July 2013 Case Notes & Comments

“Life is like riding a bicycle. To keep your balance you must keep moving.” ~ Albert Einstein

MONTHLY QUIZ: Insured fails to make monthly premium payments and Insurer automatically cancels the Policy, after sending notice and its own proof of mailing, based upon United States Post Office (USPO) Form 3877. Months later, Insured negligently collides with an ambulance and admits fault. Insurer does not defend lawsuit. Insured hires her own lawyer, stipulates to $900k judgment and assigns her rights to Driver. Driver sues Insurer. On summary judgment, Insurer argues that it properly cancelled Insured’s policy for non-payment and presents a copy of its cancellation notice and proof of mailing. Driver argues that Policy cancellation was defective since the proof of mailing was not on Form 3877, or another form acceptable to the USPO - as required by statute. In response, Insurer submits affidavits stating that its private form contains the same information as Form 3877, the form has UPSO approval and was accepted for use by the USPO. Driver also argues that Insurer is estopped from raising policy defenses since it did not defend Insured, or file a declaratory action. Is insurer’s own cancellation form acceptable? Is Insurer estopped from raising a cancellation defense since it did not first defend under a reservation, or file a declaratory action? You be the judge. (Answer below)


INSURABLE INTEREST - ISSUE OF FIRST IMPRESSION: Ward was cared for by Public Guardian. Public Guardian obtained insurance from Insurer for Ward’s Property. The insurance policy identified Public Guardian as the named insured, and also made reference to an apparently nonexistent “Named Insured Schedule.” A second Schedule did exist that listed the Property owned by Ward; and in a third schedule, Ward’s Estate was designated as the “Loss Payee.” Ward died, Public Guardian was discharged, and an Administrator of Ward’s Estate was appointed. Ward’s property was then destroyed by fire. Administrator made a claim to Insurer for the fire loss.  Insurer denied claim, asserting that Policy covered Public Guardian’s insurable interest in the property and that the Public Guardian, having previously been discharged after Ward’s death, had no insurable interest in the property at the time of the loss. On appeal, Court considered reference to the nonexistent “Named Insured Schedule” reason enough to inquire into the intention of the parties as to the identity of the insured. The Court considered it “clear” from the face of the policy and facts that Public Guardian obtained coverage not to protect its own property interests, but to protect Ward’s property interests. Further, the fact that premiums were chargeable to Ward’s Estate led Court to the conclusion that Ward’s Estate - not Public Guardian - was the intended insured under the Policy. Affirmed - the damage to Ward’s Property was a covered loss payable to the Administrator of Ward’s Estate. Ryding v. The Cincinnati Special Underwriters Insurance Company, 2013 IL App (2d) 120833 (Jun. 28, 2013)


WORKERS’ COMPENSATION - INSURER NOT ENTITLED TO INTEREST ON REIMBURSEMENT: While driving gasoline truck, Employee was killed by oncoming truck. Insurer paid Employee’s Estate workers’ compensation (WC) benefits. Estate subsequently recovered against other third-party tortfeasors involved in accident and was awarded damages and statutory interest. Insurer claimed that it was also entitled to a portion of the statutory interest award. Section 5 of the Illinois Workers Comp. Act provides for reimbursement of WC benefits when a judgment against a third-party tortfeasor is obtained. However, in affirming judgment below, Court concluded that Insurer was not entitled to reimbursement of its WC payments until Estate obtained a judgment against the third-party tortfeasors in the underlying action andonly after Estate had been paid.Williamson v. Asher, 2013 IL App (1st) 122038 (Jun. 24, 2013)


NEXT-OF-KIN HAVE RIGHT TO REMAINS: Following her death, Hospital buried Daughter’s body in a mass, unmarked grave. Mother (Plaintiff) contended that Daughter was buried without Plaintiff’s knowledge or consent, without performing a requested autopsy and maintained that Hospital’s misconduct made it impossible to give Daughter a proper burial in the family plot. Plaintiff sued Hospital for, among other things, willful and wanton interference with Daughter’s remains. Jury returned a verdict for Plaintiff and against Hospital. In Illinois, next-of-kin have a quasi-property right to possession of remains in order to determine the time, manner, and the place of burial. To state a cause of action based on the next-of-kin’s right of possession and preservation of the body of a decedent, a plaintiff must demonstrate by specific facts that the defendant’s conduct was wilful and wanton. Given the conflicting evidence as to whether Plaintiff consented to the burial and whether Hospital policy was followed, the Appellate Court affirmed the Jury’s verdict against Hospital.Drakeford v. University of Chicago Hospitals, 2013 IL App (1st) 111466 (Jun. 28, 2013)


ANSWER TO QUIZ: Insurer wins. While Insurer did not use Form 3877, it used a privately printed form that contained all the same information as Form 3877, which had been accepted by the USPO. Here, since there was no genuine dispute as to whether Policy was cancelled, there was no possibility of coverage and Insurer was not estopped from raising a cancellation defense. Hunt vState Farm Mutual Automobile Insurance Company, 2013 IL App (1st) 120561 (Jun. 28, 2013)