Opinion ID: 661508
Heading Depth: 2
Heading Rank: 2

Heading: authority to waive provisions of the policy

Text: 38 The second challenge raised by plaintiffs focuses on whether Morreale's statements to Ryan, Sr. and plaintiffs constituted a waiver of provisions of the Receipt. Morreale told plaintiffs that temporary insurance was in effect on September 13, 1991 and at the same time handed Ryan, Sr. the Receipt. Plaintiffs contend that this statement bound Metropolitan. While count II of the complaint phrases this issue in terms of estoppel, we understand this assertion to imply that Morreale's statement waived the provisions of the Receipt on behalf of Metropolitan. However, we address both issues below. We also review the agency issues implied by these arguments for [a] waiver of the terms and provisions of a policy can only be made, or estoppel created, by a duly authorized representative while acting within the scope of his authority. 16C Appleman Sec. 9122 at 55. Even though we view the facts of this case in the light most favorable to the plaintiffs, we resolve these issues in favor of the defendant.
39 Plaintiffs maintain that the district court erred by holding that plaintiffs could not have reasonably relied on the representations of the agent. Reasonable reliance is the fourth element for a claim of estoppel under Illinois law. To estop defendants from denying coverage, plaintiffs must show the following elements: (1) words or conduct by Metropolitan, through its agent, Morreale, amounting to a misrepresentation or concealment of material facts; (2) Metropolitan had knowledge, either actual or implied, that the representations were untrue at the time made; (3) Metropolitan intended for plaintiffs to rely on the misstatements; (4) Plaintiffs relied on the misrepresentations without knowledge or reasonable means of knowing the true facts; and (5) Plaintiffs would be prejudiced if Metropolitan is permitted to deny the truth of their misrepresentations. Dresser Industries, Inc. v. Pyrrhus AG, 936 F.2d 921, 930 (7th Cir.1991); UIDC Management, Inc. v. Sears, Roebuck & Co., 167 Ill.App.3d 81, 85, 117 Ill.Dec. 813, 816, 520 N.E.2d 1164, 1167 (1st Dist.1988). While plaintiffs phrase their argument in terms of an objection to the district court's conclusion regarding count II of the complaint, they do not present any serious argument against this conclusion. Instead, plaintiffs argue that Morreale's statements on September 13, 1991, constituted a waiver of the medical examination requirement. We agree with the district court that plaintiffs have not alleged facts demonstrating that Ryan, Sr. relied upon Morreale's misrepresentation without knowledge or reasonable means of knowing the true facts, 6 and we affirm the district court's judgment as to count II and focus our attention on the waiver and agency issues.
40 Whether the facts of this case are sufficient to constitute a waiver of the contractual provision is a question of law. See Geier v. Hamer Enterprises, Inc., 226 Ill.App.3d 372, 390, 168 Ill.Dec. 311, 322, 589 N.E.2d 711, 722 (1st Dist.1992); Whalen v. K-Mart Corp., 166 Ill.App.3d 339, 343, 116 Ill.Dec. 776, 779, 519 N.E.2d 991, 994 (1st Dist.), appeal denied, 121 Ill.2d 587, 122 Ill.Dec. 448, 526 N.E.2d 841 (1988). In order to waive a requirement of an insurance contract, the insurer must intentionally relinquish a known right. Western Casualty & Surety Co. v. Brochu, 105 Ill.2d 486, 498, 86 Ill.Dec. 493, 499-500, 475 N.E.2d 872, 878-79 (1985); Florsheim v. Travelers Indem. Co., 75 Ill.App.3d 298, 304, 30 Ill.Dec. 876, 882, 393 N.E.2d 1223, 1229 (1st Dist.1979). A waiver may be expressed or implied, arising from acts, words, conduct, or knowledge of the insurer. It is unilateral, as no act of the insured is necessary to complete it. Western Casualty, 105 Ill.2d at 498, 86 Ill.Dec. at 499, 475 N.E.2d at 878 (1985). For an insurer to expressly or impliedly waive a provision of an insurance agreement, its actions, words, knowledge, or conduct must be inconsistent with the intention to rely on the requirements of the policy. Ames v. Crown Life Ins. Co., 85 Ill.App.3d 203, 204-05, 40 Ill.Dec. 521, 523, 406 N.E.2d 222, 224 (3d Dist.1980). See also Mulholland v. State Farm Mutual Auto. Ins. Co., 171 Ill.App.3d 600, 609-10, 122 Ill.Dec. 657, 662-63, 527 N.E.2d 29, 34-35 (5th Dist.1988). Plaintiffs do not argue that Metropolitan expressly waived these provisions so we address only the implied waiver issue. 41 Plaintiffs heavily rely on Morreale's statement to them on September 13, 1991, that insurance coverage was in effect. At the same time that Morreale made this statement, he handed Ryan, Sr. the Receipt containing the language at issue in this case. For plaintiffs to maintain their implied waiver argument, they must demonstrate that Morreale's statement impliedly waived both the medical examination requirement and the nonwaiver clause. 