Direct Auto Insurance Company v. Koziol
2018 IL App (1st) 171931
| Ill. App. Ct. | 2018Background
- On April 8, 2013 Koziol purchased a DAI policy covering his 2008 Dodge Charger; on July 21, 2013 he crashed the Charger into a utility pole and submitted a claim. DAI investigated and learned Koziol did not disclose a 2002 Ford Explorer registered to his parents and kept at his home.
- DAI rescinded the policy and denied coverage, alleging Koziol made a material misrepresentation on his electronic application by answering “no” to "Any other cars in the household other than those listed on the application?" and relying on fraud/misrepresentation clauses in the application and policy.
- Koziol sued for breach of contract; DAI filed a declaratory-judgment action seeking a declaration of no coverage and rescission ab initio. The actions were consolidated.
- DAI moved for summary judgment, supported by an underwriting affidavit that the undisclosed vehicle would have increased Koziol’s premium by $477 (about 35%) and would have affected underwriting. Koziol relied on this court’s earlier decision in Direct Auto Ins. Co. v. Beltran.
- The trial court denied DAI’s summary-judgment motion and motion to reconsider, finding (under Beltran) that an increased premium alone does not establish materiality under 215 ILCS 5/154; factual issues remained about intent and actual increased risk. The parties later stipulated to the facts and the court entered judgment for Koziol for $11,573.55. DAI appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Koziol’s omission (undisclosed household vehicle) was a material misrepresentation justifying rescission under 215 ILCS 5/154 | Omission was material because disclosure would have increased premium ~35% and affected acceptability of the risk; premium increase alone demonstrates materiality | Under Beltran, a premium increase alone is not dispositive; no evidence the undisclosed vehicle increased the insured risk or that Koziol or his parents drove the other vehicle | Judgment for Koziol affirmed: premium increase alone, without evidence of actual increased risk or intent, is insufficient for rescission under §154 |
| Whether there was sufficient evidence of intent to deceive | DAI argued materiality obviates need to show intent; underwriting affidavit implies the omission mattered to acceptance | Koziol argued there was no evidence of intent and Beltran controls; parents’ vehicle was separately insured and not shown to be driven by Koziol | Trial court’s finding that questions of fact existed as to intent was not against manifest weight; summary-judgment denial merged into final judgment; judgment for Koziol stands |
| Whether the trial court misapplied Beltran and should have granted reconsideration | DAI urged Beltran is distinguishable and that statutory/administrative benchmarks (e.g., 30% notice rule) show a 35% premium change is material | Koziol relied on Beltran precedent and lack of evidence tying the undisclosed vehicle to increased risk | Appellate court held Beltran’s reasoning properly applied: absent evidence showing the undisclosed fact increased the chances of the insured event, mere premium impact is insufficient |
| Appealability of denial of summary judgment/motion to reconsider | DAI challenged trial court’s denial orders on appeal | Koziol did not file a brief; court considered appeal under First Capitol principles | Appellate court dismissed the interlocutory appeals from denial of summary judgment/reconsideration because those rulings merged into the final judgment; review proceeded from final judgment |
Key Cases Cited
- Golden Rule Ins. Co. v. Schwartz, 203 Ill. 2d 456 (supreme court) ( §154 requires falsehood plus intent to deceive or material effect on acceptance of risk )
- Law Office of Tuzzolino & Terminas v. 2015 IL 117096 (supreme court) (interpreting §154 and confirming rescission may be allowed for innocent but material misrepresentations)
- Northern Life Ins. Co. v. Ippolito Real Estate P’ship, 234 Ill. App. 3d 792 (App. Ct.) (materiality measured by whether facts would "substantially increase the chances" of the event insured against)
- Ratliff v. Safeway Ins. Co., 257 Ill. App. 3d 281 (App. Ct.) (distinguishable precedent where undisclosed young driver materially affected risk and led to higher premium)