American Country Insurance Co. v. Bruhn

No. 2--96--0921

________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT
________________________________________________________________

AMERICAN COUNTRY INSURANCE ) Appeal from the Circuit Court
COMPANY, ) of Kane County.
)
Plaintiff-Appellant, )
) No. 93--MR--484
v. )
)
MARJORIE BRUHN, as Adm'r of )
the Estate of Kristeen Anne )
Kaufman, Deceased; and TODD )
RAYMOND NEBEL, ) Honorable
) Melvin E. Dunn,
Defendants-Appellees. ) Judge, Presiding.
________________________________________________________________

JUSTICE McLAREN delivered the opinion of the court:
The plaintiff, American Country Insurance Company, appeals
from an order of the circuit court of Kane County which entered
judgment in favor of the defendants, Marjorie Bruhn, administrator
of the estate of Kristeen Anne Kaufman (deceased), and Todd Raymond
Nebel, in a declaratory judgment suit after the close of the
plaintiff's case. We reverse.
On December 17, 1988, while driving his automobile, Nebel
struck and killed two pedestrians, Kristeen and Lee Kaufman, on
West Highland Avenue in Aurora, Illinois. The police questioned
Nebel about the accident in June 1989, but Nebel denied
involvement. Nebel concealed his involvement in the accident until
January 21, 1992, when he was questioned again by the police and
admitted his involvement in the accident.
On February 18, 1992, the People of the State of Illinois
indicted Nebel in a two-count indictment, alleging that Nebel
committed the offense of reckless homicide in the deaths of
Kristeen and Lee Kaufman. Ill. Rev. Stat. 1991, ch. 38, par. 9--3
(now 720 ILCS 5/9--3 (West 1994)). On May 6, 1992, the State
amended its indictment to include a third count, alleging that
Nebel committed the felony offense of leaving the scene of a
personal injury accident. Ill. Rev. Stat. 1991, ch. 95«, par. 11--
401 (now 625 ILCS 5/11--401(b) (West 1994)).
On May 6, 1992, Nebel entered a plea of guilty in the offense
of leaving the scene of a personal injury accident. The assistant
State's Attorney provided the court with the factual basis for the
guilty plea:
"If the State's witnesses were called, those witnesses would
establish proof beyond a reasonable doubt that on or about
December 17, 1988, this Defendant before you, Todd R. Nebel,
committed the offense of leaving the scene of a personal
injury accident, which is a Class IV felony, *** in that said
Defendant intentionally failed to stop the vehicle he was
driving after that vehicle was involved in an accident at 548
West Highland Avenue, in Aurora, Kane County, Illinois, in
which Kristeen Kaufman and Lee Kaufman were killed as a result
of that accident, and thereafter failed to report the accident
to any police station or sheriff's office near the place where
the accident occurred within three hours after the accident,
and there was no physical incapacity of the Defendant which
would obviate that duty."
Thereafter, the trial judge inquired, "Is this about what the
State's evidence would show if we went to trial?" In response
Nebel replied, "Yes."
On July 27, 1992, Bruhn commenced a three-count action against
Nebel alleging that on December 17, 1988, while operating a motor
vehicle, Nebel struck and killed Kristeen Kaufman. Count I alleged
negligence, count II alleged wrongful death, and count III alleged
intentional infliction of emotional distress. In August 1992,
Nebel notified the plaintiff of the accident, but refused to
provide a statement. The plaintiff undertook the defense of Nebel,
but filed a reservation of rights.
On March 30, 1993, the plaintiff filed a complaint for
declaratory judgment against Nebel and Bruhn. The plaintiff
alleged that it issued an automobile insurance policy to Nebel
which was in effect at the time of the accident. However, the
complaint also alleged that it had no duty to defend or indemnify
Nebel with respect to the death of Kristeen Kaufman because Nebel
failed to comply with the notice and cooperation provisions of the
insurance contract. The insurance policy at issue provides:
"PART E--DUTIES AFTER AN ACCIDENT OR LOSS
We must be notified promptly of how, when and where the
accident or loss happened. Notice should also include the
names and addresses of any injured persons and of any
witnesses.
A person seeking coverage must:
1. Cooperate with us in the investigation, settlement
or defense of any claim or suit.
2. Promptly send us copies of any notices or legal
papers received in connection with the accident or loss.
3. Submit, as often as we reasonably require, to
physical exams by physicians we select."