42 Examining these facts from plaintiffs' perspective, at the time of the September 13, 1991 meeting, everyone present knew of Ryan, Sr.'s health problems. During the meeting Morreale discussed the application procedure, stated that temporary insurance began that day, and handed Ryan, Sr. the Receipt containing the two clauses at issue. One clause warned that temporary insurance would not take effect beyond accidental death coverage until the medical examination, if required by the underwriting rules, was completed. The second clause warned plaintiffs that Morreale did not have authority to waive requirements of the Receipt, including the medical examination requirement. As we held above, the language contained in the receipt was unambiguous. 43 The policy was in effect even without a medical examination in the event of accidental death prior to the medical exam. Approximately eight to ten days later, when Morreale telephoned Deborah Anetsberger to inform her that her father was required to undergo a physical examination before the policy would be issued, plaintiffs were again notified that Metropolitan was enforcing the medical exam provision. Metropolitan did not lull plaintiffs into a false sense of security by taking an unusually long time to review the application for the purposes of determining whether a medical exam was required. See Whalen, 166 Ill.App.3d at 343, 116 Ill.Dec. at 779, 519 N.E.2d at 994. Further, neither Ryan, Sr. nor plaintiffs objected to this customary requirement. Taken as a whole, the statements and actions by Metropolitan, through its agent Morreale, were not inconsistent with the intention to rely on provisions of the policy. See Florsheim, 75 Ill.App.3d at 304, 30 Ill.Dec. at 882, 393 N.E.2d at 1229. Accordingly, we hold that Metropolitan did not intentionally waive any provisions of the Agreement. 44 But even if we were to conclude that a jury could find that Morreale's statements waived provisions of the policy, plaintiffs have pleaded no facts showing that Morreale had the authority to do so.
45 A question presented by plaintiffs' waiver and estoppel arguments, though not separately addressed by the parties' briefs, is whether Morreale's statement bound Metropolitan. To bind the principal, the agent must have either actual authority, apparent authority, or the principal must ratify Morreale's actions. See 16C Appleman Sec. 9122 at 56. The existence and scope of an agency relationship are questions of fact, unless the parties' relationship is so clear as to be undisputed. Weil, Freiburg & Thomas, P.C. v. Sara Lee Corp., 218 Ill.App.3d 383, 394, 160 Ill.Dec. 773, 781, 577 N.E.2d 1344, 1352 (1st Dist.1991), citing Northern Trust v. Saint Francis Hospital, 168 Ill.App.3d 270, 276, 119 Ill.Dec. 37, 41, 522 N.E.2d 699, 703 (1st Dist.1988). Based on the facts contained in the record, we find that none of these forms have been shown here. 46 To demonstrate actual authority, the plaintiff must present evidence showing that an insurance agent should be treated as a general agent with the power to bind the principal, and this must be beyond the mere testimony of the agent. C.L. Maddox, Inc. v. Royal Ins. Co., 208 Ill.App.3d 1042, 1047, 153 Ill.Dec. 791, 794, 567 N.E.2d 749, 752 (5th Dist.1991); Sommerio v. Prudential Ins. Co., 289 Ill.App. 520, 7 N.E.2d 631 (1st Dist.1937); 22 Illinois Law and Practice Sec. 72, at 107 (1956). See also Weil, 218 Ill.App.3d at 390, 160 Ill.Dec. at 779, 577 N.E.2d at 1350. To survive a motion for summary judgment, the nonmovant must produce proper documentary evidence to support his contentions, i.e., identify a genuine issue of material fact such that a reasonable jury could find for the nonmovant. Whetstine v. Gates Rubber Co., 895 F.2d 388, 392 (7th Cir.1990). The only evidence contained in the record concerning Morreale's authority is his deposition testimony that he was a general agent of Metropolitan. By itself, this evidence is insufficient to demonstrate that Morreale had actual authority to bind Metropolitan by his representations. Plaintiffs offer no other evidence indicating that Morreale had actual authority to bind Metropolitan by his representations, so we concern ourselves only with whether apparent authority exists under the facts of this case. 7 47 Apparent authority may exist when a principal, by words or conduct, holds out an agent as possessing certain authority and thereby inducing others to believe that authority exists. Lynch v. Board of Educ. of Collinsville Community Unit Dist. No. 10, 82 Ill.2d 415, 426, 45 Ill.Dec. 96, 104-05, 412 N.E.2d 447, 455-56 (1980). While Metropolitan did send its agent to sell