Ragan v. Columbia Mutual Insurance Co.

Annotate this Case
Ragan v. Columbia Mutual Ins. Co., No. 84257 (9/24/98)
Docket No. 84257--Agenda 22--May 1998.
INSURANCE COMPANY et al. (Columbia Mutual Insurance
Company, Appellant).

JUSTICE NICKELS delivered the opinion of the court:
The issue presented here is whether an insurance company's
failure to produce the proof of mailing on a form as required by
the cancellation provisions of the Illinois Insurance Code (215
ILCS 5/143.14(a) (West 1994)) invalidates the cancellation. The
circuit court of Madison County found that cancellation is
ineffective unless the insurance company produces the properly
completed form. The appellate court affirmed in part and
reversed in part. 291 Ill. App. 3d 1088. We allowed the petition
for leave to appeal under Rule 315 (166 Ill. 2d R. 315). We
affirm the appellate court.

Plaintiff, Jerald Ragan, purchased a seven-unit apartment
building in Granite City, Illinois, in 1988 or 1989. In 1992,
Ragan contacted defendant Looking Glass Mutual Insurance
Company through its agent Orville Bierbaum to gather
information on changing the carrier of the liability and property
insurance on his apartment building.
Bierbaum submitted an application for Ragan's liability and
property insurance to Columbia Mutual Insurance Company.
Ragan told Bierbaum that he was remodeling one of the units
for himself but he had not moved into the building. Ragan asked
that any notices under the policy be sent to his post office box.
In the "Applicant Information" section of the application form,
Bierbaum listed the address of the insured property as Ragan's
mailing address along with a note to the side that said "Send
P.O. Box 8091."
Ragan was quoted an annual premium of $529 and made
the first payment of $132.50 along with his application in order
to bind coverage from the date of the application. Under the
policy's payment plan, in addition to Ragan's initial payment,
Ragan would have an installment of $82.10 due on December
7, 1992, and four more installments of $82.35 due throughout
the year. Ragan asserts that he advised Bierbaum that he
intended to have his mortgage company make the payments due
under the policy. The application was later approved and
Bierbaum sent a copy of the approved policy and declaration
sheet to Ragan's post office box. After he received the policy
and declaration sheet from Bierbaum, Ragan claims, he
contacted his mortgage company, Roosevelt Bank, and requested
that the bank make any further premium payments. No
additional payment was ever made to Columbia Mutual under
the policy.
On December 11, 1992, Columbia Mutual allegedly sent
notice of cancellation to Ragan at the apartment building
address. Columbia Mutual admits that it did not send a copy to
Ragan's post office box. The cancellation notice cites Ragan's
failure to make the December 7, 1992, installment and it
purports to cancel the policy effective December 26, 1992.
On January 4, 1993, Columbia Mutual sent a letter to
Looking Glass stating that Ragan's policy had been cancelled
and that a refund check for unearned premiums was "holding."
It is unclear from the record how Ragan received the check, but
Ragan endorsed and deposited the $8.50 refund check. On
August 31, 1993, the apartment building was destroyed by fire
and Ragan sought insurance benefits from Columbia Mutual
through his agent Bierbaum. Bierbaum advised Ragan that
Columbia Mutual had canceled the policy effective December
26, 1992.
On December 15, 1993, Ragan filed a complaint in the
circuit court against Columbia Mutual, Looking Glass, Bernice
Pollmann, the owner of Looking Glass, Orville Bierbaum and
Roosevelt Bank. Count I of the complaint alleges that Columbia
Mutual's attempted cancellation of Ragan's insurance policy was
ineffective and that under the policy Ragan was entitled to
recover $94,500, his policy limits. Columbia Mutual denied all
of the allegations in an answer filed March 8, 1994. Counts II
and III allege wrongdoing by other defendants who are not
participating in this appeal.
On June 12, 1995, Ragan filed an amendment to his
complaint, set out as count IV, which adds claims of vexatious
and unreasonable delay and prayers for statutory penalties,
attorney fees and costs. Count IV also adds a prayer for
prejudgment interest. Ragan was never granted leave to file this
amendment. Columbia Mutual denied all of the allegations in an
answer filed October 11, 1995.