On February 14, 1994, the plaintiff filed a motion for summary
judgment in its declaratory judgment action. On March 16, 1994,
Bruhn filed a response to the motion for summary judgment claiming
that Nebel's notice in August 1992 was reasonable and timely under
the circumstances because he had successfully concealed his
involvement in the accident for three years. Bruhn also argued
that judgment on the plaintiff's declaratory judgment action should
be stayed because it was premature based on the underlying wrongful
death claim. On June 14, 1994, Judge R. Peter Grometer denied the
plaintiff's motion for summary judgment and stayed final resolution
of the declaratory judgment action until the wrongful death action
was resolved. The plaintiff filed an interlocutory appeal based on
the court's decision to stay the declaratory judgment action. This
court affirmed the trial court's decision in a Rule 23 order
(No. 2--94--0760 (April 28, 1995)).
On December 7, 1995, Bruhn and Nebel caused a stipulated
judgment to be entered in the wrongful death case. The judgment
was entered against Nebel as to counts I, II, and III of Bruhn's
complaint, in the amount of $25,000, plus costs. However, the
judgment provided that the award could only be collected from
whatever rights Nebel had in his insurance policy and not from
Nebel's personal assets.
A bench trial based on the declaratory judgment action began
on July 10, 1996. The parties stipulated to the admission of the
following documents: the automobile insurance policy issued to
Nebel by the plaintiff; Nebel's answer to an interrogatory; Nebel's
indictment; Nebel's oral guilty plea; Nebel's written guilty plea;
the judgment order in the criminal case; the summons and complaint
in the wrongful death claim filed by Bruhn against Nebel; and the
judgment in favor of Bruhn in the wrongful death claim.
The plaintiff called only one witness, Arthur Siemers, who
testified that he had been a claim representative for 30 years and
had been employed by the plaintiff for the last 22 years. Siemers
stated that Nebel was insured by the plaintiff on December 17,
1988. The policy required Nebel to provide the plaintiff with
prompt notice of any accident. Siemers stated that Nebel first
provided the plaintiff with notice of the accident on August 26,
1992, when Nebel called Siemers. While speaking with Nebel,
Siemers filled out an accord form, which is used in the ordinary
course of the plaintiff's business to record the first report of an
accident. The accord form was admitted into evidence. Siemers
asked Nebel for a recorded statement in order to assess liability
for the accident, but Nebel refused to comply. Siemers recorded
Nebel's refusal. This document was also admitted into evidence.
Nebel's attorney later told Siemers that Nebel had concealed
the accident from the police for three years. Nebel's attorney
sent Siemers copies of the police reports and some investigative
materials prepared by the police. The police reports and
investigative materials indicated that Nebel lied about his
involvement in the accident when questioned by the police in June
1989, but later admitted his involvement when the police questioned
him again on January 21, 1992. Nebel explained his concealment by
saying that he listened to some people who gave him bad advice.
The trial court admitted the police reports and investigative
materials into evidence.
Siemers stated that he believed the plaintiff had policy
defenses based on Nebel's late notice and lack of cooperation;
therefore, Siemers dictated a reservation of rights letter,
recommended that counsel be retained to file a declaratory judgment
action, and referred the wrongful death suit to counsel for
defense. Siemers also stated that, based on Nebel's late notice
and refusal to give a statement, the plaintiff was unable to
undertake a meaningful investigation of the accident.
On cross-examination, Siemers admitted that he did not view
the scene of the accident or canvass the neighborhood looking for
witnesses. Siemers further stated that the plaintiff did not
undertake any investigation of the accident and never asked Nebel
to undergo a physical examination. Siemers also stated that the
summons and complaint he received from Nebel could constitute
sufficient notice under the duty promptly to send notice of any
legal papers in connection with an accident.
Siemers also stated that there were three basic areas that the
plaintiff investigated when adjusting an insurance claim: damages,
proximate cause, and liability. Siemers stated that the plaintiff
would not have investigated the damages because there had been two
deaths in the case. With regard to proximate cause, adjusters or
outside investigators would ordinarily speak with neighbors or
anyone who may have witnessed the accident, would get a weather
report for the day, and then review the police report.
At the close of the plaintiff's case, the defendants moved for
a finding pursuant to section 2--1110 of the Code of Civil
Procedure (735 ILCS 5/2--1110 (West 1994)). Judge Melvin E. Dunn
granted the defendants' motion, stating:
"[M]y feeling is that the notice was made properly, given the
circumstances; that Mr. Nebel could not be expected to come
forward and voluntarily admit to a criminal offense which
could have led to long periods of incarceration.