insurance, it tried to indicate to potential customers that Morreale had only limited authority. The record establishes that Metropolitan did not hold Morreale out as having the authority to waive requirements in the Receipt. The Receipt specifically states Limitations on Authority--No one but the President, the Secretary or Vice-President of Metropolitan may change or waive the terms of this Receipt. Also, Metropolitan later informed plaintiffs, through Morreale, that a medical examination was required by the underwriting rules before a policy could be issued. These facts clearly demonstrate that Metropolitan did not acquiesce in the agent's alleged waiver of the clauses in issue. Therefore we hold that plaintiffs have failed to establish that there are contested facts on whether Morreale had the authority to waive provisions of the Receipt and that the district court properly granted summary judgment in favor of Metropolitan on Count II of the complaint. 48 Such a result makes sense. It is hard to imagine a scenario whereby an agent of the company could simply waive any provision contained in the Receipt/Temporary Insurance Agreement and bind the insurance company to a totally uninsurable risk. This is one reason why the theory of apparent authority requires the principal to actively hold the agent out as having the authority to bind the principal when in fact actual authority does not exist. 49 Rather than addressing the authority issues directly, plaintiffs argue that Morreale was a general agent of Metropolitan who, under Illinois law, could waive any part of the policy. General agent is a term used loosely and sometimes carelessly when discussing the authority of insurance agents. See 16 Appleman Sec. 8691. Some Illinois cases, while adhering to the proposition that agency law applies to the creation of insurance contracts, recognize two general types of insurance agents: general agents and soliciting agents. The key difference between these two categories is that a waiver or estoppel claim may result from the acts, conduct, or statements of a general agent, but a mere soliciting agent generally has no authority to waive conditions of the policy. 22 Illinois Law and Practice Secs. 354-355. 8 Because of this difference in powers, Morreale's ability to waive the two provisions hinges on him being classified as a general agent. [A] general agent is one who has actual authority to bind an insurer by his creation of a contract of insurance; it cannot rest upon implied, apparent, or ostensible authority. 12A Appleman Sec. 7242, at 241 (emphasis added). Here plaintiffs rely on Morreale's testimony that he was a general agent. However, the mere statement by an agent that he is a general agent does not amount to the legal conclusion that he was a general agent. For plaintiffs to establish that Morreale was a general agent of Metropolitan, they must show he had actual authority to do so. As discussed above, the record is void of any evidence of actual authority, and thus Morreale has not been shown to be a general agent. 50 Plaintiffs cite Zannini v. Reliance Ins. Co., 147 Ill.2d 437, 168 Ill.Dec. 820, 590 N.E.2d 457 (1992), and Armstrong v. United Ins. Co., 98 Ill.App.3d 1132, 54 Ill.Dec. 313, 424 N.E.2d 1216 (1st Dist.1981), in support of their argument that Morreale's statements bound Metropolitan. Both cases, however, are clearly distinguishable from the instant case. 51 In Zannini, the court found express authority existed as evidenced by the agency-company agreement and there were no expressed limitations as to his authority. Because there is no evidence of such express authority in this case, Zannini does not apply. Similarly, Armstrong involved an agent who had actual authority to bind the principal by issuing a conditional receipt. The conditional receipt contained no language indicating a need for a medical examination or that the agent did not have the authority to waive the medical examination requirement. Armstrong, 98 Ill.App.3d at 1142-43, 54 Ill.Dec. at 320-21, 424 N.E.2d at 1223-24. Both Zannini and Armstrong stand in stark contrast to this case where the Receipt explicitly notified the applicant that the insured may be required to undergo a medical examination and there is no evidence showing that the insurance agent had no authority to waive its provisions. 9 52 Because plaintiffs present no argument regarding the third count of the complaint alleging that Metropolitan vexatiously and unreasonably delayed paying the plaintiffs' claims and seeking statutory penalties under 215 ILCS 5/155 (1993), we affirm the district court's grant of summary judgment as to Count III. 53 For the reasons stated, the district court's order granting defendant summary judgment on all counts of the complaint is 54 AFFIRMED.