6 October 2000

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JUSTICE GALASSO delivered the opinion of the court:

Plaintiff, Century-National Insurance Company (Century),brought a declaratory action against defendants, James JosephTracy (James), Debra Tracy (Debra), and CMDK DevelopmentCorporation (CMDK), alleging that James was not entitled tounderinsured motorist benefits under a policy issued to CMDK. Century appeals from a directed finding entered by the trialcourt at the conclusion of Century's case and the award ofSupreme Court Rule 137 (155 Ill. 2d R. 137) sanctions againstCentury and its attorney, Daniel Suber.

The record on appeal reveals the following pertinent facts.CMDK was co-owned by James and his wife, Debra. They were thesole principals and employees of CMDK, which was owned andoperated as a partnership. The record contains no evidence that,during the relevant period of time, CMDK was incorporated. Inprocuring a business auto insurance policy for a 1987 Chevy half-ton pickup truck (insured vehicle) allegedly owned by CMDK,certain information regarding the application for insurance wasprovided to several insurance agents/brokers and, ultimately, toplaintiff. The application for insurance was signed by "D.Tracy." Debra was the only driver listed on it. On September28, 1993, plaintiff issued a business auto policy to CMDK thatcovered the insured vehicle. This policy provided comprehensive,liability, collision, medical payments, anduninsured/underinsured motorist coverage from September 28, 1993,to September 28, 1994. The policy was a named- driver policy andspecifically required that all drivers of the covered vehicle bereported to plaintiff and endorsed on the policy.

On February 24, 1994, the driver of the insured vehicle wasinvolved in a two-car accident in Aurora, Illinois. There wereno passengers in the insured vehicle. The driver presentedpolice with a driver's license that stated he was Kevin Tracy. The driver reported some injuries and was taken to Mercy CenterHospital. Ambulance records indicated that the driver toldambulance personnel that he was Kevin Tracy. X-ray records atMercy Center Hospital showed that the name Kevin Tracy wascrossed out in certain places and replaced with the name JamesTracy. Laura Tijerna was the operator and sole occupant of theother vehicle involved in the subject accident. Subsequently,James filed a complaint for personal injuries against Tijernaarising out of the subject accident. Later, Tijerna, insuredthrough Economy Preferred Insurance Company, paid James $50,000,the single-person limit of her policy, in settlement of thelawsuit.

On December 28, 1995, James filed a complaint againstCentury pursuant to the underinsured motorist provision of thepolicy for injuries he was alleged to have sustained in thesubject traffic accident. On November 21, 1996, after theparties had failed to reach a settlement, James made a demandupon Century for arbitration, per terms of the policy. On March3, 1998, Century filed a complaint for declaratory judgmentagainst James and CMDK. This complaint sought a declaration thatCentury owed no obligations to defendants under the policy. Thecomplaint alleged that defendants provided insufficient evidencethat James Tracy, rather than Kevin Tracy, was involved in thesubject accident and that defendants had misrepresented thatJames was the individual involved in the accident.

On April 3, 1998, Century filed a first amended complaint,in which Debra was added as a defendant. Counts I and IIrealleged that defendants provided insufficient evidence thatJames was the individual involved in the accident. In countsIII, IV, and V, Century alleged that Debra had materiallymisrepresented CMDK as being a corporate entity for the purposesof obtaining insurance and had materially omitted the fact thatJames, an unlicensed motorist, was the true owner and driver ofthe truck.

On January 20, 1999, an evidentiary hearing was held oncounts I and II of the first amended complaint. Argumentsrelated to the allegations in counts III, IV, and V of Debra'smisrepresentation of CMDK's corporate status, her omission ofinformation related to James's status as an unlicensed driver,and his operation of the insured vehicle were reserved for ahearing on June 2, 1999. At the close of Century's case at theJanuary 20 hearing, the trial court granted defendants' oralmotion for a directed finding.

