Court: Appellate Court of Illinois; October 28, 2002; Illinois; State Appellate Court
Amanda Adams owned a Doberman pinscher that bit seven-year-old Christopher Marshall. Following the incident, Amanda's renter’s liability insurance provider, Pekin Insurance Co., denied a claim submitted by Christopher’s father, Nicholas Marshall, alleging that Amanda misrepresented her ownership of animals on her insurance application. Pekin filed for rescission of the policy based on this misrepresentation. The trial court sided with Pekin, granting summary judgment and denying the defendants’ motions. Nicholas appealed, arguing that Pekin should be held responsible for the misrepresentation and that the misrepresentation was not material.
The background reveals that Amanda purchased the insurance through Bybee Insurance Agency, where an agency employee, Linda Sade, failed to inquire about any animals during their initial conversation. When Amanda received the application, it already contained a pre-typed 'no' in response to whether she had any animals. Amanda admitted to not reading the application thoroughly, only completing highlighted sections before signing. The application included a declaration that she read it and believed the statements were true.
Upon investigating the claim, Pekin found that Amanda owned a dog and had a prior incident involving a dog bite. Pekin's underwriter, Becky Weems, attested that dog ownership is a material fact affecting liability risk, and policies would not be issued if there was a prior dog bite history. The trial court's ruling included rescission of the insurance policy, a declaration that it did not cover Nicholas's claim, and an order for Pekin to refund Amanda's premiums. Nicholas's appeal referenced legal precedent suggesting that Pekin, not Amanda, should bear responsibility for the alleged misrepresentation.
Clarence had significant health issues, including heart disease and diabetes, when he signed an insurance application, and the misrepresentation regarding his health was deemed material to the insurer's risk. Following a bench trial, the circuit court ruled in favor of the plaintiff, Clarence's wife, who testified that the insurance agent completed the application without inquiring about Clarence's health. The insurer contended that the policy was voidable as Clarence was bound by the application's representations. However, the Fifth District court disagreed, stating that if an agent completes an application without questioning the insured, the insurer cannot invoke misrepresentations as a defense if there is no collusion.
The plaintiff distinguished this case from others by pointing out that Amanda's application contained a clause asserting the insured's verification of the statements, which was not present in Clarence's reinstatement application. Nonetheless, knowledge of the agent is still imputed to the insurer despite such clauses. Previous case law indicates that if an agent fills out an application without inquiry, the answers are not considered warranties, even if labeled as such in the policy, unless there is evidence of fraud or intent to deceive by the applicant.
In a related case, Marionjoy Rehabilitation Hospital v. Lo, an agent completed a health insurance application falsely, and despite the applicant later verifying the information, the court highlighted the importance of the agent's actions and the absence of bad faith on the applicant's part for imputation of knowledge to the insurer.
Lo's claim for medical treatment for his son was denied by the insurer, which also rescinded the policy due to misrepresentation in the application. The trial court granted summary judgment in favor of the insurer, which was affirmed by the appellate court. The appellate court determined that Lo's assertion that all application information was correct constituted an independent act of bad faith. It noted that had the agent filled out the application while aware of the true medical history, the insurer could not have used the misrepresentation as a defense. However, two factors led the appellate court to reject imputing the agent's knowledge to the insurer: the communications between Lo and the insurer were independent of the agent, and Lo was aware of the importance of his son's medical history due to prior coverage denial.
In contrast to a prior case, Beck, where the insured lacked the opportunity to review the application, Amanda had the application for five days and could have reviewed it thoroughly. The court emphasized that the insurer could not rely on incorrect answers even if the insured was aware of discrepancies entered by the agent, especially when those entries were made under the agent's guidance. Amanda could reasonably assume that only the highlighted sections of the application required her attention, and Pekin, the insurer, should not benefit from its own errors in preparing the application.
The appellate court concluded that Amanda was entitled to follow the agent's suggestion regarding the question about animals and ruled that Pekin was estopped from relying on the misrepresentation. The trial court's granting of summary judgment to Pekin was deemed erroneous, leading to a reversal and remand for further proceedings.