***
At any rate, I will grant the defendant's [sic] motion at
this point on behalf of the estate and find that notice was
sufficient under the circumstances and that there was no
breach of the policy.
***
With respect to the cooperation of that [sic]. There has
been no showing that he failed to cooperate with any
reasonable effort to obtain a statement."
The plaintiff filed a timely notice of appeal.
On appeal, the plaintiff first argues that the trial court
erred by granting the defendants' motion for a finding at the close
of the plaintiff's case. The plaintiff claims that it established
a prima facie case of late notice and failure to cooperate because
Nebel failed to provide notice until over three years after the
accident and refused to provide a recorded statement to the
plaintiff regarding the accident. The defendants claim that the
plaintiff failed to established a prima facie case of late notice
and failure to cooperate. The defendants claim that Nebel had a
justifiable excuse for the delay of notice because he feared
incarceration. Further, the defendants argue that the plaintiff
failed to establish prejudice.
Pursuant to section 2--1110 of the Code of Civil Procedure, a
defendant may move for judgment in her favor at the close of the
plaintiff's case. 735 ILCS 5/2--1110 (West 1994). In deciding a
section 2--1110 motion, the trial court must first determine
whether the plaintiff has presented a prima facie case. Kokinis v.
Kotrich, 81 Ill. 2d 151, 155 (1980); Conoway v. Hanover Park Park
District, 277 Ill. App. 3d 896, 899 (1996). If the plaintiff has
failed to present a prima facie case, the trial court must grant
the defendant's motion. Kokinis, 81 Ill. 2d at 155. If the
plaintiff has presented a prima facie case, the trial court must
weigh the evidence, including the evidence favorable to the
defendant, and determine whether sufficient evidence remains to
establish the plaintiff's prima facie case. Kokinis, 81 Ill. 2d at
154-55. If sufficient evidence does not remain to sustain the
plaintiff's burden, the trial court must grant the defendant's
motion. Kokinis, 81 Ill. 2d at 155. We will not disturb a trial
court's decision to grant a section 2--1110 motion unless it is
against the manifest weight of the evidence. Kokinis, 81 Ill. 2d
at 154. A decision is against the manifest weight of the evidence
where the opposite conclusion is clearly evident or where the
ruling is unreasonable, arbitrary, and not based on the evidence.
Rhodes v. Illinois Central Gulf R.R., 172 Ill. 2d 213, 242 (1996).
An insured's duties are defined and controlled by the terms of
the insurance contract. Waste Management, Inc. v. International
Surplus Lines Insurance Co., 144 Ill. 2d 178, 191 (1991). The duty
to provide notice is a reasonable requirement in an insurance
policy. Barrington Consolidated High School v. American Insurance
Co., 58 Ill. 2d 278, 281 (1974). An insurance company is justified
in denying coverage to an insured who fails to comply with the
notice provision contained in the insurance policy. Allstate
Insurance Co. v. Hoffman, 21 Ill. App. 2d 314, 324 (1959). The
purpose of the provision is to afford "the insurer an opportunity
to make a timely and thorough investigation and to gather and
preserve possible evidence." Barrington Consolidated High School,
58 Ill. 2d at 281. Illinois courts have interpreted notice
provisions as requiring the insured to notify the insurance company
within a reasonable time, considering all the facts and
circumstances of the case. Barrington Consolidated High School, 58 Ill. 2d at 281. Further, it is well settled that the insurance
company need not prove that it was prejudiced by the lack of notice
before it can validly deny coverage. General Casualty Co. v. Juhl,
283 Ill. App. 3d 376, 382 (1996). Rather, prejudice is only one
factor in determining whether notice was reasonable. American
States Insurance Co. v. National Cycle, Inc., 260 Ill. App. 3d 299,
311 (1994). The other factors to consider are (1) the insured's
sophistication regarding insurance policies; (2) the insured's
awareness that an occurrence as defined under the terms of the
policy has taken place; and (3) the insured's diligence in
ascertaining whether policy coverage is available. American Family
Mutual Insurance Co. v. Blackburn, 208 Ill. App. 3d 281, 288
(1991).
Thus, a lengthy delay in providing notice is not an absolute
bar to recovery under an insurance policy requiring notice.
McFarlane v. Merit Insurance Co., 58 Ill. App. 3d 616, 619 (1978).
In certain circumstances, delays in providing notice are excusable
and will not bar coverage. McFarlane, 58 Ill. App. 3d at 619.
However, delays in providing notice are excused only when the
insured's delay was reasonable under the circumstances. For
example, lengthy delays in providing notice are excused when the
insured did not reasonably believe that the insurance policy
covered the occurrence in question (Allstate Insurance Co. v.
