___________________________________________________________________________

__________________________________________________________________________

JUSTICE GOLDENHERSH delivered the opinion of the court:

The third-party defendant, Gallant Insurance Company (Gallant), appeals the May 7,1999, summary judgment order denying its motion for summary judgment and granting themotion for summary judgment of the third-party plaintiffs, Melvin Frasier, administrator ofthe estate of Joseph Frasier (Frasier), and Michael Falcetti. The trial court found that Gallanthad a duty to defend the underlying action and failed to discharge its duty to defend. Gallantfiled a motion to reconsider, which was denied on June 29, 1999. Gallant filed a timelynotice of appeal on July 9, 1999. On appeal, Gallant presents three issues for review: (1)whether the Illinois Insurance Code (215 ILCS 5/1 et seq. (West 1994)) requires an insurerwho cancels an insurance policy for the nonpayment of a premium to notify lienholdersactually unknown to the insurer, (2) whether an insurer is required to obtain a declaratoryjudgment as to its obligations under a policy or to defend under a reservation-of-rightsapproach where the policy was canceled prior to the loss without notice to a potentiallienholder, and (3) whether there can be a question as to the existence of insurance coverage,or a potential for coverage, where the subject policy was canceled prior to the loss withoutnotice to a potential lienholder. For the reasons that follow, the judgment of the trial courtis affirmed.

On March 23, 1995, Pamela Gnojewski signed and submitted an application for anautomobile insurance policy to be issued by Gallant. The application covered three separateautomobiles owned by Gnojewski: (1) a 1992 Chevrolet S10 pickup truck, (2) a 1992Chevrolet Cavalier, and (3) a 1991 Ford Escort GT. The policy coverage was to run for sixmonths, from March 24, 1995, through September 24, 1995. The total premium due forcoverage on all three automobiles for the six-month policy period was $1,227. Gnojewskisubmitted with her application a down payment in the amount $478. Additional premiumpayments were to be due on April 24, 1995, on May 24, 1995, and on June 24, 1995. However, the only premium payment ever received by Gallant was the initial payment of$478, which was submitted with the application.

On May 26, 1995, Gallant mailed a notice of cancellation to Gnojewski informingher that coverage under the insurance policy would be canceled effective June 10, 1995, dueto the nonpayment of the premium.

On August 1, 1995, Frasier was a passenger in the 1991 Ford Escort GT owned andoperated by Gnojewski. Gnojewski's automobile was involved in an accident with anautomobile driven by Falcetti. As a result of the accident, both Gnojewski and Frasier werekilled. Falcetti was injured but survived.

On November 28, 1995, Frasier's estate filed a lawsuit against Gnojewski's estate inMadison County, alleging that Gnojewski's negligence proximately caused Frasier's death. Falcetti later intervened in that lawsuit, alleging that Gnojewski's negligence proximatelycaused his injuries. Gallant declined to defend Gnojewski's estate in that action, based uponits cancellation of Gnojewski's automobile insurance policy for the nonpayment of thepremium on June 10, 1995, approximately seven weeks prior to the accident.

On June 10, 1996, American Standard Insurance Company of Wisconsin (AmericanStandard) filed a complaint for declaratory judgment naming as the defendants, Gnojewski'sestate, Frasier's estate, and Falcetti. In that complaint American Standard sought adeclaration that it had no obligation or duty to provide a defense or coverage to Gnojewski'sestate under an automobile insurance policy it had previously issued to Gnojewski'ssurviving husband, Richard S. Gnojewski. American Standard filed a motion for summaryjudgment asserting that, under the terms of the policy it had issued to Richard S. Gnojewski,Pamela Gnojewski was not an "insured person" and, therefore, her estate was not entitledto coverage or a defense. Frasier's estate filed a cross-motion for summary judgment,arguing that American Standard had waived any policy defenses by failing to defend theunderlying action. Judge David R. Herndon granted American Standard's motion forsummary judgment, finding that no coverage existed for Pamela Gnojewski on the AmericanStandard policy and that there was no duty to defend. Judge Herndon specifically rejectedthe argument of Frasier's estate that American Standard had waived its policy defenses bynot defending the underlying action, noting that the accident involving Gnojewski was"something clearly not within its policy responsibility."

