year": 2000, "pin_cites": [ { "page": "380" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/312/0374-01" ] }, { "cite": "293 Ill. App. 3d 720", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 847526 ], "year": 1997, "pin_cites": [ { "page": "724" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/293/0720-01" ] }, { "cite": "317 Ill. App. 3d 67", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 1025995 ], "year": 2000, "pin_cites": [ { "page": "73" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/317/0067-01" ] }, { "cite": "314 Ill. App. 3d 885", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 140061 ], "year": 2000, "pin_cites": [ { "page": "888" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/314/0885-01" ] } ], "analysis": { "cardinality": 769, "char_count": 19916, "ocr_confidence": 0.801, "pagerank": { "raw": 1.818215589583855e-07, "percentile": 0.7188289741988819 }, "sha256": "0b6dbf1954d03c6e1e64b54b83468a6d475d4bc947b937a0e6ac408fd2631914", "simhash": "1:9affcb0617ccc465", "word_count": 3162 }, "last_updated": "2023-07-14T19:45:54.915644+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "McNULTY and TULLY, JJ., concur." ], "parties": [ "STATE FARM INSURANCE COMPANY, Plaintiff-Appellee and Cross-Appellant, v. AMERICAN SERVICE INSURANCE COMPANY, Defendant-Appellant and Cross-Appellee." ], "opinions": [ { "text": "PRESIDING JUSTICE COHEN\ndelivered the opinion of the court:\nPlaintiff State Farm Insurance Company (State Farm), assignee of Eleazar and Fernando Buzos\u2019 automobile insurance policy, brought this action seeking declaratory judgment against the Buzos\u2019 insurer, American Service Insurance Company (American). In its complaint, State Farm pled that American had breached its duty to defend the Buzos in an underlying personal injury lawsuit filed by Linda Josephs, State Farm\u2019s insured, and was therefore estopped from denying that the Buzos\u2019 insurance policy provided coverage for the accident. State Farm sought reimbursement of the $20,000 it paid under its policy to Josephs, along with costs and attorney fees. Both State Farm and American filed cross-motions for summary judgment. After briefing and a hearing, the trial court granted State Farm\u2019s motion for summary judgment, denied American\u2019s cross-motion for summary judgment and denied State Farm\u2019s request for costs and attorney fees.\nOn appeal, American argues that the trial court erred as a matter of law in granting summary judgment to State Farm. American asserts that pursuant to the explicit language of the Buzos\u2019 insurance policy, American properly declared the policy \u201cnull and void\u201d due to a \u201cmaterial misrepresentation\u201d in the insurance application. Because no policy was in existence at the time of the accident, American asserts that the trial court erred in determining that Josephs\u2019 loss was covered under the policy thereby estopping American from denying liability under the policy on the ground of misrepresentation.\nState Farm filed a cross-appeal contending that the trial court erred in declining to award attorney fees incurred both by the Buzos in defending the underlying personal injury action and by State Farm in prosecuting its subsequent complaint for declaratory judgment. For the following reasons, we affirm the trial court\u2019s denial of costs and attorney fees. We reverse the trial court\u2019s order granting summary judgment in favor of State Farm and remand this cause for further proceedings.\nBACKGROUND\nOn June 5, 1995, Eleazar Buzo signed an application for automobile insurance coverage through American for a 1983 Chevrolet Caprice four-door sedan. The application listed Eleazar as the principal driver and Leopoldo and Julia Buzo as resident drivers/regular operators. American accepted Eleazar\u2019s application and the policy went into effect December 18, 1995.\nOn March 7, 1996, an attorney representing Josephs contacted American to report an accident that occurred on March 1, 1996, involving Eleazar\u2019s 1983 Chevrolet Caprice. On March 11, 1996, Jack Harnett, an agent of American, spoke to Eleazar, who denied being involved in an accident with Josephs. On October 3, 1997, Josephs filed a personal injury lawsuit against Eleazar and his son, Fernando, in the circuit court of Cook County. In her complaint, Josephs alleged that on the date of the accident Fernando was driving the 1983 Chevrolet Caprice in a Jewel/Osco parking lot located at 3700 South Archer in Chicago, Illinois, when he struck and injured Josephs, a pedestrian. After receiving the summons and complaint from Josephs\u2019 attorney, American began investigating the accident.\nDuring American\u2019s investigation, Harnett discovered that after the accident Fernando had been ticketed as the driver of the 1983 Chevrolet Caprice and that Eleazar had been arrested for permitting an unlicenced driver to drive his car. Both Fernando and Eleazar were later found guilty of the charges. On November 11, 1997, Harnett took a recorded statement from Fernando. In his statement, Fernando admitted that he was only 14 years old on the date of the accident and that he was, in fact, driving Eleazar\u2019s car. Fernando claimed that Eleazar was teaching him how to drive at the time. Based on Fernando\u2019s admissions, Harnett concluded that American would not have to defend against or pay any claims asserted by Josephs against the Buzos and noted such in his activity log.