Application of False Pretense Exclusion in Business Protection Policy
In Joe Cotton Ford v. Illinois Emcasco Ins., Joe Cotton Ford (“Cotton”) owned and operated an automobile dealership. Cotton’s dealership manager, Drendel, admitted that he had removed approximately 75 trade-in cars from the lot for his own benefit with a total estimated value of $1,244,796.00.
Illinois Emcasco (“Emcasco”) issued a business protection policy to Cotton as policyholder. Cotton sought a declaration that Emcasco had a duty to indemnify Cotton for its loss under the “Physical Damage” coverage section of the policy, which provided that Emcasco would pay for a loss of covered autos caused by theft up to $2,750,000.00.
Emcasco argued that Cotton’s claims were barred by the “False Pretense Exclusion” to the Physical Damage coverage of the policy, which provided that an insurer would not pay for a loss to a covered auto caused by, or resulting from, “Someone causing you to voluntarily part with it by trick or scheme or under false pretenses.”
The issue was whether Drendel caused Cotton to “voluntarily part” with each of the autos that Drendel converted.
The court found that Drendel’s ongoing activities depended on a scheme and false representations made to Cotton. Thus, such activities fell under the False Pretense Exclusion, and Emcasco had no duty to indemnify Cotton.
Joe Cotton Ford, Inc. v. Illinois Emcasco Ins. Co., 906 N.E.2d 1279 (Ill.App. 1Dist., 2009).
