Court Opinion

ID: 9714325
Source: CourtListenerOpinion
Date Created: 2023-08-26 05:35:16.132765+00
Date Added: 2024-06-11T18:23:25.202726
License: Public Domain

JUSTICE COOK, dissenting: I respectfully dissent. The jury should have been instructed that a misrepresentation is not material unless the insurer somehow could have relied on it. I would reverse and remand for a new trial. It is incorrect to say that “fraud” has no application to this case. The clause upon which State Farm relies to void this policy is captioned “Concealment or Fraud.” Innocent misrepresentations are not enough; the misrepresentations must be fraudulent or something like it. We should deal with a “Concealment or Fraud” clause carefully. In the context of common-law fraud, the law presumes that transactions are fair and honest; fraud is not presumed. Accordingly, fraud must be proved by clear and convincing evidence. Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill. 2d 100, 191, 835 N.E.2d 801, 856 (2005). Exclusionary clauses, which run counter to the basic purpose of the policy to afford coverage, are strictly construed against the insurer. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 119, 607 N.E.2d 1204, 1217 (1992); Wasik v. Allstate Insurance Co., 351 Ill. App. 3d 260, 267, 813 N.E.2d 1152, 1158 (2004) (innocent insured entitled to recover despite arson of co-insured). “Illinois courts will liberally construe any doubts as to coverage in favor of the insured, especially when the insurer seeks to avoid coverage based on an exclusion.” Johnson Press of America, Inc. v. Northern Insurance Co. of New York, 339 Ill. App. 3d 864, 871-72, 791 N.E.2d 1291, 1298 (2003). In the general nature of things, information is usually developed during an investigation; what is believed or assumed to be correct at the beginning may be explained to be otherwise at the end. We should avoid an interpretation that allows the insurer, in hindsight, to seize upon any misstatement made during its investigation and use that misstatement to void the policy. It should not be enough that the insurer “feels” that it has been misled. The “Concealment or Fraud” clause provides an easy fail-back position for an insurer that cannot prove the insured committed arson. For example, in A&A, the jury first found that the insured had not been involved in setting the fire but then went on to find the insured had violated the “Concealment or Fraud” clause. A&A, 259 Ill. App. 3d at 74, 630 N.E.2d at 1003. The appellate court reversed and remanded. It is interesting that, in the present case, the jury was first asked whether the insured had violated the clause and, after it had answered that question in the affirmative, it did not even address the question whether the insured had been involved in setting the fire, despite the fact that arson had been the focus of the evidence presented. The real question in this case was whether Penn and Burmeister took advantage of the insured, but State Farm was allowed to limit the jury’s inquiry to whether the insured, even if he had been taken advantage of, had made a misstatement. It is not enough to void a policy that an insured has made a misstatement on an unimportant matter. “[FJalse answers are material if they might have affected the attitude and action of insurer, and they are equally material if they may be said to have been calculated either to discourage, mislead, or deflect a company’s investigation in any area that might seem to the company, at that time, a relevant or productive area to investigate.” (Emphasis added.) Couch on Insurance §197:16, 197 — 38, 197 — 39 (3d ed. 2005). The same statement is made in Passero. Passero, 196 Ill. App. 3d at 609, 554 N.E.2d at 388. State Farm’s instruction appears to be taken from Passero, but it significantly changes the highlighted language. State Farm’s instruction states: “A concealment, misrepresentation[,] or false statement is material if a reasonable insurer would attach importance to it at the time it was made. A reasonable insurer would attach importance to any fact or statement that would affect the insurer’s action or attitude regarding a claim by an insured.” There are several problems with State Farm’s instruction. First of all, it is phrased in the abstract. It would make no difference that State Farm, in this particular case, could not have been affected by the alleged misstatement. The question is how a “reasonable insurer” would have been affected. It is not clear where that language came from; it did not come from Passero, the principal case on which State Farm relies. The language whether a reasonable insurer “would attach importance to it” is also troubling. It should not be enough that an insurer might “feel” that an answer is important. Something more is required than a general statement that insurers rely on insured’s representations when ascertaining the true facts of a loss. Couch on Insurance §197:19, 197 — 44, 197 — 47 (3d ed. 2005). State Farm’s instruction is defective because it significantly lessens the requirement that the alleged misstatement be one that “might have affected” the insurer. Under the instruction, any misstatement, no matter how minor, can be used to void the policy. In a case similar to ours, the First District has stressed the importance of the materiality definition. Without