\nOn November 17, 1997, American sent a certified letter to Eleazar explaining that because Eleazar had made a material misrepresentation by failing to declare Fernando as a resident driver on his application for insurance coverage, American was rescinding his insurance policy. American also sent Eleazar a $213 check refunding the premium amount Eleazar had paid and suggested that Eleazar take the necessary steps to protect himself and Fernando. Eleazar later cashed the premium refund check. American also sent a letter to Josephs\u2019 attorney advising him of the rescission and American\u2019s inability to provide coverage for the accident.\nThe cause proceeded to mandatory arbitration. At no time did American defend either Eleazar or Fernando under a reservation of rights or file a declaratory judgment requesting a finding that Eleazar\u2019s insurance policy was void from its inception due to a material misrepresentation and thus did not provide coverage for the accident of March 1, 1996. On August 19, 1999, the arbitration panel awarded $20,000 in favor of Josephs. On September 22, 1999, Eleazar and Fernando assigned all of their right, title and interest in the insurance policy issued by American to State Farm in consideration for a \u201cCovenant Not to Execute Judgment\u201d against them personally. On October 1, 1999, judgment was entered on the award in the amount of $20,000 plus costs.\nOn October 28, 1999, State Farm filed a complaint for declaratory judgment against American requesting that the trial court find that the insurance policy issued by American to Eleazar provided coverage for the accident of March 1, 1996. In its complaint, State Farm alleged that American breached its duty to defend the Buzos in Josephs\u2019 underlying personal injury lawsuit. State Farm further alleged that because American had failed to either defend the Buzos under a reservation of rights or to file its own declaratory judgment action, American was now estopped from denying coverage under its policy.\nOn January 3, 2000, American filed its answer to State Farm\u2019s complaint denying that the insurance policy was in force and effect on March 1, 1996. American asserted, as an affirmative defense, that it had exercised its contractual right under part VI(4) of the policy to declare the policy \u201cnull and void from its inception\u201d due to a material misrepresentation in Eleazar\u2019s application. American further asserted that it had returned a check for his entire $213 premium payment to Eleazar, a check which Eleazar accepted and later cashed.\nBoth parties subsequently filed cross-motions for summary judgment and a hearing was held on April 10, 2001. After hearing arguments from both parties, the trial court granted State Farm\u2019s motion for summary judgment, denied American\u2019s motion for summary judgment and denied State Farm\u2019s request for costs and attorney fees. The court determined that the allegations in Josephs\u2019 complaint in the underlying personal injury action were \u201cwithin or certainly potentially within\u201d part B of the insurance policy issued by American to Eleazar and therefore triggered a duty to defend. The court further found that American had breached its duty to defend by failing either to defend the Buzos under a reservation of rights or to file its own declaratory judgment action. Based on this breach, the court determined that American was estopped from asserting that the insurance policy was void ab initio due to a material misrepresentation and was liable to State Farm in the amount of $20,000. The court also denied State Farm\u2019s request for costs and attorney fees without explanation. This appeal and cross-appeal followed.\nANALYSIS\n1. Standard of Review\nOur review of the circuit court\u2019s grant of summary judgment is de novo. Natale v. Gottlieb Memorial Hospital, 314 Ill. App. 3d 885, 888 (2000). Summary judgment is properly granted where \u201cthe pleadings, depositions, admissions, and affidavits on file, when taken together in the light most favorable to the nonmovant, show that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law.\u201d Freemont Casualty Insurance Co. v. Ace-Chicago Great Dane Corp., 317 Ill. App. 3d 67, 73 (2000). The function of a reviewing court on appeal from a grant of summary judgment is limited to determining whether the trial court correctly concluded that no genuine issue of material fact was raised and, if none was raised, whether judgment as a matter of law was correctly entered. Malanowski v. Jabamoni, 293 Ill. App. 3d 720, 724 (1997). In situations where both parties file cross-motions for summary judgment, \u201cthey agree that no material issue of fact exists and that only a question of law is involved.\u201d Robson v. Electrical Contractors Ass\u2019n Local 134 IBEW Joint Pension Trust, 312 Ill. App. 3d 374, 380 (2000). Thus, \u201c \u2018the court is invited to decide the issues presented as a question of law.\u2019 \u201d Lexmark International, Inc. v. Transportation Insurance Co., 327 Ill. App. 3d 128, 134 (2001), quoting Container Corp. of America v. Wagner, 293 Ill. App. 3d 1089, 1091 (1997). However, \u201cthe mere filing of cross-motions for summary judgment does not require that the court grant the requested relief to one of the parties where genuine issues of fact exist precluding summary judgment in favor of either party.\u201d Travelers Insurance Co. of Illinois v. Eljer Manufacturing, Inc., 307 Ill. App. 3d 872, 878 (1999).