Barth v. State Farm Fire and Casualty Co.

NO. 4-06-0208 Filed 2/20/07
IN THE APPELLATE COURT
OF ILLINOIS
FOURTH DISTRICT
RODNEY J. BARTH, ) Appeal from
Plaintiff-Appellant, ) Circuit Court of
v. ) Sangamon County
STATE FARM FIRE AND CASUALTY COMPANY, ) No. 04L220
Defendant-Appellee. )
) Honorable
) Patrick W. Kelley,
) Judge Presiding.
______________________________________________________________
JUSTICE TURNER delivered the opinion of the court:
In March 2005, plaintiff, Rodney J. Barth, filed a
second-amended complaint against defendant, State Farm Fire and
Casualty Company, claiming defendant failed to pay an insurance
claim following a house fire. In December 2005, a jury found in
favor of defendant.
On appeal, plaintiff argues (1) the trial court erred
in failing to give plaintiff's instructions to the jury, (2) the
trial judge erred in not recusing himself from the case, (3) the
court erred in prohibiting plaintiff from presenting certain
evidence, (4) the court erred in not granting the motion for
judgment notwithstanding the verdict as to the second affirmative
defense, and (5) the jury's verdict on the second affirmative
defense was against the manifest weight of the evidence. We
affirm.
I. BACKGROUND
In March 2005, plaintiff filed a second-amended com-
plaint against defendant, seeking to recover losses that resulted
from a house fire in Auburn. Plaintiff alleged (1) defendant
breached its homeowner's policy by failing to pay the claim, (2)
defendant's refusal to pay and/or delay in settlement was unrea-
sonable and vexatious, and (3) the denial amounted to intentional
infliction of emotional distress.
In April 2005, defendant set forth three affirmative
defenses, including the "intentional act provision" of the
policy, the "concealment or fraud provision" of the policy, and
set-off. Under the second affirmative defense concerning con-
cealment or fraud, defendant alleged plaintiff hid the actual
status of his financial condition by misrepresenting the status
of his mortgage, his satellite-television service, and his
ability to withdraw money from an automated teller machine (ATM),
and by not revealing the existence of his American Express card.
Defendant alleged plaintiff's financial condition was a motive
for the fire.
In June 2005, plaintiff filed a motion for substitution
of judge for cause pursuant to section 2-1001(a)(3) of the Code
of Civil Procedure (Procedure Code) (735 ILCS 5/2-1001(a)(3)
(West 2004)). The motion alleged Judge Patrick Kelley had
recently disclosed he was an insured of defendant, thereby
creating an appearance of partiality. Judge Kelley referred the
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motion to Judge Robert Eggers for a hearing on the matter. Judge
Eggers indicated he too was insured by State Farm and reassigned
the case. Judge Leo Zappa heard the motion, denied it, and
referred the case back to Judge Kelley for trial. In December
2005, Judge Kelley filed an order to clarify that his prior
referral of the motion for substitution to Judge Eggers was
considered as a motion for recusal and Judge Kelly intended to
deny that motion by referring it to Judge Eggers.
At trial, William Bolletta testified he was certified
as an arson investigator in 1996. On June 2, 2003, Bolletta
responded to a fire at plaintiff's home in Auburn. Upon arrival,
he was advised that the fire appeared to have different points of
origin. Bolletta talked to an individual, suggested by counsel
to be William Penn, who remarked he had been at the scene of
other fires and was "amazed" at how fast the fire department
responded. Bolletta spoke with plaintiff, who was sitting in a
vehicle and appeared "very agitated."
On cross-examination, Bolletta testified he believed
the fire in the kitchen had "a couple of points of origin" that
appeared to be unrelated. The fire in the bedroom was also
unrelated to the kitchen fire. He came to the conclusion the
bedroom fire was not accidental. It was Bolletta's opinion that
the occupants of the house started the fire, left, then returned
to see the fire did not take, and started another fire.
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Plaintiff called Cheryl Jyawook as an adverse witness.
She worked as a claim representative for State Farm. After the
fire, Jyawook provided plaintiff with various forms to inventory
property. She stated the coverage limits on the property
amounted to $102,599. Jyawook determined that plaintiff was
behind in his mortgage payments. Defendant denied the claim on
March 31, 2004.
Plaintiff's evidence deposition was read to the jury.