Carioto, 194 Ill. App. 3d 767, 780 (1990) (2«-year delay excused
because a psychologically disturbed 19-year-old could not have
reasonably known that his stabbing of a claimant on a Chicago
street would have been covered by his mother's homeowner's policy))
and when an insured reasonably relied on her husband's assurances
that he made arrangements to notify the insurer (McFarlane, 58 Ill.
App. 3d at 619 (13-month delay excused because husband repeatedly
told insured that he sent a copy of the insurance policy to their
attorney and the insured promptly provided notice when she learned
of her husband's deception); see also Grasso v. Mid-Century
Insurance Co., 181 Ill. App. 3d 286, 290 (1989) (two-year delay
excused because insured, who was involved in an accident while
driving her boyfriend's jeep, did not reasonably believe the
accident was covered by her father's excess coverage insurance
policy); Brotherhood Mutual Insurance Co. v. Roseth, 177 Ill. App.
3d 443, 449 (1988) (two-year delay excused because insureds did not
reasonably believe that an accidental shooting which occurred
outside of their home would be covered by their homeowner's policy
and they did not reasonably believe that their friends would file
a late claim)). However, lengthy delays in providing notice are
not excused when the delay is caused by the insured's negligence
(Equity General Insurance Co. v. Patis, 119 Ill. App. 3d 232, 237
(1983) (4«-year delay not excused when an insurance agent failed to
notify his malpractice insurer of a malpractice claim against him
and offered no reason for the delay); City of Chicago, v. United
States Fire Insurance Co., 124 Ill. App. 2d 340, 345 (1970) (five-
year delay not excused where the insured failed to provide notice
of a tort claim because it misfiled the insurance policy in
question)) or when the insured should have known that notice was
required under the terms of policy (General Casualty Co., 283 Ill.
App. 3d at 381 (7«-year delay not excused when interrogatory
revealed that the plaintiffs were seeking damages in an amount
which would trigger coverage under the insurer's excess coverage
policy)).
In the instant case, it is undisputed that on December 17,
1988, Nebel knew he was involved in an accident. It is also
undisputed that Nebel knew that the accident was covered by the
plaintiff's insurance policy and intentionally failed to notify the
plaintiff of his involvement in the accident until August 1992,
approximately three years and eight months later. Nebel's only
explanation for the delay is that he feared incarceration. We do
not believe the delay is reasonable under the circumstances of this
case. Nebel's behavior was that of a felon, not a reasonable
person. A reasonable person would have immediately reported the
accident to the police and promptly notified the plaintiff. The
defendants cite no case which supports Nebel's claim that fear of
self-incrimination is a valid excuse for the failure to provide
notice under the terms of an insurance contract. We note that,
although the facts are not identical, Exline v. Exline, 277 Ill.
App. 3d 10, 13-14 (1995), negates Nebel's fear and supports the
proposition that an insured's communication to his insurer
regarding an accident is not discoverable because it is privileged.
Thus, Nebel has only given a reason, not a valid excuse, for his
deliberate failure to notify promptly. After reviewing the record,
it is clearly evident that the plaintiff established a prima facie
case of breach of the notice provision.
We also determine that it is clearly evident that Nebel
breached the cooperation clause. "The basic purpose of a
cooperation clause is to protect the insurer's interests and to
prevent collusion between the insured and the injured party."
Waste Management, 144 Ill. 2d at 191. The cooperation clause in
this case imposed a duty upon Nebel to "[c]ooperate *** in the
investigation, settlement or defense of any claim or suit." It
cannot seriously be contended that Nebel did not breach this duty
when he refused to provide a statement regarding the accident to
the plaintiff and then entered into a stipulated judgment which
admitted liability but provided that damages could only be
collected from the plaintiff. After reviewing the record, it is
clearly evident that the plaintiff established a prima facie case
of breach of the cooperation provision.
The defendants argue that the plaintiff failed to present any
evidence that it was prejudiced by Nebel's alleged failure to
provide notice. In fact, the defendants claim that there is
evidence that the plaintiff was not prejudiced. The defendants
support this claim with evidence that the plaintiff was provided
with police investigation reports and statements and failed to
undergo any investigation after it learned of the accident.