On April 16, 1999, Century filed a second amended complaintfor declaratory judgment. Therein, Century realleged that Debrahad misrepresented CMDK as being a corporation. Further, Centuryalleged that Debra materially omitted James's name from theinsurance application and that James was a nonpermissive user ofthe insured vehicle.

On June 2, 1999, a hearing was held as to the remainingcounts of Century's second amended complaint. After Centurycompleted its case in chief, wherein it unsuccessfully attemptedto introduce evidence that James had provided the informationused in completing the application for insurance, the trial courtgranted defendants' motion for a directed finding. On August 5,1999, Century filed a motion for leave to file a third amendedcomplaint to include allegations that James had misrepresentedCMDK as being a corporation, that James had materially omittedhis name from being a named driver of the insured vehicle, andthat defendants had violated the terms of the policy becauseJames, who did not have a valid driver's license at the time ofthe accident, had no reasonable belief that he was entitled todrive the insured vehicle. The trial court continued the matteruntil October 14, 1999, ordering Century to file a petitionpursuant to Illinois Supreme Court Rule 183 (134 Ill. 2d R. 183)explaining therein why it should be permitted to file an amendedcomplaint after the requisite filing date. On October 14, 1999,the trial court denied the motion for leave to file a thirdamended complaint.

On July 2, 1999, defendants filed a motion for Rule 137 (155Ill. 2d R. 137) sanctions against Century and its attorney,Daniel Suber. On July 15, 1999, Century filed a cross-motion forRule 137 sanctions against defendants and their attorneys. Aftera hearing on October 14-15, 1999, the trial court awardeddefendants $2,000 in sanctions against Century and its attorney,Daniel Suber, and denied the cross-motion for sanctions.

On appeal, plaintiff raises the following arguments, namely,(1) whether the trial court's directed finding that James, ratherthan Kevin Tracy, his brother, was driving the insured vehicle atthe time of an accident on February 24, 1994, was against themanifest weight of the evidence; (2) whether the trial courtabused its discretion in barring evidence that James made falserepresentations in applying for the subject insurance policy; (3)whether the trial court's directed finding of June 2, 1999, wasagainst the manifest weight of the evidence; (4) whether thetrial court abused its discretion in denying Century leave tofile a third amended complaint; (5) whether the trial courtabused its discretion in awarding Rule 137 sanctions; and (6)whether the trial court abused its discretion in compellingdisclosure of and admitting into evidence a letter fromplaintiff's attorney Suber to Century concerning the pendinglitigation. Due to our determinations of issues 1, 2, and 5,discussed below, we do not need to address issues 3, 4, and 6.

Century first argues that the trial court's directed findingof January 20, 1999, that James rather than Kevin Tracy was thedriver of the insured vehicle was against the manifest weight ofthe evidence. Defendants respond that the evidence clearlysupported the trial court's directed finding.

Initially, we note that in such cases the court of reviewmust determine whether the trial court erred in deciding thatplaintiff failed to show a prima facie case. Kokinis v. Kotrich,81 Ill. 2d 151, 154 (1980). A prima facie case is one in whichthe plaintiff has presented at least some evidence on everyelement essential to its cause of action. Kokinis, 81 Ill. 2d at154. A trial court's decision on this matter will not bereversed unless it is contrary to the manifest weight of theevidence. Kokinis, 81 Ill. 2d at 154.

On January 20, 1999, an evidentiary hearing was held inregard to counts I and II of the first amended complaint, whichsounded in misrepresentation and asserted that James's action forunderinsured motorist coverage was not supported by the evidence. Specifically, these counts alleged that the individual drivingthe insured vehicle was in fact Kevin Tracy, the brother ofJames. Laura Tijerna, the driver of the other vehicle involvedin the collision, positively identified Kevin Tracy in open courtas the driver and sole occupant of the insured vehicle at thetime of the accident. She stated that she had independentlyidentified Kevin Tracy as the driver and sole occupant of theinsured vehicle while she waited outside the courtroom before thestart of the proceedings. Aurora police officer Brian Hester,the first police officer to arrive at the scene of the accident,testified that he was "90% sure" that Kevin Tracy was the driverand sole occupant of the insured vehicle. Further, ambulance andemergency room records indicated that Kevin Tracy was transportedby ambulance to Mercy Center Hospital's emergency room, where hereceived medical treatment. Certain records from Mercy CenterHospital showed that Kevin Tracy's name had been crossed out andJames's name substituted for it.

