Misrepresentation Ruled Material Fact in Risk

Issue: Frank Duran and his son, Dennis, purchased a 1976 Ford LTD in September, 1975. Both of them were registered as owners. At that time, Dennis was 20 years old and living at home. Dennis also owned another car, which he used to go to and from work.

According to the Durans, Dennis' name was given as an owner only to furnish him with credit references. It was understood between the father and son that Dennis would use the car occasionally and with the father's permission.

After an accident, the father's insurance carrier learned of the joint ownership of the car and denied liability.

Judgment: The Father, Frank, secured the Auto Liability insurance in May, 1976, and he was listed as the sole applicant and sole owner of the car. His wife was listed as the only other person who would drive the car.

Dennis, however, drove the car 25 to 50 times from its purchase to the date of the accident in May, 1976. During the month prior to the accident, he drove the car at least four times. About that time, he moved from his parent's home because of a disagreement with his father regarding Dennis' failure to secure liability insurance.

On May 21, 1976, Dennis lost control of the car and left the roadway, striking a light pole, two roadway gates and a guardrail, all owned by the state of Illinois. Damages amounted to $17,123.40.

After the accident, Dennis gave his parents' address as his residence. Both Frank and Dennis were shown as owners of the car on the claim form submitted to the company.

About three months after the accident, the company filed this action for declaratory judgment that it was not liable because of misrepresentation in the application for insurance.

The trial found that the failure to disclose a legal co-owner of an automobile was a material non-disclosure affecting the risk and entered summary judgment for the company.

The insured father contended that the misrepresentation was not material inasmuch as Dennis did not possess and control the car, that Dennis used another car to travel to and from work and he needed his father's permission to use the Ford. Furthermore, the father pointed out that, at the time of the accident, Dennis did not reside at his parent's home.

The court found that the evidence showed that Dennis was a regular user of the car; that after the accident, he gave his residence as his parents' home and that address was shown on his driver's license.

The court pointed out that when an insurance company issues an Automobile Liability policy, it has no knowledge of who may use the car with the permission of the insured. It is a reasonable assumption that ordinarily the major use of the car will be by the owner and the named insured. The test is whether the facts which were withheld from the company might reasonably have influenced the company in deciding whether to accept or reject the risk.

The court concluded: "Here we find Frank Duran's misrepresentation that he was the sole owner of the car, and that he and his wife would drive the car 100 percent of the time might have influenced Safeway in accepting, limiting of rejecting the risk of insuring the Durans' car."

The judgment of the trial court in favor of the company was affirmed.

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