March 6, 2001

NO. 4-00-0736

IN THE APPELLATE COURT

OF ILLINOIS

FOURTH DISTRICT

JUSTICE KNECHT delivered the opinion of the court:

Defendant, Country Mutual Insurance Company, appeals from the granting of a summary judgment motion in favor ofplaintiff, Vincent G. Thompson, and the denial of its own motion for summary judgment in a declaratory judgmentproceeding. Defendant argues the trial court erred in finding its automobile policy applied to plaintiff's replacement vehiclewhen an accident involving the vehicle occurred after the end of the original policy term but during the extension periodprovided by defendant in its notice of cancellation. We affirm.

The facts are undisputed. On April 22, 1994, defendant issued an automobile insurance policy to Richard Scott Claypoolinsuring Claypool's 1991 Chevrolet. The term of the policy was

for a period of six months and included coverage for bodily injury resulting from an accident involving Claypool's vehicle. On September 3, 1994, Claypool purchased a 1977 Mercury Montego as a replacement vehicle for his 1991 Chevrolet.

In regard to newly acquired vehicles, defendant's insurance policy provides:

"6. Newly Acquired Vehicle. If you have

disposed of the vehicle described on the

declarations page and have acquired another

in its place, this policy transfers to the

newly acquired vehicle.

      This policy also applies to an addi-

tional vehicle you have acquired ifwe in-

sure all the motor vehicles you own.

* * *

      You must ask us to insure the newly

or additionally acquired vehicle during the

policy period or within 30 days afteryou

acquire it, whichever is longer. You must

also pay any additional premium required."

On October 31, 1994, defendant mailed to Claypool at his last known address a cancellation notice, which stated:

"COVERAGE TERMINATION DATE: Nov 12, 1994

     According to our records the total billed

installment has not been received. Because

of that, insurance coverage will terminate

on the date and time shown above.

     If you have not purchased another policy

and payment of the required amount due is

received by the coverage termination date,

and approved by the company at its Regional

Office in Bloomington, Illinois, you will

receive notification providing you with un-

interrupted coverage."

On November 3, 1994, Claypool was involved in an automobile accident with plaintiff while operating the 1977 Mercuryhe had purchased on September 3. Plaintiff claims to have sustained bodily injury from that accident. Claypool had notprovided defendant with notice of the newly acquired vehicle. Defendant denied coverage to Claypool for the November 3accident, asserting coverage had expired on October 22 at the end of the initial six-month policy term without notice of thenewly acquired vehicle.

On February 13, 1996, plaintiff filed a declaratory judgment action in the circuit court of McLean County, contending thecancellation notice from defendant extended the policy period from October 22 to November 12, 1994. As the accident occurred on November 3, plaintiff contended it was within thepolicy period in which Claypool had to notify defendant of his newly acquired vehicle and, therefore, insurance coveragehad automatically transferred to the newly acquired vehicle.

Defendant filed an affirmative defense, claiming Claypool had failed to notify it within 30 days of acquisition of the newlyacquired vehicle or within the policy period that had expired on October 22. Thus, there was no automatic transfer ofcoverage to the newly acquired vehicle.

The parties filed cross-motions for summary judgment. On July 26, 2000, the trial court granted plaintiff's motion forsummary judgment and denied defendant's motion, finding the end of the policy period for providing notice of areplacement vehicle was November 12, 1994, the date defendant expressly indicated to its insured the policy wouldterminate. Because the accident in question occurred on November 3, 1994, the loss occurred during the policy period andprior to the termination of the coverage provided by defendant to Claypool and there was coverage. This appeal followed.

Summary judgment should only be granted if the pleadings, depositions, and admissions, together with affidavits on file,show no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 1998). In an appeal from the grant of summary judgment, the standard of review is de novo. Crum &Forster Corp. v. Resolution Trust Corp., 156 Ill. 2d 384, 390, 620 N.E.2d 1073, 1077 (1993).