Additionally, Dr. Jeffrey Kapp, a dentist who had been ingeneral practice for over 20 years, testified that he hadreviewed the X rays of the driver of the insured vehicle takenimmediately after the accident at Mercy Center Hospital. Dr.Kapp stated that the Mercy Center Hospital records gave noindication as to why dental X rays were taken. He opined thatthese X rays were of such poor quality that they were of nodiagnostic value. Dr. Kapp stated that he reviewed James'sdental X rays that had been taken three or four years prior tothe accident. According to Dr. Kapp, those portions of thehospital's dental X rays that were readable, when compared toJames's previous dental X rays, did not appear to reflect thesame dental conditions as those that existed in his previousdental X rays.

In order to accommodate the schedule of defendants' expertwitness, Dr. Stefan Turcic, the trial court permitted defendantsto present his testimony during Century's case. Dr. Turcicstated that he had been James's dentist since 1992. He statedthat both the X rays he had taken of James's mouth and the dentalX rays taken at Mercy Center Hospital showed crowns at teethnumbers 8 and 9. He further testified that he had inspected themouth of Kevin Tracy in the hallway of the courthouse just priorto the hearing. According to Dr. Turcic, the cursory inspectionindicated that Kevin Tracy did not have crowns on teeth numbers 8and 9. Dr. Turcic opined that the dental X rays taken at MercyCenter Hospital depicted James Tracy rather than Kevin Tracy.

At the end of Century's case, defendants orally moved for adirected finding. The trial court stated inter alia:

"On one level there is eyewitness testimony in the case ofMiss Tijerna, a positive identification of Kevin as theoperator of the vehicle, in the case of the police officer,Officer Hester, a somewhat equivocal, but fairly strongidentification. On the other hand, the plaintiff [sic] hasestablished that the person who was driving the automobilehad two crowns, two posts in his two front teeth, teethnumber 8 and 9 as the dentist identified those teeth. Thatis irrebuttable and unrefuted. It is also unrebuttable[sic] and irrefutable that James has two such posts and twosuch crowns, although there might be some distinction as towhether his were the screw type or not, but he has two. Itis also absolutely unrebutted that Kevin does not."

Century first points out that the trial court, in grantingthe motion for a directed finding, relied on Dr. Turcic'stestimony and that normally such testimony would have beenpresented during the defendant's case. Century maintains that itwas improper for the trial court to use such evidence indetermining whether plaintiff had presented a prima facie case. Plaintiff further contends that the circumstantial evidence ofthe driver's identity should not have been considered by thetrial court where there was "uncontradicted, reasonable andunimpeached direct testimony of the eyewitnesses who identifiedthe driver." In response, defendants argue that the trial courtproperly granted a directed finding, as the testimony of LauraTijerna and Officer Hester was equivocal and the testimony of Dr.Turcic was "significant and relevant."