\n2. Summary Judgment\nAmerican argues that the trial court erred as a matter of law in finding that American was estopped from denying liability under the policy based on Eleazar\u2019s misrepresentation. American claims that its denial of coverage was not based on a \u201cpolicy defense\u201d but, rather, on its conclusion that \u201cthere was no policy in existence at the time of the loss.\u201d American asserts that the trial court failed to note this important distinction when granting summary judgment in favor of State Farm. State Farm characterizes American\u2019s argument as a \u201csemantic sleight of hand.\u201d State Farm argues that because American is relying upon provisions of the insurance policy to support its argument, American is asserting a \u201cpolicy defense\u201d as a matter of law. State Farm asserts that American cannot rely upon provisions of the insurance policy and at the same time claim that it is not asserting a \u201cpolicy defense.\u201d\nOur supreme court has explained the application of the estoppel doctrine to insurance policy coverage disputes:\n\u201cThe general rule of estoppel provides that an insurer which takes the position that a complaint potentially alleging coverage is not covered under a policy that includes a duty to defend may not simply refuse to defend the insured. Rather, the insurer has two options: (1) defend the suit under a reservation of rights or (2) seek a declaratory judgment that there is no coverage. If the insurer fails to take either of these steps and is later found to have wrongfully denied coverage, the insurer is estopped from raising policy defenses to coverage. (Emphasis added.) [Citations.]\nThe estoppel doctrine has deep roots in Illinois jurisprudence. It arose out of the recognition that an insurer\u2019s duty to defend under a liability insurance policy is so fundamental an obligation that a breach of that duty constitutes a repudiation of the contract. [Citation.] Although the doctrine has roots in the principle of equitable estoppel, a review of the case law reveals that it has since developed into a distinct doctrine that stands on its own. [Citations.]\n*** Application of the estoppel doctrine is not appropriate if the insurer had no duty to defend, or if the insurer\u2019s duty to defend was not properly triggered. These circumstances include where the insurer was given no opportunity to defend; where there was no insurance policy in existence-, and where, when the policy and the complaint are compared, there clearly was no coverage or potential for coverage. (Emphasis added.) [Citations.]\u201d Employers Insurance of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127, 150-51 (1999).\nDespite State Farm\u2019s unsupported assertions to the contrary, American\u2019s argument that the insurance policy was not in existence at the time of the accident is not a \u201cpolicy defense\u201d simply because American relies on provisions of the insurance policy in order to support its argument. American\u2019s rescission defense does not involve a question of policy coverage. Rather, the affirmative defense of rescission raises the issue of whether an insurance policy was in existence. See Pepper Construction Co. v. Transcontinental Insurance Co., 285 Ill. App. 3d 573, 577 (1996); Allied American Insurance Co. v. Ayala, 247 Ill. App. 3d 538, 549-50 (1993) (both noting a distinction between a policy defense and a claim that a policy is void).\nEmployers Insurance states that the doctrine of estoppel is inapplicable in cases where there was no insurance policy in existence at the time of the loss. 186 Ill. 2d at 151. Thus, the trial court erred as a matter of law in invoking the estoppel doctrine prior to determining whether Eleazar\u2019s insurance policy was in existence at the time of the accident. Under the law, because the trial court determined that American breached its duty to defend under part B of the insurance policy prior to determining whether the insurance policy indeed even existed, the trial court\u2019s conclusion that American breached its duty to defend was premature. Consequently, this cause is remanded to allow the parties to litigate the issue of rescission in the trial court.\nIt must be further heeded summary judgment was also improper on an entirely separate basis. American claims that the undisputed facts demonstrate that as a matter of law there was no policy in existence on the date of the accident because it properly declared the policy \u201cnull and void\u201d pursuant to the explicit language of part VI(4) of the policy. Therefore, American claims that it had no duty to defend the Buzos in the underlying personal injury claim. Part VI(4) of the policy states, in pertinent part:\n\u201cFraud and Misrepresentation. The statements contained in the application are deemed to be representations relied upon by the Company. In the event that any representation contained in the application is false, misleading or materially affects the acceptance or rating of this risk by the Company, by either direct misrepresentation, omission, concealment of facts or incorrect statements, this policy shall be null and void and of no benefit whatsoever from its inception.\u201d\nState Farm responds that American lacked the power to unilaterally void the insurance policy pursuant to sections 143.15 (215 ILCS 5/143.15 (West 2000)) and 143.19 (215 ILCS 5/143.19 (West 2000)) of the Illinois Insurance Code (Insurance Code). However, both section 143.15 and section 143.19 pertain to the cancellation of automobile insurance policies and are inapplicable in cases where, as here, an insurance company purports to declare an insurance policy void ab initio. American Country Insurance Co. v. Mahoney, 203 Ill. App. 3d 453, 462 (1990).