Case Title: Ragan v. Columbia Mutual Insurance Co.

Citation: 

Docket Number: 84257

State: illinois

Court: Illinois Supreme Court

Date: 1998-09-24T00:00:00Z

Document:
Ragan v. Columbia Mutual Ins. Co., No. 84257 (9/24/98) 
                              Docket No. 84257--Agenda 22--May 1998. 
           JERALD L. RAGAN, Appellee, v. COLUMBIA MUTUAL 
           INSURANCE COMPANY et al. (Columbia Mutual Insurance 
                              Company, Appellant). 
 
             JUSTICE NICKELS delivered the opinion of the court: 
             The issue presented here is whether an insurance company's 
           failure to produce the proof of mailing on a form as required by 
           the cancellation provisions of the Illinois Insurance Code (215 
           ILCS 5/143.14(a) (West 1994)) invalidates the cancellation. The 
           circuit court of Madison County found that cancellation is 
           ineffective unless the insurance company produces the properly 
           completed form. The appellate court affirmed in part and 
           reversed in part. 291 Ill. App. 3d 1088. We allowed the petition 
           for leave to appeal under Rule 315 (166 Ill. 2d R. 315). We 
           affirm the appellate court. 
 
                     BACKGROUND 
             Plaintiff, Jerald Ragan, purchased a seven-unit apartment 
           building in Granite City, Illinois, in 1988 or 1989. In 1992, 
           Ragan contacted defendant Looking Glass Mutual Insurance 
           Company through its agent Orville Bierbaum to gather 
           information on changing the carrier of the liability and property 
           insurance on his apartment building. 
             Bierbaum submitted an application for Ragan's liability and 
           property insurance to Columbia Mutual Insurance Company. 
           Ragan told Bierbaum that he was remodeling one of the units 
           for himself but he had not moved into the building. Ragan asked 
           that any notices under the policy be sent to his post office box. 
           In the "Applicant Information" section of the application form, 
           Bierbaum listed the address of the insured property as Ragan's 
           mailing address along with a note to the side that said "Send 
           P.O. Box 8091." 
             Ragan was quoted an annual premium of $529 and made 
           the first payment of $132.50 along with his application in order 
           to bind coverage from the date of the application. Under the 
           policy's payment plan, in addition to Ragan's initial payment, 
           Ragan would have an installment of $82.10 due on December 
           7, 1992, and four more installments of $82.35 due throughout 
           the year. Ragan asserts that he advised Bierbaum that he 
           intended to have his mortgage company make the payments due 
           under the policy. The application was later approved and 
           Bierbaum sent a copy of the approved policy and declaration 
           sheet to Ragan's post office box. After he received the policy 
           and declaration sheet from Bierbaum, Ragan claims, he 
           contacted his mortgage company, Roosevelt Bank, and requested 
           that the bank make any further premium payments. No 
           additional payment was ever made to Columbia Mutual under 
           the policy. 
             On December 11, 1992, Columbia Mutual allegedly sent 
           notice of cancellation to Ragan at the apartment building 
           address. Columbia Mutual admits that it did not send a copy to 
           Ragan's post office box. The cancellation notice cites Ragan's 
           failure to make the December 7, 1992, installment and it 
           purports to cancel the policy effective December 26, 1992. 
             On January 4, 1993, Columbia Mutual sent a letter to 
           Looking Glass stating that Ragan's policy had been cancelled 
           and that a refund check for unearned premiums was "holding." 
           It is unclear from the record how Ragan received the check, but 
           Ragan endorsed and deposited the $8.50 refund check. On 
           August 31, 1993, the apartment building was destroyed by fire 
           and Ragan sought insurance benefits from Columbia Mutual 
           through his agent Bierbaum. Bierbaum advised Ragan that 
           Columbia Mutual had canceled the policy effective December 
           26, 1992. 
             On December 15, 1993, Ragan filed a complaint in the 
           circuit court against Columbia Mutual, Looking Glass, Bernice 
           Pollmann, the owner of Looking Glass, Orville Bierbaum and 
           Roosevelt Bank. Count I of the complaint alleges that Columbia 
           Mutual's attempted cancellation of Ragan's insurance policy was 
           ineffective and that under the policy Ragan was entitled to 
           recover $94,500, his policy limits. Columbia Mutual denied all 
           of the allegations in an answer filed March 8, 1994. Counts II 