On November 21, 1996, just four days before granting American Standard's motionfor summary judgment, the trial court granted Frasier's estate's motion for leave to file athird-party claim for declaratory judgment against Gallant, seeking a declaration that theautomobile insurance policy issued by Gallant to Gnojewski obligated Gallant to providecoverage to Gnojewski's estate for the underlying wrongful death lawsuit filed by Frasier'sestate against Gnojewski's estate. Falcetti later filed a similar third-party claim fordeclaratory judgment against Gallant, seeking a declaration that the automobile insurancepolicy issued by Gallant to Gnojewski obligated Gallant to provide coverage to Gnojewski'sestate for Falcetti's underlying personal injury lawsuit filed by Falcetti against Gnojewski'sestate.

In the third-party complaints for declaratory judgment, both Frasier's estate andFalcetti argued that the automobile insurance policy issued by Gallant to Gnojewski did notlapse prior to the August 1, 1995, automobile accident, because of Gallant's failure toprovide notice of cancellation to Laclede Credit Union (Laclede), which perfected its lieninterest in Gnojewski's 1991 Ford Escort GT pursuant to section 3-202 of the IllinoisVehicle Code (625 ILCS 5/3-202 (West 1994)). The complaints alleged that the failure tonotify Laclede rendered the cancellation ineffective and that, as a result, the policy was stillin effect at the time of the August 1, 1995, automobile accident.

Gallant responded to the third-party complaints by asserting that the June 10, 1995,policy cancellation was proper according to section 143.14(a) of the Illinois Insurance Code(215 ILCS 5/143.14(a) (West 1994)). Gallant noted that the requirement of mailing noticesof cancellation to mortgagees or lienholders applied not to all lienholders, as alleged by thethird-party plaintiffs, but only to those mortgagees or lienholders "if known" to an insurer. Gallant argued that the application for the Gallant insurance policy signed by Gnojewskicontained a section entitled "loss payee," which was left blank by Gnojewski when theapplication was submitted to Gallant. Gallant claimed that, as a result, it was unaware of anylienholders with regard to Gnojewski's 1991 Ford Escort GT.

After discovery, Gallant filed a motion for summary judgment based upon itscontention that the policy had been canceled effective June 10, 1995. Both Frasier's estateand Falcetti filed cross-motions for summary judgment, which raised a new argument thateven if the policy was canceled effective June 10, 1995, Gallant nevertheless had a duty todefend the Gnojewski estate because at the time the estate's defense was tendered to Gallant,a question existed as to whether the policy was properly canceled. On May 7, 1999, the trialcourt entered an order denying Gallant's motion for summary judgment and granting themotions for summary judgment of Frasier's estate and Falcetti. Gallant's motion toreconsider was denied. The trial court ruled: "[W]hether or not the policy was properly andeffectively canceled remains a disputed question. Therefore, a duty to defend was triggeredwhen the potentiality for coverage, albeit minimal, became apparent to the insurer."

Gallant argues that the doctrine of estoppel does not apply in this case because nocoverage existed. Gallant contends that it canceled the insurance policy on May 26, 1995,by issuing to Gnojewski notice of termination of the 1991 Ford Escort GT insurance policyeffective June 10, 1995. Gallant claims that, because the accident occurred on August 1,1995, Gnojewski was not insured on the date of the accident. Conversely, Frasier's estateand Falcetti argue that cancellation of the policy was ineffective because Gallant failed toalso notify Laclede, a lienholder with a perfected secured interest in the 1991 Ford EscortGT, of the impending cancellation. Frasier's estate and Falcetti contend that the failure ofGallant to supply the notification owed to Laclede injured Laclede by not giving it a chanceto maintain the policy covering the 1991 Ford Escort GT and does not constitute notice ofcancellation under section 143.14(a) of the Illinois Insurance Code (215 ILCS 5/143.14(a)(West 1994)).