The issue is whether plaintiff presented enough evidence tomake a prima facie case that should have withstood a motion for adirected finding. Contrary to defendants' assertion and thetrial court's perspective, we do not find the testimony of Ms.Tijerna and Officer Hester particularly equivocal. OfficerHester said he was 90% sure that Kevin was driving the vehicle,and Ms. Tijerna was quite emphatic that Kevin, rather than James,was the driver. Additionally, the records of the ambulance andthe Mercy Center Hospital emergency room list the name of KevinTracy as the person being transported and treated, respectively. This was more than enough evidence to meet the prima faciestandard. However, the trial court did not base itsdetermination of whether the standard had been met on suchevidence. Rather, in ruling on the motion for a directedfinding, it considered the testimony of Dr. Turcic, whoseappearance on defendants' behalf was taken out of order toaccommodate his schedule. Section 2--1110 of the Code of Civilprocedure (735 ILCS 5/2-1110 (West 1992)) provides in pertinentpart, "In all cases tried without a jury, defendant may, at theclose of plaintiff's case, move for a finding or judgment in hisor her favor." (Emphasis added.) While the parties have notcited a case directly on point, nor has our research uncoveredone, we conclude that the plain meaning of this statute is thatonly the evidence presented by plaintiff will be considered bythe trial court in deciding a motion for a directed finding. Byfailing to follow the proper procedure in deciding the subjectmotion, the trial court "jumped to the end of the evidence,"essentially depriving plaintiff of any opportunity to put on arebuttal case. Accordingly, we find that the trial court erredin granting defendants' motion for a directed finding and remandthis cause of action for further proceedings.

However, that is not the end of our consideration of theissues raised by plaintiff, as the trial court made other rulingsthat affected plaintiff's ability to pursue fully this case.

Century further argues that the trial court erred in denyingits motion to file a third amended complaint. In effect,Century's argument regarding the trial court's denial of itsefforts at the June 2, 1999, hearing to conform the pleadings tothe proof is subsumed by this argument, and, thus, we willaddress only the contention concerning the denial of the motionfor leave to file the third amended complaint. Century maintainsthat it meets all of the four factors of the test for determiningwhether a complaint should be amended. In response, defendantsargue that the trial court acted properly in refusing to allowCentury leave to file its third amended complaint.

There is no absolute right to amend a pleading. Lake CountyGrading Co. of Libertyville, Inc. v. Advance MechanicalContractors, Inc., 275 Ill. App. 3d 452, 460 (1995). However,amendments to pleadings should be liberally allowed to permitparties to present fully their causes of actions. Jeffrey M.Goldberg & Associates, Ltd. v. Collins Tuttle & Co., 264 Ill.App. 3d 878, 885 (1994). Moreover, there is a strong policy thatfavors an adequate hearing of a litigant's claim on the merits. Goldberg, 264 Ill. App. 3d at 885. In determining whether topermit an amendment to the pleadings, a trial court considers (1)whether the amendment cured a defective pleading; (2) whether theamendment prejudiced or surprised the other parties; (3) whetherthe amendment was timely; and (4) whether previous opportunitiesto amend were identifiable. Reich v. Gendreau, 308 Ill. App. 3d825, 830 (1999). The decision to allow amendment of thepleadings rests within the sound discretion of the trial court,and its decision will not be reversed absent a showing of anabuse of that discretion. Indiana Insurance Corp. v. HydraCorp., 245 Ill. App. 3d 926, 932 (1993). The test to be appliedin determining whether there has been an abuse of discretion iswhether the allowance of the amendment furthers the ends ofjustice. Ray Dancer, Inc. v. D M C Corp., 230 Ill. App. 3d 40,48 (1992).

As indicated above, Century filed its second amendedcomplaint on April 16, 1999. Therein, Century realleged thatDebra had misrepresented CMDK as being a corporation. Additionally, Century alleged that Debra had materially omittedJames's name from the insurance application and that James was anonpermissive user of the insured vehicle. On June 2, 1999, anevidentiary hearing was held on the remaining counts of thesecond amended complaint. In his opening statement, Century'scounsel stated that the evidence would show that (1) the subjectinsurance application was completed by agent Mike Trojanowskibased upon information given to him by James; (2) Trojanowski,who was aware of James's prior driving record, warned him thatthe policy's coverage would not include him; (3) James had notbeen a licensed driver in Illinois since 1980; (4) James had beencited twice for driving with a revoked license; (5) the subjectpolicy was a named-driver policy; and 6) there was no informationabout James on the application or accompanying documents conveyedto Century. In his opening statement, counsel for defendantsargued that "[Century's] case is based on omissions andmisrepresentations made by James." Defense counsel then movedfor a directed finding, arguing that the second amended complaintmade reference only to Debra. The trial court denied the motion,adding that defense counsel was free to object on the grounds ofmateriality and relevance "to the extent that any proofs that areadduced which are inconsistent with the theory framed by thepleadings."

