Find Legal Information

JUSTICE O'MARA FROSSARD delivered the opinion of the court:

This case arises from a dispute over a medical insurance policy issued by defendant UnitedSecurity Life Insurance Company of Illinois to plaintiff Roman Styzinski. Plaintiff filed a complaintagainst defendant alleging breach of contract based on its failure to pay, pursuant to that policy,approximately $100,000 of medical expenses he incurred after he was injured while driving amotorized two-wheel vehicle. Defendant filed a three-count first amended counterclaim. Count Ialleged that plaintiff made a misrepresentation on his application for medical insurance when heresponded "no" to a question asking whether he had driven a motorcycle during the preceding twoyears or contemplated driving one in the future. The count further alleged that his misrepresentationwas material and therefore required rescission of the insurance contract. Counts II and III allegedthat even if the insurance contract was valid, two of its exclusionary provisions regarding injuriessustained while engaged in illegal activity barred plaintiff's claim. Specifically, Count II allegedplaintiff operated his vehicle at the time of the accident under the influence of marijuana and/or withmarijuana in his bodily systems in violation of section 11-501(a)(5) of the Illinois Vehicle Code (625ILCS 5/11-501(a)(5) (West 1996)). Count III alleged plaintiff violated Illinois laws which made itillegal to operate a motorcycle in the place and manner undertaken by plaintiff at the time of theaccident.

Defendant subsequently filed a motion for summary judgment based on the same claimsalleged in its first amended counterclaim. Thereafter, the trial court issued a written order grantingdefendant's motion for summary judgment, entering judgment for defendant on count I of its firstamended counterclaim and rescinding the contract, and dismissing counts II and III "as moot." Plaintiff appeals the entry of summary judgment, contending that the trial court erred by concludinghe made a material misrepresentation on his application for insurance. Plaintiff argues that hisanswer to the motorcycle-related question was accurate because the vehicle he was operating at thetime of his accident was an off-road dirt bike rather than a motorcycle. Defendant responds that thetrial court properly entered summary judgment based on plaintiff's misrepresentation and cross-appeals, alternatively contending that the entry of summary judgment should be affirmed becauseplaintiff's claim was barred by the exclusionary provisions identified in its first amendedcounterclaim and summary judgment motion. Plaintiff subsequently filed a motion in this court tostrike defendant's brief on cross-appeal and dismiss its cross-appeal on the grounds that its brieffailed to address "mootness," the basis on which the trial court dismissed counts II and III ofdefendant's first amended counterclaim.

Plaintiff, a certified mechanic, operated a business that repaired small engines at the time heapplied to receive medical insurance from defendant. Plaintiff submitted his written application forinsurance on December 4, 1996, and answered "no" to the following question on the application:

"Does any person named above contemplate or has within the last twoyears been engaged in the following activities: Aviation, HangGliding, Parachuting, Parasailing, Racing (any kind), MotorcycleDriving or Racing, Rodeo Activities, Competitive Skiing, Scuba orSky Diving, or other hazardous sports?" (Emphasis added.)

Plaintiff stated during his deposition that insurance agent Ron Yocum helped him fill out theapplication and read the questions out loud to him "in a fast kind of motion, 'yes' or 'no.' " AfterYocum read the motorcycle-related question at issue, plaintiff told Yocum he occasionally test-drovedirt bikes. Plaintiff also told Yocum that he repaired go carts and golf carts and assumed Yocumknew that he also worked on vehicles such as motorcycles or dirt bikes. Plaintiff stated that Yocumtold him nontitled, nonhighway vehicles did not qualify as motorcycles under the application andadvised him to answer the question "no." In an affidavit attached to plaintiff's complaint, Yocumacknowledged he assisted plaintiff with his insurance application and stated that plaintiff told himhe had a license to drive a motorcycle but had not driven one in 10 years and had no intention ofdriving one. Accordingly, Yocum advised plaintiff to answer the question "no."

Plaintiff signed the following attestation included on the application:

"I represent the statements I have made herein are completeand true. I understand the following: (a) if any information on thisapplication is incorrect, this coverage may be voided[.]"