           and III allege wrongdoing by other defendants who are not 
           participating in this appeal. 
             On June 12, 1995, Ragan filed an amendment to his 
           complaint, set out as count IV, which adds claims of vexatious 
           and unreasonable delay and prayers for statutory penalties, 
           attorney fees and costs. Count IV also adds a prayer for 
           prejudgment interest. Ragan was never granted leave to file this 
           amendment. Columbia Mutual denied all of the allegations in an 
           answer filed October 11, 1995. 
             On August 14, 1995, Ragan, pursuant to discovery rules, 
           sent Columbia Mutual a request to admit that Columbia Mutual 
           did not maintain a proof of mailing the cancellation notice as 
           required by the Insurance Code. 215 ILCS 5/143.14(a) (West 
           1994). Ragan also sent Columbia Mutual a notice to produce the 
           proof of mailing form. Columbia Mutual replied to the request 
           to admit on August 25, 1995, as follows: "Columbia Mutual 
           Maintains the cancellation letter in its file and, therefore, denies 
           the request to admit." Upon motion by Ragan, on January 12, 
           1996, Columbia Mutual's reply to the request to admit was 
           stricken as nonresponsive and the circuit court granted Columbia 
           Mutual additional time to respond. Columbia Mutual did not 
           respond. Columbia Mutual also failed to produce the proof of 
           mailing form requested in Ragan's notice to produce. During 
           discovery, Columbia Mutual did produce what it alleges to be 
           the original envelope, containing a cancellation notice. The 
           envelope was metered and imprinted with the date December 11, 
           1992, addressed to the apartment building address, and returned 
           as undeliverable. 
             On February 6, 1996, Ragan filed a motion for summary 
           judgment. The trial court granted Ragan's motion for summary 
           judgment on counts I and IV on March 29, 1996. On May 30, 
           1996, Columbia Mutual filed a motion to reconsider the order 
           granting Ragan's motion for summary judgment. At the same 
           time Columbia Mutual produced a copy of its unsigned form 
           entitled "Certificate of Mailing" which listed the December 11, 
           1992, cancellation letter to Ragan. Columbia Mutual argued that 
           this form satisfies the proof of mailing requirements of the 
           Insurance Code. 
             On June 24, 1996, the circuit court denied Columbia 
           Mutual's motion to reconsider, and ordered Columbia Mutual to 
           pay Ragan a total of $182,300.54. Ragan was granted $94,500 
           under count I, which includes the fire insurance claim. Count 
           IV, as set forth in Ragan's amendment to his original complaint, 
           alleges vexatious and unreasonable conduct by Columbia Mutual 
           in not paying the amount of the loss under the insurance policy 
           and contains a prayer for prejudgment interest. Ragan was 
           granted the following under count IV: $38,823.75 (attorney 
           fees); $25,000 (statutory maximum for vexatious and 
           unreasonable delay); $352 (filing fee); $236.04 (service of 
           summons); and $23,388.75 (prejudgment interest). 
             On July 19, 1996, Columbia Mutual moved to vacate and 
           set aside the summary judgment and award of damages. 
           Columbia Mutual alleged that there remained genuine issues of 
           material fact. The motion also contained a request for leave to 
           amend Columbia Mutual's prior response to the request to 
           admit. The amended response denied the allegation that 
           Columbia Mutual did not maintain the form and contained a 
           copy of the "Certificate of Mailing." The circuit court denied 
           both motions. Columbia Mutual appealed. 
             The appellate court affirmed the summary judgment, stating 
           that Columbia Mutual did not produce the required statutory 
           proof of mailing and therefore the purported cancellation was 
           invalid and ineffective. The appellate court reversed the trial 
           court's finding of vexatious and unreasonable delay on the part 
           of Columbia Mutual. Accordingly, the portion of the judgment 
           awarding attorney fees, the statutory amount for vexatious and 
           unreasonable delay, the filing fee and the cost of service was 
           reversed. Defendant Columbia Mutual petitioned for leave to 
           appeal to this court. Neither party raises the issue of vexatious 
           and unreasonable delay in this appeal. The only remaining issues 
           are the judgments for $94,500 under the insurance contract and 
           $23,388.75 in prejudgment interest. 
 