Insurance agent Mike Trojanowski was then called to testifyfor Century. Trojanowski initially testified that he had beendefendants' insurance agent for approximately eight years. Hestated that he had written the subject Century-National policydown. When Century sought to elicit testimony regardingstatements made to him by James regarding the application forinsurance, defense counsel objected, stating that no suchallegations were in the second amended complaint. The trialcourt sustained the objection, finding that the complaint'sallegations of misrepresentation related to Debra rather thanJames. Century made an offer of proof, wherein Trojanowskitestified regarding the conversation he had with James during theapplication process. Trojanowski acknowledged that James gave himthe information regarding the policy's coverage, including thetype of vehicle and the "type of risk it is." According toTrojanowski, James stated that he needed coverage "for a job orsomething like that." Trojanowski told James that he couldn'tinsure him because he knew he didn't have a license. "So we [putDebra on the application]," Trojanowski testified, "[a]nd then I*** suggested that he go out and get a license pretty quick, youknow." Trojanowski could not recall whether James or Debrasigned the application. Century's counsel moved to conform itscomplaint to the proofs. The trial court denied the motion.

Further, Thomas Zaura testified that he was an "insuranceunderwriter, commercial line," for the Buschback Insurance Agencyof Oak Lawn, Illinois. Zaura testified that he was contacted byTrojanowski regarding the subject application for insurance. Zaura explained that, in this instance, Trojanowski was acting asa broker. He further stated that Trojanowski "had no particularauthority with any of the companies" that Zaura was using,although Zaura himself did. Subsequently, the trial courtsustained defense counsel's objection to questions concerning theconversation Zaura had with Trojanowski in relation to theinsurance application. In an offer of proof, Zaura stated thathe was told by Trojanowski that the insured would be CMDKCorporation and that the only named driver was Debra. There wasno request for James to be included as a driver under the policy. Zaura testified that he did not convey any information aboutJames to Century because he "didn't know of a James Tracy."

Wendell Langman testified that he was a "commercial automanager" with Century. Langman stated that the subject policywas a "named-driver" policy and that "the insured agrees toreport all drivers to the company before they drive vehiclesscheduled on this policy." Defense counsel objected to thequestions that asked Langman to interpret the language of thesubject policy. In an offer of proof, Langman stated that thepolicy's guidelines contained provisions that required alldrivers to have a valid Illinois driver's license and that alldrivers must be appropriately licensed for the type of vehicledriven. On cross- examination, Langman was asked if this policyextended coverage to unreported drivers who were using a vehiclewith the permission of the insured. Langman responded that,under the policy, coverage did not extend to an unreported driverwho was using the vehicle with permission. Later, Langmanconceded that he would consider a co-owner of CMDK to be a namedinsured under the policy. On redirect examination, Langmantestified that, if the subject insurance application did not listJames as a driver, then Century would not have any means ofdetermining the risk identified with him.

Debra testified that she was the sole owner of "CMDKConstruction Incorporated." She testified that Mike Trojanowskihad been her insurance agent for approximately eight years. Shedenied that she had talked to Trojanowski regarding theapplication for the policy. She further denied that she signedthe application. James testified that CMDK had never beenincorporated.

Century again moved to conform the pleadings with theproofs, and the trial court denied the motion. The trial courtthen granted defendants' motion for a directed finding on countsIII, IV, and V.

On August 5, 1999, Century filed a motion for leave to filea third amended complaint to include allegations that Jamesmisrepresented CMDK as being a corporation, that James materiallyomitted his name from being identified as a named driver of theinsured vehicle, and that defendants violated the terms of thepolicy because James was without a valid driver's license at thetime of the accident and had no reasonable belief that he wasentitled to drive the insured vehicle. On August 19, 1999, ahearing was held on the motion. Century's attorney explained thereason for amending the complaint:

"[T]he reason why we are bringing this motion now is to makesure it is announced the individual who testified and gaveus the information that it was Debra Tracy who had made thematerial misrepresentation and omissions for the hearing ofJune 2nd, turned and flipped and said at the date of thehearing on June 2nd that it is, in fact, James Tracy. Sothat's why we are asking to amend the pleadings at thistime."