Defendant accepted the application and issued the policy in question to plaintiff, effectiveFebruary 1, 1997. On November 3, 1997, plaintiff was injured while he was operating a SuzukiDR370, a motorized, two-wheel vehicle, which could reach top speed of approximately 50 miles perhour. Plaintiff was driving the vehicle off-road along a gravel railroad bed when he lost control ofit and struck a tree. Plaintiff subsequently submitted a written claim statement to defendant in whichthe accident was noted as "motorcycle accident off road dirt bike." Defendant denied plaintiff'sclaim for medical expenses based on his "no" answer to the question on the application for insuranceasking whether he had driven a motorcycle during the preceding two years or contemplated drivinga motorcycle in the future. In its letter of denial, defendant stated that "a copy of [plaintiff's]application was attached to, and made part of, [his] policy." Defendant asserted that had plaintiffcorrectly answered the question regarding his use or contemplated use of a motorcycle, it "wouldhave applied an Elimination Endorsement to [motorcycle driving] at that time."

Following the denial of his claim under the policy, plaintiff filed a complaint alleging thatdefendant breached the subject insurance contract by refusing to pay medical expenses arising fromhis injury. Defendant, in turn, filed a three-count first amended counterclaim. Count I soughtrescission, alleging that defendant's "no" answer to the motorcycle-related question on theapplication constituted a material misrepresentation. Counts II and III both sought a declaratoryjudgment stating that two exclusions in the policy regarding injuries sustained while engaged inillegal activity barred plaintiff's contractual right to recover medical expenses arising from his injury.

Defendant subsequently filed a motion for summary judgment seeking rescission of thecontract based upon plaintiff's "no" answer to the motorcycle-related question in the application forinsurance. In support of its contention that this answer constituted a misrepresentation, defendantattached to its motion plaintiff's deposition. Plaintiff stated during his deposition that at the time hecompleted the insurance application, he had a license to drive a motorcycle and owned a 200 Hondastreet bike as well as the off-road bike involved in the accident. Plaintiff received the street bike inexchange for tuning up a customer's tractor but had never driven it. Plaintiff stated he repairedapproximately a dozen motorcycle or dirt bikes per year and test-drove all of them. He stated thatduring 1996 he test-drove a motorcycle that he had serviced and test-drove a dirt bike or motorcyclethat he worked on in 1997. When asked whether he operated a dirt bike or motorcycle during thetwo years before the date on which he submitted his insurance application, plaintiff answered,"Again I must have to test them, yes." Plaintiff subsequently indicated that when he test-drovemotorcycles and off-road cycles prior to submitting his application for insurance, he always did sooff-road. Plaintiff stated that at the time he applied for his policy he had no intention of driving amotorcycle on the streets and had not operated a motorcycle upon a highway in the past two years.

In support of its contention that plaintiff's misrepresentation was material, defendant attachedto its motion for summary judgment the deposition of Martin Pinkowski, an underwriting managerfor defendant. As an underwriting manager, Pinkowski evaluated the risks presented by insuranceapplications, determined whether a policy should be issued, and if so, whether it should be issuedwith an endorsement limiting or changing the terms of coverage. Pinkowski stated that had plaintiffanswered "yes" in response to the motorcycle-related question on the insurance application,defendant would have asked follow-up questions regarding his use of motorcycles and issued anelimination endorsement excluding coverage for motorcycle injuries.

During his deposition, Pinkowski identified the Lincoln National Life Underwriting Manualas a guide used by several insurance companies throughout the country which contains informationon how to evaluate either medical or nonmedical risks. With respect to the manual, Pinkowskiexplained:

"It gives [underwriters] some guidelines what to look for and whatnot to look for and possibly what requirements you might want toorder also, but, again, it's just a guideline. It's just guidelines. It's notanything that's set in stone."

Pinkowski noted that the underwriters he managed used the manual and that it recommends issuinga policy without elimination endorsements if the applicant operates a motorcycle for pleasure ortransportation on normal streets and roadways and does not have any history of accidents.

Defendant alternatively contended in its motion for summary judgment that even if thecontract was enforceable, the exclusions in the policy of coverage for injuries sustained whileengaged in illegal activities barred plaintiff's claim under the policy. Plaintiff tested positive formarijuana when treated for injuries sustained in the accident. Plaintiff admitted using marijuana,either a day or two before the accident or a week before the accident.