Plaintiff testified he suffered from polio and had been in a
wheelchair since he was 12 years old. He obtained a bachelor's
degree and a master's degree in education and worked in state
government for over 20 years. He quit working because of his
weakened physical condition and depression, and he began receiv-
ing disability income. Plaintiff paid $77,500 for his house in
Auburn with monthly mortgage payments totaling $511.74. He had
the house insured with State Farm. After the fire, the house was
sold for $52,500.
In 2002, plaintiff did not have a driver's license and
used a taxi to take him to Springfield. He met William Penn,
whom he later hired to drive him when necessary. Plaintiff
allowed Penn to keep his car and would call him if he needed a
ride. At one point, Penn introduced plaintiff to William
Burmeister, "a sidekick of Penn's."
In March 2003, plaintiff discovered he had bounced
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checks in his bank account. He also thought he failed to receive
some of his mail. As of June 2003, plaintiff believed he had a
net worth of $72,638. He had received an American Express card
in January or February 2003, and the $4,202.86 in charges for
February 2003 were not authorized by him. Penn had borrowed the
American Express card, and plaintiff authorized the purchase of
eyeglasses and a tattoo. Plaintiff did not authorize $3,200
worth of cash advances on his Visa card in March 2003. Penn also
had access to the Visa card. Near the time of the fire, plain-
tiff gave Penn $700 in cash to pay $511.74 for the mortgage and
$188.16 for the car payment. Plaintiff believed Penn did not
deliver the money because the amount was not recorded. Plaintiff
later made up the payments in August 2003.
On June 2, 2003, Penn and Burmeister showed up at
plaintiff's residence at around 4:15 p.m. At around 7:30 p.m.,
the three men decided to leave. Penn lifted plaintiff into the
car and placed his wheelchair in the trunk. Penn also took
plaintiff's shaving kit from the house and put it in the car.
Plaintiff found this "odd" but did not say anything. The men
traveled to Chatham and stopped at a cigar store and then a gas
station. They then drove aimlessly around Chatham before re-
turning to Auburn at around 9 p.m. The men exited the car and
talked in the garage. Some time later, Penn and Burmeister
wanted to rent some movies. Penn entered the house for about 10
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minutes, while plaintiff used his cellular phone to call his
neighbor to borrow $20.
The men reentered the car and headed toward Virden.
They stopped at a bank around 10:20 p.m. so plaintiff could get a
cash advance using his Visa card. Plaintiff gave Penn the card
and the personal identification number, but the transaction was
declined for insufficient funds. Penn tried again with the same
result. Plaintiff was "surprised" because he thought he had
enough money available in the account. They continued to a video
store, and Penn and Burmeister were in the store for about 20
minutes.
The men returned to Auburn, and Penn stopped the car in
the driveway. Penn indicated he needed to use the bathroom.
Plaintiff watched Penn open the door and noticed "what looked
like steam" coming out of the house. Penn returned to the car
and asked plaintiff for his keys. Penn then tried the front door
and opened it, and plaintiff saw smoke. Penn came back to the
car and yelled for plaintiff to call the fire department.
Plaintiff made the call at 10:52 p.m. and then waited for the
fire department to arrive. Because of the fire damage, plaintiff
stayed at a hotel with help from the Red Cross.
After the fire, plaintiff met with representatives from
State Farm. Plaintiff told Jyawook his satellite-television
service had been disconnected because he owed $100. He also
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provided her with a copy of his credit report in August 2003.
The report showed his accounts with American Express and Visa.
If he failed to mention the American Express card in a June 10,
2003, recorded statement, it was "inadvertent." Plaintiff
testified he did not start and did not tell anyone to start the
fire. Plaintiff learned from Jyawook that Penn and Burmeister
had criminal records.
On cross-examination, plaintiff acknowledged he did not
identify to State Farm in his June 10, 2003, recorded statement
that he had an American Express card. He received the card in
February 2003 and used it "a few times." American Express
contacted him in May 2003, and he was surprised at the balance.
Penn had the card for several months and put off returning it.
At the time of the fire, plaintiff was not current with his
utility bills.
John Pinneo testified he worked as a fire investigator
for the Sangamon County sheriff's office. He responded to the
fire at plaintiff's residence and found the fire was suspicious.
