Court Opinion

ID: 9734243
Source: CourtListenerOpinion
Date Created: 2023-08-26 17:29:25.659573+00
Date Added: 2024-06-11T18:26:47.227572
License: Public Domain

Mr. Justice Schaefer, dissenting: The majority opinion correctly states, “The critical issue posed on this appeal is whether or not the third party, John Mimms, was insured for liability with Adams Mutual Insurance Company at the time of the accident.” Curiously, however, neither John Mimms nor the Adams Mutual Insurance Company is a party to this action. John Bolton, special deputy liquidator of the Adams Mutual Insurance Company, was named as a party defendant but the summons was returned “not found” as to him. Mimms was not named as a party defendant. In my opinion the trial court should have directed that these parties be joined before proceeding with the case. (See Ill. Rev. Stat. 1965, chap, no, par. 25.) The absence of these parties of course limits the res judicata effect of the judgment in this case. Their absence also probably accounts for the unsatisfactory condition of the record in several respects. It is assumed that the Iberra Agency was the agent of John Mimms, and not of Adams, but I do not find satisfactory proof of that fact in the record. The record is silent as to whether or not Mimms had paid the premium on the policy which Adams issued. It does not show when Adams first learned of the accident or who notified Adams of the accident. Van Gundy, the vice president of Adams who issued the policy, testified that other officials of the company were already discussing the accident when he first heard about it. The policy that Adams issued to Mimms does not appear in the record. Van Gundy also testified that after the policy had been repossessed from the Iberra Agency “the entire transaction was voided and never showed on the books of the Adams Mutual Insurance Company.” In these circumstances it seems to me singularly inappropriate to speak of a lack of good faith on the part of the applicant for the insurance policy. In this case the applicant sought insurance coverage from the day he made the application. He applied for a policy that would be effective beginning 12 :oi A.M. June 22, 1962. The company was not required to accept that application, but it did so. To permit the company to repudiate its contract thereafter seems to me to sanction bad faith on the part of the insurance company. The majority opinion states: “The relationship between an applicant and an insurer requires good faith on the part of the applicant because of the peculiar character of the insurance contract. The applicant has an obligation imposed by law to notify the insurer of any changed condition materially affecting the risk during the pendency of the application for insurance.” For this proposition the opinion cites Western and Southern Life Ins. Co. v. Tomasun, 358 Ill. 496; Stipcich v. Metropolitan Life Ins. Co. 277 U.S. 311, 72 L. Ed. 895; Palmer v. Bull Dog Auto Ins. Ass’n, 294 Ill. 287, and Merchants’ Ins. Co. v. Paige, 60 Ill. 448. None of these cases involved the acceptance of an application for coverage from a specified antecedent time. That is what the parties bargained for in this case, and that is the contract that was entered into. The company’s acceptance was complete when the policy was deposited in the mail addressed to the Iberra Agency. (Restatement of Contracts, § 64.) As the majority recognize, such a bargain is not contrary to public policy. Whether or not the Iberra Agency was authorized to issue a binder is immaterial in this case. There is no problem as to the authority of the agent, for the company itself accepted the application which specifically requested the issuance of a predated policy. In my opinion the majority overlooks the crucial difference between the duty to notify of changed conditions under an ordinary application and the duty that exists when predated insurance is involved. The Supreme Court of the United States drew this distinction in Stipcich v. Metropolitan Life Ins. Co. 277 U.S. 311, 315; “An insurer may of course assume the risk of such changes in the insured’s health as may occur between the date of application and the date of the issuance of a policy. Where the parties contract exclusively on the basis of conditions as they existed at the date of the application, the failure of the insured to divulge any later known changes in health may well not affect the policy.” Several courts in other jurisdictions have upheld the insured’s claim on predated insurance against the insurer’s contention that the insured violated a duty to notify it of a loss that occurred after the application was executed but before it was accepted. In Mutual Benefit Life Ins. Co. v. Higginbotham, 95 U.S. 380, 24 L. Ed. 499, 501 (1877), the insurer contended, as here, that the insured had a duty to notify of intervening circumstances, and that the representations about his health made in the application for a predated life policy were “continuing” to the time of acceptance. The United States Supreme Court rejected this argument, holding that the jury could find that the parties had agreed that the risk was to begin on the application date or before “by relation.” “Had it been otherwise, we cannot conceive how the sagacious business men who control this Company would have assented to the delivery of the policy without inquiry as to the intermediate time.” Similarly in Burdick v. California Ins. Co. of San Francisco, 50 Ida. 327, 295 P. 1005 (1931), an insured was allowed to recover against the insurer on a predated auto casualty policy for a loss occurring after the date of the policy but before the application was actually accepted. The court quoted with approval the statement of the Second Circuit Court of Appeals in El Dia Ins. Co. v. Sinclair, 228 F. 833, 841 (1915), that “By antedating the policy the defendant assumed the retrospective risk for which it provided, in the same manner as if it had been issued on the day it bore date.” The principle recognized by these cases is reflected in those construing the effect of a “not valid unless countersigned” clause. In most of these cases the insured’s loss occurs after the termination date of the policy but within its time span if its duration was computed from the date of countersigning. These cases hold that the subsequent loss is not covered, although the contract was not formally complete until it was countersigned. As was said in McKee v. Continental Ins. Co. 191 Tenn. 413, 234 S.W.ad 830, 832 (1950), “where the application is made in good-faith to one having authority to receive the application and a loss happens between that and the countersigning, and there is no fraud involved, the better reasoned cases hold that the Insurance Company is liable for the loss that happened pending the countersignature.” See also Pruitt v. Great American Ins. Co. 241 N.C. 725, 86 S.E.2d 401 (1955); Union Marine & General Ins. Co. v. Holmes, 249 Ala. 294, 31 So. 2d 303 (1947) ; Dillon v. General Exchange Ins. Corp. 60 S.W.2d 331 (Tex. Civ. App. 1933). There are two cases which seem to support the majority’s position, Stranglio v. Consolidated Indemnity & Ins. Co. (9th cir. 1933) 66 F.2d 330 and Millar v. New Amsterdam Casualty Co. (App. Div. 1936), 289 N.Y.S. 599, but their results have been severaly criticized. “It appears that many companies have fallen into the practice of predating policies to the time when the application for insurance was made. If no loss had occurred in the interval between application and issuance of the policy, all is well. But when such a loss has been sustained, the insurer then attempts to wriggle out of liability on the ground that the risk has been increased without its knowledge. It is submitted that a rule of law which sustains this position is instrumental in perpetrating a fraud upon the insured. If the insurer dates back its policy, and charges a premium for such period of time, it should bear the risk of a loss occurring within the same period of time. It would be monstrous to allow the insurer to charge for a coverage which it was never prepared to assume.” 7 Appleman, Insurance Law and Practice, sec. 4266 (2d ed. 1962). For these reasons I am unable to join in the majority’s conclusion that Mimms was an “uninsured motorist.” Mr. Justice Underwood joins in this dissent.