Gallant contends that it complied with the Illinois Insurance Code as to notice ofcancellation. See 215 ILCS 5/143.14(a) (West 1994). According to section 143.15 of theIllinois Insurance Code, notice of cancellation must be given to the insured at least 30 daysprior to the effective date of cancellation or, if the cancellation is based upon the insured'sfailure to pay the premium, then 10 days' notice is required. 215 ILCS 5/143.15 (West1994). Gallant, therefore, complied with the time requirements of cancellation as toGnojewski as it is undisputed that Gnojewski failed to make her premium payments and had14 days' notice prior to the cancellation's effective date. However, Frasier's estate andFalcetti contend that Gallant did not comply with section 143.14(a) as to notifying a"mortgagee or lienholder, if known ***" (215 ILCS 5/143.14(a) (West 1994)). The cruxof the issue is the phrase, "if known." Gallant argues that the phrase plainly means actualknowledge. Gallant claims that since Gnojewski failed to list any parties with an interest inthe 1991 Ford Escort GT in the "loss payee" portion of the insurance application, Gallantdid not have actual knowledge of the lienholder and was not required to provide notice. Frasier's estate and Falcetti argue that the phrase "if known" should be construed to includeconstructive notice. They argue that Laclede is a perfected secured party and that Illinoispublic policy favors allowing notice to parties who have perfected a security interest so theycan protect their insurable interest. See Ellegood v. American States Insurance Co., 266 Ill.App. 3d 135, 138, 638 N.E.2d 1193, 1195 (1994). Thus, they argue, Gallant should havechecked the public records, discovered Laclede's interest, and notified them of thecancellation.

Frasier's estate and Falcetti argue that the notice was ineffective and, therefore,coverage still existed, thus activating the doctrine of estoppel for Gallant's failure to defendunder a reservation-of-rights approach or, in the alternative, to seek a declaratory judgment. Gallant argues that "if known" should be construed to mean actual knowledge. They reasonthat public policy should favor the procedure of the insured listing any lienholders on theinsurance application. Gallant explains that the insured has the requisite knowledge andshould be held accountable. If not, insurance companies must expend resources to checkpublic records to discover lienholders, and these costs will be transferred to the public inhigher insurance premiums. Gallant argues that if actual knowledge is accepted by the court,then cancellation was proper and Gallant owes no duty to defend. Gallant concludes thatwithout a duty to defend there can be no breach of said duty and that estoppel is inapplicablebecause the doctrine of estoppel is rooted in the breach of the duty to defend. SeeEmployers Insurance of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127, 151, 708N.E.2d 1122, 1135 (1999); Chandler v. Doherty, 299 Ill. App. 3d 797, 804, 702 N.E.2d 634,639 (1998). On the other hand, Frasier's estate and Falcetti argued, and the trial courtagreed, that the definition of "if known" is an open question. The mere discussion of thesearguments indicates the potential for coverage, and Gallant must take some action, such asdefend the underlying suit under a reservation-of-rights approach or seek a declaratoryjudgment relieving it of liability.

The standard for review on a trial court's granting of summary judgment is de novo. See In re Estate of Hoover, 155 Ill. 2d 402, 411, 615 N.E.2d 736, 740 (1993); Crum &Forster Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384, 390, 620 N.E.2d 1073,1077 (1993); Morris v. Margulis, 307 Ill. App. 3d 1024, 1032, 718 N.E.2d 709, 716 (1999),appeal allowed, 187 Ill. 2d 571, 724 N.E.2d 1269 (2000). The reviewing court mustexamine the affidavits, pleadings, admissions, and depositions on file, and it should construethe evidence against the moving party. See Hoover, 155 Ill. 2d at 410, 615 N.E.2d at 739-40; Morris, 307 Ill. App. 3d at 1032, 718 N.E.2d at 716. A summary judgment isappropriate if there is no genuine issue of material fact and the moving party is entitled toa judgment as a matter of law. See Crum & Forster Managers Corp., 156 Ill. 2d at 390-91,620 N.E.2d at 1077; Morris, 307 Ill. App. 3d at 1032, 718 N.E.2d at 716.