Plaintiff filed a response to the motion for summary judgment contending that his answer tothe motorcycle-related question on the application for insurance was accurate and that the vehiclehe was operating at the time of his accident was a dirt bike rather than a motorcycle. Plaintiffasserted in his response that while a motorcycle is "a bike that you drive on the street or highway asa means of transportation from here to there," a dirt bike is driven off-road for recreational purposes. Plaintiff additionally noted that he "might repair ten or twelve dirt bikes or off-road motorcycles"a year, which he test-drove not on the street, but off-road on his own property or on trails throughthe woods.

On October 16, 2001, the trial court issued a written memorandum and order grantingdefendant's motion for summary judgment. The court found no ambiguity in the term "motorcycle,"stating that "the common-sense, 'plain, ordinary, and popular' definition of 'motorcycle' manifestlyinclude[d] the sort of vehicle used [by plaintiff]." The court concluded that plaintiff'smisrepresentation on the application was material and that defendant was thus entitled to summaryjudgment. The final paragraph of the court's order stated:

"For the foregoing reasons, defendant's Motion for SummaryJudgment is granted. Plaintiff's action is dismissed with prejudice. Judgment is entered for defendant on Count I of its Counterclaim,rescinding the policy in question. The rest of the Counterclaim isdismissed as moot."

Plaintiff contends on appeal that the trial court erred by rescinding the insurance policy andentering summary judgment in favor of defendant based upon its conclusion that he made a materialmisrepresentation on his application for medical insurance.

Summary judgment should be granted when there is no genuine issue of material fact and themoving party is entitled to judgment as a matter of law. Outboard Marine Corp. v. Liberty MutualInsurance Co., 154 Ill. 2d 90, 102 (1992). In reviewing a motion for summary judgment, the trialcourt is required to consider the affidavits, depositions, admissions, exhibits, and pleadings on fileand to construe them strictly against the moving party and liberally in favor of the nonmoving party. In re Estate of Hoover, 155 Ill. 2d 402, 410-11 (1993). We apply de novo review to orders grantingsummary judgment. In re Hoover, 155 Ill. 2d at 411.

"Under the Insurance Code, no misrepresentation in a written insurance policy application'shall defeat or avoid the policy unless it shall have been made with actual intent to deceive ormaterially affects either the acceptance of the risk or the hazard assumed by the company.' " Ratcliffe v. International Surplus Lines Insurance Co., 194 Ill. App. 3d 18, 25 (1990), quoting Ill.Rev. Stat. 1987, ch. 73, par. 766 (amended and recodified at 215 ILCS 5/154 (West 1996)); see also215 ILCS 5/359a(3) (West 1996) (submission of a false statement on an insurance policy applicationmay bar the insured's right to recover under the policy if the statement is material). "A'misrepresentation' in an application for insurance is a statement of something as a fact which isuntrue and affects the risk undertaken by the insurer." Ratcliffe, 194 Ill. App. 3d at 25. A materialmisrepresentation will render a contract unenforceable even if it is made mistakenly or in good faith. Ratcliffe, 194 Ill. App. 3d at 25. Thus, an insurer need not prove that a misrepresentation was madewith the intent to deceive so long as it was material to the assumed risk. Ratcliffe, 194 Ill. App. 3dat 25. Whether information submitted on an application for insurance constitutes a misrepresentationis generally a question of fact. See, e.g., Ratcliffe, 194 Ill. App. 3d at 27.

Plaintiff contends that in reviewing whether the trial court properly ruled that he made amisrepresentation, we must apply principles of contract interpretation to construe the term"motorcycle" in the insurance application. Plaintiff argues that his "no" answer to the motorcycle-related question did not constitute a misrepresentation because the term "motorcycle," as it appearedon the application, was ambiguous and could reasonably have been construed not to include thevehicle he was operating at the time of his accident.