The trial court required Century, pursuant to Supreme CourtRule 183 (134 Ill. 2d R. 183), to file the reasons why the thirdamended complaint had not been filed. At a hearing onOctober 14, 1999, the trial court found that Century had not made"a proper showing of good cause" and denied the motion.

We now review the above-cited elements of the test fordetermining whether Century's motion to file a third amendedcomplaint should have been granted. The first element concernswhether the amendment would have cured a defective pleading. Atthe June 2, 1999, hearing, agent Trojanowski, during an offer ofproof, stated that James, rather than Debra, provided theinformation from which the application for insurance wascompleted. Century's third amended complaint would have containedcounts alleging that James made material misrepresentations andomitted material information in providing Trojanowski withinformation for the completion of the insurance application. Clearly, such an amended complaint would have cured the principaldefect in Century's second amended complaint, namely, that thesubject allegations were against Debra rather than James.

The next element of the test is whether the amendmentprejudiced or surprised other parties. As James had always beena named defendant in this litigation, we cannot conclude that theproposed third amended complaint would have either prejudiced orsurprised him.

Timeliness of the amendment is the next factor to consider. It is uncontradicted that, an hour before the June 2, 1999,hearing, agent Trojanowski told Century's attorney that Jamesrather than Debra provided the information with which the subjectinsurance application was completed. Up until this time, theevidence regarding who had given the information to Trojanowskito complete the application was, at best, confusing. In anaffidavit dated May 1, 1998, Debra stated that she had not givenTrojanowski the information. A further statement in theaffidavit indicated that Debra "believed" that when agentTrojanowski was completing the application he used information"which was in his possession from previous transactions." However, in their answers to Century's interrogatories, datedMarch 10, 1999, defendants were asked, "What representative ofCMDK Development Corp. procured a policy of insurance fromCentury *** in 1993?" Their response was, "Defendants do notrecall specifically, but believe that Debra Tracy ordered thepolicy by means of a telephone call." (Emphasis added.) Further, in an affidavit dated May 4, 1999, Trojanowski statedthat he was told by both James and Debra Tracy that "at the time[of the application] that the CMDK business was incorporated, andthat the incorporated business owned the prospective insuredvehicle, the 1987 Chevy pickup." Trojanowski further stated thathe advised both James and Debra that "the policy [he] procured ontheir behalf would not cover James Tracy, and that James Tracywould not be insured under any policy." Additionally,Trojanowski stated that he did not remember witnessing DebraTracy signing the application "on her behalf." After receivingthe approved Century policy, he "forwarded it to Debra Tracy." Added to this evidence are the facts that the insuranceapplication is signed "D. Tracy" and that it lists only DebraTracy as a named driver.

From this record, who told what to agent Trojanowski incompleting the application was quite unclear until just beforethe June 2, 1999, hearing on counts III, IV, and V of the secondamended complaint. Admittedly, it appears that Century couldhave been more aggressive in determining whether James had givenTrojanowski the information for the application. However, it isalso apparent that defendants and possibly Trojanowski could havebeen more forthcoming regarding this matter during discovery. Atthe subject hearing, armed with the knowledge imparted byTrojanowski only an hour before the hearing, Century attempted toconform the pleadings to the proof by having agent Trojanowskitestify that James had given him the information. Finding itselfin a "Catch--22" type of situation, Century was unable to getsuch testimony into evidence, as the trial court sustaineddefendants' continuing objections to testimony showing that Jamesgave the subject information on the basis of Century's failure toplead such allegations in the second amended complaint. Twomonths later Century filed a motion for leave to file a thirdamended complaint. Said complaint would have made the relevantallegations against James rather than Debra. Under thesecircumstances, we conclude that Century's motion to amend itspleading was timely.

