Court Opinion

ID: 9486454
Source: CourtListenerOpinion
Date Created: 2023-08-05 11:48:17.921295+00
Date Added: 2024-06-11T17:51:43.733674
License: Public Domain

ALDISERT, Circuit Judge,
dissenting.
“How you come out in this case depends on how you go in.”
I’m not sure when I first heard this phrase or who said it, but I think it applies here.
In this appeal, the Jabins anchor their main contention on provisions of the Illinois Premium Finance Act, Ill.Rev.Stat. ch. 73 ¶ 1065.68, and argue that the finance company, Imperial, failed to observe the notice provisions of the Act when canceling their policy. Imperial’s failure, in turn, rendered the insurance company’s subsequent cancellation void. The insurance company, Universal Fire and Casualty, Inc., responds that Imperial’s notice did comport with the statutory requirements, to-wit, that all premium finance companies provide ten days written notice to the insured of an intent to cancel an insurance contract. It also contends that it had no obligation to ensure that Imperial complied with the Act.
The argument presented to us followed a narrow compass: The parties limited their discussion to the Premium Finance Act. In so doing, both parties missed the jurisprudential boat.
I.
I believe that the basic tenets of Illinois insurance law govern the interpretation of the contract between Universal, the insurer, and the Jabins, its insured, rather than the Premium Finance Act as argued by the parties and accepted by the majority. In my view, the proper question for decision is whether Universal, in relying on the notice representations of Imperial, met the high standard of care under Illinois law for terminating an insurance policy.
The facts here are simple and not controverted:
1. Universal gave no actual notice to its insured that it was canceling their insurance contract. It relied solely on the representations of Imperial, a finance company, which was not a party to the insurance contract nor a third party beneficiary.
2. Rather than giving actual notice to its policyholders, Universal relied on boilerplate language found on the back of Imperial’s letter canceling the Jabins’ policy:
The Lender hereby acknowledges and affirms that written notice of the exercise of its right and intent to cancel has been mailed to the insured pursuant to appropriate state law.
App. at 44.
3. Imperial offered no evidence that it gave actual and timely notice to the Jabins. It could not even rely on the presumption of delivery to them of a letter notice placed in the U.S. mails. The sole evidence presented was that Imperial delivered the letter to a private presort service.1
“Insurance companies must be held to a strict standard with reference to termination and forfeiture of insurance contracts for nonpayment of [a] premium.” Horan & Co. v. Republic Ins. Group, 175 Ill.App.3d 735, 737, 125 Ill.Dec. 247, 530 N.E.2d 275 (1988). I believe that under this “strict standard,” the insurer must do more than sleep on boilerplate language contained in a standardized form provided by a third party. This is particularly true when the third party is acting in its own best interests and not those of the insured. See Holbrook v. Institutional Ins. Co. of Am., 369 F.2d 236, 240 (7th Cir.1967). And that is precisely what Universal did here. It did nothing to ascertain wheth*1473er its insured received actual notice of the finance company’s intent to cancel the policy.
II.
Illinois law requires insurance companies to do more, much more, before they can proceed with the draconian act of terminating an insurance policy. It is well established that an “insurance policy is a contract between the insurer and the insured party,” Copley v. Pekin Ins. Co., 111 Ill.2d 76, 85, 94 Ill.Dec. 757, 488 N.E.2d 1004 (1986), and that “a public policy favoring communications between insurance companies or agents and policy holders regarding cancellations or non-renewals of insurance is evidenced by section 143.18 of the Illinois Insurance Code.” See Guarantee Trust Life Ins. Co. v. Gilldorn Ins. Midwest Corp., 240 Ill.App.3d 707, 181 Ill.Dec. 490, 608 N.E.2d 563 (1992) (section provides that no cause of action shall lie for written or oral statements pertaining to a notice of cancellation).
The policy favoring direct communication between the insurer and the insured is at the heart of the strict standard imposed on insurance companies when canceling a policy. Illinois law permits an insurer to delegate to another the authority to send a cancellation notice, but it does not sanction the delegation of the ultimate responsibility to ascertain that timely notice was given.
III.
The insurance company should not be held to a lesser standard of care under the insurance contract simply because necessity has driven an insured to seek financing to pay its premiums. There is nothing in Illinois insurance law that absolutely immunizes the insurer from its strict obligations when terminating or canceling a policy for nonpayment of premiums. Accordingly, Universal cannot be relieved of its responsibilities, notwithstanding the agreement between Imperial and the Jabins appointing Imperial as their “Attomey-in-fact with complete authority to cancel the Policies” and the Illinois Premium Finance Act, which gives the finance company the right to “request cancellation in the name of the insured.” Ill.Rev.Stat. ch. 73 ¶ 1065.68.
Whatever the effect of the Premium Finance Act on the relationship between the lender and the borrower, this statute cannot operate as a safe haven for insurance companies. Its provisions cannot dilute the high duty of care imposed upon an insurance company when it seeks to terminate the contract of a policy holder.
