SPRINGFIELD – Fifth District appellate judges answered every question in an insurance dispute except the question Madison County Circuit Judge Dennis Ruth asked, according to the Illinois Supreme Court.
On March 30, the Justices vacated a Fifth District order that would have sent the action back to Ruth in different shape with further changes ahead.
The Justices instructed the appellate judges to limit the scope of the order to a single question Ruth certified for review in 2013.
He certified a long question:
“Does an insurer have the right to cancel an insurance policy at the direction of a premium finance company where the contract between the premium finance company and the named insured that purportedly gave the premium finance company the power of attorney to request cancellation of the policy was undated and, therefore, did not comply with the Illinois Premium Finance Act’s requirement that the premium finance agreement be dated?”
The action dates back to Aug. 19, 2004, when a fire at Teresa’s Inn in Wood River killed building tenant Douglas Kibby and damaged a building nearby.
Owner Teresa Stephens notified USF Insurance, which told her it canceled her policy for failure to pay a premium, effective Aug. 5.
USF told her Premium Financing Specialists, which financed her policy, directed USF to cancel it on Aug. 2.
Stephens sued USF for coverage that November, claiming she received no notice of cancellation until Oct. 28.
She argued that she had a history of paying late and that UFS had a history of accepting her late payments.
Days later Kibby’s estate filed a separate wrongful death suit against Stephens.
UFS filed a counterclaim for declaratory judgment against her in 2005, naming Kibby’s estate as a necessary party.
USF named the Surinder Kumar trust, owner of the nearby building, as a necessary party after the trust sued Stephens for property damage.
Stephens amended her complaint in 2006, to add a claim against Premium Financing as agent of UFS.
USF and Premium Financing moved for summary judgment in 2007, arguing that Premium Financing canceled the policy as Stephens’s attorney in fact.
The Kumar trust moved for summary judgment against them in 2008, challenging the authority of Premium Financing to act as attorney in fact.
The trust claimed Premium Financing’s agreement with Stephens did not conform to state law because neither she nor anyone on her behalf dated it.
Kibby’s estate later joined the motion.
Stephens settled the suits against her in 2009, assigning to Kibby’s estate her policy limit of $500,000.
Ruth held hearings on the summary judgment motions in 2009 and 2011.
In 2013, he ruled that the USF policy was not in effect on the date of the fire.
He cited Selective Insurance v. Urbina, a First District decision from 2007, holding that the lack of a valid power of attorney did not negate a cancellation.
“On appeal the Fifth District appellate court may well rule that a cancellation without a valid power is a nullity but for now this court is bound by the decision in Selective Insurance,” Ruth wrote.
In 2014, the Kumar trust composed a question and asked Ruth to certify it to the Fifth District.
He certified it, after trimming the final line from “dated by or on behalf of the named insured” to “dated.”
Last Oct. 15, Fifth District judges agreed with Ruth about USF but disagreed about Premium Financing.
Justice Richard Goldenhersh wrote, “USF had no duty under the insurance code to independently verify whether Premium Financing had fulfilled its statutory obligations by having in its possession a valid power of attorney.”
“While we find USF is not responsible for the faulty premium finance agreement between Premium Financing and Stephens, we find no reason why Premium Financing should not be held responsible,” he wrote.
Presiding Justice Judy Cates and Justice Melissa Chapman concurred.
They directed Ruth to allow amendments to all pleadings.