On August 14, 1995, Ragan, pursuant to discovery rules,
sent Columbia Mutual a request to admit that Columbia Mutual
did not maintain a proof of mailing the cancellation notice as
required by the Insurance Code. 215 ILCS 5/143.14(a) (West
1994). Ragan also sent Columbia Mutual a notice to produce the
proof of mailing form. Columbia Mutual replied to the request
to admit on August 25, 1995, as follows: "Columbia Mutual
Maintains the cancellation letter in its file and, therefore, denies
the request to admit." Upon motion by Ragan, on January 12,
1996, Columbia Mutual's reply to the request to admit was
stricken as nonresponsive and the circuit court granted Columbia
Mutual additional time to respond. Columbia Mutual did not
respond. Columbia Mutual also failed to produce the proof of
mailing form requested in Ragan's notice to produce. During
discovery, Columbia Mutual did produce what it alleges to be
the original envelope, containing a cancellation notice. The
envelope was metered and imprinted with the date December 11,
1992, addressed to the apartment building address, and returned
as undeliverable.
On February 6, 1996, Ragan filed a motion for summary
judgment. The trial court granted Ragan's motion for summary
judgment on counts I and IV on March 29, 1996. On May 30,
1996, Columbia Mutual filed a motion to reconsider the order
granting Ragan's motion for summary judgment. At the same
time Columbia Mutual produced a copy of its unsigned form
entitled "Certificate of Mailing" which listed the December 11,
1992, cancellation letter to Ragan. Columbia Mutual argued that
this form satisfies the proof of mailing requirements of the
Insurance Code.
On June 24, 1996, the circuit court denied Columbia
Mutual's motion to reconsider, and ordered Columbia Mutual to
pay Ragan a total of $182,300.54. Ragan was granted $94,500
under count I, which includes the fire insurance claim. Count
IV, as set forth in Ragan's amendment to his original complaint,
alleges vexatious and unreasonable conduct by Columbia Mutual
in not paying the amount of the loss under the insurance policy
and contains a prayer for prejudgment interest. Ragan was
granted the following under count IV: $38,823.75 (attorney
fees); $25,000 (statutory maximum for vexatious and
unreasonable delay); $352 (filing fee); $236.04 (service of
summons); and $23,388.75 (prejudgment interest).
On July 19, 1996, Columbia Mutual moved to vacate and
set aside the summary judgment and award of damages.
Columbia Mutual alleged that there remained genuine issues of
material fact. The motion also contained a request for leave to
amend Columbia Mutual's prior response to the request to
admit. The amended response denied the allegation that
Columbia Mutual did not maintain the form and contained a
copy of the "Certificate of Mailing." The circuit court denied
both motions. Columbia Mutual appealed.
The appellate court affirmed the summary judgment, stating
that Columbia Mutual did not produce the required statutory
proof of mailing and therefore the purported cancellation was
invalid and ineffective. The appellate court reversed the trial
court's finding of vexatious and unreasonable delay on the part
of Columbia Mutual. Accordingly, the portion of the judgment
awarding attorney fees, the statutory amount for vexatious and
unreasonable delay, the filing fee and the cost of service was
reversed. Defendant Columbia Mutual petitioned for leave to
appeal to this court. Neither party raises the issue of vexatious
and unreasonable delay in this appeal. The only remaining issues
are the judgments for $94,500 under the insurance contract and
$23,388.75 in prejudgment interest.

Summary judgment is proper where, when viewed in the
light most favorable to the nonmoving party, the pleadings,
depositions and admissions on file reveal that there is no
genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law. 735 ILCS 5/2--
1005(c) (West 1994); Busch v. Graphic Color Corp. 169 Ill. 2d 325, 333 (1996). The standard of review in cases involving
summary judgment is de novo. Busch, 169 Ill. 2d at 333.
In order to determine whether summary judgment was
proper in the instant case, we must first decide whether, under
the statute, an insurance company must introduce evidence of
mailing the cancellation notice on the proof of mailing form
required by the statute or whether it may prove compliance with
the statute through introduction of other evidence. This is a case
of first impression in this court.
Section 143.14(a) of the Insurance Code states:
"(a) No notice of cancellation of any policy of
insurance, to which Section 143.11 applies, shall be
effective unless mailed by the company to the named
insured and the mortgage or lien holder, at the last mailing
address known by the company. The company shall
maintain proof of mailing of such notice on a recognized
U.S. Post Office form or a form acceptable to the U.S. Post
Office or other commercial mail delivery service. A copy of
all such notices shall be sent to the insured's broker if
known, or the agent of record, and to the mortgagee or
lienholder, if known, at the last mailing address known to
the company." (Emphasis added.) 215 ILCS 5/143.14(a)
(West 1994).
Ragan cites Economy Fire & Casualty Co. v. Hughes, 271
Ill. App. 3d 1009 (3d Dist. 1995), in support of his argument
that production of the proof of mailing on the statutory form is
required. Columbia Mutual cites Kolias v. State Farm Mutual
Automobile Insurance Co., 148 Ill. App. 3d 1086 (1st Dist.
1986), and its progeny to support the opposite position. We find
the reasoning in Hughes more persuasive.