\nInterestingly, State Farm acknowledges the inherent difference between cancelling a policy and declaring a policy void from its inception, but asserts that section 143.15 of the Insurance Code would be rendered meaningless if an insurer could sidestep the effective-date-of-cancellation provision set forth therein simply by claiming to \u201cvoid\u201d a policy rather than \u201ccancel\u201d it. We note, however, that our legislature has already closed this obvious loophole by adding section 154 to the Insurance Code:\n\u201cNo misrepresentation or false warranty made by the insured or in his behalf in the negotiation for a policy of insurance, or breach of a condition of such policy shall defeat or avoid the policy or prevent its attaching unless such misrepresentation, false warranty or condition shall have been stated in the policy or endorsement or rider attached thereto, or in the written application therefor. No such misrepresentation or false warranty shall defeat or avoid the policy unless it shall have been made with actual intent to deceive or materially affects either the acceptance of the risk or the hazard assumed by the company.\u201d 215 ILCS 5/154 (West 2000).\nThis statutory language supercedes part VI(4) of Eleazar\u2019s insurance policy, which purports to grant American the power to avoid the insurance policy for reasons other than those outlined in section 154. Pursuant to section 154, American could have properly avoided Eleazar\u2019s automobile insurance policy only if Eleazar, in fact, made a misrepresentation or false warranty in the written application and: (1) Eleazar made the misrepresentation or false warranty with the actual intent to deceive American; or (2) the misrepresentation materially affected American\u2019s acceptance of the risk or the hazard assumed.\nIt is undisputed that Eleazar failed to disclose Fernando as a \u201cresident driver\u201d or \u201cregular operator\u201d of the insured automobile on the insurance application. However, myriad other factual questions preclude a finding of summary judgment on this issue in favor of either party. For example, it is unclear from the record whether Eleazar\u2019s failure to disclose Fernando on the application for insurance constitutes a \u201cmisrepresentation\u201d or \u201cfalse warranty.\u201d It is also unclear whether Eleazar\u2019s failure to disclose Fernando on the application was either made with the actual intent to deceive American or if it materially affected American\u2019s acceptance of the risk or the hazard assumed. Furthermore, it is unclear whether the fact that Eleazar cashed the $213 premium refund check issued by American demonstrated his intent to rescind the insurance policy.\nFinding genuine issues of material fact remain, this cause is remanded to the trial court for a determination of whether American properly avoided the policy as defined under section 154 of the Insurance Code.\n3. Attorney Fees\nFinally, State Farm contends that the trial court erred in declining to award the costs and attorney fees incurred both by the Buzos in defending the underlying personal injury action and by State Farm in prosecuting its subsequent complaint for declaratory judgment in the trial court. State Farm\u2019s entire argument relies on the fact that the trial court found that American had breached its duty to defend the Buzos in the underlying personal injury claim. Because we remand for a determination of whether Eleazar\u2019s policy was in effect at the time of the accident, the issue of costs and attorney fees arising out of an alleged breach of the duty to defend is not yet ripe for our consideration. We therefore find that the trial court did not abuse its discretion in denying State Farm\u2019s request for costs and attorney fees.\nCONCLUSION\nThe trial court erred as a matter of law in holding that American was estopped from denying liability under the policy on the ground of misrepresentation. This error in law resulted in the trial court\u2019s failure to consider issues that were properly raised, issues that required the court to rule. Accordingly, we reverse the trial court\u2019s order granting summary judgment in favor of State Farm, affirm the trial court\u2019s order denying State Farm\u2019s request for costs and attorney fees and remand this cause for proceedings consistent with this opinion.\nAffirmed in part and reversed in part; cause remanded with directions.\nMcNULTY and TULLY, JJ., concur.\nThe specific charges against Fernando cannot be determined from the record.", "type": "majority", "author": "PRESIDING JUSTICE COHEN" } ], "attorneys": [ "James E Newman, of Newman & Felafas, of Chicago, for appellant.", "John R. Adams, of Taylor, Miller, Sprowl, Hoffnagle & Merletti, of Chicago, for appellee." ], "corrections": "", "head_matter": "STATE FARM INSURANCE COMPANY, Plaintiff-Appellee and Cross-Appellant, v. AMERICAN SERVICE INSURANCE COMPANY, Defendant-Appellant and Cross-Appellee.\nFirst District (1st Division)\nNo. 1 \u2014 01 \u2014 1512\nOpinion filed June 24, 2002.\nJames E Newman, of Newman & Felafas, of Chicago, for appellant.\nJohn R. Adams, of Taylor, Miller, Sprowl, Hoffnagle & Merletti, of Chicago, for appellee." }, "file_name": "0031-01", "first_page_order": 49, "last_page_order": 58 }