He determined at least two fires started in two separate areas of
the house. Pinneo opined the two distinct and separate fires led
him to conclude an incendiary arson fire had occurred. Several
weeks after the fire, Pinneo asked to talk to plaintiff through
his attorney, but he found the restrictions that would be placed
on the interview to be unacceptable. Pinneo contacted defendant
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and indicated the fire had been set.
Jeff Jones worked in collections with the Bank of
Springfield. Jones testified he contacted plaintiff in November
2002 to tell him he was past due on his mortgage payment. Jones
contacted plaintiff in December, indicating he was past due for
his November payment. As of June 2, 2003, plaintiff was two
months behind on his mortgage payments, but payment would have
been accepted by June 15 without a late charge being applied.
Following closing arguments, the jury found for defen-
dant and against plaintiff. The verdict form indicated the jury
found defendant proved by clear and convincing evidence that
plaintiff concealed or misrepresented a fact or circumstance or
made a false statement relating to the insurance, or he misrepre-
sented any material fact to defendant either before or after the
claim. The jury also found (1) the fact concealed or misrepre-
sented, or the subject of the false statement, was material; (2)
the concealment, misrepresentation, or false statement was made
to defendant or their agents; and (3) the concealment, misrepre-
sentation, or false statement was made knowingly, willfully, and
with intent to deceive defendant.
In January 2006, plaintiff filed a posttrial motion,
seeking judgment notwithstanding the verdict or for a new trial.
In February 2006, the trial court denied the motion. This appeal
followed.
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II. ANALYSIS
A. Jury Instructions
Plaintiff argues the trial court should have given his
proposed jury instructions on the law of misrepresentation as the
policy only contained an exclusion for intentional misrepresen-
tation without any further definition or limitation. We dis-
agree.
A party has the right to have the jury clearly and
fairly instructed on each theory supported by the evidence.
Leonardi v. Loyola University of Chicago, 168 Ill. 2d 83, 100,
658 N.E.2d 450, 458 (1995). Whether to give a jury instruction
is within the discretion of the trial court. Snelson v. Kamm,
319 Ill. App. 3d 116, 139, 745 N.E.2d 128, 148 (2001). A trial
court's refusal to give a tendered instruction will result in the
granting of a new trial only when the refusal amounts to a
serious prejudice to a party's right to a fair trial. Linn v.
Damilano, 303 Ill. App. 3d 600, 607, 708 N.E.2d 533, 538 (1999).
In determining the propriety of the trial court's tendered
instructions, the test is "whether, taken as a whole, the in-
structions fairly, fully, and comprehensively apprised the jury
of the relevant legal principles." Schultz v. Northeast Illinois
Regional Commuter R.R. Corp., 201 Ill. 2d 260, 273-74, 775 N.E.2d
964, 973 (2002).
In the case sub judice, the "concealment or fraud"
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provision of the insurance policy stated as follows:
"This policy is void as to you and any
other insured, if you or any other insured
under this policy has intentionally concealed
or misrepresented any material fact or cir-
cumstance relating to this insurance, whether
before or after a loss." (Emphasis in origi-
nal.)
On the affirmative defense of misrepresentation, the
trial court instructed the jury that defendant must prove (1)
plaintiff concealed or misrepresented a fact or circumstance, or
made a false statement, relating to the insurance at issue; (2)
the fact concealed or misrepresented, or the subject of the false
statement, was material; (3) the concealment, misrepresentation,
or false statement was made to State Farm or its agents; and (4)
the concealment, misrepresentation, or false statement was made
knowingly, willfully, and with intent to deceive State Farm.
Plaintiff, however, argues the court should have instructed the
jury on two additional elements of common-law fraudulent misrep-
resentation, requiring action by a party in reliance on the truth
of the statements and damage to that party as a result of the
reliance. See Board of Education of City of Chicago v. A, C & S,
Inc., 131 Ill. 2d 428, 452, 546 N.E.2d 580, 591 (1989).
"An insurance policy is a contract, and the general
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rules governing the interpretation of other types of contracts
also govern the interpretation of insurance polices." Hobbs v.