The First District found in Kolias that an insurance
company need not introduce proof of mailing on the form
required by the statute but instead found that proof of mailing
could be shown by other evidence that the proof of mailing was
maintained. The Fourth District later relied on Kolias and held
in Bates v. Merrimack Mutual Fire Insurance Co., 238 Ill. App.
3d 1050, 1053 (4th Dist. 1992), that one need not even
introduce evidence pertaining to the specific notice of
cancellation at issue. According to the Bates decision, evidence
that proofs of mailing were maintained on the statutory form in
the company's regular mailing practices was enough to satisfy
the statutory requirement.
Hughes points out that after the 1986 Kolias decision, the
statute was amended to broaden the types of proof of mailing
forms that an insurance company may use to include
commercial carriers other than the United States Postal Service.
The Hughes court noted, however, that the legislature did not
expand the proof of mailing section to include those methods set
forth in Kolias. The Hughes court concluded that had the
legislature intended to allow for additional types of proof it
would have amended the statute to provide for them. Hughes,
271 Ill. App. 3d at 1014.
It is well settled that the court's role in interpreting statutes
is to give effect to the intention of the legislature and that the
language of the statute is the starting point of the court's
analysis. People v. Woodard, 175 Ill. 2d 435, 443 (1997), citing
People v. Hare, 119 Ill. 2d 441 (1988). Where the language of
the statute is clear, it will be given effect without resort to other
tools of construction. Woodard, 175 Ill. 2d at 443. A court
should not depart from the language of the statute by reading
into it exceptions, limitations or conditions that conflict with the
intent of the legislature. Bridgestone/Firestone, Inc. v. Aldridge,
179 Ill. 2d 141, 149 (1997).
The language of section 143.14(a) is clear and
unambiguous. First, it requires that the insurance company mail
a notice of cancellation to the insured, and if applicable to
certain other parties. Second, the statute requires that "[t]he
company shall maintain proof of mailing." (Emphasis added.)
215 ILCS 5/143.14(a) (West 1994). There is no alternative
method for proving compliance with the proof of mailing
requirements other than to maintain the proof of mailing. To
allow other methods of proving compliance would circumvent
the language and purpose of the statute.
It is apparent from the wording of the provision in the
context of the Insurance Code that the purpose of the statute is
to protect the insured from cancellation of his insurance without
his knowledge. In order to accomplish this purpose, the
legislature could have required insurance companies to prove
receipt by the insured. However, by enacting this section, the
legislature clearly sought to strike a balance between the interest
of the insured in being informed of a cancellation of his
insurance policy and the burden that would be put on an
insurance company to prove receipt by the insured. The statute,
therefore, requires proof of mailing rather than proof of receipt
by the insured. In order to maintain this balance of interests, the
legislature set forth the types of proof of mailing that are
reliable enough to afford the insured the necessary protections.
Under this statutory scheme, the insurance company has a
very low threshold of proof. It must only show proof "on a
recognized U.S. Post Office form or a form acceptable to the
U.S. Post Office or other commercial mail delivery service" that
the notice was mailed to the insured. For us to find that the
statute implicitly allows an insurance company to use other
evidence to show that it maintained the proof of mailing when
the statute explicitly requires it to maintain such a form would
disturb the balance that the legislature sought to achieve in
enacting this section.
In the present case, Columbia Mutual had many
opportunities to introduce the form but failed to do so.
Columbia Mutual did not meet the statutory requirements of
section 143.14 (a). Therefore, the attempted cancellation was
ineffective and summary judgment on count I was proper.
Columbia Mutual next argues the circuit court should have
granted Columbia Mutual's May 30, 1996, motion to reconsider
granting summary judgment. As a part of the motion to
reconsider, Columbia Mutual sought to introduce its "Certificate
of Mailing," claiming that it was "unavailable" at the time of the
hearing on Ragan's motion for summary judgment. The sole
reason proffered for this unavailability was a misunderstanding
between Columbia Mutual and its attorneys. We find that the
circuit court did not err in denying Columbia Mutual's motion
to reconsider.
Columbia Mutual further argues that the circuit court also
erred in denying its July 19, 1996, motion for leave to amend its
earlier answer to Ragan's request to admit. At the outset we
note that the circuit court has discretion over the conduct of
discovery. Bright v. Dicke, 166 Ill. 2d 204, 208 (1995). Absent
an abuse of that discretion, this court will not overturn a circuit
court's ruling. As the appellate court noted, although the circuit
court did not specify why it denied Columbia Mutual's motion,
there are two sound theories upon which the circuit court could
have based the denial.
