Material Misrepresentation Sufficient to Void Insurance Policy
In Direct Auto Insurance Co. v. Beltran, Direct Auto Insurance (DAI) filed an action seeking a declaratory judgment and argued that: (1) an insurance policy it issued to Elia Beltran was rescinded and null and void; (2) DAI owed no duties under the policy to any of the Beltrans; and (3) the Beltans were not entitled to any recovery under the policy. DAI received an application for automobile insurance from Northwest Insurance Network, Inc. (NIN), an insurance broker. The application listed Elia as the applicant. The application lists Elia’s gender as “M” even though Elia is a woman. The application states that Elia has an international driver’s license. However, Elia testified at her deposition that she does not know how to drive. She purchased a vehicle with the intent that her brother, Mario, would use it to drive her to and from work. Elia did not sign the application. DAI issued a policy of insurance to Elia. The DAI policy covered bodily injury, property damage, medical payments, uninsured motorists, and physical damage. The DAI policy had an effective date of November 23, 2008.
On December 15, 2008, Mario was operating Elia’s vehicle when it collided with Mark Obermann’s vehicle, which was insured by Acuity. The declaratory judgment action in the case at bar arises from an underlying subrogation action filed by Acuity. Acuity filed a complaint alleging negligence against Mario and negligent entrustment against Elia. DAI filed a declaratory judgment action alleging that Elia made material misrepresentation in her application for insurance and, as a result, there was no coverage.
The issue before the court is whether there was a material misrepresentation sufficient to allow the insurer to void the insurance policy. DAI argues that Elia’s misrepresentations were material because the “status, number and character of the persons who are likely to be driving the [vehicle] with the owner’s permission” are relevant to the risk. DAI’s argument rests on the “number” of drivers likely to be driving the Elia vehicle and is premised on the assumption that Mario was a driver in addition to Elia. DAI relies on Elia’s deposition to prove that Mario lived with Elia on the effective date of the DAI policy, and thus that Elia had additional drivers in her home. However, Elia’s deposition repeatedly states that Elia cannot and does not drive and that she purchased the Elia vehicle with the intention that Mario would drive it. Therefore, Elia’s deposition indicates that there was only one driver in her residence. Misrepresentations were material because the insurers would have denied coverage had the insureds not made their misrepresentations. In the case at bar, DAI stated that it would not have issued the policy as written and that Elia’s premium would have been higher. In addition, in its motion to reconsider, DAI submitted a document estimating what Elia’s premium would have been had DAI known that other potential drivers lived with Elia. Therefore, DAI cannot argue that it would have found Elia uninsurable had it known that she lived with other drivers. As a result, there was no misrepresentation that “substantially increas[ed] the chances of the events insured against.” The court stated that the number of drivers disclosed on the application matches the number of drivers who actually drove the Elia vehicle. DAI argues that the affidavits sufficiently establish that Elia’s misrepresentation was material. DAI relies on its claims manager’s affidavit to assert that “the [DAI] policy would not have been issued as written, or would not have been issued at all,” had DAI known of the inaccuracies on the application. The court found that any misrepresentation by Elia was not material because she did not misstate the number of regular drivers of the Elia vehicle, nor did the misrepresentation “substantially increas[e] the chances of the events insured against.” Most importantly, there is no evidence showing that Elia intentionally misrepresented the facts. In its motion for summary judgment, DAI relies on the affidavits of its claims manager and an NIN employee to support its arguments..
There was only one licensed, male driver in the residence at the time of the application. If the application included Mario’s name instead of Elia’s, Mario would not have been required to disclose that Elia lived in the residence with him because she was not a licensed driver, according to the application form questions. The trial court found no evidence of any indicators that insuring Mario would have negatively affected DAI’s risk, such as a bad driving record. The court found no such evidence in the record and therefore cannot say that the trial court abused its discretion in denying the motion for reconsideration.
Direct Auto Insurance Co. v. Beltran, 2013 WL 5429294 (Ill.App. 1 Dist.).