holding that a definition of fraudulent misrepresentation must be given, the First District said that at least if that instruction had been given, the jury would have known that it was necessary that “ ‘the person to whom the representation was made had a right to rely upon it and in fact did so.’” A&A, 259 Ill. App. 3d at 83, 630 N.E.2d at 1009. A&A did not explain the extent to which an insurer must “in fact” rely on the representation, but certainly materiality requires that the insurer “had a right to rely” upon the representation. “Reliance” has been a difficult concept in these cases. Certainly the insurer is not required to pay improper claims as a precondition to its denial of the same claims on grounds of violation of the policy condition. State Farm Fire & Casualty Insurance Co. v. Graham, 567 N.E.2d 1139, 1141 (Ind. 1991). “However, as used in the policy condition, the phrase ‘if any insured has intentionally concealed or misrepresented any material fact or circumstance’ reasonably means more than momentary or inadvertent concealment or misrepresentation. Facts demonstrating a voluntary correction of error would be probative evidence on the issue of intentional concealment or misrepresentation.” Graham, 567 N.E.2d at 1141. This court has previously required reliance, recognizing that insurers are unlikely to “give any significant weight to” a speculative assertion by an insured. Nagel-Taylor Automotive Supplies, Inc. v. Aetna Casualty & Surety Co., 81 Ill. App. 3d 607, 612, 402 N.E.2d 302, 306 (1980) (recovery allowed despite clearly unreasonable estimate of lost profits; jury rejected evidence that insured was complicit in arson). The Passero case, which stated that the definition of material misrepresentations is “quite different” in the realm of insurance law, involved a unique situation, very different from our case. In Passero, the insureds argued that their admittedly false statements, consisting of altered receipts for personal property, were not material because their policy provided replacement-cost coverage. Passero, 196 Ill. App. 3d at 609, 554 N.E.2d at 389. The First District rejected the insured’s technical argument that the statements were not material and affirmed summary judgment for the insurer. Passero, 196 Ill. App. 3d at 611, 554 N.E.2d at 390. Passero did not hold that reliance was irrelevant under the “Concealment or Fraud” clause. Passero held that false answers were material only if they might have affected the insurer, which is another way of saying only if the insurer “had a right to rely” upon the representations. Passero, 196 Ill. App. 3d at 608-09, 554 N.E.2d at 388; see also A&A, 259 Ill. App. 3d at 83, 630 N.E.2d at 1009 (“had a right to rely”). Passero recognized that “relatively innocent” misrepresentations were not a basis for voiding a policy. Passero, 196 Ill. App. 3d at 610, 554 N.E.2d at 389. There was no misrepresentation in the present case that might have affected the disposition of the claim. Plaintiff met with State Farm’s adjuster on June 10, 2003, after the fire. Plaintiff told the adjuster about his financial problems. He did not mention his American Express card, but he told her he would furnish a credit report. The credit report was furnished in August 2003, showing the $4,202.86 in charges on the American Express card. There is no way State Farm could have been harmed by the brief failure to mention the American Express card. State Farm did not ask plaintiff about the American Express card when it took his evidence deposition on October 31, 2003. Plaintiff told State Farm on June 10 that he could not use his ATM card, perhaps because he used the wrong password. At the deposition, he told State Farm he had learned the card was rejected because of insufficient funds. Plaintiff was making mortgage payments in 2003 but, at the time of the fire, was two months behind, although he had not incurred any late-payment charges. It is not an adequate discharge of our duties to simply leave the matter to the jury, particularly when the jury has not been properly instructed. There has to be evidence to support a jury verdict. How could State Farm have been harmed by anything the insured said, or did not say, regarding the American Express card? State Farm’s other complaints are equally trivial. The insured misrepresented whether he had satellite television service at the time of the fire? The insured disclosed that he could not draw money from his ATM but misrepresented the reason why? The jury should not have been allowed to conclude that any misstatement, no matter how insignificant, could be material. The fact that insurers generally rely on insureds’ representations does not mean that every alleged misrepresentation is material. Couch on Insurance §107:19 (3d ed. 2005). The instruction defining what is “material” did not adequately state the law. As in A&A, if the insured’s instruction had been given, the jury would at least have known that the person to whom the representation was made had to have a right to rely upon it. A&A, 259 Ill. App. 3d at 83, 630 N.E.2d at 1009. The jury’s verdict is contrary to the manifest weight of the evidence. No reasonable jury could have concluded that State Farm could have been affected by these statements or that the insured, who provided all the information, had any intent to deceive.