We recognize that the insurance application and the insurance policy subsequently issued bydefendant constitute the underlying insurance contract in the instant case (see Bellmer v. CharterSecurity Life Insurance Co., 140 Ill. App. 3d 752, 755 (1986)), and that the trial court appliedprinciples of contract interpretation in ruling upon defendant's motion for summary judgment. However, we reject plaintiff's contention that we must apply those principles to the motorcycle-related question on the application in order to determine whether his answer to that questionconstituted a misrepresentation. See Sullivan v. Board of Commissioners of Oak Lawn Park District,318 Ill. App. 3d 1067, 1071 (2001) (reviewing court may uphold a trial court's entry of summaryjudgment on any grounds that appear in the record without regard to whether trial court relied uponthem); see also Norskog v. Pfiel, 197 Ill. 2d 60, 69-70 (2001). Regardless of whether the vehicleinvolved in the accident qualified as a motorcycle, plaintiff admitted in his deposition that duringthe two years preceding his submission of the subject insurance application he operated not only dirtbikes but also motorcycles. Plaintiff did state at one point during his deposition that he did notoperate a motorcycle or dirt bike "on a highway" during the two years preceding the submission ofhis insurance application. However, the question at issue on the insurance application did not askwhether plaintiff had driven a motorcycle on a highway during the preceding two years. Rather, itasked whether plaintiff had driven, without specifying where, a motorcycle during the preceding twoyears. Plaintiff's deposition testimony unambiguously established that he did operate a motorcycleduring that time period and thus established that there was no genuine issue of fact regarding whetherhis "no" answer was a misrepresentation.

Plaintiff additionally argues that his answer was not a misrepresentation because Yocum toldhim to answer the question "no" and was an agent acting on behalf of defendant. We note, however,that whether Yocum qualified as defendant's agent is irrelevant because plaintiff did not tell him thathe repaired or drove motorcycles during the two years preceding the submission of his insuranceapplication. Rather, as plaintiff concedes in his brief, he "assumed" that Yocum knew he test-drovemotorcycles.

Plaintiff next contends that his "no" answer to the motorcycle-related question on hisinsurance application did not constitute a "material" misrepresentation. A misrepresentation ismaterial if a reasonable person would consider it to substantially increase the chances of the eventinsured against and in turn cause the insurer to reject the application or require different conditions. Golden Rule Insurance Co. v. Schwartz, 323 Ill. App. 3d 86, 96 (2001). Materiality is generally aquestion of fact and may be established through testimony from the insurer's underwriter. GoldenRule Insurance Co., 323 Ill. App. 3d at 97.

Plaintiff contends that "[defendant] never showed that, as a matter of law, a 'yes' answer to[the motorcycle-related question on the application] would have resulted in the issuance of an ***elimination endorsement by defendant." To support this contention, he relies upon Pinkowski'stestimony regarding the portion of the Lincoln National Life Underwriting Manual whichrecommends issuing insurance without endorsements for motorcycle injuries to applicants who ridemotorcycles and have no history of accidents. Plaintiff mistakenly assumes that the guidelines inthe manual categorically dictated what defendant's underwriters were required to do. Pinkowski'stestimony made clear, however, that the guidelines in the manual were recommendations and nothard and fast rules that bound defendant's underwriters. Pinkowski explained that had plaintiffanswered the motorcycle-related question affirmatively, defendant would have undertaken furtherinvestigation to determine the circumstances under which plaintiff operated motorcycles. Pinkowskirepeatedly stated that defendant would not have provided coverage for motorcycle injuries hadplaintiff revealed that he had test-driven motorcycles during the two years preceding the submissionof his insurance application. Thus, we find that plaintiff failed to establish a genuine issue regardingthe materiality of his misrepresentation.

Based on the record, we conclude that the trial court properly rescinded the insurance contractpursuant to count I of defendant's first amended counterclaim. We find it unnecessary to address thearguments raised by defendant in its cross-appeal or those raised in plaintiff's motion to dismiss thatcross-appeal. Based on the foregoing reasons, we affirm the trial court's entry of summary judgment,dismiss defendant's cross-appeal, and dismiss plaintiff's motion to strike defendant's cross-appeal.

Affirmed; cross-appeal and motion to strike cross-appeal dismissed.

BUCKLEY and O'BRIEN, JJ., concur.