Construction of the terms of an insurance policy and a determination of the rights thereunder are questions of law properlydecided in a motion for summary judgment. Crum & Forster, 156 Ill. 2d at 391, 620 N.E.2d at 1077. In construing thelanguage of an insurance policy, the trial court's goal is to ascertain and give effect to the intentions of the parties asexpressed in their agreement. American States Insurance Co. v. Koloms, 177 Ill. 2d 473, 479, 687 N.E.2d 72, 75 (1997). Ifthe terms of the policy are clear, they must be given their plain and ordinary meaning. Additionally, provisions that limit orexclude coverage will be interpreted liberally in favor of the insured and against the insurer. American States, 177 Ill. 2d at 479,687 N.E.2d at 75.

As noted, the policy in question here provided for an automatic transfer of coverage to a newly acquired vehicle and thiscoverage was effective for a period of 30 days or to the end of the policy period, whichever is longer. The giving of noticewas not a prerequisite to the coverage. Instead, the coverage ceased after 30 days or the policy period if no notice wasgiven. Defendant concedes Claypool's 1977 Mercury was covered for the remainder of the policy period. The dispute liesin the date the policy period ended: the six-month anniversary of the policy on October 22, 1994, or the extension toNovember 12, 1994, defendant provided in its cancellation notice.

In regard to cancellation notices, the policy states in pertinent part:

"11. Cancellation.

* * *

     b. We may cancel this policy by notifying

you in writing of the date cancellation takes

effect.

 * * *

     (1) Whenyou have not paid the premium,

we may cancel at any time by notifyingyou

at least 10 days before the date cancellation

takes effect.

* * *

     d. The effective date of cancellation

stated in the notice will become the end of

the policy period."

Defendant contends it was not really sending a "cancellation notice" to Claypool because cancellations only apply, underthe Illinois Insurance Code, where an insurer terminates a policy prior to the expiration date of the policy and not where apolicy lapses due to nonpayment of the premium. 215 ILCS 5/143.13(g) (West 1994); Librizzi v. State Farm Fire &Casualty Co., 236 Ill. App. 3d 582, 592-93, 603 N.E.2d 821, 827-28 (1992). The sending of a cancellation notice upon thenonpayment of premiums is apparently not mandatory under defendant's insurance contract by the use of the word "may" inthe cancellation provisions of the contract. That no notice is required is further bolstered by that portion of the policyentitled "Nonrenewal." Under that section, the policy includes this provision: "Ifyou fail to pay the renewal premium, thepolicy will lapse on the expiration date."

Defendant argues that a lapse occurred here and the policy period ended on the original expiration date, October 22. Itfurther contends it merely granted a "grace period" for the paying of the premium by sending the notice entitled"CANCELLATION" extending the policy period. Defendant did admit, through the deposition of its senior autounderwriter, the cancellation notice effectively extended coverage for the 1991 Chevrolet through November 12, 1994, butdenied that it did so for any newly acquired vehicle as it was not notified of such vehicle prior to October 22 when thepolicy lapsed.

Apparently, defendant could have simply let Claypool's policy lapse on October 22 for nonpayment of premium and hewould have had no coverage for any vehicle, original or newly acquired, on November 3. However, when defendant choseto send a cancellation notice providing for a "grace period" for Claypool to pay his premium and keep his policy in force,the entire policy was extended until November 12 not just selected portions of it. Under the policy, coverage wasautomatically extended to newly acquired vehicles for as long as the period of the policy. Under the policy, the effectivedate of cancellation stated in the cancellation notice becomes the end of the policy period. Thus, the automatic coveragefor newly acquired vehicles under the policy was included in the extension of coverage until November 12 by the expressterms of the contract of insurance coupled with the cancellation notice, which provided "insurance coverage will terminateon the date and time shown above."

Thus, the automatic coverage that the policy provided to newly acquired vehicles continued to be in force through the endof the policy period, including the date of loss, November 3, 1994. The trial court properly concluded the policy affordedcoverage at the time of the accident.

For the foregoing reasons, we affirm the trial court's judgment granting plaintiff's motion for summary judgment anddenying defendant's motion for summary judgment.

Affirmed.

McCULLOUGH and MYERSCOUGH, JJ., concur.