Hartford Insurance Co. of the Midwest, 214 Ill. 2d 11, 17, 823
N.E.2d 561, 564 (2005). "Under policy provisions voiding cover-
age if the insured willfully conceals any material fact, or in
the case of fraud or false swearing, courts will deny recovery to
an insured who has made deliberate material misstatements in the
sworn proof of loss." Marvel Engineering Co. v. Commercial Union
Insurance Co., 118 Ill. App. 3d 844, 848, 455 N.E.2d 545, 548
(1983).
In this case, defendant did not raise a claim of
fraudulent misrepresentation. Instead, defendant's second
affirmative defense concerned the "concealment or fraud" provi-
sion of its insurance policy. That provision indicates the
policy is void if the insured intentionally concealed or misrep-
resented a material fact or circumstance relating to the insur-
ance. Thus, the issue centers on whether plaintiff misrepre-
sented or concealed material facts, not whether defendant detri-
mentally relied on those misrepresentations.
In Passero v. Allstate Insurance Co., 196 Ill. App. 3d
602, 604, 554 N.E.2d 384, 385 (1990), the insurance policy at
issue contained a provision voiding the policy if the insured
intentionally concealed or misrepresented any material fact or
circumstance before or after the loss. The appellate court
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focused on the material nature of the misrepresentations and
noted the definition of material misrepresentation is different
in insurance law than in cases involving common-law, statutory,
and consumer fraud. Passero, 196 Ill. App. 3d at 606, 554 N.E.2d
at 387. The question in Passero dealt with whether the misrepre-
sentations were material and did not indicate prejudice and
detrimental reliance had to be shown by the insurer to succeed in
denying the claim under the policy.
In contrast, plaintiff cites A&A, Inc. v. Great Central
Insurance Co., 259 Ill. App. 3d 73, 76, 630 N.E.2d 1002, 1004
(1994), where the insurer asserted the affirmative defense that
the insured was barred from recovery because it misrepresented a
subject matter of the policy and engaged in conduct to defraud
the insurer. The policy also included a provision indicating
concealment or misrepresentation of material facts or an attempt
to defraud the insurer would void the policy. A&A, 259 Ill. App.
3d at 76, 630 N.E.2d at 1004. On appeal, the First District
found the jury should have been given instructions on whether the
alleged false statement was material and the definition of fraud-
ulent misrepresentation, thereby raising the issues of material-
ity and reliance on the misrepresentation. A&A, 259 Ill. App. 3d
at 83, 630 N.E.2d at 1008-09.
Here, however, the policy language at issue did not
invoke fraud as a basis for voiding the policy, and defendant's
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second affirmative defense was not based on a claim that plain-
tiff attempted to defraud defendant. Thus, no proof of fraud or
detrimental reliance was required. Instead, defendant had to
show plaintiff misrepresented or concealed a material fact to
void the policy. The instructions given by the trial court
adequately informed the jury of the law on the issue that was
decided given the evidence presented. We find no abuse of
discretion.
B. Recusal
Plaintiff argues the trial judge erred in not recusing
himself when he had an ongoing relationship with defendant as an
insured of State Farm. We disagree.
Section 2-1001(a)(3)(iii) provides as follows with
respect to substitution of judge for cause:
"Upon the filing of a petition for sub-
stitution of judge for cause, a hearing to
determine whether the cause exists shall be
conducted as soon as possible by a judge
other than the judge named in the petition."
735 ILCS 5/2-1001(a)(3)(iii) (West 2004).
Here, plaintiff's motion was referred to and denied by
Judge Zappa. "A reviewing court will not reverse a determination
on allegations of judicial prejudice unless the finding is
contrary to the manifest weight of the evidence." Jacobs v.
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Union Pacific R.R. Co., 291 Ill. App. 3d 239, 244, 683 N.E.2d
176, 180 (1997). We, however, cannot make a determination on
Judge Zappa's findings because none appear in the record.
Counsel for both parties appeared at an August 2005 hearing on
the motion and argued the merits. No transcript has been pro-
vided and no bystander's report has been included in the record.
Absent a transcript or suitable substitute for proceedings in the
trial court, a reviewing court will not consider the alleged
errors. Smith v. Central Illinois Public Service Co., 176 Ill.
App. 3d 482, 497, 531 N.E.2d 51, 61 (1988). Thus, we will not
consider whether Judge Zappa's decision was against the manifest
weight of the evidence.
