IL App 1st / Misrepresentationshoke2013
No Rescission of Renewal Policy after Single Policy Term
The Appellate Court of Illinois, First District, in an opinion written by Justice Pucinski, applying Illinois law, affirmed the Circuit Court’s dismissal of an insurer’s motion for summary judgment, holding that the Illinois Insurance Code precluded the insurer, United Equitable Insurance Company (“UEIC”), from rescinding an insurance policy despite material misrepresentations made by the insured. In doing so, the Appellate Court applied Section 154 of the Illinois Insurance Code, which prohibits rescission of personal lines policies after the policy has been in effect for one year or one policy term, whichever is less.
The instant case concerned a six-month automobile policy issued by UEIC to Anthony Thomas (“Thomas”) in March 2016. In his application for the policy, Thomas stated that the car covered by the policy would not be used for messenger, delivery, driver training or commercial purposes. Additionally, Thomas’ insurance broker confirmed to Thomas that the car could not be used for ride sharing services such as Uber and Lyft. Nonetheless, shortly after receiving the policy, Thomas began working as an Uber driver. The automobile policy was renewed twice before an uninsured driver rear-ended Thomas in June 2017, causing injury to Thomas’ passenger. At the time of the accident, Thomas was using his car solely in a private manner; the passenger was Thomas’ girlfriend.
Nonetheless, UEIC attempted to void the contract based on Thomas’ misrepresentations about the use of his car. According to UEIC, using a car as a ride-sharing vehicle increases the risk level, which they would not have insured when originally issuing a policy to Thomas. The Appellate Court rejected UEIC’s attempt to rescind the contract, holding that UEIC’s action was untimely, in light of Section 154 of the Insurance Code.
In addition to defining materiality for misrepresentations in insurance policy, Section 154 of the Illinois Insurance Code prohibits the rescission of a personal lines insurance policy after the policy has been in effect for one year or one policy term, whichever is less. Finding this language unambiguous, the Appellate Court stated that, in the present case, one year (as well as several policy terms) had passed, and, thus, UEIC’s attempt at rescission was untimely. The Appellate Court noted that this may yield some unfair results in some cases but that it was ultimately bound by the plain text of the law. As such, the Appellate Court affirmed the Circuit Court’s dismissal of UEIC’s motion for summary judgment. United Eq. Ins. Co. v. Thomas, 2021 IL App (1st) 201122 (Nov. 22, 2021).