The final factor is whether previous opportunities to amendwere identifiable. Based on our discussion of the timelinessfactor, we find that no previous opportunities for Century toamend were identifiable.

In conclusion, we decide that, based on our review of theabove-cited factors, the trial court abused its discretion indenying Century's motion to file a third amended complaint.

Finally, we address the argument of Century and itsattorney, Daniel Suber, that the trial court erred in awardingdefendants sanctions of $2,000 pursuant to Rule 137 (155 Ill. 2dR. 137). In so doing we will have to reiterate some of the factsthat related to the previous issue. Century and Suber maintainthat they had a reasonable basis to allege in the second amendedcomplaint that Debra had been the source of false information inthe insurance application. Defendants contend that the Rule 137sanctions are supported by the record.

Initially, we note that Rule 137 serves to penalize thelitigant or attorney who pleads false or frivolous matters, orwho brings suit without any basis in the law. In re Estate ofWernick, 127 Ill. 2d 61, 77 (1989). Rule 137 imposes anaffirmative duty on attorneys and litigants alike to conduct aninvestigation of the facts and the law prior to filing an action,pleading, or other paper. In re Marriage of Schneider, 298 Ill.App. 3d 103, 108-09 (1998). The standard for evaluation of aparty's conduct under this rule is one of reasonableness underthe circumstances existing at the time the pleading was filed. Schneider. 298 Ill. App. 3d at 109. The decision to imposesanctions rests within the sound discretion of the trial court,and that determination will not be overturned on review absent anabuse of discretion. Schneider, 298 Ill. App. 3d at 109.

In their motion for Rule 137 sanctions, defendants allegedthat Century and Suber were subject to sanctions for (1) allegingthat James was not driving the insured vehicle at the time of theaccident; (2) asserting the legal position that misrepresentingthe corporate status of CMDK was a material misrepresentation andvoided coverage under the policy; and (3) alleging that Debrasigned the application for insurance and provided the materialmisrepresentations and omissions therein. After a hearing, thetrial court found that only the third ground was sanctionable. The trial court stated that it based its conclusion in part on aletter from attorney Suber to Century, dated April 1, 1999. Theletter contains the statement:

"One complicating factor in our motion is Debra Tracy'sdenial that she either filled out or signed the insuranceapplication. The facts accumulated to date suggest that theapplication was filled out by the agent, then signed by theagent as well prior to forwarding it to Century-National."

While this statement indicates that attorney Suber wasconcerned about the propriety of filing a second amendedcomplaint in which there were allegations that Debra was thesource of the alleged misinformation and omissions on theinsurance application, the record indicates that there was someevidence supporting those allegations until an hour before theJune 2, 1999, hearing. To wit, there were the answers toCentury's interrogatories, dated March 10, 1999, whereindefendants stated that they "believed" Debra had been the one toorder the policy "by means of a telephone call." AgentTrojanowski, upon whom Century had to rely, stated in hisaffidavit, which was completed on May 4, 1999, that theinformation he received came from both Debra and James. Afterbeing told by Trojanowski an hour before the June 2, 1999,hearing that James, rather than Debra, gave the subjectinformation, attorney Suber unsuccessfully attempted to conformthe second amended complaint to the proof.

We conclude that Century and Suber were justified inmaintaining the counts against Debra until the point at whichTrojanowski clearly stated that James rather than Debra gave thesubject information. At the hearing, Suber then essentiallytried to drop the counts against Debra and direct the substanceof those counts against James but was blocked in his attempt todo so. Under these circumstances, the trial court's impositionof sanctions was an abuse of discretion.

For the reasons stated above, we reverse the Du Page CountyCircuit Court's orders for a directed verdict and for theawarding of sanctions, and we remand the cause of action forfurther proceedings consistent with this opinion.

Reversed and remanded.

INGLIS and GEIGER, JJ., concur.