Plaintiff, however, appears to argue that Judge Kelley
should have sua sponte recused himself under Supreme Court Rule
63(C)(1) (188 Ill. 2d R. 63(C)(1)). Rule 63 provides, in part,
as follows:
"A judge shall disqualify himself or
herself in a proceeding in which the judge's
impartiality might reasonably be questioned,
including but not limited to instances where:
* * *
(d) the judge knows that he or
she, individually or as a fiduciary
***, has an economic interest in
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the subject matter in controversy
or in a party to the proceeding, or
has any other more than de minimus
interest that could be
substantially affected by the pro-
ceeding." 188 Ill. R. 63(C)(1)(d).
Plaintiff concedes a trial judge merely being an
insured of a mutual insurance company would constitute a de
minimus economic interest. Plaintiff has cited no cases that
would require a judge to recuse himself solely because he was to
preside over a case involving an insurance company of which he
just happened to be an insured. We note the preamble to the Code
of Judicial Conduct defines "economic interest" as ownership of a
more than de minimus legal or equitable interest and states "the
proprietary interest of a policyholder in a mutual insurance
company *** is not an economic interest in the organization
unless a proceeding pending or impending before the judge could
substantially affect the value of the interest." 145 Ill. 2d.,
Code of Judicial Conduct, Preamble, at xxix (eff. August 6,
1993). Here, plaintiff has not shown Judge Kelley had a direct,
personal, and substantial pecuniary interest in this litigation.
Accordingly, we find plaintiff's claim of partiality is not
supported by the facts.
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C. Evidentiary Rulings
Plaintiff argues the trial court erred in evidentiary
rulings that prohibited him from presenting evidence that defen-
dant did not reasonably rely to its detriment upon the alleged
misrepresentation or that defendant was not sufficiently preju-
diced or injured by the alleged misrepresentation. We find this
issue forfeited.
"Mere contentions, without argument or citation of
authority, do not merit consideration on appeal." Elder v.
Bryant, 324 Ill. App. 3d 526, 533, 755 N.E.2d 515, 521-22 (2001).
"A court of review 'is not simply a depository into which an
appealing party may dump the burden of argument and research.'"
In re Austin C., 353 Ill. App. 3d 942, 948, 823 N.E.2d 981, 986
(2004), quoting In re Estate of Thorp, 282 Ill. App. 3d 612, 616,
669 N.E.2d 359, 362 (1996). "A conclusory assertion, without
supporting analysis, is not enough." Wolfe v. Menard, Inc., 364
Ill. App. 3d 338, 348, 846 N.E.2d 605, 613 (2006).
Here, plaintiff makes a conclusory argument that the
trial court erred in its evidentiary rulings, and his only
citation to authority focuses solely on the standard of review.
Plaintiff's reply brief merely repeats the claim that the court
erred in its evidentiary rulings. By failing to sufficiently or
properly present this issue for review, plaintiff has forfeited
this issue on appeal.
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D. Judgment Notwithstanding the Verdict
Plaintiff argues the trial court erred in not granting
the motion for judgment notwithstanding the verdict as to the
second affirmative defense. We disagree.
"A judgment notwithstanding the verdict is
properly entered only if all the evidence,
when viewed in its aspect most favorable to
the opponent, so overwhelmingly favors the
movant that no contrary verdict based on that
evidence could ever stand. [Citation.] In
ruling on a motion for a judgment notwith-
standing the verdict, a court does not weigh
the evidence, nor is it concerned with the
credibility of the witnesses; rather, it may
only consider the evidence and any inferences
therefrom, in the light most favorable to the
party resisting the motion." Board of Trust-
ees of Community College District No. 508 v.
Coopers & Lybrand, 208 Ill. 2d 259, 274, 803
N.E.2d 460, 469 (2003).
"Judgment notwithstanding the verdict is not appropriate if
'reasonable minds might differ as to inferences or conclusions to
be drawn from the facts presented.'" McClure v. Owens Corning
Fiberglas Corp., 188 Ill. 2d 102, 132, 720 N.E.2d 242, 257
- 17 -
(1999), quoting Pasquale v. Speed Products Engineering, 166 Ill.
2d 337, 351, 654 N.E.2d 1365, 1374 (1995).