Whether viewed from “a strict standard” or even couched in terms of ordinary care, I believe that the Illinois courts would hold that Universal had an obligation to do more than rely on the pre-printed statement contained in the finance company’s standardized form. Universal had obligations under its contract to notify the Jabins of its intent to cancel their policy, and instead of doing this itself, Universal delegated the task to the finance company, which was not a party to the insurance contract. Universal may delegate a task, but it may not delegate the ultimate responsibility of giving notice, for such abdication flies in the face of the public policy considerations upon which the Illinois insurance code is based.
IV.
Universal relied on Imperial’s representation that notice of termination had in fact been made by Imperial to the policy holder. This reliance was misplaced. There is no proof that the insured ever received actual and timely notice of the intent to cancel. Indeed, there is no proof that Imperial placed the notice in the U.S. mails. All we have is a form affidavit from an Imperial representative, Willie Davis, with check marks indicating that he delivered the notice in a stamped envelope to a private presort service. This is insufficient to trigger the presumption of receipt under Illinois case law.
To establish that proper notice was received by an insured, the insurance company or its agent, in this case, the premium finance company, must show that the notice was delivered to the U.S. mails and that such delivery was timely. Universal did not provide sufficient evidence that Imperial fulfilled either obligation.
*1474A
A correspondence is presumed to have been received “when the correspondence has been placed in a properly addressed envelope with adequate postage affixed and deposited in the mail.” First Nat’l Bank of Antioch v. Guerra Constr. Co., Inc., 153 Ill.App.3d 662, 667, 106 Ill.Dec. 582, 505 N.E.2d 1373 (1987). In Buckingham Corp. v. Ewing Liquors Co., 15 Ill.App.3d 839, 842, 305 N.E.2d 278 (1973), the Illinois Court of Appeals held that the presumption did not apply when the sole testimony regarding mailing was that the company used a mailing service for all mass mailings and no witness was familiar with the practices of the mailing service.
The teachings of Buckingham control this case. Here, as in Buckingham, there was testimony only that the notices were delivered to a presort service. There was no testimony, by affidavits or otherwise, disclosing what took place at the pre-sort agency after the notice was delivered to them or when mailing of the notice actually occurred. Similarly, there was no description of practices generally followed by the presort service. Although “direct testimony from the person who actually performed the mailing is not necessary if corroborating circumstances are otherwise sufficient,” First Nat’l Bank, 153 Ill.App.3d at 668, 106 Ill.Dec. 582, 505 N.E.2d 1373, no such corroborating evidence was forthcoming in this case. No evidence was provided by Universal or Imperial to substantiate the contention that the notices were in fact mailed to the insured. Absent the presumption of receipt when an item is placed in the U.S. mails, Imperial must submit additional proof that the Jabins actuaUy received the notice of canceUation.
Thus, whether we proceed under IUinois general insurance law or, alternatively, under the Premium Finance Act, as argued by the parties and accepted by the majority, the teachings of Buckingham mandate that the mere forwarding of notice to a presort service, without more, is insufficient to invoke the presumption of receipt by the addressee under IUinois law. Therefore, Universal’s reUance on the affidavits provided by Imperial would have been insufficient to satisfy IUinois’ strict standard.
B.
But there is another fatal flaw in Universal’s case. Imperial not only had to prove that the notice was received, but also that receipt was timely under the statute. Under IUinois law, a presumption of timely receipt of a notice arises upon proof that the letter was properly addressed and properly rnafled. See M.S. Kaplan Co. v. Cullerton, 49 Ill.App.3d 374, 384, 7 Ill.Dec. 220, 364 N.E.2d 381 (1977). This presumption does not apply without some evidence that the notice was actually rnafled on the date required. Id. Universal received the notice of intent to cancel from Imperial on January 2, and the Jabins’ poücy was canceled on January 3. The IUinois Premium Finance Act requires that the finance company provide “[n]ot less than 10 days written notice” to the insured of an intent to cancel. Ill.Rev.Stats. ch. 73 ¶ 1065.68.
Imperial provided only an affidavit from WUUe Davis that the notice of intent to cancel addressed to the Jabins was “dehvered to United Presort Service” on December 18, 1989, ten days prior to the notice of cancellation and that the canceUation notice was de-Uvered to the presort service on December 29, 1989. App. at 19-20. There was no evidence that the notices were actuaUy placed in the U.S. mails on or around the dates provided sufficient to satisfy the statute’s ten day requirement. This omission is fatal to Imperial’s attempt to prove timely constructive receipt by the Jabins.
Accordingly, there was insufficient proof that the notice was dehvered to the U.S. mails or that the Jabins received timely notice under the Finance Act, if in fact they received any notice at aU.
V.
I am satisfied that the IUinois courts would hold that Universal’s misplaced reUance on Imperial’s representations constituted an impermissible deviation from the strict standard imposed on insurers under IUinois insurance law.
*1475I would reverse the grant of summary judgment in favor of Universal. Accordingly, I dissent.

. In this respect, I disagree with the majority’s narrative of the facts. They state that "Imperial ... mailed the Jabins a ten day notice.” Maj.Op. at 1466. There is no evidence that the notice was placed in the custody of the U.S. Postal Service.