The general rule of the estoppel doctrine states that a complaint alleging facts whichpotentially could give rise to coverage under the policy triggers a duty to defend on the partof the insurer that cannot be simply denied by the insurer. See Ehlco, 186 Ill. 2d at 150, 708N.E.2d at 1134 (1999); Chandler, 299 Ill. App. 3d at 804, 702 N.E.2d at 639. On thecontrary, the insurer has two options if it believes that it does not, and will not, owecoverage: (1) defend the underlying lawsuit under a reservation-of-rights approach or (2)seek a declaratory judgment relieving it of liability. See Ehlco, 186 Ill. 2d at 150, 708N.E.2d at 1134-35; State Farm Fire & Casualty Co. v. Martin, 186 Ill. 2d 367, 371, 710N.E.2d 1228, 1230-31 (1999); Chandler, 299 Ill. App. 3d at 801, 702 N.E.2d at 637. If theinsured fails to take either of these two steps, then the insurer is estopped from asserting anypolicy defenses to coverage. See Ehlco, 186 Ill. 2d at 150, 708 N.E.2d at 1134-35; Martin,186 Ill. 2d at 150-51, 710 N.E.2d at 1231; Chandler, 299 Ill. App. 3d at 804, 702 N.E.2dat 639.

The estoppel doctrine is a product of the contractual relationship between an insurerand an insured and arises when an insurer breaches its duty to defend. See Ehlco, 186 Ill.2d at 151, 708 N.E.2d at 1135. The court must inquire whether a duty to defend exists andwhether the insurer breached said duty. See Ehlco, 186 Ill. 2d at 151, 708 N.E.2d at 1135;Clemmons v. Travelers Insurance Co., 88 Ill. 2d 469, 475-78, 430 N.E.2d 1104, 1107-09(1981). The estoppel doctrine is not applicable when there is no duty to defend or the dutywas not properly triggered. See Ehlco, 186 Ill. 2d at 151, 708 N.E.2d at 1135. Examplesof these situations are where the insurer did not have an opportunity to defend, there was nopolicy in existence, or the complaint, as compared to the policy, clearly demonstrates nopotential for coverage. See Ehlco, 186 Ill. 2d at 151, 708 N.E.2d at 1135. A combinationof the last two exceptions to the estoppel doctrine are the essence of Gallant's argument.

Gallant argues that because of the proper cancellation of the policy covering the 1991Ford Escort GT effective June 10, 1995, no policy existed at the time of the accident. Gallant's argument continues that because of said cancellation the underlying complaintinstituted by Frasier's estate and Falcetti clearly do not give rise to the potential forcoverage. Frasier's estate and Falcetti point to circumstances that at least rise to the potentialfor coverage. Frasier's estate and Falcetti argue that cancellation was ineffective due toGallant's failure to notify Laclede. Frasier's estate and Falcetti point to intraofficememorandums indicating at the least a discussion among Gallant's employees as to whethercoverage existed. Frasier's estate and Falcetti argue that this is not a case where no policyis in existence but rather is a dispute as to precisely that question. Since a dispute exists,Gallant must exercise one of two options: (1) defend the underlying lawsuit under areservation-of-rights approach or (2) seek a declaratory judgment relieving it of liability. If not, the estoppel doctrine is triggered, and Gallant is barred from asserting policy defensesto coverage.