                      ANALYSIS 
             Summary judgment is proper where, when viewed in the 
           light most favorable to the nonmoving party, the pleadings, 
           depositions and admissions on file reveal that there is no 
           genuine issue as to any material fact and that the moving party 
           is entitled to judgment as a matter of law. 735 ILCS 5/2-- 
           1005(c) (West 1994); Busch v. Graphic Color Corp. 169 Ill. 2d 325, 333 (1996). The standard of review in cases involving 
           summary judgment is de novo. Busch, 169 Ill. 2d  at 333. 
             In order to determine whether summary judgment was 
           proper in the instant case, we must first decide whether, under 
           the statute, an insurance company must introduce evidence of 
           mailing the cancellation notice on the proof of mailing form 
           required by the statute or whether it may prove compliance with 
           the statute through introduction of other evidence. This is a case 
           of first impression in this court. 
             Section 143.14(a) of the Insurance Code states: 
               "(a)   No notice of cancellation of any policy of 
                        insurance, to which Section 143.11 applies, shall be 
                        effective unless mailed by the company to the named 
                        insured and the mortgage or lien holder, at the last mailing 
                        address known by the company. The company shall 
                        maintain proof of mailing of such notice on a recognized 
                        U.S. Post Office form or a form acceptable to the U.S. Post 
                        Office or other commercial mail delivery service. A copy of 
                        all such notices shall be sent to the insured's broker if 
                        known, or the agent of record, and to the mortgagee or 
                        lienholder, if known, at the last mailing address known to 
                        the company." (Emphasis added.) 215 ILCS 5/143.14(a) 
                        (West 1994). 
             Ragan cites Economy Fire & Casualty Co. v. Hughes, 271 
           Ill. App. 3d 1009 (3d Dist. 1995), in support of his argument 
           that production of the proof of mailing on the statutory form is 
           required. Columbia Mutual cites Kolias v. State Farm Mutual 
           Automobile Insurance Co., 148 Ill. App. 3d 1086 (1st Dist. 
           1986), and its progeny to support the opposite position. We find 
           the reasoning in Hughes  more persuasive. 
             The First District found in Kolias that an insurance 
           company need not introduce proof of mailing on the form 
           required by the statute but instead found that proof of mailing 
           could be shown by other evidence that the proof of mailing was 
           maintained. The Fourth District later relied on Kolias and held 
           in Bates v. Merrimack Mutual Fire Insurance Co., 238 Ill. App. 
           3d 1050, 1053 (4th Dist. 1992), that one need not even 
           introduce evidence pertaining to the specific notice of 
           cancellation at issue. According to the Bates decision, evidence 
           that proofs of mailing were maintained on the statutory form in 
           the company's regular mailing practices was enough to satisfy 
           the statutory requirement. 
             Hughes points out that after the 1986 Kolias decision, the 
           statute was amended to broaden the types of proof of mailing 
           forms that an insurance company may use to include 
           commercial carriers other than the United States Postal Service. 
           The Hughes court noted, however, that the legislature did not 
           expand the proof of mailing section to include those methods set 
           forth in Kolias. The Hughes court concluded that had the 
           legislature intended to allow for additional types of proof it 
           would have amended the statute to provide for them. Hughes, 
           271 Ill. App. 3d at 1014. 
             It is well settled that the court's role in interpreting statutes 
           is to give effect to the intention of the legislature and that the 
           language of the statute is the starting point of the court's 
           analysis. People v. Woodard, 175 Ill. 2d 435, 443 (1997), citing 
           People v. Hare,  119 Ill. 2d 441  (1988). Where the language of 
           the statute is clear, it will be given effect without resort to other 
           tools of construction. Woodard, 175 Ill. 2d  at 443. A court 
           should not depart from the language of the statute by reading 
           into it exceptions, limitations or conditions that conflict with the 
           intent of the legislature. Bridgestone/Firestone, Inc. v. Aldridge, 
           179 Ill. 2d 141, 149 (1997). 
             The language of section 143.14(a) is clear and 
           unambiguous. First, it requires that the insurance company mail 