In this case, the jury found plaintiff misrepresented a
material fact or circumstance, or made a false statement, to
defendant's agents with the intent to deceive State Farm. "False
sworn answers are material if they might have affected the
insurer's action or attitude, or if they may be said to have been
calculated to discourage, mislead, or deflect the insurer's
investigation in any area that might have seemed to it, at that
time, a relevant area to investigate." Passero, 196 Ill. App. 3d
at 609, 554 N.E.2d at 388.
Here, the evidence indicated plaintiff obtained an
American Express card in January or February 2003, and he admit-
ted approving some transactions with the card, including glasses
and a tattoo for Penn. Later, $4,000 in charges accrued, and
plaintiff did not attempt to make payments. Plaintiff did not
mention the existence of this credit card in his June 10, 2003,
recorded statement to Jyawook or his October 31, 2003, deposi-
tion, even though American Express had called him in May 2003.
The balance on the card, and other financial concerns, provided
motive for plaintiff to facilitate the fire to collect insurance
proceeds. Also, plaintiff told Jyawook in his recorded statement
that he could not retrieve funds from the ATM on the evening of
the fire because he may have used the wrong password. At his
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October 31, 2003, deposition, plaintiff stated his ATM card was
rejected because of insufficient funds. Moreover, plaintiff
claimed in his deposition he was current on his mortgage payments
at the time of the fire, but Jeff Jones testified he would have
contacted plaintiff prior to the fire regarding his late mortgage
payments and computer-generated notices would have been mailed.
The jury considered the evidence and testimony pre-
sented at trial. It was in the best position to determine the
credibility of the witnesses and decide whether plaintiff made an
innocent mistake or materially misrepresented his financial
condition to mislead State Farm's investigation. Considering the
evidence in the light most favorable to defendant, we find the
evidence does not so overwhelmingly favor plaintiff that a
verdict in favor of defendant cannot stand. Thus, the trial
court did not err in denying plaintiff's motion for judgment
notwithstanding the verdict.
E. Second Affirmative Defense
Plaintiff argues the jury's verdict on the second
affirmative defense was contrary to the manifest weight of the
evidence. We disagree.
"A reviewing court will set aside a
jury's verdict only if it was against the
manifest weight of the evidence. [Citation.]
Under this standard of review, we will re-
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verse a jury verdict only (1) if it is unrea-
sonable, arbitrary, and not based on evi-
dence, or (2) when the opposite conclusion is
clearly apparent to us. [Citation.]"
Bachman v. General Motors Corp., 332 Ill.
App. 3d 760, 803, 776 N.E.2d 262, 300 (2002).
"'[I]t is the province of the jury to resolve conflicts in the
evidence, to pass upon the credibility of the witnesses, and to
decide what weight should be given to the witnesses' testimony.'"
Redmond v. Socha, 216 Ill. 2d 622, 652, 837 N.E.2d 883, 900
(2005), quoting Maple v. Gustafson, 151 Ill. 2d 445, 452, 603
N.E.2d 508, 511-12 (1992).
Here, the jury heard the evidence and had the opportun-
ity to judge the credibility of the witnesses. The jury resolved
the case in defendant's favor, and the record fails to demon-
strate an opposite conclusion is clearly evident or that the
verdict was unreasonable and not based on the evidence. Thus,
the jury's verdict was not against the manifest weight of the
evidence.
III. CONCLUSION
For the reasons stated, we affirm the trial court's
judgment.
Affirmed.
KNECHT, J., concurs.
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COOK, J., dissents.
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
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fraudulent or something like it. We should deal with a "Conceal-
ment 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
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the policy. It should not be enough that the insurer "feels"
that it has been misled.
The "Concealment or Fraud" clause provides an easy
fall-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. "[F]alse 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
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company, at that time, a relevant or productive area to investi-
gate." (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 instruc-
tion. 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.
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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 misstate-
ment, 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 cer-
tainly 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 intention-
ally concealed or misrepresented any
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material fact or circumstance' reasonably
means more than momentary or inadvertent con-
cealment or misrepresentation. Facts demon-
strating 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 techni-
cal argument that the statements were not material and affirmed
summary judgment for the insurer. Passero, 196 Ill. App. 3d at
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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
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of insufficient funds. Plaintiff was making mortgage payments in
2003 but, at the time of the fire, was two months behind, al-
though 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' representa-
tions 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 instruc-
tion 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
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Farm could have been affected by these statements or that the
insured, who provided all the information, had any intent to
deceive.
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