The issue of proper notification of cancellation revolves around the definition of thephrase "if known" in sections 143.14(a) and 143.15. No Illinois court has addressed thisissue. The primary rule of statutory construction is to follow the legislative intent. SeeDenton v. Civil Service Comm'n, 176 Ill. 2d 144, 148, 679 N.E.2d 1234, 1236 (1997);Presley v. P & S Grain Co., 289 Ill. App. 3d 453, 462, 683 N.E.2d 901, 909 (1997). Thewords in a statute should be given their plain and ordinary meaning. See Denton, 176 Ill.2d at 148, 679 N.E.2d at 1236; Presley, 289 Ill. App. 3d at 462, 683 N.E.2d at 909. Astatute is ambiguous if it is susceptible to more than one meaning, and if so, the courts lookto other aids to ascertain the intent of the legislature. See Denton, 176 Ill. 2d at 149, 679N.E.2d at 1236; Presley, 289 Ill. App. 3d at 462, 683 N.E.2d at 909. In this case, bothparties present arguments as to the definition of "if known." Gallant argues that "if known"simply means known to the insurer, or actual knowledge. Frasier's estate and Falcetti defineit as constructive notice, because of the public policy favoring parties who secure theirinterest. See Ellegood v. American States Insurance Co., 266 Ill. App. 3d 135, 138, 638N.E.2d 1193, 1195 (1994). The key to this case is that this is a disputed question. Therefore, there is a potentiality for coverage because cancellation may have beenineffective. Gallant cannot ignore the underlying complaint and should have either defendedunder a reservation-of-rights approach or sought a declaratory judgment relieving it ofliability. See 215 ILCS 5/143.15 (West 1994).

The trial court agreed with the argument of Frasier's estate and Falcetti that a disputeremains as to whether Gallant properly canceled the policy. The trial court wrote in its June29, 1999, order: "Therefore, a duty to defend was triggered when the potentiality forcoverage, albeit minimal, became apparent to the insurer. Thus, the insurer is estopped fromcontesting coverage." This is consistent with the rule that the duty to defend is muchbroader than an insurer's duty to indemnify. See Ehlco, 186 Ill. 2d at 151-52, 708 N.E.2dat 1135; Chandler, 299 Ill. App. 3d at 801, 702 N.E.2d at 637. It is irrelevant whether aninsurer would have prevailed had it taken one of the two proper procedures; once the dutyto defend has been breached, the estoppel doctrine is activated. See Ehlco, 186 Ill. 2d at151-52, 708 N.E.2d at 1136; Chandler, 299 Ill. App. 3d at 804, 702 N.E.2d at 638. " '[T]heinsurer is obliged to defend its insured even if the allegations are groundless, false, orfraudulent.' " Ehlco, 186 Ill. 2d at 153, 708 N.E.2d at 1136 (quoting United States Fidelity& Guaranty Co. v. Wilkin Insulation Co., 144 Ill. 2d 64, 73, 578 N.E.2d 926, 930 (1991)). The underlying complaint and the policy must be liberally construed in the favor of theinsured to determine if the face of the underlying complaint constitutes the potential forcoverage under the policy. See Ehlco, 186 Ill. 2d at 153, 708 N.E.2d at 1136. An insurermay be required to defend a suit even though it may not be held to indemnify the insured. See Chandler, 299 Ill. App. 3d at 801, 702 N.E.2d at 637.

Gallant argues, in the alternative, that the law in Illinois states that even ifcancellation was not effective on Laclede, cancellation was still effective on the insured ifnotification of cancellation was proper on the insured. See Economy Fire & Casualty Co.v. Hughes, 271 Ill. App. 3d 1009, 1013, 649 N.E.2d 561, 563 (1995); Ellegood, 266 Ill.App. 3d at 137, 638 N.E.2d at 1195. While an accurate statement of the law, this argumentshould have been made in either a defense with a reservation of rights or a declaratoryjudgment. The insured's policy may or may not be in existence, and the insurer must takeone of the two steps of defending under a reservation of rights or seeking declaratoryjudgment.

We hold that the dispute as to whether or not proper cancellation took placeaccording to section 143.14(a) of the Illinois Insurance Code generates the potential forcoverage. Gallant should have either filed a declaratory judgment relieving it of liability ordefended the suit under a reservation-of-rights approach. Gallant is estopped from assertingpolicy defenses to coverage.

For the foregoing reasons, the judgment of the circuit court of Madison County isaffirmed.

Affirmed.

RARICK and KUEHN, JJ., concur.