           a notice of cancellation to the insured, and if applicable to 
           certain other parties. Second, the statute requires that "[t]he 
           company shall maintain proof of mailing." (Emphasis added.) 
           215 ILCS 5/143.14(a) (West 1994). There is no alternative 
           method for proving compliance with the proof of mailing 
           requirements other than to maintain the proof of mailing. To 
           allow other methods of proving compliance would circumvent 
           the language and purpose of the statute. 
             It is apparent from the wording of the provision in the 
           context of the Insurance Code that the purpose of the statute is 
           to protect the insured from cancellation of his insurance without 
           his knowledge. In order to accomplish this purpose, the 
           legislature could have required insurance companies to prove 
           receipt by the insured. However, by enacting this section, the 
           legislature clearly sought to strike a balance between the interest 
           of the insured in being informed of a cancellation of his 
           insurance policy and the burden that would be put on an 
           insurance company to prove receipt by the insured. The statute, 
           therefore, requires proof of mailing rather than proof of receipt 
           by the insured. In order to maintain this balance of interests, the 
           legislature set forth the types of proof of mailing that are 
           reliable enough to afford the insured the necessary protections. 
             Under this statutory scheme, the insurance company has a 
           very low threshold of proof. It must only show proof "on a 
           recognized U.S. Post Office form or a form acceptable to the 
           U.S. Post Office or other commercial mail delivery service" that 
           the notice was mailed to the insured. For us to find that the 
           statute implicitly allows an insurance company to use other 
           evidence to show that it maintained the proof of mailing when 
           the statute explicitly requires it to maintain such a form would 
           disturb the balance that the legislature sought to achieve in 
           enacting this section. 
             In the present case, Columbia Mutual had many 
           opportunities to introduce the form but failed to do so. 
           Columbia Mutual did not meet the statutory requirements of 
           section 143.14 (a). Therefore, the attempted cancellation was 
           ineffective and summary judgment on count I was proper. 
             Columbia Mutual next argues the circuit court should have 
           granted Columbia Mutual's May 30, 1996, motion to reconsider 
           granting summary judgment. As a part of the motion to 
           reconsider, Columbia Mutual sought to introduce its "Certificate 
           of Mailing," claiming that it was "unavailable" at the time of the 
           hearing on Ragan's motion for summary judgment. The sole 
           reason proffered for this unavailability was a misunderstanding 
           between Columbia Mutual and its attorneys. We find that the 
           circuit court did not err in denying Columbia Mutual's motion 
           to reconsider. 
             Columbia Mutual further argues that the circuit court also 
           erred in denying its July 19, 1996, motion for leave to amend its 
           earlier answer to Ragan's request to admit. At the outset we 
           note that the circuit court has discretion over the conduct of 
           discovery. Bright v. Dicke,  166 Ill. 2d 204 , 208 (1995). Absent 
           an abuse of that discretion, this court will not overturn a circuit 
           court's ruling. As the appellate court noted, although the circuit 
           court did not specify why it denied Columbia Mutual's motion, 
           there are two sound theories upon which the circuit court could 
           have based the denial. 
             Columbia Mutual's response to Ragan's request to admit, 
           if allowed by the court, would have been untimely. A judge has 
           the discretion to allow an untimely response to a request to 
           admit only after a showing of good cause. Bright, 166 Ill. 2d  at 
           209. The record supports a finding that Columbia Mutual did 
           not provide good cause for its untimely response to Ragan's 
           request to admit and the trial court could have denied Columbia 
           Mutual's motion on that basis. See 134 Ill. 2d R. 183. 
             Additionally, there is ample support for a finding of 
           discovery abuse by Columbia Mutual. The proof of mailing 
           could have been excluded as a discovery sanction under 
           Supreme Court Rule 219(d) (see 166 Ill. 2d R. 219(d)). We 
           therefore find that the trial court did not abuse its discretion in 
           denying Columbia Mutual leave to amend its pleading. 
               The final issue raised by Columbia Mutual is whether 
           the trial court erred in awarding prejudgment interest to Ragan. 