Columbia Mutual's response to Ragan's request to admit,
if allowed by the court, would have been untimely. A judge has
the discretion to allow an untimely response to a request to
admit only after a showing of good cause. Bright, 166 Ill. 2d at
209. The record supports a finding that Columbia Mutual did
not provide good cause for its untimely response to Ragan's
request to admit and the trial court could have denied Columbia
Mutual's motion on that basis. See 134 Ill. 2d R. 183.
Additionally, there is ample support for a finding of
discovery abuse by Columbia Mutual. The proof of mailing
could have been excluded as a discovery sanction under
Supreme Court Rule 219(d) (see 166 Ill. 2d R. 219(d)). We
therefore find that the trial court did not abuse its discretion in
denying Columbia Mutual leave to amend its pleading.
The final issue raised by Columbia Mutual is whether
the trial court erred in awarding prejudgment interest to Ragan.
Ragan's original complaint did not contain a prayer for
prejudgment interest. Ragan filed an amendment to the original
complaint on June 12, 1995, including a prayer for prejudgment
interest. Ragan failed to obtain leave of court to amend his
complaint. Columbia Mutual did not object to Ragan's failure
to obtain leave and filed a response to Ragan's complaint as
amended. The circuit court awarded Ragan prejudgment interest.
The appellate court did not address the issue of prejudgment
interest although it was raised in the parties's briefs.
Columbia Mutual argues that the issue of prejudgment
interest was not properly before the trial court because of
Ragan's failure to obtain leave of court to file the amended
complaint. Columbia Mutual argues that the trial court lacked
jurisdiction to award prejudgment interest to Ragan. Columbia
Mutual cites three cases, Greene v. Helis, 252 Ill. App. 3d 957
(1993), Torley v. Foster G. McGaw Hospital, 116 Ill. App. 3d
19 (1983), and Glickauf v. Moss, 23 Ill. App. 3d 679 (1974),
that deal with a party's failure to obtain leave to amend
pleadings as a jurisdictional defect. Because of the proported
jurisdictional nature of the defect, these cases hold that a party
cannot waive his right to raise the failure to obtain leave on
appeal. We find these cases unpersuasive. In addition, all of the
cases relied upon by Columbia Mutual may be distinguished
from the present case. Each case cited by Columbia Mutual
involves an amendment to a pleading that would add a party to
the suit. Greene, 252 Ill. App. 3d 957 (failure to obtain leave to
substitute representative of decedent's estate for decedent);
Torley, 116 Ill. App. 3d 19 (failure to obtain leave to add party
in medical malpractice case); Glickauf, 23 Ill. App. 3d 679
(failure to obtain leave to add corporation as defendant). In
contrast, Ragan's amended complaint added claims and prayers
against parties who were already properly before the court.
The Code of Civil Procedure provides that technical defects
in pleadings should not prevent the courts from doing justice
between the parties. See 735 ILCS 5/2--616 (West 1994)
(amendments to pleadings may be allowed at any time before
judgment on just and reasonable terms); 735 ILCS 5/2--1005(g)
(West 1994) (pleadings may be amended at any time after
judgment to conform the pleadings to the proofs); 735 ILCS
5/2--612(c) (West 1994) (defects in form or substance of
pleadings not objected to at trial are waived); 735 ILCS 5/2--
603(c) (West 1994) (pleadings are liberally construed to do
substantial justice between the parties); 735 ILCS 5/2--617
(West 1994) (pleadings may be amended to grant relief to which
the plaintiff is entitled although that party failed to include the
prayer in its pleading). To interpret the failure to obtain leave to
add a prayer for relief against a party already before the court
as a jurisdictional defect would frustrate the purpose of the
foregoing provisions.
Since we find that failure to obtain leave to amend a
complaint is not a jurisdictional defect and that a party may
waive its right to object to the defect, we must now determine
whether Columbia Mutual has waived the issue. Questions not
raised in the trial court cannot be argued for the first time on
appeal. In re Marriage of Minear, 181 Ill. 2d 552, 564 (1998).
Columbia Mutual did not object to Ragan's failure to obtain
leave in the trial court. Columbia Mutual did, however, file an
answer to the complaint, file affirmative defenses and argue the
merits of the pleadings as amended in the hearing on summary
judgment. Accordingly, we find that Columbia Mutual waived
its right to raise the issue on appeal and affirm the grant of
prejudgment interest.

We find that an insurance company must produce proof of
mailing of a cancellation notice on a form meeting the
requirements of section 143.14(a) of the Insurance Code to
prove compliance with that provision. Further, we find that the
circuit court did not abuse its discretion denying Columbia
Mutual's motion for leave to amend its pleadings by the late
filing of its notice of mailing. Therefore, we affirm the judgment
of the appellate court.

Appellate court judgment affirmed.