However, the defendants' argument that the plaintiff was not
prejudiced is speculative. If Nebel had provided the plaintiff
with notice promptly after the accident, the plaintiff could have
investigated while the information was fresh in the minds of
potential witnesses. Further, if Nebel would have cooperated by
giving the plaintiff a recorded statement, the statement could have
led to a defense to Bruhn's tort claim. The defendants have not
established that had the plaintiff been given prompt notice the
discovery of evidence would have been no different. Even if there
were merit to the defendants' position, prejudice is not
dispositive of the issue of whether a policy is voided for lack of
notice. General Casualty Co., 283 Ill. App. 3d at 382.
The defendants claim that the plaintiff must establish
prejudice to deny coverage based on a lack of cooperation.
However, in this case, such an assertion is absurd. The only way
the plaintiff can prove prejudice caused by the lack of cooperation
is to know what Nebel's statement would have revealed. Since Nebel
refused to give the plaintiff a statement, the plaintiff cannot
know how it was prejudiced. When an insured completely fails to
communicate with the insurer regarding an accident, "[a] violation
of [the cooperation] provision is patent." Safeco Insurance Co. v.
Treinis, 238 Ill. App. 3d 541, 549 (1992). Further, the
defendants' citation to M.F.A. Mutual Insurance Co. v. Cheek, 66 Ill. 2d 492 (1977), is not persuasive because the insured in that
case timely corrected a false report he made to the insurer. In
the case at bar, Nebel never provided a statement regarding the
accident.
The defendants argue that, even if the plaintiff established
a prima facie case, sufficient evidence did not remain to sustain
the plaintiff's burden after the trial court considered all the
facts. The defendants note that Siemers, the plaintiff's employee,
admitted that notice regarding the wrongful death suit was
reasonable. After reviewing the transcript, it is apparent that
Siemers was discussing the duty of the insured promptly to notify
the plaintiff of any legal papers. Thus, Siemers' statement does
not support the defendants' claim that Nebel provided reasonable
notice of the accident.
Finally, the defendants argue that public policy
considerations strongly favor their position. The defendants
assert that an innocent third party should not suffer due to an
insured's noncompliance with his insurance policy. The defendants
support this argument by citing section 7--601 of the Illinois
Safety Responsibility Law, which requires mandatory liability
insurance for all drivers. 625 ILCS 5/7--601 (West 1994). The
defendants claim that, if an insured can frustrate coverage, the
statute cannot serve its purpose of protecting the rights of
innocent third parties.
We disagree with the defendants and, instead, believe that the
public policy considerations militate strongly against coverage in
this case. The premise behind the defendants' argument is that one
has not sinned if one is not apprehended or found out. In this
case Nebel hid his involvement in the accident from the police and
the victims' representatives for more than three years. Then Nebel
and Bruhn stipulated to $25,000 in damages which could only be
collected from the plaintiff's insurance coverage. We know of no
public policy that promotes subterfuge and allows an individual to
profit from the concealment of a crime, nor do we deem it
appropriate to create one. Further, the law should not condone
actions which conceal torts, crimes, and other breaches of ethics
and morality. Thus, after reviewing the record, we determine that
the trial court's decision to grant the defendants' motion at the
close of the plaintiff's case was against the manifest weight of
the evidence. Accordingly, the trial court erred by granting the
defendants' motion in their favor at the close of the plaintiff's
case.
Finally, the plaintiff urges this court to reverse the trial
court's decision to deny its motion for summary judgment. The
defendants argue that this decision is not reviewable because the
summary judgment decision has merged into the final judgment that
granted judgment in the defendants' favor after the close of the
plaintiff's case. However, the merger doctrine does not apply in
this case because a complete trial was not conducted. See Bransky
v. Schmidt Motor Sales, Inc., 222 Ill. App. 3d 1056, 1062 (1991).
We determine we have the authority to review this issue in the
interest of judicial economy. The facts in this record are
uncontroverted, and the issues are essentially questions of law.
It seems apparent from the arguments made in the defendants' brief
that they believe that all the evidence that might have been
presented in this cause was presented during the plaintiff's case
in chief. If that is correct, then judgment should have been
entered for the plaintiff at the close of the plaintiff's case in
chief because the defendants would not have presented any
additional evidence. See 134 Ill. 2d R. 366(a)(5).
In the interest of judicial economy, we order that the
defendants indicate if there is any evidence that might have been
presented had the court denied the motion for a directed finding.
If there is additional evidence, the defendants shall make an offer
of proof in writing within 21 days of the filing of this
disposition, and the court will then determine if remand is
necessary or whether judgment should be entered in favor of the
plaintiff.
The judgment of the circuit court of Kane County is reversed.
Reversed.
GEIGER, P.J., and INGLIS, J., concur.