           Ragan's original complaint did not contain a prayer for 
           prejudgment interest. Ragan filed an amendment to the original 
           complaint on June 12, 1995, including a prayer for prejudgment 
           interest. Ragan failed to obtain leave of court to amend his 
           complaint. Columbia Mutual did not object to Ragan's failure 
           to obtain leave and filed a response to Ragan's complaint as 
           amended. The circuit court awarded Ragan prejudgment interest. 
           The appellate court did not address the issue of prejudgment 
           interest although it was raised in the parties's briefs. 
             Columbia Mutual argues that the issue of prejudgment 
           interest was not properly before the trial court because of 
           Ragan's failure to obtain leave of court to file the amended 
           complaint. Columbia Mutual argues that the trial court lacked 
           jurisdiction to award prejudgment interest to Ragan. Columbia 
           Mutual cites three cases, Greene v. Helis, 252 Ill. App. 3d 957 
           (1993), Torley v. Foster G. McGaw Hospital, 116 Ill. App. 3d 
           19 (1983), and Glickauf v. Moss, 23 Ill. App. 3d 679 (1974), 
           that deal with a party's failure to obtain leave to amend 
           pleadings as a jurisdictional defect. Because of the proported 
           jurisdictional nature of the defect, these cases hold that a party 
           cannot waive his right to raise the failure to obtain leave on 
           appeal. We find these cases unpersuasive. In addition, all of the 
           cases relied upon by Columbia Mutual may be distinguished 
           from the present case. Each case cited by Columbia Mutual 
           involves an amendment to a pleading that would add a party to 
           the suit. Greene, 252 Ill. App. 3d 957 (failure to obtain leave to 
           substitute representative of decedent's estate for decedent); 
           Torley, 116 Ill. App. 3d 19 (failure to obtain leave to add party 
           in medical malpractice case); Glickauf, 23 Ill. App. 3d 679 
           (failure to obtain leave to add corporation as defendant). In 
           contrast, Ragan's amended complaint added claims and prayers 
           against parties who were already properly before the court. 
             The Code of Civil Procedure provides that technical defects 
           in pleadings should not prevent the courts from doing justice 
           between the parties. See 735 ILCS 5/2--616 (West 1994) 
           (amendments to pleadings may be allowed at any time before 
           judgment on just and reasonable terms); 735 ILCS 5/2--1005(g) 
           (West 1994) (pleadings may be amended at any time after 
           judgment to conform the pleadings to the proofs); 735 ILCS 
           5/2--612(c) (West 1994) (defects in form or substance of 
           pleadings not objected to at trial are waived); 735 ILCS 5/2-- 
           603(c) (West 1994) (pleadings are liberally construed to do 
           substantial justice between the parties); 735 ILCS 5/2--617 
           (West 1994) (pleadings may be amended to grant relief to which 
           the plaintiff is entitled although that party failed to include the 
           prayer in its pleading). To interpret the failure to obtain leave to 
           add a prayer for relief against a party already before the court 
           as a jurisdictional defect would frustrate the purpose of the 
           foregoing provisions. 
             Since we find that failure to obtain leave to amend a 
           complaint is not a jurisdictional defect and that a party may 
           waive its right to object to the defect, we must now determine 
           whether Columbia Mutual has waived the issue. Questions not 
           raised in the trial court cannot be argued for the first time on 
           appeal. In re Marriage of Minear, 181 Ill. 2d 552, 564 (1998). 
           Columbia Mutual did not object to Ragan's failure to obtain 
           leave in the trial court. Columbia Mutual did, however, file an 
           answer to the complaint, file affirmative defenses and argue the 
           merits of the pleadings as amended in the hearing on summary 
           judgment. Accordingly, we find that Columbia Mutual waived 
           its right to raise the issue on appeal and affirm the grant of 
           prejudgment interest. 
 
                     CONCLUSION 
             We find that an insurance company must produce proof of 
           mailing of a cancellation notice on a form meeting the 
           requirements of section 143.14(a) of the Insurance Code to 
           prove compliance with that provision. Further, we find that the 
           circuit court did not abuse its discretion denying Columbia 
           Mutual's motion for leave to amend its pleadings by the late 
           filing of its notice of mailing. Therefore, we affirm the judgment 
           of the appellate court. 
 
           Appellate court judgment affirmed.